[House Report 116-324]
[From the U.S. Government Publishing Office]


116th Congress }                                           { Rept. 116-324
                        HOUSE OF REPRESENTATIVES
 1st Session   }                                           { Part 3

======================================================================



 
                    LOWER DRUG COSTS NOW ACT OF 2019

                                _______
                                

December 9, 2019.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Scott of Virginia, from the Committee on Education and Labor, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                         [To accompany H.R. 3]

    The Committee on Education and Labor, to whom was referred 
the bill (H.R. 3) to establish a fair price negotiation 
program, protect the Medicare program from excessive price 
increases, and establish an out-of-pocket maximum for Medicare 
part D enrollees, and for other purposes, having considered the 
same, report favorably thereon with an amendment and recommend 
that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................    28
Committee Action.................................................    29
Committee Views..................................................    31
Section-by-Section Analysis......................................    37
Explanation of Amendments........................................    39
Application of Law to the Legislative Branch.....................    39
Unfunded Mandate Statement.......................................    39
Earmark Statement................................................    39
Roll Call Votes..................................................    39
Statement of Performance Goals and Objectives....................    48
Duplication of Federal Programs..................................    48
Hearings.........................................................    48
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................    48
New Budget Authority and CBO Cost Estimate.......................    48
Committee Cost Estimate..........................................    49
Changes in Existing Law Made by the Bill, as Reported............    49
Minority Views...................................................   326

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) In General.--This Act may be cited as the ``Lower Drug Costs Now 
Act of 2019''.
  (b) Table of Contents.--The table of contents is as follows:

Sec. 1. Short title; table of contents.

      TITLE I--LOWERING PRICES THROUGH FAIR DRUG PRICE NEGOTIATION

Sec. 101. Providing for lower prices for certain high-priced single 
source drugs.
Sec. 102. Selected drug manufacturer excise tax imposed during 
noncompliance periods.

  TITLE II--MEDICARE PARTS B AND D PRESCRIPTION DRUG INFLATION REBATES

Sec. 201. Medicare part B rebate by manufacturers.
Sec. 202. Medicare part D rebate by manufacturers.

   TITLE III--PART D IMPROVEMENTS AND MAXIMUM OUT-OF-POCKET CAP FOR 
                         MEDICARE BENEFICIARIES

Sec. 301. Medicare part D benefit redesign.

      TITLE I--LOWERING PRICES THROUGH FAIR DRUG PRICE NEGOTIATION

SEC. 101. PROVIDING FOR LOWER PRICES FOR CERTAIN HIGH-PRICED SINGLE 
                    SOURCE DRUGS.

  (a) Program To Lower Prices for Certain High-Priced Single Source 
Drugs.--Title XI of the Social Security Act (42 U.S.C. 1301 et seq.) is 
amended by adding at the end the following new part:

 ``PART E--FAIR PRICE NEGOTIATION PROGRAM TO LOWER PRICES FOR CERTAIN 
                    HIGH-PRICED SINGLE SOURCE DRUGS

``SEC. 1191. ESTABLISHMENT OF PROGRAM.

  ``(a) In General.--The Secretary shall establish a Fair Price 
Negotiation Program (in this part referred to as the `program'). Under 
the program, with respect to each price applicability period, the 
Secretary shall--
          ``(1) publish a list of selected drugs in accordance with 
        section 1192;
          ``(2) enter into agreements with manufacturers of selected 
        drugs with respect to such period, in accordance with section 
        1193;
          ``(3) negotiate and, if applicable, renegotiate maximum fair 
        prices for such selected drugs, in accordance with section 
        1194; and
          ``(4) carry out the administrative duties described in 
        section 1196.
  ``(b) Definitions Relating to Timing.--For purposes of this part:
          ``(1) Initial price applicability year.--The term `initial 
        price applicability year' means a plan year (beginning with 
        plan year 2023) or, if agreed to in an agreement under section 
        1193 by the Secretary and manufacturer involved, a period of 
        more than one plan year (beginning on or after January 1, 
        2023).
          ``(2) Price applicability period.--The term `price 
        applicability period' means, with respect to a drug, the period 
        beginning with the initial price applicability year with 
        respect to which such drug is a selected drug and ending with 
        the last plan year during which the drug is a selected drug.
          ``(3) Selected drug publication date.--The term `selected 
        drug publication date' means, with respect to each initial 
        price applicability year, April 15 of the plan year that begins 
        2 years prior to such year.
          ``(4) Voluntary negotiation period.--The term `voluntary 
        negotiation period' means, with respect to an initial price 
        applicability year with respect to a selected drug, the 
        period--
                  ``(A) beginning on the sooner of--
                          ``(i) the date on which the manufacturer of 
                        the drug and the Secretary enter into an 
                        agreement under section 1193 with respect to 
                        such drug; or
                          ``(ii) June 15 following the selected drug 
                        publication date with respect to such selected 
                        drug; and
                  ``(B) ending on March 31 of the year that begins one 
                year prior to the initial price applicability year.
  ``(c) Other Definitions.--For purposes of this part:
          ``(1) Fair price eligible individual.--The term `fair price 
        eligible individual' means, with respect to a selected drug--
                  ``(A) in the case such drug is furnished or dispensed 
                to the individual at a pharmacy or by a mail order 
                service--
                          ``(i) an individual who is enrolled under a 
                        prescription drug plan under part D of title 
                        XVIII or an MA-PD plan under part C of such 
                        title under which coverage is provided for such 
                        drug; and
                          ``(ii) an individual who is enrolled under a 
                        group health plan or health insurance coverage 
                        offered in the group or individual market (as 
                        such terms are defined in section 2791 of the 
                        Public Health Service Act) with respect to 
                        which there is in effect an agreement with the 
                        Secretary under section 1197 with respect to 
                        such selected drug as so furnished or 
                        dispensed; and
                  ``(B) in the case such drug is furnished or 
                administered to the individual by a hospital, 
                physician, or other provider of services or supplier--
                          ``(i) an individual who is entitled to 
                        benefits under part A of title XVIII or 
                        enrolled under part B of such title if such 
                        selected drug is covered under the respective 
                        part; and
                          ``(ii) an individual who is enrolled under a 
                        group health plan or health insurance coverage 
                        offered in the group or individual market (as 
                        such terms are defined in section 2791 of the 
                        Public Health Service Act) with respect to 
                        which there is in effect an agreement with the 
                        Secretary under section 1197 with respect to 
                        such selected drug as so furnished or 
                        administered.
          ``(2) Maximum fair price.--The term `maximum fair price' 
        means, with respect to a plan year during a price applicability 
        period and with respect to a selected drug (as defined in 
        section 1192(c)) with respect to such period, the price 
        published pursuant to section 1195 in the Federal Register for 
        such drug and year.
          ``(3) Average international market price defined.--
                  ``(A) In general.--The terms `average international 
                market price' and `AIM price' mean, with respect to a 
                drug, the average price (which shall be the net average 
                price, if practicable, and volume-weighted, if 
                practicable) for a unit (as defined in paragraph (4)) 
                of the drug for sales of such drug (calculated across 
                different dosage forms and strengths of the drug and 
                not based on the specific formulation or package size 
                or package type), as computed (as of the date of 
                publication of such drug as a selected drug under 
                section 1192(a)) in all countries described in clause 
                (ii) of subparagraph (B) that are applicable countries 
                (as described in clause (i) of such subparagraph) with 
                respect to such drug.
                  ``(B) Applicable countries.--
                          ``(i) In general.--For purposes of 
                        subparagraph (A), a country described in clause 
                        (ii) is an applicable country described in this 
                        clause with respect to a drug if there is 
                        available an average price for any unit for the 
                        drug for sales of such drug in such country.
                          ``(ii) Countries described.--For purposes of 
                        this paragraph, the following are countries 
                        described in this clause:
                                  ``(I) Australia.
                                  ``(II) Canada.
                                  ``(III) France.
                                  ``(IV) Germany.
                                  ``(V) Japan.
                                  ``(VI) The United Kingdom.
          ``(4) Unit.--The term `unit' means, with respect to a drug, 
        the lowest identifiable quantity (such as a capsule or tablet, 
        milligram of molecules, or grams) of the drug that is 
        dispensed.

``SEC. 1192. SELECTION OF NEGOTIATION-ELIGIBLE DRUGS AS SELECTED DRUGS.

  ``(a) In General.--Not later than the selected drug publication date 
with respect to an initial price applicability year, the Secretary 
shall select and publish in the Federal Register a list of--
          ``(1)(A) with respect to an initial price applicability year 
        during the period beginning with 2023 and ending with 2027, at 
        least 25 negotiation-eligible drugs described in subparagraphs 
        (A) and (B), but not subparagraph (C), of subsection (d)(1) 
        (or, with respect to an initial price applicability year during 
        such period beginning after 2023, the maximum number (if such 
        number is less than 25) of such negotiation-eligible drugs for 
        the year) with respect to such year;
          ``(B) with respect to an initial price applicability year 
        during the period beginning with 2028 and ending with 2032, at 
        least 30 negotiation-eligible drugs described in subparagraphs 
        (A) and (B), but not subparagraph (C), of subsection (d)(1) 
        (or, with respect to an initial price applicability year during 
        such period, the maximum number (if such number is less than 
        30) of such negotiation-eligible drugs for the year) with 
        respect to such year; and
          ``(C) with respect to an initial price applicability year 
        beginning after 2032, at least 35 negotiation-eligible drugs 
        described in subparagraphs (A) and (B), but not subparagraph 
        (C), of subsection (d)(1) (or, with respect to an initial price 
        applicability year during such period, the maximum number (if 
        such number is less than 35) of such negotiation-eligible drugs 
        for the year) with respect to such year;
          ``(2) all negotiation-eligible drugs described in 
        subparagraph (C) of such subsection with respect to such year; 
        and
          ``(3) all new-entrant negotiation-eligible drugs (as defined 
        in subsection (g)(1)) with respect to such year.
Each drug published on the list pursuant to the previous sentence shall 
be subject to the negotiation process under section 1194 for the 
voluntary negotiation period with respect to such initial price 
applicability year (and the renegotiation process under such section as 
applicable for any subsequent year during the applicable price 
applicability period). In applying this subsection, any negotiation-
eligible drug that is selected under this subsection for an initial 
price applicability year shall not count toward the required minimum 
amount of drugs to be selected under paragraph (1) for any subsequent 
year, including such a drug so selected that is subject to 
renegotiation under section 1194.
  ``(b) Selection of Drugs.--In carrying out subsection (a)(1) the 
Secretary shall select for inclusion on the published list described in 
subsection (a) with respect to a price applicability period, the 
negotiation-eligible drugs that the Secretary projects will result in 
the greatest savings to the Federal Government or fair price eligible 
individuals during the price applicability period. In making this 
projection of savings for drugs for which there is an AIM price for a 
price applicability period, the savings shall be projected across 
different dosage forms and strengths of the drugs and not based on the 
specific formulation or package size or package type of the drugs, 
taking into consideration both the volume of drugs for which payment is 
made, to the extent such data is available, and the amount by which the 
net price for the drugs exceeds the AIM price for the drugs.
  ``(c) Selected Drug.--For purposes of this part, each drug included 
on the list published under subsection (a) with respect to an initial 
price applicability year shall be referred to as a `selected drug' with 
respect to such year and each subsequent plan year beginning before the 
first plan year beginning after the date on which the Secretary 
determines two or more drug products--
          ``(1) are approved or licensed (as applicable)--
                  ``(A) under section 505(j) of the Federal Food, Drug, 
                and Cosmetic Act using such drug as the listed drug; or
                  ``(B) under section 351(k) of the Public Health 
                Service Act using such drug as the reference product; 
                and
          ``(2) continue to be marketed.
  ``(d) Negotiation-Eligible Drug.--
          ``(1) In general.--For purposes of this part, the term 
        `negotiation-eligible drug' means, with respect to the selected 
        drug publication date with respect to an initial price 
        applicability year, a qualifying single source drug, as defined 
        in subsection (e), that meets any of the following criteria:
                  ``(A) Covered part d drugs.--The drug is among the 
                125 covered part D drugs (as defined in section 1860D-
                2(e)) for which there was an estimated greatest net 
                spending under parts C and D of title XVIII, as 
                determined by the Secretary, during the most recent 
                plan year prior to such drug publication date for which 
                data are available.
                  ``(B) Other drugs.--The drug is among the 125 drugs 
                for which there was an estimated greatest net spending 
                in the United States (including the 50 States, the 
                District of Columbia, and the territories of the United 
                States), as determined by the Secretary, during the 
                most recent plan year prior to such drug publication 
                date for which data are available.
                  ``(C) Insulin.--The drug is a qualifying single 
                source drug described in subsection (e)(3).
          ``(2) Clarification.--In determining whether a qualifying 
        single source drug satisfies any of the criteria described in 
        paragraph (1), the Secretary shall, to the extent practicable, 
        use data that is aggregated across dosage forms and strengths 
        of the drug and not based on the specific formulation or 
        package size or package type of the drug.
          ``(3) Publication.--Not later than the selected drug 
        publication date with respect to an initial price applicability 
        year, the Secretary shall publish in the Federal Register a 
        list of negotiation-eligible drugs with respect to such 
        selected drug publication date.
  ``(e) Qualifying Single Source Drug.--For purposes of this part, the 
term `qualifying single source drug' means any of the following:
          ``(1) Drug products.--A drug that--
                  ``(A) is approved under section 505(c) of the Federal 
                Food, Drug, and Cosmetic Act and continues to be 
                marketed pursuant to such approval; and
                  ``(B) is not the listed drug for any drug that is 
                approved and continues to be marketed under section 
                505(j) of such Act.
          ``(2) Biological products.--A biological product that--
                  ``(A) is licensed under section 351(a) of the Public 
                Health Service Act, including any product that has been 
                deemed to be licensed under section 351 of such Act 
                pursuant to section 7002(e)(4) of the Biologics Price 
                Competition and Innovation Act of 2009, and continues 
                to be marketed under section 351 of such Act; and
                  ``(B) is not the reference product for any biological 
                product that is licensed and continues to be marketed 
                under section 351(k) of such Act.
          ``(3) Insulin product.--Notwithstanding paragraphs (1) and 
        (2), any insulin product that is approved under subsection (c) 
        or (j) of section 505 of the Federal Food, Drug, and Cosmetic 
        Act or licensed under subsection (a) or (k) of section 351 of 
        the Public Health Service Act and continues to be marketed 
        under such section 505 or 351, including any insulin product 
        that has been deemed to be licensed under section 351(a) of the 
        Public Health Service Act pursuant to section 7002(e)(4) of the 
        Biologics Price Competition and Innovation Act of 2009 and 
        continues to be marketed pursuant to such licensure.
For purposes of applying paragraphs (1) and (2), a drug or biological 
product that is marketed by the same sponsor or manufacturer (or an 
affiliate thereof or a cross-licensed producer or distributor) as the 
listed drug or reference product described in such respective paragraph 
shall not be taken into consideration.
  ``(f) Information on International Drug Prices.--For purposes of 
determining which negotiation-eligible drugs to select under subsection 
(a) and, in the case of such drugs that are selected drugs, to 
determine the maximum fair price for such a drug and whether such 
maximum fair price should be renegotiated under section 1194, the 
Secretary shall use data relating to the AIM price with respect to such 
drug as available or provided to the Secretary and shall on an ongoing 
basis request from manufacturers of selected drugs information on the 
AIM price of such a drug.
  ``(g) New-entrant Negotiation-eligible Drugs.--
          ``(1) In general.--For purposes of this part, the term `new-
        entrant negotiation-eligible drug' means, with respect to the 
        selected drug publication date with respect to an initial price 
        applicability year, a qualifying single source drug--
                  ``(A) that is first approved or licensed, as 
                described in paragraph (1), (2), or (3) of subsection 
                (e), as applicable, during the year preceding such 
                selected drug publication date; and
                  ``(B) that the Secretary determines under paragraph 
                (2) is likely to be a negotiation-eligible drug with 
                respect to the subsequent selected drug publication 
                date.
          ``(2) Determination.--In the case of a qualifying single 
        source drug that meets the criteria described in subparagraphs 
        (A) and (B) of paragraph (1), with respect to an initial price 
        applicability year, if the wholesale acquisition cost at which 
        such drug is first marketed in the United States is equal to or 
        greater than the median household income (as determined 
        according to the most recent data collected by the United 
        States Census Bureau), the Secretary shall determine before the 
        selected drug publication date with respect to the initial 
        price applicability year, if the drug is likely to be included 
        as a negotiation-eligible drug with respect to the subsequent 
        selected drug publication date, based on the projected spending 
        under title XVIII or in the United States on such drug. For 
        purposes of this paragraph the term `United States' includes 
        the 50 States, the District of Columbia, and the territories of 
        the United States.

``SEC. 1193. MANUFACTURER AGREEMENTS.

  ``(a) In General.--For purposes of section 1191(a)(2), the Secretary 
shall enter into agreements with manufacturers of selected drugs with 
respect to a price applicability period, by not later than June 15 
following the selected drug publication date with respect to such 
selected drug, under which--
          ``(1) during the voluntary negotiation period for the initial 
        price applicability year for the selected drug, the Secretary 
        and manufacturer, in accordance with section 1194, negotiate to 
        determine (and, by not later than the last date of such period 
        and in accordance with subsection (c), agree to) a maximum fair 
        price for such selected drug of the manufacturer in order to 
        provide access to such price--
                  ``(A) to fair price eligible individuals who with 
                respect to such drug are described in subparagraph (A) 
                of section 1191(c)(1) and are furnished or dispensed 
                such drug during, subject to subparagraph (2), the 
                price applicability period; and
                  ``(B) to hospitals, physicians, and other providers 
                of services and suppliers with respect to fair price 
                eligible individuals who with respect to such drug are 
                described in subparagraph (B) of such section and are 
                furnished or administered such drug during, subject to 
                subparagraph (2), the price applicability period;
          ``(2) the Secretary and the manufacturer shall, in accordance 
        with a process and during a period specified by the Secretary 
        pursuant to rulemaking, renegotiate (and, by not later than the 
        last date of such period and in accordance with subsection (c), 
        agree to) the maximum fair price for such drug if the Secretary 
        determines that there is a material change in any of the 
        factors described in section 1194(d) relating to the drug, 
        including changes in the AIM price for such drug, in order to 
        provide access to such maximum fair price (as so 
        renegotiated)--
                  ``(A) to fair price eligible individuals who with 
                respect to such drug are described in subparagraph (A) 
                of section 1191(c)(1) and are furnished or dispensed 
                such drug during any year during the price 
                applicability period (beginning after such 
                renegotiation) with respect to such selected drug; and
                  ``(B) to hospitals, physicians, and other providers 
                of services and suppliers with respect to fair price 
                eligible individuals who with respect to such drug are 
                described in subparagraph (B) of such section and are 
                furnished or administered such drug during any year 
                described in subparagraph (A);
          ``(3) the maximum fair price (including as renegotiated 
        pursuant to paragraph (2)), with respect to such a selected 
        drug, shall be provided to fair price eligible individuals, who 
        with respect to such drug are described in subparagraph (A) of 
        section 1191(c)(1), at the pharmacy or by a mail order service 
        at the point-of-sale of such drug;
          ``(4) the manufacturer, subject to subsection (c), submits to 
        the Secretary, in a form and manner specified by the 
        Secretary--
                  ``(A) for the voluntary negotiation period for the 
                price applicability period (and, if applicable, before 
                any period of renegotiation specified pursuant to 
                paragraph (2)) with respect to such drug all 
                information that the Secretary requires to carry out 
                the negotiation (or renegotiation process) under this 
                part, including information described in section 
                1192(f) and section 1194(d)(1); and
                  ``(B) on an ongoing basis, information on changes in 
                prices for such drug that would affect the AIM price 
                for such drug or otherwise provide a basis for 
                renegotiation of the maximum fair price for such drug 
                pursuant to paragraph (2);
          ``(5) the manufacturer agrees that in the case the selected 
        drug of a manufacturer is a drug described in subsection (c), 
        the manufacturer will, in accordance with such subsection, make 
        any payment required under such subsection with respect to such 
        drug; and
          ``(6) the manufacturer complies with requirements imposed by 
        the Secretary for purposes of administering the program, 
        including with respect to the duties described in section 1196.
  ``(b) Agreement in Effect Until Drug Is No Longer a Selected Drug.--
An agreement entered into under this section shall be effective, with 
respect to a drug, until such drug is no longer considered a selected 
drug under section 1192(c).
  ``(c) Special Rule for Certain Selected Drugs Without AIM Price.--
          ``(1) In general.--In the case of a selected drug for which 
        there is no AIM price available with respect to the initial 
        price applicability year for such drug and for which an AIM 
        price becomes available beginning with respect to a subsequent 
        plan year during the price applicability period for such drug, 
        if the Secretary determines that the amount described in 
        paragraph (2)(A) for a unit of such drug is greater than the 
        amount described in paragraph (2)(B) for a unit of such drug, 
        then by not later than one year after the date of such 
        determination, the manufacturer of such selected drug shall pay 
        to the Treasury an amount equal to the product of--
                  ``(A) the difference between such amount described in 
                paragraph (2)(A) for a unit of such drug and such 
                amount described in paragraph (2)(B) for a unit of such 
                drug; and
                  ``(B) the number of units of such drug sold in the 
                United States, including the 50 States, the District of 
                Columbia, and the territories of the United States, 
                during the period described in paragraph (2)(B).
          ``(2) Amounts described.--
                  ``(A) Weighted average price before aim price 
                available.--For purposes of paragraph (1), the amount 
                described in this subparagraph for a selected drug 
                described in such paragraph, is the amount equal to the 
                weighted average manufacturer price (as defined in 
                section 1927(k)(1)) for such dosage strength and form 
                for the drug during the period beginning with the first 
                plan year for which the drug is included on the list of 
                negotiation-eligible drugs published under section 
                1192(d) and ending with the last plan year during the 
                price applicability period for such drug with respect 
                to which there is no AIM price available for such drug.
                  ``(B) Amount multiplier after aim price available.--
                For purposes of paragraph (1), the amount described in 
                this subparagraph for a selected drug described in such 
                paragraph, is the amount equal to 200 percent of the 
                AIM price for such drug with respect to the first plan 
                year during the price applicability period for such 
                drug with respect to which there is an AIM price 
                available for such drug.
  ``(d) Confidentiality of Information.--Information submitted to the 
Secretary under this part by a manufacturer of a selected drug that is 
proprietary information of such manufacturer (as determined by the 
Secretary) may be used only by the Secretary or disclosed to and used 
by the Comptroller General of the United States or the Medicare Payment 
Advisory Commission for purposes of carrying out this part.
  ``(e) Regulations.--
          ``(1) In general.--The Secretary shall, pursuant to 
        rulemaking, specify, in accordance with paragraph (2), the 
        information that must be submitted under subsection (a)(4).
          ``(2) Information specified.--Information described in 
        paragraph (1), with respect to a selected drug, shall include 
        information on sales of the drug (by the manufacturer of the 
        drug or by another entity under license or other agreement with 
        the manufacturer, with respect to the sales of such drug, 
        regardless of the name under which the drug is sold) in any 
        foreign country that is part of the AIM price. The Secretary 
        shall verify, to the extent practicable, such sales from 
        appropriate officials of the government of the foreign country 
        involved.
  ``(f) Compliance With Requirements for Administration of Program.--
Each manufacturer with an agreement in effect under this section shall 
comply with requirements imposed by the Secretary or a third party with 
a contract under section 1196(c)(1), as applicable, for purposes of 
administering the program.

``SEC. 1194. NEGOTIATION AND RENEGOTIATION PROCESS.

  ``(a) In General.--For purposes of this part, under an agreement 
under section 1193 between the Secretary and a manufacturer of a 
selected drug, with respect to the period for which such agreement is 
in effect and in accordance with subsections (b) and (c), the Secretary 
and the manufacturer--
          ``(1) shall during the voluntary negotiation period with 
        respect to the initial price applicability year for such drug, 
        in accordance with this section, negotiate a maximum fair price 
        for such drug for the purpose described in section 1193(a)(1); 
        and
          ``(2) as applicable pursuant to section 1193(a)(2) and in 
        accordance with the process specified pursuant to such section, 
        renegotiate such maximum fair price for such drug for the 
        purpose described in such section.
  ``(b) Negotiating Methodology and Objective.--
          ``(1) In general.--The Secretary shall develop and use a 
        consistent methodology for negotiations under subsection (a) 
        that, in accordance with paragraph (2) and subject to paragraph 
        (3), achieves the lowest maximum fair price for each selected 
        drug while appropriately rewarding innovation.
          ``(2) Prioritizing factors.--In considering the factors 
        described in subsection (d) in negotiating (and, as applicable, 
        renegotiating) the maximum fair price for a selected drug, the 
        Secretary shall, to the extent practicable, consider all of the 
        available factors listed but shall prioritize the following 
        factors:
                  ``(A) Research and development costs.--The factor 
                described in paragraph (1)(A) of subsection (d).
                  ``(B) Market data.--The factor described in paragraph 
                (1)(B) of such subsection.
                  ``(C) Unit costs of production and distribution.--The 
                factor described in paragraph (1)(C) of such 
                subsection.
                  ``(D) Comparison to existing therapeutic 
                alternatives.--The factor described in paragraph (2)(A) 
                of such subsection.
          ``(3) Requirement.--
                  ``(A) In general.--In negotiating the maximum fair 
                price of a selected drug, with respect to an initial 
                price applicability year for the selected drug, and, as 
                applicable, in renegotiating the maximum fair price for 
                such drug, with respect to a subsequent year during the 
                price applicability period for such drug, in the case 
                that the manufacturer of the selected drug offers under 
                the negotiation or renegotiation, as applicable, a 
                price for such drug that is not more than the target 
                price described in subparagraph (B) for such drug for 
                the respective year, the Secretary shall agree under 
                such negotiation or renegotiation, respectively, to 
                such offered price as the maximum fair price.
                  ``(B) Target price.--
                          ``(i) In general.--Subject to clause (ii), 
                        the target price described in this subparagraph 
                        for a selected drug with respect to a year, is 
                        the average price (which shall be the net 
                        average price, if practicable, and volume-
                        weighted, if practicable) for a unit of such 
                        drug for sales of such drug, as computed 
                        (across different dosage forms and strengths of 
                        the drug and not based on the specific 
                        formulation or package size or package type of 
                        the drug) in the applicable country described 
                        in section 1191(c)(3)(B) with respect to such 
                        drug that, with respect to such year, has the 
                        lowest average price for such drug as compared 
                        to the average prices (as so computed) of such 
                        drug with respect to such year in the other 
                        applicable countries described in such section 
                        with respect to such drug.
                          ``(ii) Selected drugs without aim price.--In 
                        applying this paragraph in the case of 
                        negotiating the maximum fair price of a 
                        selected drug for which there is no AIM price 
                        available with respect to the initial price 
                        applicability year for such drug, or, as 
                        applicable, renegotiating the maximum fair 
                        price for such drug with respect to a 
                        subsequent year during the price applicability 
                        period for such drug before the first plan year 
                        for which there is an AIM price available for 
                        such drug, the target price described in this 
                        subparagraph for such drug and respective year 
                        is the amount that is 80 percent of the average 
                        manufacturer price (as defined in section 
                        1927(k)(1)) for such drug and year.
          ``(4) Annual report.--After the completion of each voluntary 
        negotiation period, the Secretary shall submit to Congress a 
        report on the maximum fair prices negotiated (or, as 
        applicable, renegotiated) for such period. Such report shall 
        include information on how such prices so negotiated (or 
        renegotiated) meet the requirements of this part, including the 
        requirements of this subsection.
  ``(c) Limitation.--
          ``(1) In general.--Subject to paragraph (2), the maximum fair 
        price negotiated (including as renegotiated) under this section 
        for a selected drug, with respect to each plan year during a 
        price applicability period for such drug, shall not exceed 120 
        percent of the AIM price applicable to such drug with respect 
        to such year.
          ``(2) Selected drugs without aim price.--In the case of a 
        selected drug for which there is no AIM price available with 
        respect to the initial price applicability year for such drug, 
        for each plan year during the price applicability period before 
        the first plan year for which there is an AIM price available 
        for such drug, the maximum fair price negotiated (including as 
        renegotiated) under this section for the selected drug shall 
        not exceed the amount equal to 85 percent of the average 
        manufacturer price for the drug with respect to such year.
  ``(d) Considerations.--For purposes of negotiating and, as 
applicable, renegotiating (including for purposes of determining 
whether to renegotiate) the maximum fair price of a selected drug under 
this part with the manufacturer of the drug, the Secretary shall, 
consistent with subsection (b)(2), take into consideration the 
following factors:
          ``(1) Manufacturer-specific information.--The following 
        information, including as submitted by the manufacturer:
                  ``(A) Research and development costs of the 
                manufacturer for the drug and the extent to which the 
                manufacturer has recouped research and development 
                costs.
                  ``(B) Market data for the drug, including the 
                distribution of sales across different programs and 
                purchasers and projected future revenues for the drug.
                  ``(C) Unit costs of production and distribution of 
                the drug.
                  ``(D) Prior Federal financial support for novel 
                therapeutic discovery and development with respect to 
                the drug.
                  ``(E) Data on patents and on existing and pending 
                exclusivity for the drug.
                  ``(F) National sales data for the drug.
                  ``(G) Information on clinical trials for the drug in 
                the United States or in applicable countries described 
                in section 1191(c)(3)(B).
          ``(2) Information on alternative products.--The following 
        information:
                  ``(A) The extent to which the drug represents a 
                therapeutic advance as compared to existing therapeutic 
                alternatives and, to the extent such information is 
                available, the costs of such existing therapeutic 
                alternatives.
                  ``(B) Information on approval by the Food and Drug 
                Administration of alternative drug products.
                  ``(C) Information on comparative effectiveness 
                analysis for such products, taking into consideration 
                the effects of such products on specific populations, 
                such as individuals with disabilities, the elderly, 
                terminally ill, children, and other patient 
                populations.
        In considering information described in subparagraph (C), the 
        Secretary shall not use evidence or findings from comparative 
        clinical effectiveness research in a manner that treats 
        extending the life of an elderly, disabled, or terminally ill 
        individual as of lower value than extending the life of an 
        individual who is younger, nondisabled, or not terminally ill. 
        Nothing in the previous sentence shall affect the application 
        or consideration of an AIM price for a selected drug.
          ``(3) Foreign sales information.--To the extent available on 
        a timely basis, including as provided by a manufacturer of the 
        selected drug or otherwise, information on sales of the 
        selected drug in each of the countries described in section 
        1191(c)(3)(B).
          ``(4) Additional information.--Information submitted to the 
        Secretary, in accordance with a process specified by the 
        Secretary, by other parties that are affected by the 
        establishment of a maximum fair price for the selected drug.
  ``(e) Request for Information.--For purposes of negotiating and, as 
applicable, renegotiating (including for purposes of determining 
whether to renegotiate) the maximum fair price of a selected drug under 
this part with the manufacturer of the drug, with respect to a price 
applicability period, and other relevant data for purposes of this 
section--
          ``(1) the Secretary shall, not later than the selected drug 
        publication date with respect to the initial price 
        applicability year of such period, request drug pricing 
        information from the manufacturer of such selected drug, 
        including information described in subsection (d)(1); and
          ``(2) by not later than October 1 following the selected drug 
        publication date, the manufacturer of such selected drug shall 
        submit to the Secretary such requested information in such form 
        and manner as the Secretary may require.
The Secretary shall request, from the manufacturer or others, such 
additional information as may be needed to carry out the negotiation 
and renegotiation process under this section.

``SEC. 1195. PUBLICATION OF MAXIMUM FAIR PRICES.

  ``(a) In General.--With respect to an initial price applicability 
year and selected drug with respect to such year, not later than April 
1 of the plan year prior to such initial price applicability year, the 
Secretary shall publish in the Federal Register the maximum fair price 
for such drug negotiated under this part with the manufacturer of such 
drug.
  ``(b) Updates.--
          ``(1) Subsequent year maximum fair prices.--For a selected 
        drug, for each plan year subsequent to the initial price 
        applicability year for such drug with respect to which an 
        agreement for such drug is in effect under section 1193, the 
        Secretary shall publish in the Federal Register--
                  ``(A) subject to subparagraph (B), the amount equal 
                to the maximum fair price published for such drug for 
                the previous year, increased by the annual percentage 
                increase in the consumer price index for all urban 
                consumers (all items; U.S. city average) as of 
                September of such previous year; or
                  ``(B) in the case the maximum fair price for such 
                drug was renegotiated, for the first year for which 
                such price as so renegotiated applies, such 
                renegotiated maximum fair price.
          ``(2) Prices negotiated after deadline.--In the case of a 
        selected drug with respect to an initial price applicability 
        year for which the maximum fair price is determined under this 
        part after the date of publication under this section, the 
        Secretary shall publish such maximum fair price in the Federal 
        Register by not later than 30 days after the date such maximum 
        price is so determined.

``SEC. 1196. ADMINISTRATIVE DUTIES; COORDINATION PROVISIONS.

  ``(a) Administrative Duties.--
          ``(1) In general.--For purposes of section 1191, the 
        administrative duties described in this section are the 
        following:
                  ``(A) The establishment of procedures (including 
                through agreements with manufacturers under this part, 
                contracts with prescription drug plans under part D of 
                title XVIII and MA-PD plans under part C of such title, 
                and agreements under section 1197 with group health 
                plans and health insurance issuers of health insurance 
                coverage offered in the individual or group market) 
                under which the maximum fair price for a selected drug 
                is provided to fair price eligible individuals, who 
                with respect to such drug are described in subparagraph 
                (A) of section 1191(c)(1), at pharmacies or by mail 
                order service at the point-of-sale of the drug for the 
                applicable price period for such drug and providing 
                that such maximum fair price is used for determining 
                cost-sharing under such plans or coverage for the 
                selected drug.
                  ``(B) The establishment of procedures (including 
                through agreements with manufacturers under this part 
                and contracts with hospitals, physicians, and other 
                providers of services and suppliers and agreements 
                under section 1197 with group health plans and health 
                insurance issuers of health insurance coverage offered 
                in the individual or group market) under which, in the 
                case of a selected drug furnished or administered by 
                such a hospital, physician, or other provider of 
                services or supplier to fair price eligible individuals 
                (who with respect to such drug are described in 
                subparagraph (B) of section 1191(c)(1)), the maximum 
                fair price for the selected drug is provided to such 
                hospitals, physicians, and other providers of services 
                and suppliers (as applicable) with respect to such 
                individuals and providing that such maximum fair price 
                is used for determining cost-sharing under the 
                respective part, plan, or coverage for the selected 
                drug.
                  ``(C) The establishment of procedures (including 
                through agreements and contracts described in 
                subparagraphs (A) and (B)) to ensure that, not later 
                than 90 days after the dispensing of a selected drug to 
                a fair price eligible individual by a pharmacy or mail 
                order service, the pharmacy or mail order service is 
                reimbursed for an amount equal to the difference 
                between--
                          ``(i) the lesser of--
                                  ``(I) the wholesale acquisition cost 
                                of the drug;
                                  ``(II) the national average drug 
                                acquisition cost of the drug; and
                                  ``(III) any other similar 
                                determination of pharmacy acquisition 
                                costs of the drug, as determined by the 
                                Secretary; and
                          ``(ii) the maximum fair price for the drug.
                  ``(D) The establishment of procedures to ensure that 
                the maximum fair price for a selected drug is applied 
                before--
                          ``(i) any coverage or financial assistance 
                        under other health benefit plans or programs 
                        that provide coverage or financial assistance 
                        for the purchase or provision of prescription 
                        drug coverage on behalf of fair price eligible 
                        individuals as the Secretary may specify; and
                          ``(ii) any other discounts.
                  ``(E) The establishment of procedures to enter into 
                appropriate agreements and protocols for the ongoing 
                computation of AIM prices for selected drugs, 
                including, to the extent possible, to compute the AIM 
                price for selected drugs and including by providing 
                that the manufacturer of such a selected drug should 
                provide information for such computation not later than 
                3 months after the first date of the voluntary 
                negotiation period for such selected drug.
                  ``(F) The establishment of procedures to compute and 
                apply the maximum fair price across different strengths 
                and dosage forms of a selected drug and not based on 
                the specific formulation or package size or package 
                type of the drug.
                  ``(G) The establishment of procedures to negotiate 
                and apply the maximum fair price in a manner that does 
                not include any dispensing or similar fee.
                  ``(H) The establishment of procedures to carry out 
                the provisions of this part, as applicable, with 
                respect to--
                          ``(i) fair price eligible individuals who are 
                        enrolled under a prescription drug plan under 
                        part D of title XVIII or an MA-PD plan under 
                        part C of such title; and
                          ``(ii) fair price eligible individuals who 
                        are enrolled under a group health plan or 
                        health insurance coverage offered by a health 
                        insurance issuer in the individual or group 
                        market with respect to which there is an 
                        agreement in effect under section 1197.
                  ``(I) The establishment of a negotiation process and 
                renegotiation process in accordance with section 1194, 
                including a process for acquiring information described 
                in subsection (d) of such section and determining 
                amounts described in subsection (b) of such section.
                  ``(J) The provision of a reasonable dispute 
                resolution mechanism to resolve disagreements between 
                manufacturers, fair price eligible individuals, and the 
                third party with a contract under subsection (c)(1).
          ``(2) Monitoring compliance.--
                  ``(A) In general.--The Secretary shall monitor 
                compliance by a manufacturer with the terms of an 
                agreement under section 1193, including by establishing 
                a mechanism through which violations of such terms may 
                be reported.
                  ``(B) Notification.--If a third party with a contract 
                under subsection (c)(1) determines that the 
                manufacturer is not in compliance with such agreement, 
                the third party shall notify the Secretary of such 
                noncompliance for appropriate enforcement under section 
                4192 of the Internal Revenue Code of 1986 or section 
                1198, as applicable.
  ``(b) Collection of Data.--
          ``(1) From prescription drug plans and ma-pd plans.--The 
        Secretary may collect appropriate data from prescription drug 
        plans under part D of title XVIII and MA-PD plans under part C 
        of such title in a timeframe that allows for maximum fair 
        prices to be provided under this part for selected drugs.
          ``(2) From health plans.--The Secretary may collect 
        appropriate data from group health plans or health insurance 
        issuers offering group or individual health insurance coverage 
        in a timeframe that allows for maximum fair prices to be 
        provided under this part for selected drugs.
          ``(3) Coordination of data collection.--To the extent 
        feasible, as determined by the Secretary, the Secretary shall 
        ensure that data collected pursuant to this subsection is 
        coordinated with, and not duplicative of, other data collection 
        efforts.
  ``(c) Contract With Third Parties.--
          ``(1) In general.--The Secretary may enter into a contract 
        with 1 or more third parties to administer the requirements 
        established by the Secretary in order to carry out this part. 
        At a minimum, the contract with a third party under the 
        preceding sentence shall require that the third party--
                  ``(A) receive and transmit information between the 
                Secretary, manufacturers, and other individuals or 
                entities the Secretary determines appropriate;
                  ``(B) receive, distribute, or facilitate the 
                distribution of funds of manufacturers to appropriate 
                individuals or entities in order to meet the 
                obligations of manufacturers under agreements under 
                this part;
                  ``(C) provide adequate and timely information to 
                manufacturers, consistent with the agreement with the 
                manufacturer under this part, as necessary for the 
                manufacturer to fulfill its obligations under this 
                part; and
                  ``(D) permit manufacturers to conduct periodic 
                audits, directly or through contracts, of the data and 
                information used by the third party to determine 
                discounts for applicable drugs of the manufacturer 
                under the program.
          ``(2) Performance requirements.--The Secretary shall 
        establish performance requirements for a third party with a 
        contract under paragraph (1) and safeguards to protect the 
        independence and integrity of the activities carried out by the 
        third party under the program under this part.
  ``(d) Coordination With 340B Program.--In the case of a manufacturer 
of a selected drug, with respect to an initial price applicability 
year, for each year with respect to which a maximum fair price is 
applied under this part for such drug, such drug shall not be 
considered a covered outpatient drug subject to an agreement under 
section 340B of the Public Health Service Act.

``SEC. 1197. VOLUNTARY PARTICIPATION BY OTHER HEALTH PLANS.

  ``(a) Agreement to Participate Under Program.--
          ``(1) In general.--Subject to paragraph (2), under the 
        program under this part the Secretary shall be treated as 
        having in effect an agreement with a group health plan or 
        health insurance issuer offering health insurance coverage (as 
        such terms are defined in section 2791 of the Public Health 
        Service Act), with respect to a price applicability period and 
        a selected drug with respect to such period--
                  ``(A) with respect to such selected drug furnished or 
                dispensed at a pharmacy or by mail order service if 
                coverage is provided under such plan or coverage during 
                such period for such selected drug as so furnished or 
                dispensed; and
                  ``(B) with respect to such selected drug furnished or 
                administered by a hospital, physician, or other 
                provider of services or supplier if coverage is 
                provided under such plan or coverage during such period 
                for such selected drug as so furnished or administered.
          ``(2) Opting out of agreement.--The Secretary shall not be 
        treated as having in effect an agreement under the program 
        under this part with a group health plan or health insurance 
        issuer offering health insurance coverage with respect to a 
        price applicability period and a selected drug with respect to 
        such period if such a plan or issuer affirmatively elects, 
        through a process specified by the Secretary, not to 
        participate under the program with respect to such period and 
        drug.
  ``(b) Publication of Election.--With respect to each price 
applicability period and each selected drug with respect to such 
period, the Secretary and the Secretary of Labor and the Secretary of 
the Treasury, as applicable, shall make public a list of each group 
health plan and each issuer of health insurance coverage, with respect 
to which coverage is provided under such plan or coverage for such 
drug, that has elected under subsection (a) not to participate under 
the program with respect to such period and drug.

``SEC. 1198. CIVIL MONETARY PENALTY.

  ``(a) Violations Relating To Offering of Maximum Fair Price.--Any 
manufacturer of a selected drug that has entered into an agreement 
under section 1193, with respect to a plan year during the price 
applicability period for such drug, that does not provide access to a 
price that is not more than the maximum fair price (or a lesser price) 
for such drug for such year--
          ``(1) to a fair price eligible individual who with respect to 
        such drug is described in subparagraph (A) of section 
        1191(c)(1) and who is furnished or dispensed such drug during 
        such year; or
          ``(2) to a hospital, physician, or other provider of services 
        or supplier with respect to fair price eligible individuals who 
        with respect to such drug is described in subparagraph (B) of 
        such section and is furnished or administered such drug by such 
        hospital, physician, or provider or supplier during such year;
shall be subject to a civil monetary penalty equal to ten times the 
amount equal to the difference between the price for such drug made 
available for such year by such manufacturer with respect to such 
individual or hospital, physician, provider, or supplier and the 
maximum fair price for such drug for such year.
  ``(b) Violations of Certain Terms of Agreement.--Any manufacturer of 
a selected drug that has entered into an agreement under section 1193, 
with respect to a plan year during the price applicability period for 
such drug, that is in violation of a requirement imposed pursuant to 
section 1193(a)(6) shall be subject to a civil monetary penalty of not 
more than $1,000,000 for each such violation.
  ``(c) Application.--The provisions of section 1128A (other than 
subsections (a) and (b)) shall apply to a civil monetary penalty under 
this section in the same manner as such provisions apply to a penalty 
or proceeding under section 1128A(a).

``SEC. 1199. MISCELLANEOUS PROVISIONS.

  ``(a) Paperwork Reduction Act.--Chapter 35 of title 44, United States 
Code, shall not apply to data collected under this part.
  ``(b) National Academy of Medicine Study.--Not later than December 
31, 2025, the National Academy of Medicine shall conduct a study, and 
submit to Congress a report, on recommendations for improvements to the 
program under this part, including the determination of the limits 
applied under section 1194(c).
  ``(c) MedPAC Study.--Not later than December 31, 2025, the Medicare 
Payment Advisory Commission shall conduct a study, and submit to 
Congress a report, on the program under this part with respect to the 
Medicare program under title XVIII, including with respect to the 
effect of the program on individuals entitled to benefits or enrolled 
under such title.
  ``(d) Limitation on Judicial Review.--The following shall not be 
subject to judicial review:
          ``(1) The selection of drugs for publication under section 
        1192(a).
          ``(2) The determination of whether a drug is a negotiation-
        eligible drug under section 1192(d).
          ``(3) The determination of the maximum fair price of a 
        selected drug under section 1194.
          ``(4) The determination of units of a drug for purposes of 
        section 1191(c)(3).
  ``(e) Coordination.--In carrying out this part with respect to group 
health plans or health insurance coverage offered in the group market 
that are subject to oversight by the Secretary of Labor or the 
Secretary of the Treasury, the Secretary of Health and Human Services 
shall coordinate with such respective Secretary.
  ``(f) Data Sharing.--The Secretary shall share with the Secretary of 
the Treasury such information as is necessary to determine the tax 
imposed by section 4192 of the Internal Revenue Code of 1986.
  ``(g) GAO Study.--Not later than December 31, 2025, the Comptroller 
General of the United States shall conduct a study of, and submit to 
Congress a report on, the implementation of the Fair Price Negotiation 
Program under this part.
  ``(h) Inflation Rebate for Group Health Plans.--
          ``(1) In general.--Not later than December 31, 2021, the 
        Secretary of Labor shall, in consultation with the Secretary of 
        Health and Human Services and the Secretary of the Treasury, 
        submit to Congress a report on the feasibility of the Secretary 
        of Labor--
                  ``(A) establishing an agreement process with 
                manufacturers of prescription drugs under which 
                manufacturers provide for inflation rebates (in a 
                manner similar to rebates under section 1834(x) and 
                1860D-14B with respect to part B and part D drugs, 
                respectively) with respect to drugs that are furnished 
                or dispensed to participants, enrollees, and 
                beneficiaries of health insurance coverage in 
                connection with a group health plan; and
                  ``(B) establishing an enforcement mechanism with 
                respect to such agreement process that ensures that 
                such inflation rebates are, proportionally distributed, 
                with respect to costs, to--
                          ``(i) participants, enrollees, and 
                        beneficiaries of health insurance coverage 
                        offered in the group market; and
                          ``(ii) a health insurance issuer offering 
                        health insurance coverage in the group market.
          ``(2) Regulations.--Not later than December 31, 2022, the 
        Secretary of Labor shall, in consultation with the Secretary of 
        Health and Human Services and the Secretary of the Treasury, 
        promulgate regulations consistent with the information 
        contained in the report submitted pursuant to paragraph (1) 
        if--
                  ``(A) the Secretary of Labor determines the prices of 
                a sufficient number (as determined by the Secretary of 
                Labor) of drugs described in paragraph (1)(A) have 
                increased at a percentage that exceeds the percentage 
                by which the consumer price index for all urban 
                consumers (United States city average) for a period of 
                time (as determined by the Secretary of Labor); and
                  ``(B) the Secretary of Labor finds that the agreement 
                process identified pursuant to subparagraph (A) of 
                paragraph (1) and the enforcement mechanism identified 
                pursuant to subparagraph (B) of such paragraph are 
                feasible.''.
  (b) Application of Maximum Fair Prices and Conforming Amendments.--
          (1) Under medicare prescription drug program.--
                  (A) Exception to non-interference.--Section 1860D-
                11(i) of the Social Security Act (42 U.S.C. 1395w-
                111(i)) is amended by inserting ``, except as provided 
                under part E of title XI,'' after ``the Secretary''.
                  (B) Application as negotiated price.--Section 1860D-
                2(d)(1) of the Social Security Act (42 U.S.C. 1395w-
                102(d)(1)) is amended--
                          (i) in subparagraph (B), by inserting ``, 
                        subject to subparagraph (D),'' after 
                        ``negotiated prices''; and
                          (ii) by adding at the end the following new 
                        subparagraph:
                  ``(D) Application of maximum fair price for selected 
                drugs.--In applying this section, in the case of a 
                covered part D drug that is a selected drug (as defined 
                in section 1192(c)), with respect to a price 
                applicability period (as defined in section 
                1191(b)(2)), the negotiated price described in this 
                subsection shall be the maximum fair price (as defined 
                in section 1191(c)(2)) for such drug and for each plan 
                year during such period.''.
                  (C) Information from prescription drug plans and ma-
                pd plans required.--
                          (i) Prescription drug plans.--Section 1860D-
                        12(b) of the Social Security Act (42 U.S.C. 
                        1395w-112(b)) is amended by adding at the end 
                        the following new paragraph:
          ``(8) Provision of information related to maximum fair 
        prices.--Each contract entered into with a PDP sponsor under 
        this part with respect to a prescription drug plan offered by 
        such sponsor shall require the sponsor to provide information 
        to the Secretary as requested by the Secretary in accordance 
        with section 1196(b).''.
                          (ii) MA-PD plans.--Section 1857(f)(3) of the 
                        Social Security Act (42 U.S.C. 1395w-27(f)(3)) 
                        is amended by adding at the end the following 
                        new subparagraph:
                  ``(E) Provision of information related to maximum 
                fair prices.--Section 1860D-12(b)(8).''.
          (2) Under group health plans and health insurance coverage.--
                  (A) PHSA.--Part A of title XXVII of the Public Health 
                Service Act is amended by inserting after section 2729 
                the following new section:

``SEC. 2729A. FAIR PRICE DRUG NEGOTIATION PROGRAM AND APPLICATION OF 
                    MAXIMUM FAIR PRICES.

  ``(a) In General.--In the case of a group health plan or health 
insurance issuer offering health insurance coverage that is treated 
under section 1197 of the Social Security Act as having in effect an 
agreement with the Secretary under the Fair Price Drug Negotiation 
Program under part E of title XI of such Act, with respect to a price 
applicability period (as defined in section 1191(b) of such Act) and a 
selected drug (as defined in section 1192(c) of such Act) with respect 
to such period with respect to which coverage is provided under such 
plan or coverage--
          ``(1) the provisions of such part shall apply to the plans or 
        coverage offered by such plan or issuer, and to the individuals 
        enrolled under such plans or coverage, during such period, with 
        respect to such selected drug, in the same manner as such 
        provisions apply to prescription drug plans and MA-PD plans, 
        and to individuals enrolled under such prescription drug plans 
        and MA-PD plans;
          ``(2) the plan or issuer shall apply any cost-sharing 
        responsibilities under such plan or coverage, with respect to 
        such selected drug, by substituting the maximum fair price 
        negotiated under such part for such drug in lieu of the 
        contracted rate under such plan or coverage for such selected 
        drug; and
          ``(3) the Secretary shall apply the provisions of such part 
        to such plan, issuer, and coverage, and such individuals so 
        enrolled in such plans.
  ``(b) Notification Regarding Nonparticipation in Fair Drug Price 
Negotiation Program.--A group health plan or a health insurance issuer 
offering group or individual health insurance coverage shall publicly 
disclose in a manner and in accordance with a process specified by the 
Secretary any election made under section 1197 of the Social Security 
Act by the plan or issuer to not participate in the Fair Drug Price 
Negotiation Program under part E of title XI of such Act with respect 
to a selected drug (as defined in section 1192(c) of such Act) for 
which coverage is provided under such plan or coverage before the 
beginning of the plan year for which such election was made.''.
                  (B) ERISA.--
                          (i) In general.--Subpart B of part 7 of 
                        subtitle B of title I of the Employee 
                        Retirement Income Security Act of 1974 (29 
                        U.S.C. 1181 et. seq.) is amended by adding at 
                        the end the following new section:

``SEC. 716. FAIR PRICE DRUG NEGOTIATION PROGRAM AND APPLICATION OF 
                    MAXIMUM FAIR PRICES.

  ``(a) In General.--In the case of a group health plan or health 
insurance issuer offering group health insurance coverage that is 
treated under section 1197 of the Social Security Act as having in 
effect an agreement with the Secretary under the Fair Price Drug 
Negotiation Program under part E of title XI of such Act, with respect 
to a price applicability period (as defined in section 1191(b) of such 
Act) and a selected drug (as defined in section 1192(c) of such Act) 
with respect to such period with respect to which coverage is provided 
under such plan or coverage--
          ``(1) the provisions of such part shall apply, as 
        applicable--
                  ``(A) if coverage of such selected drug is provided 
                under such plan or coverage if the drug is furnished or 
                dispensed at a pharmacy or by a mail order service, to 
                the plans or coverage offered by such plan or issuer, 
                and to the individuals enrolled under such plans or 
                coverage, during such period, with respect to such 
                selected drug, in the same manner as such provisions 
                apply to prescription drug plans and MA-PD plans, and 
                to individuals enrolled under such prescription drug 
                plans and MA-PD plans during such period; and
                  ``(B) if coverage of such selected drug is provided 
                under such plan or coverage if the drug is furnished or 
                administered by a hospital, physician, or other 
                provider of services or supplier, to the plans or 
                coverage offered by such plan or issuers, to the 
                individuals enrolled under such plans or coverage, and 
                to hospitals, physicians, and other providers of 
                services and suppliers during such period, with respect 
                to such drug in the same manner as such provisions 
                apply to the Secretary, to individuals entitled to 
                benefits under part A of title XVIII or enrolled under 
                part B of such title, and to hospitals, physicians, and 
                other providers and suppliers participating under title 
                XVIII during such period;
          ``(2) the plan or issuer shall apply any cost-sharing 
        responsibilities under such plan or coverage, with respect to 
        such selected drug, by substituting an amount not more than the 
        maximum fair price negotiated under such part E of title XI for 
        such drug in lieu of the drug price upon which the cost-sharing 
        would have otherwise applied, and such cost-sharing 
        responsibilities with respect to such selected drug may not 
        exceed such amount; and
          ``(3) the Secretary shall apply the provisions of such part E 
        to such plan, issuer, and coverage, and such individuals so 
        enrolled in such plans.
  ``(b) Notification Regarding Nonparticipation in Fair Drug Price 
Negotiation Program.--A group health plan or a health insurance issuer 
offering group health insurance coverage shall publicly disclose in a 
manner and in accordance with a process specified by the Secretary any 
election made under section 1197 of the Social Security Act by the plan 
or issuer to not participate in the Fair Drug Price Negotiation Program 
under part E of title XI of such Act with respect to a selected drug 
(as defined in section 1192(c) of such Act) for which coverage is 
provided under such plan or coverage before the beginning of the plan 
year for which such election was made.''.
                          (ii) Application to retiree and certain small 
                        group health plans.--Section 732(a) of the 
                        Employee Retirement Income Security Act of 1974 
                        (29 U.S.C. 1191a(a)) is amended by striking 
                        ``section 711'' and inserting ``sections 711 
                        and 716''.
                          (iii) Clerical amendment.--The table of 
                        sections for subpart B of part 7 of subtitle B 
                        of title I of the Employee Retirement Income 
                        Security Act of 1974 is amended by adding at 
                        the end the following:

``Sec. 716. Fair Price Drug Negotiation Program and application of 
maximum fair prices.''.

                  (C) IRC.--
                          (i) In general.--Subchapter B of chapter 100 
                        of the Internal Revenue Code of 1986 is amended 
                        by adding at the end the following new section:

``SEC. 9816. FAIR PRICE DRUG NEGOTIATION PROGRAM AND APPLICATION OF 
                    MAXIMUM FAIR PRICES.

  ``(a) In General.--In the case of a group health plan that is treated 
under section 1197 of the Social Security Act as having in effect an 
agreement with the Secretary under the Fair Price Drug Negotiation 
Program under part E of title XI of such Act, with respect to a price 
applicability period (as defined in section 1191(b) of such Act) and a 
selected drug (as defined in section 1192(c) of such Act) with respect 
to such period with respect to which coverage is provided under such 
plan--
          ``(1) the provisions of such part shall apply to the plans 
        offered by such plan, and to the individuals enrolled under 
        such plans, during such period, with respect to such selected 
        drug, in the same manner as such provisions apply to 
        prescription drug plans and MA-PD plans, and to individuals 
        enrolled under such prescription drug plans and MA-PD plans;
          ``(2) the plan shall apply any cost-sharing responsibilities 
        under such plan, with respect to such selected drug, by 
        substituting the maximum fair price negotiated under such part 
        for such drug in lieu of the contracted rate under such plan 
        for such selected drug; and
          ``(3) the Secretary shall apply the provisions of such part 
        to such plan and such individuals so enrolled in such plan.
  ``(b) Notification Regarding Nonparticipation in Fair Drug Price 
Negotiation Program.--A group health plan shall publicly disclose in a 
manner and in accordance with a process specified by the Secretary any 
election made under section 1197 of the Social Security Act by the plan 
to not participate in the Fair Drug Price Negotiation Program under 
part E of title XI of such Act with respect to a selected drug (as 
defined in section 1192(c) of such Act) for which coverage is provided 
under such plan before the beginning of the plan year for which such 
election was made.''.
                          (ii) Clerical amendment.--The table of 
                        sections for subchapter B of chapter 100 of 
                        such Code is amended by adding at the end the 
                        following new item:

``Sec. 9816. Fair Price Drug Negotiation Program and application of 
maximum fair prices.''.

SEC. 102. SELECTED DRUG MANUFACTURER EXCISE TAX IMPOSED DURING 
                    NONCOMPLIANCE PERIODS.

  (a) In General.--Subchapter E of chapter 32 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new section:

``SEC. 4192. SELECTED DRUGS DURING NONCOMPLIANCE PERIODS.

  ``(a) In General.--There is hereby imposed on the sale by the 
manufacturer, producer, or importer of any selected drug during a day 
described in subsection (b) a tax in an amount such that the applicable 
percentage is equal to the ratio of--
          ``(1) such tax, divided by
          ``(2) the sum of such tax and the price for which so sold.
  ``(b) Noncompliance Periods.--A day is described in this subsection 
with respect to a selected drug if it is a day during one of the 
following periods:
          ``(1) The period beginning on the June 16th immediately 
        following the selected drug publication date and ending on the 
        first date during which the manufacturer of the drug has in 
        place an agreement described in subsection (a) of section 1193 
        of the Social Security Act with respect to such drug.
          ``(2) The period beginning on the April 1st immediately 
        following the June 16th described in paragraph (1) and ending 
        on the first date during which the manufacturer of the drug has 
        agreed to a maximum fair price under such agreement.
          ``(3) In the case of a selected drug with respect to which 
        the Secretary of Health and Human Services has specified a 
        renegotiation period under such agreement, the period beginning 
        on the first date after the last date of such renegotiation 
        period and ending on the first date during which the 
        manufacturer of the drug has agreed to a renegotiated maximum 
        fair price under such agreement.
          ``(4) With respect to information that is required to be 
        submitted to the Secretary of Health and Human Services under 
        such agreement, the period beginning on the date on which such 
        Secretary certifies that such information is overdue and ending 
        on the date that such information is so submitted.
          ``(5) In the case of a selected drug with respect to which a 
        payment is due under subsection (c) of such section 1193, the 
        period beginning on the date on which the Secretary of Health 
        and Human Services certifies that such payment is overdue and 
        ending on the date that such payment is made in full.
  ``(c) Applicable Percentage.--The term `applicable percentage' 
means--
          ``(1) in the case of sales of a selected drug during the 
        first 90 days described in subsection (b) with respect to such 
        drug, 65 percent,
          ``(2) in the case of sales of such drug during the 91st day 
        through the 180th day described in subsection (b) with respect 
        to such drug, 75 percent,
          ``(3) in the case of sales of such drug during the 181st day 
        through the 270th day described in subsection (b) with respect 
        to such drug, 85 percent, and
          ``(4) in the case of sales of such drug during any subsequent 
        day, 95 percent.
  ``(d) Definitions.--The terms `selected drug publication date' and 
`maximum fair price' have the meaning given such terms in section 1191 
of the Social Security Act and the term `selected drug' has the meaning 
given such term in section 1192 of such Act.
  ``(e) Anti-Abuse Rule.--In the case of a sale which was timed for the 
purpose of avoiding the tax imposed by this section, the Secretary may 
treat such sale as occurring during a day described in subsection 
(b).''.
  (b) No Deduction for Excise Tax Payments.--Section 275 of the 
Internal Revenue Code of 1986 is amended by adding ``or by section 
4192'' before the period at the end of subsection (a)(6).
  (c) Conforming Amendments.--
          (1) Section 4221(a) of the Internal Revenue Code of 1986 is 
        amended by inserting ``or 4192'' after ``section 4191''.
          (2) Section 6416(b)(2) of such Code is amended by inserting 
        ``or 4192'' after ``section 4191''.
  (d) Clerical Amendments.--
          (1) The heading of subchapter E of chapter 32 of the Internal 
        Revenue Code of 1986 is amended by striking ``Medical Devices'' 
        and inserting ``Other Medical Products''.
          (2) The table of subchapters for chapter 32 of such Code is 
        amended by striking the item relating to subchapter E and 
        inserting the following new item:

               ``subchapter e. other medical products''.

          (3) The table of sections for subchapter E of chapter 32 of 
        such Code is amended by adding at the end the following new 
        item:

``Sec. 4192. Selected drugs during noncompliance periods.''.

  (e) Effective Date.--The amendments made by this section shall apply 
to sales after the date of the enactment of this Act.

  TITLE II--MEDICARE PARTS B AND D PRESCRIPTION DRUG INFLATION REBATES

SEC. 201. MEDICARE PART B REBATE BY MANUFACTURERS.

  (a) In General.--Section 1834 of the Social Security Act (42 U.S.C. 
1395m) is amended by adding at the end the following new subsection:
  ``(x) Rebate by Manufacturers for Single Source Drugs With Prices 
Increasing Faster Than Inflation.--
          ``(1) Requirements.--
                  ``(A) Secretarial provision of information.--Not 
                later than 6 months after the end of each calendar 
                quarter beginning on or after July 1, 2021, the 
                Secretary shall, for each part B rebatable drug, report 
                to each manufacturer of such part B rebatable drug the 
                following for such calendar quarter:
                          ``(i) Information on the total number of 
                        billing units described in subparagraph (A)(i) 
                        of paragraph (3) with respect to such drug and 
                        calendar quarter.
                          ``(ii) Information on the amount (if any) of 
                        the excess average sales price increase 
                        described in subparagraph (A)(ii) of such 
                        paragraph for such drug and calendar quarter.
                          ``(iii) The rebate amount specified under 
                        such paragraph for such part B rebatable drug 
                        and calendar quarter.
                  ``(B) Manufacturer requirement.--For each calendar 
                quarter beginning on or after July 1, 2021, the 
                manufacturer of a part B rebatable drug shall, for such 
                drug, not later than 30 days after the date of receipt 
                from the Secretary of the information described in 
                subparagraph (A) for such calendar quarter, provide to 
                the Secretary a rebate that is equal to the amount 
                specified in paragraph (3) for such drug for such 
                calendar quarter.
          ``(2) Part b rebatable drug defined.--
                  ``(A) In general.--In this subsection, the term `part 
                B rebatable drug' means a single source drug or 
                biological (as defined in subparagraph (D) of section 
                1847A(c)(6)), including a biosimilar biological product 
                (as defined in subparagraph (H) of such section), paid 
                for under this part, except such term shall not include 
                such a drug or biological--
                          ``(i) if the average total allowed charges 
                        for a year per individual that uses such a drug 
                        or biological, as determined by the Secretary, 
                        are less than, subject to subparagraph (B), 
                        $100; or
                          ``(ii) that is a vaccine described in 
                        subparagraph (A) or (B) of section 1861(s)(10).
                  ``(B) Increase.--The dollar amount applied under 
                subparagraph (A)(i)--
                          ``(i) for 2022, shall be the dollar amount 
                        specified under such subparagraph for 2021, 
                        increased by the percentage increase in the 
                        consumer price index for all urban consumers 
                        (United States city average) as of the first 
                        quarter of the previous year; and
                          ``(ii) for a subsequent year, shall be the 
                        dollar amount specified in this clause (or 
                        clause (i)) for the previous year, increased by 
                        the percentage increase in the consumer price 
                        index for all urban consumers (United States 
                        city average) as of the first quarter of the 
                        previous year.
                Any dollar amount specified under this subparagraph 
                that is not a multiple of $10 shall be rounded to the 
                nearest multiple of $10.
          ``(3) Rebate amount.--
                  ``(A) In general.--For purposes of paragraph (1)(B), 
                the amount specified in this paragraph for a part B 
                rebatable drug assigned to a billing and payment code 
                for a calendar quarter is, subject to paragraph (4), 
                the amount equal to the product of--
                          ``(i) subject to subparagraph (B), the total 
                        number of billing units, as described in 
                        section 1847A(b)(6)(B), for such part B 
                        rebatable drug furnished under this part during 
                        the calendar quarter; and
                          ``(ii) the amount (if any) by which--
                                  ``(I) the payment amount under 
                                subparagraph (B) or (C) of section 
                                1847A(b)(1), as applicable, for such 
                                part B rebatable drug during the 
                                calendar quarter; exceeds
                                  ``(II) the inflation-adjusted payment 
                                amount determined under subparagraph 
                                (C) for such part B rebatable drug 
                                during the calendar quarter.
                  ``(B) Excluded units.--For purposes of subparagraph 
                (A)(i), the total number of billing units for part B 
                rebatable drugs furnished during a calendar quarter 
                shall not include--
                          ``(i) units packaged into the payment for a 
                        related procedure or service under section 
                        1833(t) or under section 1833(i) (instead of 
                        separately payable under such respective 
                        section);
                          ``(ii) units included under the single 
                        payment system for renal dialysis services 
                        under section 1881(b)(14); or
                          ``(iii) units of a part B rebatable drug of a 
                        manufacturer that is furnished to an 
                        individual, if such manufacturer, with respect 
                        to the furnishing of such units of such drug, 
                        provides for discounts under section 340B of 
                        the Public Health Service Act or for rebates 
                        under section 1927.
                  ``(C) Determination of inflation-adjusted payment 
                amount.--The inflation-adjusted payment amount 
                determined under this subparagraph for a part B 
                rebatable drug for a calendar quarter is--
                          ``(i) the payment amount for the billing and 
                        payment code for such drug in the payment 
                        amount benchmark quarter (as defined in 
                        subparagraph (D)); increased by
                          ``(ii) the percentage by which the rebate 
                        period CPI-U (as defined in subparagraph (F)) 
                        for the calendar quarter exceeds the benchmark 
                        period CPI-U (as defined in subparagraph (E)).
                  ``(D) Payment amount benchmark quarter.--The term 
                `payment amount benchmark quarter' means the calendar 
                quarter beginning January 1, 2016.
                  ``(E) Benchmark period cpi-u.--The term `benchmark 
                period CPI-U' means the consumer price index for all 
                urban consumers (United States city average) for July 
                2015.
                  ``(F) Rebate period cpi-u.--The term `rebate period 
                CPI-U' means, with respect to a calendar quarter 
                described in subparagraph (C), the greater of the 
                benchmark period CPI-U and the consumer price index for 
                all urban consumers (United States city average) for 
                the first month of the calendar quarter that is two 
                calendar quarters prior to such described calendar 
                quarter.
          ``(4) Special treatment of certain drugs and exemption.--
                  ``(A) Subsequently approved drugs.--Subject to 
                subparagraph (B), in the case of a part B rebatable 
                drug first approved by the Food and Drug Administration 
                after July 1, 2015, clause (i) of paragraph (3)(C) 
                shall be applied as if the term `payment amount 
                benchmark quarter' were defined under paragraph (3)(D) 
                as the third full calendar quarter after the day on 
                which the drug was first marketed and clause (ii) of 
                paragraph (3)(C) shall be applied as if the term 
                `benchmark period CPI-U' were defined under paragraph 
                (3)(E) as if the reference to `July 2015' under such 
                paragraph were a reference to `the first month of the 
                first full calendar quarter after the day on which the 
                drug was first marketed'.
                  ``(B) Timeline for provision of rebates for new 
                drugs.--In the case of a part B rebatable drug first 
                approved by the Food and Drug Administration after July 
                1, 2015, clause (i) of paragraph (1)(B) shall be 
                applied as if the reference to `July 1, 2021' under 
                such paragraph were a reference to the later of the 6th 
                full calendar quarter after the day on which the drug 
                was first marketed or July 1, 2021.
                  ``(C) Exemption for shortages.--The Secretary may 
                reduce or waive the rebate under paragraph (1)(B) with 
                respect to a part B rebatable drug that appears on the 
                drug shortage list in effect under section 506(e) of 
                the Federal Food, Drug, and Cosmetic Act or in the case 
                of other exigent circumstances, as determined by the 
                Secretary.
                  ``(D) Selected drugs.--In the case of a part B 
                rebatable drug that is a selected drug (as defined in 
                section 1192(c)), for each applicable year beginning 
                after the price applicability period (as defined in 
                section 1191(b)(2) with respect to such drug, clause 
                (i) of paragraph (3)(C) shall be applied as if the term 
                `payment amount benchmark quarter' were defined under 
                paragraph (3)(D) as the calendar quarter beginning 
                January 1 of the last year beginning during such price 
                applicability period with respect to such selected drug 
                and clause (ii) of paragraph (3)(C) shall be applied as 
                if the term `benchmark period CPI-U' were defined under 
                paragraph (3)(E) as if the reference to `July 2015' 
                under such paragraph were a reference to the July of 
                the year preceding such last year.
          ``(5) Application to beneficiary coinsurance.--In the case of 
        a part B rebatable drug for which a rebate is payable under 
        this subsection--
                  ``(A) in computing the amount of any coinsurance 
                applicable under this title to an individual with 
                respect to such drug, the computation of such 
                coinsurance shall be based on the inflation-adjusted 
                payment amount determined under paragraph (3)(C) for 
                such part B rebatable drug; and
                  ``(B) the amount of such coinsurance is equal to 20 
                percent of such inflation-adjusted payment amount so 
                determined.
          ``(6) Rebate deposits.--Amounts paid as rebates under 
        paragraph (1)(B) shall be deposited into the Federal 
        Supplementary Medical Insurance Trust Fund established under 
        section 1841.
          ``(7) Civil money penalty.--If a manufacturer of a part B 
        rebatable drug has failed to comply with the requirements under 
        paragraph (1)(B) for such drug for a calendar quarter, the 
        manufacturer shall be subject to, in accordance with a process 
        established by the Secretary pursuant to regulations, a civil 
        money penalty in an amount equal to at least 125 percent of the 
        amount specified in paragraph (3) for such drug for such 
        calendar quarter. The provisions of section 1128A (other than 
        subsections (a) (with respect to amounts of penalties or 
        additional assessments) and (b)) shall apply to a civil money 
        penalty under this paragraph in the same manner as such 
        provisions apply to a penalty or proceeding under section 
        1128A(a).
          ``(8) Study and report.--
                  ``(A) Study.--The Secretary shall conduct a study of 
                the feasibility of and operational issues involved with 
                the following:
                          ``(i) Including multiple source drugs (as 
                        defined in section 1847A(c)(6)(C)) in the 
                        rebate system under this subsection.
                          ``(ii) Including drugs and biologicals paid 
                        for under MA plans under part C in the rebate 
                        system under this subsection.
                          ``(iii) Including drugs excluded under 
                        paragraph (2)(A) and billing units of drugs 
                        excluded under paragraph (3)(B) in the rebate 
                        system under this subsection.
                  ``(B) Report.--Not later than 3 years after the date 
                of the enactment of this subsection, the Secretary 
                shall submit to Congress a report on the study 
                conducted under subparagraph (A).
          ``(9) Application to multiple source drugs.--The Secretary 
        may, based on the report submitted under paragraph (8) and 
        pursuant to rulemaking, apply the provisions of this subsection 
        to multiple source drugs (as defined in section 
        1847A(c)(6)(C)), including, for purposes of determining the 
        rebate amount under paragraph (3), by calculating manufacturer-
        specific average sales prices for the benchmark period and the 
        rebate period.''.
  (b) Amounts Payable; Cost-Sharing.--Section 1833(a) of the Social 
Security Act is amended--
          (1) in paragraph (1)--
                  (A) in subparagraph (S), by striking ``with respect 
                to'' and inserting ``subject to subparagraph (DD), with 
                respect to'';
                  (B) by striking ``and (CC)'' and inserting ``(CC)''; 
                and
                  (C) by inserting before the semicolon at the end the 
                following: ``, and (DD) with respect to a part B 
                rebatable drug (as defined in paragraph (2) of section 
                1834(x)) for which a rebate is payable under such 
                section, the amounts paid shall be the difference 
                between (i) the payment amount under paragraph 
                (3)(A)(ii)(I) of such section for such drug, and (ii) 
                20 percent of the inflation-adjusted payment amount 
                under paragraph (3)(A)(ii)(II) of such section for such 
                drug''; and
          (2) by adding at the end of the flush left matter following 
        paragraph (9), the following:
``For purposes of applying paragraph (1)(DD) and section 1834(x)(5), 
the Secretary shall make such estimates and use such data as the 
Secretary determines appropriate.''.
  (c) Conforming Amendment to Part B ASP Calculation.--Section 
1847A(c)(3) of the Social Security Act (42 U.S.C. 1395w-3a(c)(3)) is 
amended by inserting ``or section 1834(x)'' after ``section 1927''.

SEC. 202. MEDICARE PART D REBATE BY MANUFACTURERS.

  Part D of title XVIII of the Social Security Act is amended by 
inserting after section 1860D-14A (42 U.S.C. 1395w-114a) the following 
new section:

``SEC. 1860D-14B. MANUFACTURER REBATE FOR CERTAIN DRUGS WITH PRICES 
                    INCREASING FASTER THAN INFLATION.

  ``(a) In General.--Subject to the provisions of this section, in 
order for coverage to be available under this part for a part D 
rebatable drug of a manufacturer dispensed during an applicable year, 
the manufacturer must have entered into and have in effect an agreement 
described in subsection (b). For purposes of this section the term 
`applicable year' means a year beginning with 2022.
  ``(b) Agreements.--
          ``(1) Terms of agreement.--An agreement described in this 
        subsection, with respect to a manufacturer of a part D 
        rebatable drug, is an agreement under which the following 
        applies:
                  ``(A) Secretarial provision of information.--Not 
                later than 9 months after the end of each applicable 
                year with respect to which the agreement is in effect, 
                the Secretary, for the part D rebatable drug of the 
                manufacturer, reports to the manufacturer the following 
                for such year:
                          ``(i) Information on the total units (as 
                        defined in subsection (g)(2)) dispensed for 
                        each dosage form and strength with respect to 
                        such part D rebatable drug and year.
                          ``(ii) Information on the amount (if any) of 
                        the excess average manufacturer price increase 
                        described in subsection (c)(1)(B) for each 
                        dosage form and strength with respect to such 
                        drug and year.
                          ``(iii) The rebate amount specified under 
                        subsection (c) for each dosage form and 
                        strength with respect to such drug and year.
                  ``(B) Manufacturer requirements.--For each applicable 
                year with respect to which the agreement is in effect, 
                the manufacturer of the part D rebatable drug, for each 
                dosage form and strength with respect to such drug, not 
                later than 30 days after the date of receipt from the 
                Secretary of the information described in subparagraph 
                (A) for such year, provides to the Secretary a rebate 
                that is equal to the amount specified in subsection (c) 
                for such dosage form and strength with respect to such 
                drug for such year.
          ``(2) Length of agreement.--
                  ``(A) In general.--An agreement under this section, 
                with respect to a part D rebatable drug, shall be 
                effective for an initial period of not less than one 
                year and shall be automatically renewed for a period of 
                not less than one year unless terminated under 
                subparagraph (B).
                  ``(B) Termination.--
                          ``(i) By secretary.--The Secretary may 
                        provide for termination of an agreement under 
                        this section for violation of the requirements 
                        of the agreement or other good cause shown. 
                        Such termination shall not be effective earlier 
                        than 60 days after the date of notice of such 
                        termination. The Secretary shall provide, upon 
                        request, a manufacturer with a hearing 
                        concerning such a termination, but such hearing 
                        shall not delay the effective date of the 
                        termination.
                          ``(ii) By a manufacturer.--A manufacturer may 
                        terminate an agreement under this section for 
                        any reason. Any such termination shall not be 
                        effective until the year beginning at least 60 
                        days after the date the manufacturer provides 
                        notice to the Secretary.
                  ``(C) Effectiveness of termination.--Any termination 
                under this paragraph shall not affect rebates due under 
                the agreement under this section before the effective 
                date of its termination.
                  ``(D) Delay before reentry.--In the case of any 
                agreement under this section with a manufacturer which 
                is terminated in a plan year, another such agreement 
                with the manufacturer (or a successor manufacturer) may 
                not be entered into before the subsequent plan year, 
                unless the Secretary finds good cause for an earlier 
                reinstatement of such an agreement.
          ``(3) Information.--For purposes of carrying out this 
        section, the Secretary shall use information submitted by 
        manufacturers under section 1927(b)(3).
  ``(c) Rebate Amount.--
          ``(1) In general.--For purposes of this section, the amount 
        specified in this subsection for a dosage form and strength 
        with respect to a part D rebatable drug and applicable year is, 
        subject to subparagraphs (B) and (C) of paragraph (3), the 
        amount equal to the product of--
                  ``(A) the total average number of units weighted by, 
                and dispensed for, such dosage form and strength with 
                respect to such part D rebatable drug and year; and
                  ``(B) the amount (if any) by which--
                          ``(i) the average manufacturer price (as 
                        defined in subsection (g)) paid for such dosage 
                        form and strength with respect to such part D 
                        rebatable drug during the year; exceeds
                          ``(ii) the inflation-adjusted payment amount 
                        determined under paragraph (2) for such dosage 
                        form and strength with respect to such part D 
                        rebatable drug during the year.
          ``(2) Determination of inflation-adjusted payment amount.--
        The inflation-adjusted payment amount determined under this 
        paragraph for a dosage form and strength with respect to a part 
        D rebatable drug for an applicable year, subject to 
        subparagraphs (A) and (D) of paragraph (3), is--
                  ``(A) the average manufacturer price paid for such 
                dosage form and strength with respect to such drug in 
                the payment amount benchmark year (as defined in 
                subsection (g)(3)); increased by
                  ``(B) the percentage by which the rebate period CPI-U 
                (as defined in subsection (g)(5)) for the applicable 
                year exceeds the benchmark period CPI-U (as defined in 
                subsection (g)(4)).
          ``(3) Special treatment of certain drugs and exemption.--
                  ``(A) Subsequently approved drugs.--In the case of a 
                part D rebatable drug first approved by the Food and 
                Drug Administration after January 1, 2016, subparagraph 
                (A) of paragraph (2) shall be applied as if the term 
                `payment amount benchmark year' were defined under 
                subsection (g)(3) as the first year beginning after the 
                day on which the drug was first marketed and 
                subparagraph (B) of paragraph (2) shall be applied as 
                if the term `benchmark period CPI-U' were defined under 
                subsection (g)(4) as if the reference to `January 2016' 
                under such subsection were a reference to `January of 
                the first year beginning after the date on which the 
                drug was first marketed by any manufacturer'.
                  ``(B) Exemption for shortages.--The Secretary may 
                reduce or waive the rebate under paragraph (1) with 
                respect to a part D rebatable drug in the case of a 
                shortage of such drug or other exigent circumstances, 
                as determined by the Secretary.
                  ``(C) Treatment of new formulations.--
                          ``(i) In general.--In the case of a part D 
                        rebatable drug that is a line extension of a 
                        single source drug or an innovator multiple 
                        source drug that is an oral solid dosage form, 
                        the Secretary shall establish a formula for 
                        determining the amount specified in this 
                        subsection with respect to such part D 
                        rebatable drug and an applicable year with 
                        consideration of the single source drug or an 
                        innovator multiple source drug.
                          ``(ii) Line extension defined.--In this 
                        subparagraph, the term `line extension' means, 
                        with respect to a part D rebatable drug, a new 
                        formulation of the drug (as determined by the 
                        Secretary), such as an extended release 
                        formulation, but does not include an abuse-
                        deterrent formulation of the drug (as 
                        determined by the Secretary), regardless of 
                        whether such abuse-deterrent formulation is an 
                        extended release formulation.
                  ``(D) Selected drugs.--In the case of a part D 
                rebatable drug that is a selected drug (as defined in 
                section 1192(c)), for each applicable year beginning 
                after the price applicability period (as defined in 
                section 1191(b)(2) with respect to such drug, 
                subparagraph (A) of paragraph (2) shall be applied as 
                if the term `payment amount benchmark year' were 
                defined under subsection (g)(3) as the last year 
                beginning during such price applicability period with 
                respect to such selected drug and subparagraph (B) of 
                paragraph (2) shall be applied as if the term 
                `benchmark period CPI-U' were defined under subsection 
                (g)(4) as if the reference to `January 2016' under such 
                subsection were a reference to January of the last year 
                beginning during such price applicability period with 
                respect to such drug.
  ``(d) Rebate Deposits.--Amounts paid as rebates under subsection (c) 
shall be deposited into the Medicare Prescription Drug Account in the 
Federal Supplementary Medical Insurance Trust Fund established under 
section 1841.
  ``(e) Civil Money Penalty.--In the case of a manufacturer of a part D 
rebatable drug with an agreement in effect under this section who has 
failed to comply with the terms of the agreement under subsection 
(b)(1)(B) with respect to such drug for an applicable year, the 
Secretary may impose a civil money penalty on such manufacturer in an 
amount equal to 125 percent of the amount specified in subsection (c) 
for such drug for such year. The provisions of section 1128A (other 
than subsections (a) (with respect to amounts of penalties or 
additional assessments) and (b)) shall apply to a civil money penalty 
under this subsection in the same manner as such provisions apply to a 
penalty or proceeding under section 1128A(a).
  ``(f) Judicial Review.--There shall be no judicial review of the 
following:
          ``(1) The determination of units under this section.
          ``(2) The determination of whether a drug is a part D 
        rebatable drug under this section.
          ``(3) The calculation of the rebate amount under this 
        section.
  ``(g) Definitions.--In this section:
          ``(1) Part d rebatable drug defined.--
                  ``(A) In general.--The term `part D rebatable drug' 
                means a drug or biological that would (without 
                application of this section) be a covered part D drug, 
                except such term shall, with respect to an applicable 
                year, not include such a drug or biological if the 
                average total cost under a prescription drug plan under 
                this part or MA-PD plan under part C for such year per 
                individual who uses such a drug or biological, as 
                determined by the Secretary, are less than, subject to 
                subparagraph (B), $100, as determined by the Secretary 
                using the most recent data available or, if data is not 
                available, as estimated by the Secretary.
                  ``(B) Increase.--The dollar amount applied under 
                subparagraph (A)--
                          ``(i) for 2023, shall be the dollar amount 
                        specified under such subparagraph for 2022, 
                        increased by the percentage increase in the 
                        consumer price index for all urban consumers 
                        (United States city average) as of January of 
                        2022; and
                          ``(ii) for a subsequent year, shall be the 
                        dollar amount specified in this subparagraph 
                        (or subparagraph (A)) for the previous year, 
                        increased by the percentage increase in the 
                        consumer price index for all urban consumers 
                        (United States city average) as of January of 
                        the previous year.
                Any dollar amount specified under this subparagraph 
                that is not a multiple of $10 shall be rounded to the 
                nearest multiple of $10.
          ``(2) Unit defined.--The term `unit' means, with respect to a 
        part D rebatable drug, the lowest identifiable quantity (such 
        as a capsule or tablet, milligram of molecules, or grams) of 
        the part D rebatable drug that is dispensed to individuals 
        enrolled under a prescription drug plan under this part or an 
        MA-PD plan under part C.
          ``(3) Payment amount benchmark year.--The term `payment 
        amount benchmark year' means the year beginning January 1, 
        2016.
          ``(4) Benchmark period cpi-u.--The term `benchmark period 
        CPI-U' means the consumer price index for all urban consumers 
        (United States city average) for January 2016.
          ``(5) Rebate period cpi-u.--The term `rebate period CPI-U' 
        means, with respect to an applicable year, the consumer price 
        index for all urban consumers (United States city average) for 
        January of such year.
          ``(6) Average manufacturer price.--The term `average 
        manufacturer price' has the meaning, with respect to a part D 
        rebatable drug of a manufacturer for an applicable year, given 
        such term in section 1927(k)(1), with respect to a covered 
        outpatient drug of a manufacturer for a rebate period under 
        section 1927. For purposes of applying the previous sentence, 
        with respect to a part D rebatable drug of a manufacturer and 
        an applicable year, the Secretary shall use the information 
        with respect to the average manufacturer price for such drug 
        reported by the manufacturer under section 1927(b)(3) with 
        respect to each of the quarters in the applicable year and 
        calculate an annual average manufacturer price for such 
        applicable year as the average of such average manufacturer 
        prices for each such quarter, weighted by units of such drug 
        sold or dispensed with respect to such applicable year.''.

   TITLE III--PART D IMPROVEMENTS AND MAXIMUM OUT-OF-POCKET CAP FOR 
                         MEDICARE BENEFICIARIES

SEC. 301. MEDICARE PART D BENEFIT REDESIGN.

  (a) Benefit Structure Redesign.--Section 1860D-2(b) of the Social 
Security Act (42 U.S.C. 1395w-102(b)) is amended--
          (1) in paragraph (2)--
                  (A) in subparagraph (A), in the matter preceding 
                clause (i), by inserting ``for a year preceding 2022 
                and for costs above the annual deductible specified in 
                paragraph (1) and up to the annual out-of-pocket 
                threshold specified in paragraph (4)(B) for 2022 and 
                each subsequent year'' after ``paragraph (3)'';
                  (B) in subparagraph (C)--
                          (i) in clause (i), in the matter preceding 
                        subclause (I), by inserting ``for a year 
                        preceding 2022,'' after ``paragraph (4),''; and
                          (ii) in clause (ii)(III), by striking ``and 
                        each subsequent year'' and inserting ``and 
                        2021''; and
                  (C) in subparagraph (D)--
                          (i) in clause (i)--
                                  (I) in the matter preceding subclause 
                                (I), by inserting ``for a year 
                                preceding 2022,'' after ``paragraph 
                                (4),''; and
                                  (II) in subclause (I)(bb), by 
                                striking ``a year after 2018'' and 
                                inserting ``each of years 2018 through 
                                2021''; and
                          (ii) in clause (ii)(V), by striking ``2019 
                        and each subsequent year'' and inserting ``each 
                        of years 2019 through 2021'';
          (2) in paragraph (3)(A)--
                  (A) in the matter preceding clause (i), by inserting 
                ``for a year preceding 2022,'' after ``and (4),''; and
                  (B) in clause (ii), by striking ``for a subsequent 
                year'' and inserting ``for each of years 2007 through 
                2021''; and
          (3) in paragraph (4)--
                  (A) in subparagraph (A)--
                          (i) in clause (i)--
                                  (I) by redesignating subclauses (I) 
                                and (II) as items (aa) and (bb), 
                                respectively, and moving the margin of 
                                each such redesignated item 2 ems to 
                                the right;
                                  (II) in the matter preceding item 
                                (aa), as redesignated by subclause (I), 
                                by striking ``is equal to the greater 
                                of--'' and inserting ``is equal to--
                                  ``(I) for a year preceding 2022, the 
                                greater of--'';
                                  (III) by striking the period at the 
                                end of item (bb), as redesignated by 
                                subclause (I), and inserting ``; and''; 
                                and
                                  (IV) by adding at the end the 
                                following:
                                  ``(II) for 2022 and each succeeding 
                                year, $0.''; and
                          (ii) in clause (ii)--
                                  (I) by striking ``clause (i)(I)'' and 
                                inserting ``clause (i)(I)(aa)''; and
                                  (II) by adding at the end the 
                                following new sentence: ``The Secretary 
                                shall continue to calculate the dollar 
                                amounts specified in clause (i)(I)(aa), 
                                including with the adjustment under 
                                this clause, after 2021 for purposes of 
                                section 1860D-14(a)(1)(D)(iii).'';
                  (B) in subparagraph (B)--
                          (i) in clause (i)--
                                  (I) in subclause (V), by striking 
                                ``or'' at the end;
                                  (II) in subclause (VI)--
                                          (aa) by striking ``for a 
                                        subsequent year'' and inserting 
                                        ``for 2021''; and
                                          (bb) by striking the period 
                                        at the end and inserting a 
                                        semicolon; and
                                  (III) by adding at the end the 
                                following new subclauses:
                                  ``(VII) for 2022, is equal to $2,000; 
                                or
                                  ``(VIII) for a subsequent year, is 
                                equal to the amount specified in this 
                                subparagraph for the previous year, 
                                increased by the annual percentage 
                                increase described in paragraph (6) for 
                                the year involved.''; and
                          (ii) in clause (ii), by striking ``clause 
                        (i)(II)'' and inserting ``clause (i)'';
                  (C) in subparagraph (C)(i), by striking ``and for 
                amounts'' and inserting ``and, for a year preceding 
                2022, for amounts''; and
                  (D) in subparagraph (E), by striking ``In applying'' 
                and inserting ``For each of years 2011 through 2021, in 
                applying''.
  (b) Decreasing Reinsurance Payment Amount.--Section 1860D-15(b)(1) of 
the Social Security Act (42 U.S.C. 1395w-115(b)(1)) is amended by 
inserting after ``80 percent'' the following: ``(or, with respect to a 
coverage year after 2021, 20 percent)''.
  (c) Manufacturer Discount Program.--
          (1) In general.--Part D of title XVIII of the Social Security 
        Act (42 U.S.C. 1395w-101 et seq.), as amended by section 202, 
        is further amended by inserting after section 1860D-14B the 
        following new section:

``SEC. 1860D-14C. MANUFACTURER DISCOUNT PROGRAM.

  ``(a) Establishment.--The Secretary shall establish a manufacturer 
discount program (in this section referred to as the `program'). Under 
the program, the Secretary shall enter into agreements described in 
subsection (b) with manufacturers and provide for the performance of 
the duties described in subsection (c). The Secretary shall establish a 
model agreement for use under the program by not later than January 1, 
2021, in consultation with manufacturers, and allow for comment on such 
model agreement.
  ``(b) Terms of Agreement.--
          ``(1) In general.--
                  ``(A) Agreement.--An agreement under this section 
                shall require the manufacturer to provide applicable 
                beneficiaries access to discounted prices for 
                applicable drugs of the manufacturer that are dispensed 
                on or after January 1, 2022.
                  ``(B) Provision of discounted prices at the point-of-
                sale.--The discounted prices described in subparagraph 
                (A) shall be provided to the applicable beneficiary at 
                the pharmacy or by the mail order service at the point-
                of-sale of an applicable drug.
                  ``(C) Timing of agreement.--
                          ``(i) Special rule for 2022.--In order for an 
                        agreement with a manufacturer to be in effect 
                        under this section with respect to the period 
                        beginning on January 1, 2022, and ending on 
                        December 31, 2022, the manufacturer shall enter 
                        into such agreement not later than 30 days 
                        after the date of the establishment of a model 
                        agreement under subsection (a).
                          ``(ii) 2023 and subsequent years.--In order 
                        for an agreement with a manufacturer to be in 
                        effect under this section with respect to plan 
                        year 2023 or a subsequent plan year, the 
                        manufacturer shall enter into such agreement 
                        (or such agreement shall be renewed under 
                        paragraph (4)(A)) not later than January 30 of 
                        the preceding year.
          ``(2) Provision of appropriate data.--Each manufacturer with 
        an agreement in effect under this section shall collect and 
        have available appropriate data, as determined by the 
        Secretary, to ensure that it can demonstrate to the Secretary 
        compliance with the requirements under the program.
          ``(3) Compliance with requirements for administration of 
        program.--Each manufacturer with an agreement in effect under 
        this section shall comply with requirements imposed by the 
        Secretary or a third party with a contract under subsection 
        (d)(3), as applicable, for purposes of administering the 
        program, including any determination under subparagraph (A) of 
        subsection (c)(1) or procedures established under such 
        subsection (c)(1).
          ``(4) Length of agreement.--
                  ``(A) In general.--An agreement under this section 
                shall be effective for an initial period of not less 
                than 12 months and shall be automatically renewed for a 
                period of not less than 1 year unless terminated under 
                subparagraph (B).
                  ``(B) Termination.--
                          ``(i) By the secretary.--The Secretary may 
                        provide for termination of an agreement under 
                        this section for a knowing and willful 
                        violation of the requirements of the agreement 
                        or other good cause shown. Such termination 
                        shall not be effective earlier than 30 days 
                        after the date of notice to the manufacturer of 
                        such termination. The Secretary shall provide, 
                        upon request, a manufacturer with a hearing 
                        concerning such a termination, and such hearing 
                        shall take place prior to the effective date of 
                        the termination with sufficient time for such 
                        effective date to be repealed if the Secretary 
                        determines appropriate.
                          ``(ii) By a manufacturer.--A manufacturer may 
                        terminate an agreement under this section for 
                        any reason. Any such termination shall be 
                        effective, with respect to a plan year--
                                  ``(I) if the termination occurs 
                                before January 30 of a plan year, as of 
                                the day after the end of the plan year; 
                                and
                                  ``(II) if the termination occurs on 
                                or after January 30 of a plan year, as 
                                of the day after the end of the 
                                succeeding plan year.
                          ``(iii) Effectiveness of termination.--Any 
                        termination under this subparagraph shall not 
                        affect discounts for applicable drugs of the 
                        manufacturer that are due under the agreement 
                        before the effective date of its termination.
                          ``(iv) Notice to third party.--The Secretary 
                        shall provide notice of such termination to a 
                        third party with a contract under subsection 
                        (d)(3) within not less than 30 days before the 
                        effective date of such termination.
  ``(c) Duties Described.--The duties described in this subsection are 
the following:
          ``(1) Administration of program.--Administering the program, 
        including--
                  ``(A) the determination of the amount of the 
                discounted price of an applicable drug of a 
                manufacturer;
                  ``(B) the establishment of procedures under which 
                discounted prices are provided to applicable 
                beneficiaries at pharmacies or by mail order service at 
                the point-of-sale of an applicable drug;
                  ``(C) the establishment of procedures to ensure that, 
                not later than the applicable number of calendar days 
                after the dispensing of an applicable drug by a 
                pharmacy or mail order service, the pharmacy or mail 
                order service is reimbursed for an amount equal to the 
                difference between--
                          ``(i) the negotiated price of the applicable 
                        drug; and
                          ``(ii) the discounted price of the applicable 
                        drug;
                  ``(D) the establishment of procedures to ensure that 
                the discounted price for an applicable drug under this 
                section is applied before any coverage or financial 
                assistance under other health benefit plans or programs 
                that provide coverage or financial assistance for the 
                purchase or provision of prescription drug coverage on 
                behalf of applicable beneficiaries as the Secretary may 
                specify; and
                  ``(E) providing a reasonable dispute resolution 
                mechanism to resolve disagreements between 
                manufacturers, applicable beneficiaries, and the third 
                party with a contract under subsection (d)(3).
          ``(2) Monitoring compliance.--
                  ``(A) In general.--The Secretary shall monitor 
                compliance by a manufacturer with the terms of an 
                agreement under this section.
                  ``(B) Notification.--If a third party with a contract 
                under subsection (d)(3) determines that the 
                manufacturer is not in compliance with such agreement, 
                the third party shall notify the Secretary of such 
                noncompliance for appropriate enforcement under 
                subsection (e).
          ``(3) Collection of data from prescription drug plans and ma-
        pd plans.--The Secretary may collect appropriate data from 
        prescription drug plans and MA-PD plans in a timeframe that 
        allows for discounted prices to be provided for applicable 
        drugs under this section.
  ``(d) Administration.--
          ``(1) In general.--Subject to paragraph (2), the Secretary 
        shall provide for the implementation of this section, including 
        the performance of the duties described in subsection (c).
          ``(2) Limitation.--In providing for the implementation of 
        this section, the Secretary shall not receive or distribute any 
        funds of a manufacturer under the program.
          ``(3) Contract with third parties.--The Secretary shall enter 
        into a contract with 1 or more third parties to administer the 
        requirements established by the Secretary in order to carry out 
        this section. At a minimum, the contract with a third party 
        under the preceding sentence shall require that the third 
        party--
                  ``(A) receive and transmit information between the 
                Secretary, manufacturers, and other individuals or 
                entities the Secretary determines appropriate;
                  ``(B) receive, distribute, or facilitate the 
                distribution of funds of manufacturers to appropriate 
                individuals or entities in order to meet the 
                obligations of manufacturers under agreements under 
                this section;
                  ``(C) provide adequate and timely information to 
                manufacturers, consistent with the agreement with the 
                manufacturer under this section, as necessary for the 
                manufacturer to fulfill its obligations under this 
                section; and
                  ``(D) permit manufacturers to conduct periodic 
                audits, directly or through contracts, of the data and 
                information used by the third party to determine 
                discounts for applicable drugs of the manufacturer 
                under the program.
          ``(4) Performance requirements.--The Secretary shall 
        establish performance requirements for a third party with a 
        contract under paragraph (3) and safeguards to protect the 
        independence and integrity of the activities carried out by the 
        third party under the program under this section.
          ``(5) Implementation.--The Secretary may implement the 
        program under this section by program instruction or otherwise.
          ``(6) Administration.--Chapter 35 of title 44, United States 
        Code, shall not apply to the program under this section.
  ``(e) Enforcement.--
          ``(1) Audits.--Each manufacturer with an agreement in effect 
        under this section shall be subject to periodic audit by the 
        Secretary.
          ``(2) Civil money penalty.--
                  ``(A) In general.--The Secretary may impose a civil 
                money penalty on a manufacturer that fails to provide 
                applicable beneficiaries discounts for applicable drugs 
                of the manufacturer in accordance with such agreement 
                for each such failure in an amount the Secretary 
                determines is commensurate with the sum of--
                          ``(i) the amount that the manufacturer would 
                        have paid with respect to such discounts under 
                        the agreement, which will then be used to pay 
                        the discounts which the manufacturer had failed 
                        to provide; and
                          ``(ii) 25 percent of such amount.
                  ``(B) Application.--The provisions of section 1128A 
                (other than subsections (a) and (b)) shall apply to a 
                civil money penalty under this paragraph in the same 
                manner as such provisions apply to a penalty or 
                proceeding under section 1128A(a).
  ``(f) Clarification Regarding Availability of Other Covered Part D 
Drugs.--Nothing in this section shall prevent an applicable beneficiary 
from purchasing a covered part D drug that is not an applicable drug 
(including a generic drug or a drug that is not on the formulary of the 
prescription drug plan or MA-PD plan that the applicable beneficiary is 
enrolled in).
  ``(g) Definitions.--In this section:
          ``(1) Applicable beneficiary.--The term `applicable 
        beneficiary' means an individual who, on the date of dispensing 
        a covered part D drug--
                  ``(A) is enrolled in a prescription drug plan or an 
                MA-PD plan;
                  ``(B) is not enrolled in a qualified retiree 
                prescription drug plan; and
                  ``(C) has incurred costs for covered part D drugs in 
                the year that are equal to or exceed the annual 
                deductible specified in section 1860D-2(b)(1) for such 
                year.
          ``(2) Applicable drug.--The term `applicable drug', with 
        respect to an applicable beneficiary--
                  ``(A) means a covered part D drug--
                          ``(i) approved under a new drug application 
                        under section 505(b) of the Federal Food, Drug, 
                        and Cosmetic Act or, in the case of a biologic 
                        product, licensed under section 351 of the 
                        Public Health Service Act; and
                          ``(ii)(I) if the PDP sponsor of the 
                        prescription drug plan or the MA organization 
                        offering the MA-PD plan uses a formulary, which 
                        is on the formulary of the prescription drug 
                        plan or MA-PD plan that the applicable 
                        beneficiary is enrolled in;
                          ``(II) if the PDP sponsor of the prescription 
                        drug plan or the MA organization offering the 
                        MA-PD plan does not use a formulary, for which 
                        benefits are available under the prescription 
                        drug plan or MA-PD plan that the applicable 
                        beneficiary is enrolled in; or
                          ``(III) is provided through an exception or 
                        appeal; and
                  ``(B) does not include a selected drug (as defined in 
                section 1192(c)) during a price applicability period 
                (as defined in section 1191(b)(2)) with respect to such 
                drug.
          ``(3) Applicable number of calendar days.--The term 
        `applicable number of calendar days' means--
                  ``(A) with respect to claims for reimbursement 
                submitted electronically, 14 days; and
                  ``(B) with respect to claims for reimbursement 
                submitted otherwise, 30 days.
          ``(4) Discounted price.--
                  ``(A) In general.--The term `discounted price' means, 
                with respect to an applicable drug of a manufacturer 
                furnished during a year to an applicable beneficiary--
                          ``(i) who has not incurred costs for covered 
                        part D drugs in the year that are equal to or 
                        exceed the annual out-of-pocket threshold 
                        specified in section 1860D-2(b)(4)(B)(i) for 
                        the year, 90 percent of the negotiated price of 
                        such drug; and
                          ``(ii) who has incurred such costs in the 
                        year that are equal to or exceed such threshold 
                        for the year, 70 percent of the negotiated 
                        price of such drug.
                  ``(B) Clarification.--Nothing in this section shall 
                be construed as affecting the responsibility of an 
                applicable beneficiary for payment of a dispensing fee 
                for an applicable drug.
                  ``(C) Special case for certain claims.--
                          ``(i) Claims spanning deductible.--In the 
                        case where the entire amount of the negotiated 
                        price of an individual claim for an applicable 
                        drug with respect to an applicable beneficiary 
                        does not fall at or above the annual deductible 
                        specified in section 1860D-2(b)(1) for the 
                        year, the manufacturer of the applicable drug 
                        shall provide the discounted price under this 
                        section on only the portion of the negotiated 
                        price of the applicable drug that falls at or 
                        above such annual deductible.
                          ``(ii) Claims spanning out-of-pocket 
                        threshold.--In the case where the entire amount 
                        of the negotiated price of an individual claim 
                        for an applicable drug with respect to an 
                        applicable beneficiary does not fall entirely 
                        below or entirely above the annual out-of-
                        pocket threshold specified in section 1860D-
                        2(b)(4)(B)(i) for the year, the manufacturer of 
                        the applicable drug shall provide the 
                        discounted price--
                                  ``(I) in accordance with subparagraph 
                                (A)(i) on the portion of the negotiated 
                                price of the applicable drug that falls 
                                below such threshold; and
                                  ``(II) in accordance with 
                                subparagraph (A)(ii) on the portion of 
                                such price of such drug that falls at 
                                or above such threshold.
          ``(5) Manufacturer.--The term `manufacturer' means any entity 
        which is engaged in the production, preparation, propagation, 
        compounding, conversion, or processing of prescription drug 
        products, either directly or indirectly by extraction from 
        substances of natural origin, or independently by means of 
        chemical synthesis, or by a combination of extraction and 
        chemical synthesis. Such term does not include a wholesale 
        distributor of drugs or a retail pharmacy licensed under State 
        law.
          ``(6) Negotiated price.--The term `negotiated price' has the 
        meaning given such term in section 423.100 of title 42, Code of 
        Federal Regulations (as in effect on the date of enactment of 
        section 1860D-14A), except that such negotiated price shall not 
        include any dispensing fee for the applicable drug.
          ``(7) Qualified retiree prescription drug plan.--The term 
        `qualified retiree prescription drug plan' has the meaning 
        given such term in section 1860D-22(a)(2).''.
          (2) Sunset of medicare coverage gap discount program.--
        Section 1860D-14A of the Social Security Act (42 U.S.C. 1395-
        114a) is amended--
                  (A) in subsection (a), in the first sentence, by 
                striking ``The Secretary'' and inserting ``Subject to 
                subsection (h), the Secretary''; and
                  (B) by adding at the end the following new 
                subsection:
  ``(h) Sunset of Program.--
          ``(1) In general.--The program shall not apply with respect 
        to applicable drugs dispensed on or after January 1, 2022, and, 
        subject to paragraph (2), agreements under this section shall 
        be terminated as of such date.
          ``(2) Continued application for applicable drugs dispensed 
        prior to sunset.--The provisions of this section (including all 
        responsibilities and duties) shall continue to apply after 
        January 1, 2022, with respect to applicable drugs dispensed 
        prior to such date.''.
          (3) Inclusion of actuarial value of manufacturer discounts in 
        bids.--Section 1860D-11 of the Social Security Act (42 U.S.C. 
        1395w-111) is amended--
                  (A) in subsection (b)(2)(C)(iii)--
                          (i) by striking ``assumptions regarding the 
                        reinsurance'' an inserting ``assumptions 
                        regarding--
                                  ``(I) the reinsurance''; and
                          (ii) by adding at the end the following:
                                  ``(II) for 2022 and each subsequent 
                                year, the manufacturer discounts 
                                provided under section 1860D-14C 
                                subtracted from the actuarial value to 
                                produce such bid; and''; and
                  (B) in subsection (c)(1)(C)--
                          (i) by striking ``an actuarial valuation of 
                        the reinsurance'' and inserting ``an actuarial 
                        valuation of--
                          ``(i) the reinsurance'';
                          (ii) in clause (i), as inserted by clause (i) 
                        of this subparagraph, by adding ``and'' at the 
                        end; and
                          (iii) by adding at the end the following:
                          ``(ii) for 2022 and each subsequent year, the 
                        manufacturer discounts provided under section 
                        1860D-14C;''.
  (d) Conforming Amendments.--
          (1) Section 1860D-2 of the Social Security Act (42 U.S.C. 
        1395w-102) is amended--
                  (A) in subsection (a)(2)(A)(i)(I), by striking ``, or 
                an increase in the initial'' and inserting ``or, for a 
                year preceding 2022, an increase in the initial'';
                  (B) in subsection (c)(1)(C)--
                          (i) in the subparagraph heading, by striking 
                        ``at initial coverage limit''; and
                          (ii) by inserting ``for a year preceding 2022 
                        or the annual out-of-pocket threshold specified 
                        in subsection (b)(4)(B) for the year for 2022 
                        and each subsequent year'' after ``subsection 
                        (b)(3) for the year'' each place it appears; 
                        and
                  (C) in subsection (d)(1)(A), by striking ``or an 
                initial'' and inserting ``or, for a year preceding 
                2022, an initial''.
          (2) Section 1860D-4(a)(4)(B)(i) of the Social Security Act 
        (42 U.S.C. 1395w-104(a)(4)(B)) is amended by striking ``the 
        initial'' and inserting ``for a year preceding 2022, the 
        initial''.
          (3) Section 1860D-14(a) of the Social Security Act (42 U.S.C. 
        1395w-114(a)) is amended--
                  (A) in paragraph (1)--
                          (i) in subparagraph (C), by striking ``The 
                        continuation'' and inserting ``For a year 
                        preceding 2022, the continuation'';
                          (ii) in subparagraph (D)(iii), by striking 
                        ``1860D-2(b)(4)(A)(i)(I)'' and inserting 
                        ``1860D-2(b)(4)(A)(i)(I)(aa)''; and
                          (iii) in subparagraph (E), by striking ``The 
                        elimination'' and inserting ``For a year 
                        preceding 2022, the elimination''; and
                  (B) in paragraph (2)--
                          (i) in subparagraph (C), by striking ``The 
                        continuation'' and inserting ``For a year 
                        preceding 2022, the continuation''; and
                          (ii) in subparagraph (E)--
                                  (I) by inserting ``for a year 
                                preceding 2022,'' after ``subsection 
                                (c)''; and
                                  (II) by striking ``1860D-
                                2(b)(4)(A)(i)(I)'' and inserting 
                                ``1860D-2(b)(4)(A)(i)(I)(aa)''.
          (4) Section 1860D-21(d)(7) of the Social Security Act (42 
        U.S.C. 1395w-131(d)(7)) is amended by striking ``section 1860D-
        2(b)(4)(B)(i)'' and inserting ``section 1860D-2(b)(4)(C)(i)''.
          (5) Section 1860D-22(a)(2)(A) of the Social Security Act (42 
        U.S.C. 1395w-132(a)(2)(A)) is amended--
                  (A) by striking ``the value of any discount'' and 
                inserting the following: ``the value of--
                          ``(i) for years prior to 2022, any 
                        discount''.
                  (B) in clause (i), as inserted by subparagraph (A) of 
                this paragraph, by striking the period at the end and 
                inserting ``; and''; and
                  (C) by adding at the end the following new clause:
                          ``(ii) for 2022 and each subsequent year, any 
                        discount provided pursuant to section 1860D-
                        14C.''.
          (6) Section 1860D-41(a)(6) of the Social Security Act (42 
        U.S.C. 1395w-151(a)(6)) is amended--
                  (A) by inserting ``for a year before 2022'' after 
                ``1860D-2(b)(3)''; and
                  (B) by inserting ``for such year'' before the period.
          (7) Paragraph (1) of section 1860D-43(a) of the Social 
        Security Act (42 U.S.C. 1395w-153(a)) is amended to read as 
        follows:
          ``(1) participate in--
                  ``(A) for 2011 through 2021, the Medicare coverage 
                gap discount program under section 1860D-14A; and
                  ``(B) for 2022 and each subsequent year, the 
                manufacturer discount program under section 1860D-
                14C;''.
  (e) Effective Date.--The amendments made by this section shall apply 
with respect to plan year 2022 and subsequent plan years.

                          Purpose and Summary

    The purpose of H.R. 3, the Lower Drug Costs Now Act, is to 
lower prescription drug prices, reduce out-of-pocket costs, and 
improve transparency. Over $450 billion is spent annually 
across the health care system on prescription drugs,\1\ and 
consumers' out-of-pocket share of this spending is projected to 
reach $67 billion by 2025.\2\ Prescription drug prices in the 
United States are several times those of other developed 
countries--sometimes dozens of times higher--and consequently, 
American consumers are often forced to ration their medication 
or choose between the medications they need and other basic 
needs like food or rent.\3\ Congress must act to prevent these 
prices from soaring further and to ensure American consumers 
are getting a fair deal.
---------------------------------------------------------------------------
    \1\U.S. Dep't of Health and Human Servs., Observations on Trends in 
Prescription Drug Spending 1 (2016), https://aspe.hhs.gov/system/files/
pdf/187586/Drugspending.pdf.
    \2\Lisa L. Gill, How to Pay Less for Your Meds, Consumer Reports 
(Apr. 05, 2018), https://www.consumerreports.org/drug-prices/how-to-
pay-less-for-your-meds/.
    \3\See Committee on Ways and Means, A Painful Pill to Swallow: U.S. 
vs. International Prescription Drug Prices 9 (2019), https://
waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/
documents/U.S.%20vs.%20International%20Prescription%20 
Drug%20Prices_0.pdf.
---------------------------------------------------------------------------
    The Lower Drug Costs Now Act makes several major reforms to 
reduce drug prices and limit out-of-pocket costs for Medicare 
beneficiaries, participants in employer-sponsored health plans, 
and individuals enrolled in commercial health insurance.
    The Lower Drug Costs Now Act requires the Secretary of 
Health and Human Services (the Secretary) to negotiate directly 
with drug manufacturers to establish a fair price for certain 
high-cost drugs by establishing a Fair Price Negotiation 
Program. H.R. 3 ensures that these negotiations result in a 
meaningful reduction in price by establishing an upper limit 
for the price based on an Average International Market (AIM) 
price that is based on the average prices paid in six other 
developed countries. Additionally, H.R. 3 gives the Secretary 
leverage in negotiations by imposing penalties on any 
manufacturer that refuses to participate in negotiations or 
does not comply with the agreement reached.
    The Lower Drug Costs Now Act also strengthens and improves 
Medicare by instituting a new rebate system in Medicare Parts B 
and D to prevent unjustified price hikes and creating an out-
of-pocket spending maximum for Medicare beneficiaries enrolled 
in the Medicare Part D prescription drug program.
    Finally, the bill allows for the reinvestment of billions 
of dollars in health care priorities, including 
transformational improvements to Medicare for seniors and 
people with disabilities. The savings achieved by the Lower 
Drug Costs Now Act may also be used to support development of 
new drugs, the National Institutes of Health (NIH), 
improvements in the Medicare program, and investments in other 
vital public health priorities.

                            Committee Action


                             116TH CONGRESS

    On September 19, 2019, Congressman Frank Pallone, Jr. (D-
NJ-9) introduced H.R. 3, the Lower Drug Costs Now Act, with 
Congressmen Robert C. ``Bobby'' Scott (D-VA-3) and Richard E. 
Neal (D-MA-1) as original cosponsors.
    On September 26, 2019, the Committee on Education and 
Labor's (the Committee) Subcommittee on Health, Employment, 
Labor, and Pensions held a legislative hearing entitled 
``Making Health Care More Affordable: Lowering Drug Prices and 
Increasing Transparency.'' The hearing explored the rising cost 
of prescription drug prices in the United States and the impact 
of high prices on workers and businesses. The Committee heard 
testimony from Mr. Frederick Isasi, Executive Director, 
Families USA; Mr. David Mitchell, Founder, Patients for 
Affordable Drugs; Ms. Bari Talente, Executive Vice President, 
National Multiple Sclerosis Society; Dr. Mariana Socal, 
Assistant Scientist, Johns Hopkins University Bloomberg School 
of Public Health; Christopher Holt, Director of Health Care 
Policy, American Action Forum; and Dr. Craig Garthwaite, 
Associate Professor of Strategy, Northwestern University 
Kellogg School of Management.
    On October 17, 2019, the Committee marked up H.R. 3 and 
ordered it to be reported favorably, as amended, to the House 
of Representatives by a vote of 27-21.
    The Committee considered the following amendments to H.R. 
3.
           Congressman Scott offered an Amendment in 
        the Nature of a Substitute (ANS) that makes several 
        improvements and clarifications to H.R. 3. The ANS 
        increases the number of drugs subject to negotiation 
        and ensures drugs will remain eligible for negotiation 
        until two generic competitors are available. It 
        includes a new pathway to negotiation for drugs with 
        high launch prices. It adds language clarifying that 
        the maximum fair price (MFP) will be available to 
        individuals who receive drugs administered or furnished 
        by a hospital, physician, or other provider. It 
        provides clarifications to ensure that the Secretary of 
        Health and Human Services (the Secretary) does not 
        consider findings from comparative clinical 
        effectiveness research in a manner that treats 
        extending the life of an elderly, disabled, or 
        terminally ill individual as of lower value than 
        extending the life of an individual who is younger, 
        nondisabled, or not terminally ill. It ensures that the 
        voluntary negotiation option applies to retiree-only 
        health plans. Additionally, the ANS includes technical 
        edits throughout that clarify that the bill applies to 
        U.S. territories. The ANS, as amended with further 
        amendments described below, was adopted by voice vote.
           Congressman Tim Walberg (R-MI-7), in 
        coordination with Congresswoman Elise Stefanik (R-NY-
        21), offered an amendment excluding Alzheimer's drugs 
        from the list of negotiation-eligible drugs. The 
        amendment was defeated by a vote of 19-26.
           Congressman Donald Norcross (D-NJ-1) offered 
        an amendment to ensure that a participant's cost-
        sharing cannot exceed the MFP. The amendment was 
        adopted by a voice vote.
           Congressman Rick Allen (R-GA-12) offered an 
        amendment requiring the Secretary of Labor to certify 
        that the voluntary plan option will not result in a 
        shift in biotech investment and manufacturing jobs to 
        China. The amendment was defeated by a vote of 20-26.
           Congresswoman Lori Trahan (D-MA-3) offered 
        an amendment requiring the Government Accountability 
        Office (GAO) to conduct a study on the implementation 
        of the Fair Price Negotiation Program. The amendment 
        was adopted by a voice vote.
           Congressman Dusty Johnson (R-SD-AL) offered 
        an amendment stating that the bill does not implicate 
        fiduciary liability with regard to a plan's decision to 
        participate in the Fair Price Negotiation Program. The 
        amendment was defeated by a vote of 20-26.
           Congresswoman Pramila Jayapal (D-WA-7) 
        offered an amendment to require the Department of Labor 
        to conduct a study regarding the establishment of an 
        inflation rebate program for group health plans and 
        promulgate regulations consistent with the findings of 
        the study with respect to the need for and feasibility 
        of such a program. The amendment was adopted by a voice 
        vote.
           Congresswoman Virginia Foxx (R-NC-5) offered 
        an amendment modifying the employer reporting 
        provisions to only require reporting if a selected drug 
        price is higher than the Secretary's negotiated price. 
        The amendment was defeated by a vote of 21-26.
           Congressman Josh Harder (D-CA-10), in 
        coordination with Congressman David Trone (D-MD-6), 
        offered an amendment clarifying that the Secretary 
        should try to ensure, where practicable, that data 
        collection under the bill is coordinated with, and not 
        duplicative of, other data collection efforts. The 
        amendment was adopted by a voice vote.
           Congresswoman Foxx offered an amendment 
        preventing the bill from going into effect if GAO finds 
        it will result in the loss of manufacturing jobs. The 
        amendment was defeated by a vote of 21-26.
           Congressman Mark Walker (R-NC-6) offered an 
        amendment preventing the bill from going into effect if 
        GAO finds it will result in decreased research and 
        development. The amendment was defeated by a vote of 
        21-26.
           Congressman Phil Roe (R-TN-1) offered an 
        amendment striking the applicability of the negotiated 
        price to group health plans and adding provisions 
        regarding pharmacy benefit manager (PBM) rebates. The 
        amendment was ruled non-germane because the method of 
        achieving the fundamental purpose or objective in the 
        amendment differed from that of the ANS in violation of 
        clause 7 of Rule 16 of the Rules of the House of 
        Representatives.
           Congressman Roe offered an amendment 
        preventing the voluntary plan option from taking effect 
        unless the Secretary of Labor certifies it will not 
        result in diminished access to drugs in group health 
        plans. The amendment was defeated by a vote of 21-27.

                            Committee Views


                              INTRODUCTION

    The Lower Drug Costs Now Act would make several major 
reforms to reduce drug prices; limit out-of-pocket costs; and 
increase transparency for Medicare beneficiaries, participants 
in employer-sponsored plans, and individuals enrolled in 
individual market health insurance.
    Americans should not have to make the decision to forego 
life-saving treatments because they cannot afford them. 
However, across the country, seniors, individuals, and families 
are struggling to afford the sky-rocketing price of 
prescription drugs they need to stay healthy. Since 2012, 49 of 
the most common top-selling brand-name drugs have seen a median 
cost increase of 76 percent.\4\ As a result, three in ten 
adults report not taking their medicines as prescribed at some 
point in the past year because of the cost; many report 
skipping doses, cutting pills in half, or opting not to fill 
their prescriptions at all.\5\ The soaring price of 
prescription drugs is crushing Americans at the pharmacy 
counter, driving up health insurance premiums, and costing 
taxpayers who finance Medicare and Medicaid.
---------------------------------------------------------------------------
    \4\Nathan Wineinger et al., Trends in Prices of Popular Brand-Name 
Prescription Drugs in the United States, 2 JAMA Network Open 1 (2019).
    \5\Ashley Kirzinger et al., KFF Health Tracking Poll--February 
2019: Prescription Drugs, The Kaiser Family Foundation (Mar. 01, 2019), 
https://www.kff.org/health-costs/poll-finding/kff-health-tracking-poll-
february-2019-prescription-drugs/.
---------------------------------------------------------------------------

          RISING PRESCRIPTION DRUG PRICES IN THE UNITED STATES

    On average, drug prices in the United States are several 
times those of other developed countries--sometimes dozens of 
times higher.\6\ The total annual spending on prescription 
drugs is over $450 billion across the health care system\7\ or 
approximately $1,200 per person.\8\ One study of the top 
spending single-source drugs covered by Medicare found that the 
prices paid in the United States were approximately three to 
four times higher than the prices paid in the United Kingdom, 
Japan, and Canada.\9\ For example, the price of the rheumatoid 
arthritis drug Humira is 96 percent higher in the United States 
($2,669 for one twenty-eight day supply) than in the United 
Kingdom ($1,362 for the same supply); the price of the multiple 
sclerosis drug Tecfidera is over 800 percent higher ($5,089 for 
a 30-day supply in the United States versus $663 in the United 
Kingdom).\10\
---------------------------------------------------------------------------
    \6\Committee on Ways and Means, supra note 3.
    \7\U.S. Dep't of Health and Human Servs., supra note 1.
    \8\Organization for Economic Co-operation and Development (OECD), 
Pharmaceutical Spending (2018), https://data.oecd.org/healthres/
pharmaceutical-spending.htm (last visited Oct. 22, 2019).
    \9\So-Yeon Kang et al., Using External Reference Pricing In 
Medicare Part D To Reduce Drug Price Differentials With Other 
Countries, 38 Health Affairs 804 (2019).
    \10\Rabah Kamal & Cynthia Cox, How Do Healthcare Prices and Use in 
the U.S. Compare to Other Countries?, Peterson-Kaiser (May 8, 2018), 
https://www.healthsystemtracker.org/chart-collection/how-do-healthcare-
prices-and-use-in-the-u-s-compare-to-other-countries/#item-start.
---------------------------------------------------------------------------
    While Americans are price gouged on prescription drugs, 
according to a 2017 study by GAO, from 2006 to 2015, sales 
revenue for prescription drugs rose from $534 to $775 billion, 
and average annual profit margins increased for two-thirds of 
drug manufacturers.\11\ The largest drug companies recorded 
profit margins between 15 and 20 percent--substantially higher 
than even the average margins of the largest 500 companies, 
which tend to be between four to nine percent.\12\
---------------------------------------------------------------------------
    \11\U.S. Gov't Accountability Office, Profits, Research and 
Development Spending, and Merger and Acquisition Deals 16-17 (2017), 
https://www.gao.gov/assets/690/688472.pdf.
    \12\Id. at 18-20.
---------------------------------------------------------------------------
    While pharmaceutical companies are enjoying large profits 
and offering lower prices to consumers in other countries, 
Americans are struggling to afford their needed medications. 
The rising cost of prescription drugs is having a devastating 
impact on American workers and businesses. The Lower Drug 
Prices Now Act enables the Secretary of Health and Human 
Services (the Secretary) to negotiate fair prices and is a bold 
step forward to lower drug prices for the American people.

             TAXPAYER SUPPORT FOR RESEARCH AND DEVELOPMENT

    The pharmaceutical industry argues that the high prices for 
drugs are needed to offset losses incurred due to a lengthy 
approval process and the cost of researching and developing new 
drugs. However, studies have found that actual investment in 
research and development by drug companies is significantly 
lower than expected--in some case only about quarter of what 
manufacturers claimed.\13\ In fact, much of the investment in 
research and development of new treatments and cures is not 
driven by drug companies, but rather is supported by American 
taxpayers through the National Institutes of Health (NIH) and 
other public sources of funding. Over the last 90 years, the 
NIH has supported basic and applied research to help spur the 
development of numerous breakthrough drugs.\14\ Federally-
funded research contributed to the development of every single 
new drug that was approved by the Food and Drug Administration 
(FDA) from 2010-2016.\15\
---------------------------------------------------------------------------
    \13\Vinay Prasad & Sham Mailankody, Research and Development 
Spending to Bring a Single Cancer Drug to Market and Revenues After 
Approval, 177 JAMA Internal Med. 1569 (2017).
    \14\Mariana Mazzucato, How Taxpayers Prop up Big Pharma, and How to 
Cap That, Los Angeles Times (Oct. 27, 2015, 5:00 AM), https://
www.latimes.com/opinion/op-ed/la-oe-1027-mazzucato-big-pharma-prices-
20151027-story.html.
    \15\Ekaterina Galkina Cleary et al., Contribution of NIH Funding to 
New Drug Approvals 2010-2016, 115 Proceedings of the National Academy 
of Sciences of the United States of America 2329 (2018).
---------------------------------------------------------------------------
    In reality, the largest drug companies tend to spend more 
on marketing and administrative costs than they spend on 
research and development.\16\ While research and development 
costs can be considerable and should not be ignored, these 
costs do not justify the sky-high prices that often prevent 
consumers from accessing the drugs they need. A recent study 
shows that of the top 100 pharmaceutical companies by sales, 89 
spent more on marketing and sales than on research and 
development, with 43 of them spending up to five times as 
much.\17\
---------------------------------------------------------------------------
    \16\Ana Swanson, Big Pharmaceutical Companies are Spending Far More 
on Marketing than Research, The Washington Post (Feb. 11, 2015), 
https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-
pharmaceutical-companies-are-spending-far-more-on-marketing-than-
research/.
    \17\Institute for Health and Socio-Economic Policy, The R&D 
Smokescreen: The Prioritization of Marketing & Sales in the 
Pharmaceutical Industry 3 (2016), https://nurses.3cdn.net/
e74ab9a3e937fe5646_afm6bh0u9.pdf.
---------------------------------------------------------------------------

        WORKERS WITH PRIVATE COVERAGE FACE EXCESSIVE DRUG COSTS

    Approximately 156 million Americans receive coverage 
through an employer-sponsored health insurance plan.\18\ Rising 
health care costs have a direct financial impact on Americans 
enrolled in employer-sponsored health plans in the form of 
higher premiums and out-of-pocket expenses for plan 
participants.\19\ In 2016, plans sponsored by large employers 
spent a total of $83.9 billion on their plan's drug benefits, 
and just ten particularly high-price drugs accounted for $14.8 
billion of this spending.\20\ The cost of providing drug 
benefits for large employers has risen by more than eight 
percent each year, including 15 percent annual increases in 
spending on specialty drugs,\21\ often leading employers to 
shift costs onto workers. Rising costs of prescription drugs 
are especially challenging for small employers. In a recent 
nationwide poll of 500 small-business owners who provide health 
coverage to their employees, the rising costs of prescription 
drugs was cited as a top challenge in providing health care 
coverage.\22\ Particularly expensive drugs used to treat 
conditions such as multiple sclerosis, cancer, and other 
conditions can result in average out-of-pocket expenses that 
are over a thousand dollars per year.\23\ The Patient 
Protection and Affordable Care Act (ACA) instituted protections 
that help shield consumers from having to shoulder the full 
burden of rising drug prices; for example, it established 
limits on out-of-pocket costs and mandated the provision of 
certain preventive services without cost-sharing.\24\ However, 
there are virtually no limitations on the underlying price that 
manufacturers charge for prescription drugs in current law.
---------------------------------------------------------------------------
    \18\Kaiser Family Foundation, Health Insurance Coverage of the 
Total Population, https://www.kff.org/other/state-indicator/total-
population/ (last visited Oct. 22, 2019) (Covering the 2017 
timeframe.).
    \19\See Susan L. Hayes et al., How Much U.S. Households with 
Employer Insurance Spend on Premiums and Out-of-Pocket Costs: A State-
by-State Look 1 (2019), https://www.commonwealthfund.org/sites/default/
files/2019-05/Hayes_households_employer_ins_spend_ premiums_OOP_db.pdf.
    \20\Juliette Cubanski et al., How Does Prescription Drug Spending 
and Use Compare Across Large Employer Plans, Medicare Part D, and 
Medicaid?, The Kaiser Family Foundation (May 20, 2019), https://
www.kff.org/medicare/issue-brief/how-does-prescription-drug-spending-
and-use-compare-across-large-employer-plans-medicare-part-d-and-
medicaid/.
    \21\Mercer, Mercer National Health Survey: Employers Finding New 
Ways To Hold The Line On Health Benefit Cost Growth, https://
www.mercer.com/newsroom/mercer-national-health-survey-employers-
finding-new-ways-to-hold-the-line-on-health-benefit-cost-growth.html 
(last visited Oct. 22, 2019).
    \22\Rhett Buttle et al., Small-Business Owners' Views on Health 
Coverage and Costs 2 (2019), https://www.commonwealthfund.org/sites/
default/files/2019-09/Buttle_small_business_owners_ survey_ib.pdf.
    \23\Juliette Cubanski et al., supra note 20.
    \24\Pub. L. No. 111-148, 124 Stat. 119 (2010).
---------------------------------------------------------------------------

   THE SECRETARY IS PROHIBITED FROM NEGOTIATING LOWER PRICES FOR THE 
                            AMERICAN PEOPLE

    In the 108th Congress, the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) was enacted 
and signed into law by President George W. Bush.\25\ The MMA 
established the Part D prescription drug benefit and 
established a ``noninterference clause,'' which stipulates that 
the Secretary ``may not interfere with the negotiations between 
drug manufacturers and pharmacies and [Part D Plan] sponsors'' 
and ``may not require a particular formulary or institute a 
price structure for the reimbursement of covered part D 
drugs.''\26\ This provision has prohibited the federal 
government from having a direct role in negotiating the price 
of drugs in Medicare Part D, in contrast to other federal 
health care programs such as Medicaid and the Veterans Health 
Administration (VHA), which both achieve robust discounts from 
drug manufacturers through negotiation and other tools. As a 
result, on average, Medicare pays 73 percent more than Medicaid 
and 80 percent more than the VHA for brand name drugs covered 
under Part D.\27\ Studies suggest that the federal government 
could save between $15.2 and $16 billion per year if Medicare 
Part D paid the same prices as Medicaid or VHA.\28\ Savings 
through a negotiation referencing the prices paid in foreign 
countries have been estimated to be significantly greater.\29\
---------------------------------------------------------------------------
    \25\Pub. L. No. 108-173, 117 Stat. 2066 (2003).
    \26\42 U.S.C. Sec. 1395w-111(i).
    \27\Marc-Andre Gagnon & Sidney Wolfe, Mirror, Mirror on the Wall: 
Medicare Part D Pays Needlessly High Brand-Name Drug Prices Compared 
with Other OECD Countries and with U.S. Government Programs 2 (2015), 
https://ir.library.carleton.ca/pub/18756/Mirror-Mirror-
Medicare-Part-D-eleased-1-.pdf.
    \28\Id.
    \29\Dean Baker, Reducing Waste with an Efficient Medicare 
Prescription Drug Benefit 3 (2013), http://cepr.net/documents/
publications/medicare-drug-2012-12.pdf.
---------------------------------------------------------------------------

                         DRUG PRICE NEGOTIATION

    The Lower Drug Prices Now Act empowers the Secretary to 
negotiate prices on as many drugs as possible that both: (1) 
fall within the top 250 most costly drugs to Medicare and the 
entire U.S health system, and (2) lack competition. Beginning 
in 2021, the Secretary would publish annually a list of 250 
drugs that account for the highest proportion of spending 
through Medicare and the overall health system. To be eligible 
for the list, a drug must lack price competition--defined as a 
brand-name drug that does not have a generic or biosimilar 
competitor on the market. H.R. 3 specifically targets drugs 
that lack competition and drugs for which the market is clearly 
broken by giving the Secretary the ability to achieve fairer 
prices for Americans.
    Under H.R. 3, the Secretary and the manufacturer negotiate 
a mutually agreed maximum fair price (MFP) through a voluntary, 
bilateral negotiation process. Just as private companies and 
agencies such as the Department of Defense negotiate for the 
best price for certain goods and services, this bill would 
empower the Secretary to do the same. The Secretary is required 
to negotiate a lower price on at least 25 drugs in the first 
year, increasing to at least 30 after five years and at least 
35 after ten years. These negotiation targets are a floor and 
the Secretary can negotiate as many drugs as possible from the 
list. The gradually increasing requirement ensures that the 
Secretary and the Department of Health and Human Services have 
sufficient time to build capacity and expertise while still 
ensuring that savings are immediately delivered to the American 
people. However, this bill does not prohibit the Secretary from 
negotiating on all 250 drugs. Importantly, when negotiating 
prices, the Secretary would take various factors into 
consideration such as the research and development costs of the 
drug, the cost of production, and domestic and international 
sales information.
    To ensure that negotiations result in meaningful savings 
for consumers, the Secretary must achieve a price that is no 
more than 120 percent of the Average International Market (AIM) 
price of six foreign countries (United Kingdom, France, Canada, 
Germany, Australia, and Japan). The negotiated price, or the 
MFP, then applies to drugs covered by Medicare as well as 
private payers. This ensures that workers and employers also 
benefit from the Secretary's negotiation. Individual and group 
health plans are automatically opted-in to the negotiated 
price, but plans can opt-out should they believe that they are 
able to achieve a deeper discount. If private plans use the 
negotiated price, they are required to use that negotiated 
price in determining cost-sharing.
    If a pharmaceutical company fails to negotiate in good 
faith, the bill establishes a noncompliance fee of 65 percent 
of the gross sales of drugs sold by the manufacturer in the 
prior year. This penalty escalates every quarter in which the 
manufacturer is not in compliance, reaching a maximum of 95 
percent. Manufacturers that fail to offer the drugs to Medicare 
or health plans that participate in the Fair Price Negotiation 
Program would be subject to a noncompliance fee calculated as 
ten times the difference of the negotiated price and the amount 
charged by the manufacturer.
    Once a price is negotiated, the manufacturer may not 
increase the price faster than inflation in subsequent years 
until sufficient competition enters the market.

       MEDICARE PARTS B AND D PRESCRIPTION DRUG INFLATION REBATES

    Year after year, drug companies have increased the prices 
of drugs well above the rate of inflation, subjecting American 
seniors and patients to soaring prices, even on drugs that have 
been around for decades. For example, insulin was invented in 
1922, yet the prices continue to skyrocket--with the price 
doubling from 2012 to 2016 ($2,864 compared to $5,075).\30\
---------------------------------------------------------------------------
    \30\Jean Fuglesten Biniek & William Johnson, Spending on 
Individuals with Type 1 Diabetes and the Role of Rapidly Increasing 
Insulin Prices 2 (2019), https://healthcostinstitute.org/images/
easyblog_articles/267/HCCI-Insulin-Use-and-Spending-Trends-Brief-
01.22.19.pdf.
---------------------------------------------------------------------------
    To reverse unjustified price hikes, the Lower Drugs Prices 
Now Act further addresses high drug costs even beyond drugs 
that are negotiated. H.R. 3 creates new inflation rebates for 
Medicare Parts B and D. Drug manufacturers would be required to 
provide a rebate to Medicare for any price increases in excess 
of inflation, as measured by the Consumer Price Index for All 
Urban Consumers (CPI-U). Rebates would apply to price increases 
dating back to 2016 and would cover all of the more than 8,000 
drugs covered by Medicare Parts B and D. The rebates would also 
take into account prices outside of Medicare, and the 
Congressional Budget Office (CBO) has previously indicated that 
such rebates will result in downward pressure on costs in the 
commercial market.\31\ These inflation rebates would correct 
past and prevent future unnecessary and unjustified price 
hikes.
---------------------------------------------------------------------------
    \31\Congressional Budget Office, The Prescription Drug Pricing 
Reduction Act (PDPRA) of 2019 2 (2019), https://www.cbo.gov/system/
files/2019-07/PDPRA_preliminary_estimate.pdf.
---------------------------------------------------------------------------

    PART D IMPROVEMENTS AND MAXIMUM OUT-OF-POCKET CAP FOR MEDICARE 
                             BENEFICIARIES

    The Lower Drug Costs Now Act will strengthen and improve 
the Medicare Part D benefit to reduce out-of-pocket costs for 
seniors and people with disabilities. Under current law, 
beneficiaries are liable for 5 percent of the cost of Part D 
drugs in the catastrophic phase of their coverage (currently 
$5,100). For certain high-cost drugs, such as those used to 
treat multiple sclerosis or cancer, this can be an enormous 
financial burden on families--many of whom must use their life 
savings just to afford treatment.\32\ The bill would 
restructure the Part D benefit to establish a $2,000 out-of-
pocket limit in Part D, end beneficiary liability in the 
catastrophic phase, and realign incentives to ensure health 
plans and drug manufacturers pay a fair share.
---------------------------------------------------------------------------
    \32\Scott Ramsey & Veena Shankaran, Financial Toxicity: 1 in 3 
Cancer Patients Have to Turn to Friends or Family to Pay for Care, Stat 
News (Nov. 2, 2016), https://www.statnews.com/2016/11/02/cancer-
treatment-financial-toxicity/.
---------------------------------------------------------------------------

        REINVESTING SAVINGS IN THE HEALTH OF THE AMERICAN PEOPLE

    The Office of the Actuary (OACT) at the Centers for 
Medicare and Medicaid Services (CMS) found that Titles I and II 
of the bill alone would save a total of $218.7 billion over 
2020-29 and reduce total national health spending by $480.7 
billion.\33\ OACT estimated savings of $158.3 billion to 
households ($82.6 billion in cost-sharing and $75.7 billion in 
lower premiums).\34\ With respect to private health insurance, 
these savings would include $55 billion in reduced cost-sharing 
and premiums for consumers and $46.3 billion in savings to 
private businesses.\35\ In addition, although a complete score 
from the CBO is not yet available, a preliminary estimate shows 
that savings during the budget window to Medicare Part D alone 
will total $345 billion.\36\
---------------------------------------------------------------------------
    \33\Memorandum from the Ctrs. for Medicare & Medicaid Servs. Office 
of the Actuary 2 (Oct. 11, 2019).
    \34\Id.
    \35\Id. at 3.
    \36\Congressional Budget Office, Re: Effects of Drug Price 
Negotiation Stemming From Title 1 of H.R. 3, the Lower Drug Costs Now 
Act of 2019, on Spending and Revenues Related to Part D of Medicare 1 
(2019), https://www.cbo.gov/system/files/2019-10/hr3ltr.pdf.
---------------------------------------------------------------------------
    Apart from immediately lowering premiums and cost-sharing, 
the additional savings resulting from H.R. 3 will be used to 
improve the health of the American people through reinvestment 
in the health care system. It is the intention that H.R. 3 
ultimately finance several historic benefit improvements, such 
as adding dental, vision, and hearing coverage to the Medicare 
program and reforming the Part D Low-Income Subsidy and 
Medicare Savings Programs. In addition, the savings achieved by 
H.R. 3 will also be available to support development of new 
drugs through the NIH as well as other public health 
priorities.

                               CONCLUSION

    The Committee has a duty and obligation to ensure that 
Americans can access the drugs they need to stay healthy. 
Americans should not have to choose between the medications 
they need and other necessities like food or rent. As drug 
prices continue to soar, Congress must take action. The Lower 
Drug Costs Now Act grants the Secretary the authority, 
directive, and tools to negotiate drug prices, providing much 
needed relief to millions of consumers. The Lower Drug Costs 
Now Act stops drug companies from overcharging Americans while 
charging patients in other countries significantly less for the 
exact same drug. The Lower Drug Costs Now Act lowers drug 
prices, reduces out-of-pocket costs, and increases 
transparency.

                      Section-by-Section Analysis


      TITLE I--LOWERING PRICES THROUGH FAIR DRUG PRICE NEGOTIATION

Sec. 101. Providing for lower prices for certain high-priced single 
        source drugs

    This section establishes a Fair Price Negotiation Program 
(program) through which the Secretary of Health and Human 
Services (the Secretary) must negotiate lower prices for 
certain high-priced single source drugs. Each year, the 
Secretary will publish in the Federal Register a list of 250 
drugs responsible for the greatest spending by Medicare and in 
the United States overall. Insulin products would also be 
included on the list. Of these listed drugs, the Secretary must 
enter into agreements with manufacturers to negotiate a maximum 
fair price (MFP) for at least 25 drugs from 2023 to 2027; at 
least 30 drugs from 2028 to 2032; and at least 35 drugs in 2033 
and all subsequent years. The MFP may not exceed 120 percent of 
a volume-weighted Average International Market (AIM) price in 
six countries (Canada, Australia, the United Kingdom, Germany, 
Japan, and France). If no AIM price is available, a 
manufacturer must pay to the Treasury an amount equal to 15 
percent of the average manufacturer price (AMP) of the drug, 
and manufacturers may later be required to pay back a certain 
amount once the AIM price becomes available. In determining the 
MFP, the Secretary shall consider various factors, prioritizing 
research and development costs, market data, unit costs of 
production and distribution, and comparison to existing 
therapeutic alternatives. A manufacturer will be subject to 
civil monetary penalties for failing to provide access to a 
price no higher than the MFP or for violation of other program 
requirements.
    A group health plan or health insurance issuer offering 
group or individual coverage shall be treated as having in 
effect an agreement with the Secretary to utilize the MFP for 
any drug selected for negotiation. Plans or issuers may elect 
not to participate in the program through a process established 
by the Secretary. The Secretary and the Secretaries of Labor 
and the Treasury must make public a list of each group health 
plan and issuer of health insurance coverage that has elected 
not to participate. Participating plans and issuers must apply 
cost-sharing responsibilities with respect to selected drugs by 
substituting an amount that is not more than the MFP in lieu of 
the price upon which the cost-sharing would otherwise have been 
based.

Sec. 102. Selected drug manufacturer excise tax imposed during 
        noncompliance periods

    This section provides that if a drug manufacturer fails to 
enter into good faith negotiation with the Secretary, the 
manufacturer may be assessed an excise tax of 65 percent of the 
sales of drugs sold by the manufacturer in the prior year. This 
penalty will escalate for every quarter during which the 
manufacturer is in noncompliance, reaching a maximum of 95 
percent of sales. The Committee does not have jurisdiction over 
this section of H.R. 3.

  TITLE II--MEDICARE PARTS B AND D PRESCRIPTION DRUG INFLATION REBATES

Sec. 201. Medicare Part B rebate by manufacturers

    This section establishes a mandatory rebate program for all 
manufacturers of covered Part B drugs whose prices increase at 
a rate in excess of inflation. If the average sales price (ASP) 
for a rebatable Part B drug increases faster than the Consumer 
Price Index for All Urban Consumers (CPI-U), the manufacturer 
must pay a rebate based on the difference between the ASP and 
CPI-U. This will apply to price increases that have occurred 
since January 1, 2016. The Committee does not have jurisdiction 
over this section of H.R. 3.

Sec. 202. Medicare Part D rebate by manufacturers

    This section establishes a mandatory rebate program for all 
manufacturers of covered Part D drugs whose prices increase at 
a rate in excess of inflation. If the average manufacturer 
price (AMP) for a rebatable Part D drug increases faster than 
the CPI-U, the manufacturer must pay a rebate based on the 
difference between the AMP and CPI-U. This will apply to price 
increases that have occurred since January 1, 2016. The 
Committee does not have jurisdiction over this section of H.R. 
3.

   TITLE III--PART D IMPROVEMENTS AND MAXIMUM OUT-OF-POCKET CAP FOR 
                         MEDICARE BENEFICIARIES

Sec. 301. Medicare Part D benefit redesign

    This section phases out the coverage gap discount program 
and simplifies the part D benefit design to include a 
deductible phase, initial coverage phase, and catastrophic 
coverage phase. Beginning in plan year 2022, Part D out-of-
pocket costs for beneficiaries would be capped at $2,000. 
Financial liability under Part D would be modified such that in 
the initial coverage phase beneficiaries would be responsible 
for 25 percent, manufacturers would be responsible for 10 
percent, and plans would be responsible for 65 percent. In the 
catastrophic phase, the federal government would provide 20 
percent in reinsurance payments while manufacturers would be 
responsible for 30 percent and plans would be responsible for 
50 percent. The Committee does not have jurisdiction over this 
section of H.R. 3.

                       Explanation of Amendments

    The amendments, including the amendment in the nature of a 
substitute, are explained in the descriptive portions of this 
report.

              Application of Law to the Legislative Branch

    Pursuant to section 102(b)(3) of the Congressional 
Accountability Act, Pub. L. No. 104-1, H.R. 3, as amended, does 
not apply to terms and conditions of employment or to access to 
public services or accommodations within the legislative 
branch.

                       Unfunded Mandate Statement

    Pursuant to Section 423 of the Congressional Budget and 
Impoundment Control Act (as amended by Section 101(a)(2) of the 
Unfunded Mandates Reform Act, Pub. L. No. 104-4), the Committee 
traditionally adopts as its own the cost estimate prepared by 
the Director of the Congressional Budget Office (CBO) pursuant 
to section 402 of the Congressional Budget Act of 1974. The 
Committee reports that because this cost estimate was not 
timely submitted to the Committee before the filing of this 
report, the Committee is not in a position to make a cost 
estimate for H.R. 3, as amended.

                           Earmark Statement

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 3 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as described in clauses 9(e), 9(f), and 9(g) of rule 
XXI.

                            Roll Call Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
following roll call votes occurred during the Committee's 
consideration of H.R. 3:


             Statement of Performance Goals and Objectives

    Pursuant to clause (3)(c) of rule XIII of the Rules of the 
House of Representatives, the goal of H.R. 3 is to lower drug 
costs for the American people by establishing a fair price 
negotiation program, protecting consumers from excessive price 
increases, and establishing an out-of-pocket maximum for 
Medicare part D enrollees.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee states that no 
provision of H.R. 3 establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
federal program, a program that was included in any report from 
the Government Accountability Office to Congress pursuant to 
section 21 of Pub. L. No. 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

                                Hearings

    Pursuant to section 103(i) of H. Res. 6 for the 116th 
Congress, on September 26, 2019, the Committee on Education and 
Labor's Subcommittee on Health, Employment, Labor, and Pensions 
held a legislative hearing entitled ``Making Health Care More 
Affordable: Lowering Drug Prices and Increasing Transparency,'' 
which was used to consider H.R. 3. The hearing explored the 
rising cost of prescription drug prices in the United States 
and the impact of high prices on workers and businesses. The 
Committee heard testimony from Mr. Frederick Isasi, Executive 
Director, Families USA; Mr. David Mitchell, Founder, Patients 
for Affordable Drugs; Ms. Bari Talente, Executive Vice 
President, National Multiple Sclerosis Society; Dr. Mariana 
Socal, Assistant Scientist, Johns Hopkins University Bloomberg 
School of Public Health; Christopher Holt, Director of Health 
Care Policy, American Action Forum; and Dr. Craig Garthwaite, 
Associate Professor of Strategy, Northwestern University 
Kellogg School of Management.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee's oversight findings and recommendations are 
reflected in the descriptive portions of this report.

               New Budget Authority and CBO Cost Estimate

    Pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974, and pursuant to clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has requested but not received a cost 
estimate for the bill from the Director of the Congressional 
Budget Office.

                        Committee Cost Estimate

    Clause 3(d)(1) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison of the 
costs that would be incurred in carrying out H.R. 3. However, 
clause 3(d)(2)(B) of that rule provides that this requirement 
does not apply when the committee has included in its report a 
timely submitted cost estimate of the bill prepared by the 
Director of the Congressional Budget Office under section 402 
of the Congressional Budget Act of 1974. The Committee reports 
that because this cost estimate was not timely submitted to the 
Committee before the filing of this report, the Committee is 
not in a position to make a cost estimate for H.R. 3, as 
amended.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, H.R. 3, as reported, are shown as follows:

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                          SOCIAL SECURITY ACT




           *       *       *       *       *       *       *
     TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE 
SIMPLIFICATION

           *       *       *       *       *       *       *



  PART E--FAIR PRICE NEGOTIATION PROGRAM TO LOWER PRICES FOR CERTAIN 
                    HIGH-PRICED SINGLE SOURCE DRUGS

SEC. 1191. ESTABLISHMENT OF PROGRAM.

  (a) In General.--The Secretary shall establish a Fair Price 
Negotiation Program (in this part referred to as the 
``program''). Under the program, with respect to each price 
applicability period, the Secretary shall--
          (1) publish a list of selected drugs in accordance 
        with section 1192;
          (2) enter into agreements with manufacturers of 
        selected drugs with respect to such period, in 
        accordance with section 1193;
          (3) negotiate and, if applicable, renegotiate maximum 
        fair prices for such selected drugs, in accordance with 
        section 1194; and
          (4) carry out the administrative duties described in 
        section 1196.
  (b) Definitions Relating to Timing.--For purposes of this 
part:
          (1) Initial price applicability year.--The term 
        ``initial price applicability year'' means a plan year 
        (beginning with plan year 2023) or, if agreed to in an 
        agreement under section 1193 by the Secretary and 
        manufacturer involved, a period of more than one plan 
        year (beginning on or after January 1, 2023).
          (2) Price applicability period.--The term ``price 
        applicability period'' means, with respect to a drug, 
        the period beginning with the initial price 
        applicability year with respect to which such drug is a 
        selected drug and ending with the last plan year during 
        which the drug is a selected drug.
          (3) Selected drug publication date.--The term 
        ``selected drug publication date'' means, with respect 
        to each initial price applicability year, April 15 of 
        the plan year that begins 2 years prior to such year.
          (4) Voluntary negotiation period.--The term 
        ``voluntary negotiation period'' means, with respect to 
        an initial price applicability year with respect to a 
        selected drug, the period--
                  (A) beginning on the sooner of--
                          (i) the date on which the 
                        manufacturer of the drug and the 
                        Secretary enter into an agreement under 
                        section 1193 with respect to such drug; 
                        or
                          (ii) June 15 following the selected 
                        drug publication date with respect to 
                        such selected drug; and
                  (B) ending on March 31 of the year that 
                begins one year prior to the initial price 
                applicability year.
  (c) Other Definitions.--For purposes of this part:
          (1) Fair price eligible individual.--The term ``fair 
        price eligible individual'' means, with respect to a 
        selected drug--
                  (A) in the case such drug is furnished or 
                dispensed to the individual at a pharmacy or by 
                a mail order service--
                          (i) an individual who is enrolled 
                        under a prescription drug plan under 
                        part D of title XVIII or an MA-PD plan 
                        under part C of such title under which 
                        coverage is provided for such drug; and
                          (ii) an individual who is enrolled 
                        under a group health plan or health 
                        insurance coverage offered in the group 
                        or individual market (as such terms are 
                        defined in section 2791 of the Public 
                        Health Service Act) with respect to 
                        which there is in effect an agreement 
                        with the Secretary under section 1197 
                        with respect to such selected drug as 
                        so furnished or dispensed; and
                  (B) in the case such drug is furnished or 
                administered to the individual by a hospital, 
                physician, or other provider of services or 
                supplier--
                          (i) an individual who is entitled to 
                        benefits under part A of title XVIII or 
                        enrolled under part B of such title if 
                        such selected drug is covered under the 
                        respective part; and
                          (ii) an individual who is enrolled 
                        under a group health plan or health 
                        insurance coverage offered in the group 
                        or individual market (as such terms are 
                        defined in section 2791 of the Public 
                        Health Service Act) with respect to 
                        which there is in effect an agreement 
                        with the Secretary under section 1197 
                        with respect to such selected drug as 
                        so furnished or administered.
          (2) Maximum fair price.--The term ``maximum fair 
        price'' means, with respect to a plan year during a 
        price applicability period and with respect to a 
        selected drug (as defined in section 1192(c)) with 
        respect to such period, the price published pursuant to 
        section 1195 in the Federal Register for such drug and 
        year.
          (3) Average international market price defined.--
                  (A) In general.--The terms ``average 
                international market price'' and ``AIM price'' 
                mean, with respect to a drug, the average price 
                (which shall be the net average price, if 
                practicable, and volume-weighted, if 
                practicable) for a unit (as defined in 
                paragraph (4)) of the drug for sales of such 
                drug (calculated across different dosage forms 
                and strengths of the drug and not based on the 
                specific formulation or package size or package 
                type), as computed (as of the date of 
                publication of such drug as a selected drug 
                under section 1192(a)) in all countries 
                described in clause (ii) of subparagraph (B) 
                that are applicable countries (as described in 
                clause (i) of such subparagraph) with respect 
                to such drug.
                  (B) Applicable countries.--
                          (i) In general.--For purposes of 
                        subparagraph (A), a country described 
                        in clause (ii) is an applicable country 
                        described in this clause with respect 
                        to a drug if there is available an 
                        average price for any unit for the drug 
                        for sales of such drug in such country.
                          (ii) Countries described.--For 
                        purposes of this paragraph, the 
                        following are countries described in 
                        this clause:
                                  (I) Australia.
                                  (II) Canada.
                                  (III) France.
                                  (IV) Germany.
                                  (V) Japan.
                                  (VI) The United Kingdom.
          (4) Unit.--The term ``unit'' means, with respect to a 
        drug, the lowest identifiable quantity (such as a 
        capsule or tablet, milligram of molecules, or grams) of 
        the drug that is dispensed.

SEC. 1192. SELECTION OF NEGOTIATION-ELIGIBLE DRUGS AS SELECTED DRUGS.

  (a) In General.--Not later than the selected drug publication 
date with respect to an initial price applicability year, the 
Secretary shall select and publish in the Federal Register a 
list of--
          (1)(A) with respect to an initial price applicability 
        year during the period beginning with 2023 and ending 
        with 2027, at least 25 negotiation-eligible drugs 
        described in subparagraphs (A) and (B), but not 
        subparagraph (C), of subsection (d)(1) (or, with 
        respect to an initial price applicability year during 
        such period beginning after 2023, the maximum number 
        (if such number is less than 25) of such negotiation-
        eligible drugs for the year) with respect to such year;
          (B) with respect to an initial price applicability 
        year during the period beginning with 2028 and ending 
        with 2032, at least 30 negotiation-eligible drugs 
        described in subparagraphs (A) and (B), but not 
        subparagraph (C), of subsection (d)(1) (or, with 
        respect to an initial price applicability year during 
        such period, the maximum number (if such number is less 
        than 30) of such negotiation-eligible drugs for the 
        year) with respect to such year; and
          (C) with respect to an initial price applicability 
        year beginning after 2032, at least 35 negotiation-
        eligible drugs described in subparagraphs (A) and (B), 
        but not subparagraph (C), of subsection (d)(1) (or, 
        with respect to an initial price applicability year 
        during such period, the maximum number (if such number 
        is less than 35) of such negotiation-eligible drugs for 
        the year) with respect to such year;
          (2) all negotiation-eligible drugs described in 
        subparagraph (C) of such subsection with respect to 
        such year; and
          (3) all new-entrant negotiation-eligible drugs (as 
        defined in subsection (g)(1)) with respect to such 
        year.
Each drug published on the list pursuant to the previous 
sentence shall be subject to the negotiation process under 
section 1194 for the voluntary negotiation period with respect 
to such initial price applicability year (and the renegotiation 
process under such section as applicable for any subsequent 
year during the applicable price applicability period). In 
applying this subsection, any negotiation-eligible drug that is 
selected under this subsection for an initial price 
applicability year shall not count toward the required minimum 
amount of drugs to be selected under paragraph (1) for any 
subsequent year, including such a drug so selected that is 
subject to renegotiation under section 1194.
  (b) Selection of Drugs.--In carrying out subsection (a)(1) 
the Secretary shall select for inclusion on the published list 
described in subsection (a) with respect to a price 
applicability period, the negotiation-eligible drugs that the 
Secretary projects will result in the greatest savings to the 
Federal Government or fair price eligible individuals during 
the price applicability period. In making this projection of 
savings for drugs for which there is an AIM price for a price 
applicability period, the savings shall be projected across 
different dosage forms and strengths of the drugs and not based 
on the specific formulation or package size or package type of 
the drugs, taking into consideration both the volume of drugs 
for which payment is made, to the extent such data is 
available, and the amount by which the net price for the drugs 
exceeds the AIM price for the drugs.
  (c) Selected Drug.--For purposes of this part, each drug 
included on the list published under subsection (a) with 
respect to an initial price applicability year shall be 
referred to as a ``selected drug'' with respect to such year 
and each subsequent plan year beginning before the first plan 
year beginning after the date on which the Secretary determines 
two or more drug products--
          (1) are approved or licensed (as applicable)--
                  (A) under section 505(j) of the Federal Food, 
                Drug, and Cosmetic Act using such drug as the 
                listed drug; or
                  (B) under section 351(k) of the Public Health 
                Service Act using such drug as the reference 
                product; and
          (2) continue to be marketed.
  (d) Negotiation-eligible Drug.--
          (1) In general.--For purposes of this part, the term 
        ``negotiation-eligible drug'' means, with respect to 
        the selected drug publication date with respect to an 
        initial price applicability year, a qualifying single 
        source drug, as defined in subsection (e), that meets 
        any of the following criteria:
                  (A) Covered part d drugs.--The drug is among 
                the 125 covered part D drugs (as defined in 
                section 1860D-2(e)) for which there was an 
                estimated greatest net spending under parts C 
                and D of title XVIII, as determined by the 
                Secretary, during the most recent plan year 
                prior to such drug publication date for which 
                data are available.
                  (B) Other drugs.--The drug is among the 125 
                drugs for which there was an estimated greatest 
                net spending in the United States (including 
                the 50 States, the District of Columbia, and 
                the territories of the United States), as 
                determined by the Secretary, during the most 
                recent plan year prior to such drug publication 
                date for which data are available.
                  (C) Insulin.--The drug is a qualifying single 
                source drug described in subsection (e)(3).
          (2) Clarification.--In determining whether a 
        qualifying single source drug satisfies any of the 
        criteria described in paragraph (1), the Secretary 
        shall, to the extent practicable, use data that is 
        aggregated across dosage forms and strengths of the 
        drug and not based on the specific formulation or 
        package size or package type of the drug.
          (3) Publication.--Not later than the selected drug 
        publication date with respect to an initial price 
        applicability year, the Secretary shall publish in the 
        Federal Register a list of negotiation-eligible drugs 
        with respect to such selected drug publication date.
  (e) Qualifying Single Source Drug.--For purposes of this 
part, the term ``qualifying single source drug'' means any of 
the following:
          (1) Drug products.--A drug that--
                  (A) is approved under section 505(c) of the 
                Federal Food, Drug, and Cosmetic Act and 
                continues to be marketed pursuant to such 
                approval; and
                  (B) is not the listed drug for any drug that 
                is approved and continues to be marketed under 
                section 505(j) of such Act.
          (2) Biological products.--A biological product that--
                  (A) is licensed under section 351(a) of the 
                Public Health Service Act, including any 
                product that has been deemed to be licensed 
                under section 351 of such Act pursuant to 
                section 7002(e)(4) of the Biologics Price 
                Competition and Innovation Act of 2009, and 
                continues to be marketed under section 351 of 
                such Act; and
                  (B) is not the reference product for any 
                biological product that is licensed and 
                continues to be marketed under section 351(k) 
                of such Act.
          (3) Insulin product.--Notwithstanding paragraphs (1) 
        and (2), any insulin product that is approved under 
        subsection (c) or (j) of section 505 of the Federal 
        Food, Drug, and Cosmetic Act or licensed under 
        subsection (a) or (k) of section 351 of the Public 
        Health Service Act and continues to be marketed under 
        such section 505 or 351, including any insulin product 
        that has been deemed to be licensed under section 
        351(a) of the Public Health Service Act pursuant to 
        section 7002(e)(4) of the Biologics Price Competition 
        and Innovation Act of 2009 and continues to be marketed 
        pursuant to such licensure.
For purposes of applying paragraphs (1) and (2), a drug or 
biological product that is marketed by the same sponsor or 
manufacturer (or an affiliate thereof or a cross-licensed 
producer or distributor) as the listed drug or reference 
product described in such respective paragraph shall not be 
taken into consideration.
  (f) Information on International Drug Prices.--For purposes 
of determining which negotiation-eligible drugs to select under 
subsection (a) and, in the case of such drugs that are selected 
drugs, to determine the maximum fair price for such a drug and 
whether such maximum fair price should be renegotiated under 
section 1194, the Secretary shall use data relating to the AIM 
price with respect to such drug as available or provided to the 
Secretary and shall on an ongoing basis request from 
manufacturers of selected drugs information on the AIM price of 
such a drug.
  (g) New-entrant Negotiation-eligible Drugs.--
          (1) In general.--For purposes of this part, the term 
        ``new-entrant negotiation-eligible drug'' means, with 
        respect to the selected drug publication date with 
        respect to an initial price applicability year, a 
        qualifying single source drug--
                  (A) that is first approved or licensed, as 
                described in paragraph (1), (2), or (3) of 
                subsection (e), as applicable, during the year 
                preceding such selected drug publication date; 
                and
                  (B) that the Secretary determines under 
                paragraph (2) is likely to be a negotiation-
                eligible drug with respect to the subsequent 
                selected drug publication date.
          (2) Determination.--In the case of a qualifying 
        single source drug that meets the criteria described in 
        subparagraphs (A) and (B) of paragraph (1), with 
        respect to an initial price applicability year, if the 
        wholesale acquisition cost at which such drug is first 
        marketed in the United States is equal to or greater 
        than the median household income (as determined 
        according to the most recent data collected by the 
        United States Census Bureau), the Secretary shall 
        determine before the selected drug publication date 
        with respect to the initial price applicability year, 
        if the drug is likely to be included as a negotiation-
        eligible drug with respect to the subsequent selected 
        drug publication date, based on the projected spending 
        under title XVIII or in the United States on such drug. 
        For purposes of this paragraph the term ``United 
        States'' includes the 50 States, the District of 
        Columbia, and the territories of the United States.

SEC. 1193. MANUFACTURER AGREEMENTS.

  (a) In General.--For purposes of section 1191(a)(2), the 
Secretary shall enter into agreements with manufacturers of 
selected drugs with respect to a price applicability period, by 
not later than June 15 following the selected drug publication 
date with respect to such selected drug, under which--
          (1) during the voluntary negotiation period for the 
        initial price applicability year for the selected drug, 
        the Secretary and manufacturer, in accordance with 
        section 1194, negotiate to determine (and, by not later 
        than the last date of such period and in accordance 
        with subsection (c), agree to) a maximum fair price for 
        such selected drug of the manufacturer in order to 
        provide access to such price--
                  (A) to fair price eligible individuals who 
                with respect to such drug are described in 
                subparagraph (A) of section 1191(c)(1) and are 
                furnished or dispensed such drug during, 
                subject to subparagraph (2), the price 
                applicability period; and
                  (B) to hospitals, physicians, and other 
                providers of services and suppliers with 
                respect to fair price eligible individuals who 
                with respect to such drug are described in 
                subparagraph (B) of such section and are 
                furnished or administered such drug during, 
                subject to subparagraph (2), the price 
                applicability period;
          (2) the Secretary and the manufacturer shall, in 
        accordance with a process and during a period specified 
        by the Secretary pursuant to rulemaking, renegotiate 
        (and, by not later than the last date of such period 
        and in accordance with subsection (c), agree to) the 
        maximum fair price for such drug if the Secretary 
        determines that there is a material change in any of 
        the factors described in section 1194(d) relating to 
        the drug, including changes in the AIM price for such 
        drug, in order to provide access to such maximum fair 
        price (as so renegotiated)--
                  (A) to fair price eligible individuals who 
                with respect to such drug are described in 
                subparagraph (A) of section 1191(c)(1) and are 
                furnished or dispensed such drug during any 
                year during the price applicability period 
                (beginning after such renegotiation) with 
                respect to such selected drug; and
                  (B) to hospitals, physicians, and other 
                providers of services and suppliers with 
                respect to fair price eligible individuals who 
                with respect to such drug are described in 
                subparagraph (B) of such section and are 
                furnished or administered such drug during any 
                year described in subparagraph (A);
          (3) the maximum fair price (including as renegotiated 
        pursuant to paragraph (2)), with respect to such a 
        selected drug, shall be provided to fair price eligible 
        individuals, who with respect to such drug are 
        described in subparagraph (A) of section 1191(c)(1), at 
        the pharmacy or by a mail order service at the point-
        of-sale of such drug;
          (4) the manufacturer, subject to subsection (c), 
        submits to the Secretary, in a form and manner 
        specified by the Secretary--
                  (A) for the voluntary negotiation period for 
                the price applicability period (and, if 
                applicable, before any period of renegotiation 
                specified pursuant to paragraph (2)) with 
                respect to such drug all information that the 
                Secretary requires to carry out the negotiation 
                (or renegotiation process) under this part, 
                including information described in section 
                1192(f) and section 1194(d)(1); and
                  (B) on an ongoing basis, information on 
                changes in prices for such drug that would 
                affect the AIM price for such drug or otherwise 
                provide a basis for renegotiation of the 
                maximum fair price for such drug pursuant to 
                paragraph (2);
          (5) the manufacturer agrees that in the case the 
        selected drug of a manufacturer is a drug described in 
        subsection (c), the manufacturer will, in accordance 
        with such subsection, make any payment required under 
        such subsection with respect to such drug; and
          (6) the manufacturer complies with requirements 
        imposed by the Secretary for purposes of administering 
        the program, including with respect to the duties 
        described in section 1196.
  (b) Agreement in Effect Until Drug is No Longer a Selected 
Drug.--An agreement entered into under this section shall be 
effective, with respect to a drug, until such drug is no longer 
considered a selected drug under section 1192(c).
  (c) Special Rule for Certain Selected Drugs Without AIM 
Price.--
          (1) In general.--In the case of a selected drug for 
        which there is no AIM price available with respect to 
        the initial price applicability year for such drug and 
        for which an AIM price becomes available beginning with 
        respect to a subsequent plan year during the price 
        applicability period for such drug, if the Secretary 
        determines that the amount described in paragraph 
        (2)(A) for a unit of such drug is greater than the 
        amount described in paragraph (2)(B) for a unit of such 
        drug, then by not later than one year after the date of 
        such determination, the manufacturer of such selected 
        drug shall pay to the Treasury an amount equal to the 
        product of--
                  (A) the difference between such amount 
                described in paragraph (2)(A) for a unit of 
                such drug and such amount described in 
                paragraph (2)(B) for a unit of such drug; and
                  (B) the number of units of such drug sold in 
                the United States, including the 50 States, the 
                District of Columbia, and the territories of 
                the United States, during the period described 
                in paragraph (2)(B).
          (2) Amounts described.--
                  (A) Weighted average price before aim price 
                available.--For purposes of paragraph (1), the 
                amount described in this subparagraph for a 
                selected drug described in such paragraph, is 
                the amount equal to the weighted average 
                manufacturer price (as defined in section 
                1927(k)(1)) for such dosage strength and form 
                for the drug during the period beginning with 
                the first plan year for which the drug is 
                included on the list of negotiation-eligible 
                drugs published under section 1192(d) and 
                ending with the last plan year during the price 
                applicability period for such drug with respect 
                to which there is no AIM price available for 
                such drug.
                  (B) Amount multiplier after aim price 
                available.--For purposes of paragraph (1), the 
                amount described in this subparagraph for a 
                selected drug described in such paragraph, is 
                the amount equal to 200 percent of the AIM 
                price for such drug with respect to the first 
                plan year during the price applicability period 
                for such drug with respect to which there is an 
                AIM price available for such drug.
  (d) Confidentiality of Information.--Information submitted to 
the Secretary under this part by a manufacturer of a selected 
drug that is proprietary information of such manufacturer (as 
determined by the Secretary) may be used only by the Secretary 
or disclosed to and used by the Comptroller General of the 
United States or the Medicare Payment Advisory Commission for 
purposes of carrying out this part.
  (e) Regulations.--
          (1) In general.--The Secretary shall, pursuant to 
        rulemaking, specify, in accordance with paragraph (2), 
        the information that must be submitted under subsection 
        (a)(4).
          (2) Information specified.--Information described in 
        paragraph (1), with respect to a selected drug, shall 
        include information on sales of the drug (by the 
        manufacturer of the drug or by another entity under 
        license or other agreement with the manufacturer, with 
        respect to the sales of such drug, regardless of the 
        name under which the drug is sold) in any foreign 
        country that is part of the AIM price. The Secretary 
        shall verify, to the extent practicable, such sales 
        from appropriate officials of the government of the 
        foreign country involved.
  (f) Compliance With Requirements for Administration of 
Program.--Each manufacturer with an agreement in effect under 
this section shall comply with requirements imposed by the 
Secretary or a third party with a contract under section 
1196(c)(1), as applicable, for purposes of administering the 
program.

SEC. 1194. NEGOTIATION AND RENEGOTIATION PROCESS.

  (a) In General.--For purposes of this part, under an 
agreement under section 1193 between the Secretary and a 
manufacturer of a selected drug, with respect to the period for 
which such agreement is in effect and in accordance with 
subsections (b) and (c), the Secretary and the manufacturer--
          (1) shall during the voluntary negotiation period 
        with respect to the initial price applicability year 
        for such drug, in accordance with this section, 
        negotiate a maximum fair price for such drug for the 
        purpose described in section 1193(a)(1); and
          (2) as applicable pursuant to section 1193(a)(2) and 
        in accordance with the process specified pursuant to 
        such section, renegotiate such maximum fair price for 
        such drug for the purpose described in such section.
  (b) Negotiating Methodology and Objective.--
          (1) In general.--The Secretary shall develop and use 
        a consistent methodology for negotiations under 
        subsection (a) that, in accordance with paragraph (2) 
        and subject to paragraph (3), achieves the lowest 
        maximum fair price for each selected drug while 
        appropriately rewarding innovation.
          (2) Prioritizing factors.--In considering the factors 
        described in subsection (d) in negotiating (and, as 
        applicable, renegotiating) the maximum fair price for a 
        selected drug, the Secretary shall, to the extent 
        practicable, consider all of the available factors 
        listed but shall prioritize the following factors:
                  (A) Research and development costs.--The 
                factor described in paragraph (1)(A) of 
                subsection (d).
                  (B) Market data.--The factor described in 
                paragraph (1)(B) of such subsection.
                  (C) Unit costs of production and 
                distribution.--The factor described in 
                paragraph (1)(C) of such subsection.
                  (D) Comparison to existing therapeutic 
                alternatives.--The factor described in 
                paragraph (2)(A) of such subsection.
          (3) Requirement.--
                  (A) In general.--In negotiating the maximum 
                fair price of a selected drug, with respect to 
                an initial price applicability year for the 
                selected drug, and, as applicable, in 
                renegotiating the maximum fair price for such 
                drug, with respect to a subsequent year during 
                the price applicability period for such drug, 
                in the case that the manufacturer of the 
                selected drug offers under the negotiation or 
                renegotiation, as applicable, a price for such 
                drug that is not more than the target price 
                described in subparagraph (B) for such drug for 
                the respective year, the Secretary shall agree 
                under such negotiation or renegotiation, 
                respectively, to such offered price as the 
                maximum fair price.
                  (B) Target price.--
                          (i) In general.--Subject to clause 
                        (ii), the target price described in 
                        this subparagraph for a selected drug 
                        with respect to a year, is the average 
                        price (which shall be the net average 
                        price, if practicable, and volume-
                        weighted, if practicable) for a unit of 
                        such drug for sales of such drug, as 
                        computed (across different dosage forms 
                        and strengths of the drug and not based 
                        on the specific formulation or package 
                        size or package type of the drug) in 
                        the applicable country described in 
                        section 1191(c)(3)(B) with respect to 
                        such drug that, with respect to such 
                        year, has the lowest average price for 
                        such drug as compared to the average 
                        prices (as so computed) of such drug 
                        with respect to such year in the other 
                        applicable countries described in such 
                        section with respect to such drug.
                          (ii) Selected drugs without aim 
                        price.--In applying this paragraph in 
                        the case of negotiating the maximum 
                        fair price of a selected drug for which 
                        there is no AIM price available with 
                        respect to the initial price 
                        applicability year for such drug, or, 
                        as applicable, renegotiating the 
                        maximum fair price for such drug with 
                        respect to a subsequent year during the 
                        price applicability period for such 
                        drug before the first plan year for 
                        which there is an AIM price available 
                        for such drug, the target price 
                        described in this subparagraph for such 
                        drug and respective year is the amount 
                        that is 80 percent of the average 
                        manufacturer price (as defined in 
                        section 1927(k)(1)) for such drug and 
                        year.
          (4) Annual report.--After the completion of each 
        voluntary negotiation period, the Secretary shall 
        submit to Congress a report on the maximum fair prices 
        negotiated (or, as applicable, renegotiated) for such 
        period. Such report shall include information on how 
        such prices so negotiated (or renegotiated) meet the 
        requirements of this part, including the requirements 
        of this subsection.
  (c) Limitation.--
          (1) In general.--Subject to paragraph (2), the 
        maximum fair price negotiated (including as 
        renegotiated) under this section for a selected drug, 
        with respect to each plan year during a price 
        applicability period for such drug, shall not exceed 
        120 percent of the AIM price applicable to such drug 
        with respect to such year.
          (2) Selected drugs without aim price.--In the case of 
        a selected drug for which there is no AIM price 
        available with respect to the initial price 
        applicability year for such drug, for each plan year 
        during the price applicability period before the first 
        plan year for which there is an AIM price available for 
        such drug, the maximum fair price negotiated (including 
        as renegotiated) under this section for the selected 
        drug shall not exceed the amount equal to 85 percent of 
        the average manufacturer price for the drug with 
        respect to such year.
  (d) Considerations.--For purposes of negotiating and, as 
applicable, renegotiating (including for purposes of 
determining whether to renegotiate) the maximum fair price of a 
selected drug under this part with the manufacturer of the 
drug, the Secretary shall, consistent with subsection (b)(2), 
take into consideration the following factors:
          (1) Manufacturer-specific information.--The following 
        information, including as submitted by the 
        manufacturer:
                  (A) Research and development costs of the 
                manufacturer for the drug and the extent to 
                which the manufacturer has recouped research 
                and development costs.
                  (B) Market data for the drug, including the 
                distribution of sales across different programs 
                and purchasers and projected future revenues 
                for the drug.
                  (C) Unit costs of production and distribution 
                of the drug.
                  (D) Prior Federal financial support for novel 
                therapeutic discovery and development with 
                respect to the drug.
                  (E) Data on patents and on existing and 
                pending exclusivity for the drug.
                  (F) National sales data for the drug.
                  (G) Information on clinical trials for the 
                drug in the United States or in applicable 
                countries described in section 1191(c)(3)(B).
          (2) Information on alternative products.--The 
        following information:
                  (A) The extent to which the drug represents a 
                therapeutic advance as compared to existing 
                therapeutic alternatives and, to the extent 
                such information is available, the costs of 
                such existing therapeutic alternatives.
                  (B) Information on approval by the Food and 
                Drug Administration of alternative drug 
                products.
                  (C) Information on comparative effectiveness 
                analysis for such products, taking into 
                consideration the effects of such products on 
                specific populations, such as individuals with 
                disabilities, the elderly, terminally ill, 
                children, and other patient populations.
        In considering information described in subparagraph 
        (C), the Secretary shall not use evidence or findings 
        from comparative clinical effectiveness research in a 
        manner that treats extending the life of an elderly, 
        disabled, or terminally ill individual as of lower 
        value than extending the life of an individual who is 
        younger, nondisabled, or not terminally ill. Nothing in 
        the previous sentence shall affect the application or 
        consideration of an AIM price for a selected drug.
          (3) Foreign sales information.--To the extent 
        available on a timely basis, including as provided by a 
        manufacturer of the selected drug or otherwise, 
        information on sales of the selected drug in each of 
        the countries described in section 1191(c)(3)(B).
          (4) Additional information.--Information submitted to 
        the Secretary, in accordance with a process specified 
        by the Secretary, by other parties that are affected by 
        the establishment of a maximum fair price for the 
        selected drug.
  (e) Request for Information.--For purposes of negotiating 
and, as applicable, renegotiating (including for purposes of 
determining whether to renegotiate) the maximum fair price of a 
selected drug under this part with the manufacturer of the 
drug, with respect to a price applicability period, and other 
relevant data for purposes of this section--
          (1) the Secretary shall, not later than the selected 
        drug publication date with respect to the initial price 
        applicability year of such period, request drug pricing 
        information from the manufacturer of such selected 
        drug, including information described in subsection 
        (d)(1); and
          (2) by not later than October 1 following the 
        selected drug publication date, the manufacturer of 
        such selected drug shall submit to the Secretary such 
        requested information in such form and manner as the 
        Secretary may require.
The Secretary shall request, from the manufacturer or others, 
such additional information as may be needed to carry out the 
negotiation and renegotiation process under this section.

SEC. 1195. PUBLICATION OF MAXIMUM FAIR PRICES.

  (a) In General.--With respect to an initial price 
applicability year and selected drug with respect to such year, 
not later than April 1 of the plan year prior to such initial 
price applicability year, the Secretary shall publish in the 
Federal Register the maximum fair price for such drug 
negotiated under this part with the manufacturer of such drug.
  (b) Updates.--
          (1) Subsequent year maximum fair prices.--For a 
        selected drug, for each plan year subsequent to the 
        initial price applicability year for such drug with 
        respect to which an agreement for such drug is in 
        effect under section 1193, the Secretary shall publish 
        in the Federal Register--
                  (A) subject to subparagraph (B), the amount 
                equal to the maximum fair price published for 
                such drug for the previous year, increased by 
                the annual percentage increase in the consumer 
                price index for all urban consumers (all items; 
                U.S. city average) as of September of such 
                previous year; or
                  (B) in the case the maximum fair price for 
                such drug was renegotiated, for the first year 
                for which such price as so renegotiated 
                applies, such renegotiated maximum fair price.
          (2) Prices negotiated after deadline.--In the case of 
        a selected drug with respect to an initial price 
        applicability year for which the maximum fair price is 
        determined under this part after the date of 
        publication under this section, the Secretary shall 
        publish such maximum fair price in the Federal Register 
        by not later than 30 days after the date such maximum 
        price is so determined.

SEC. 1196. ADMINISTRATIVE DUTIES; COORDINATION PROVISIONS.

  (a) Administrative Duties.--
          (1) In general.--For purposes of section 1191, the 
        administrative duties described in this section are the 
        following:
                  (A) The establishment of procedures 
                (including through agreements with 
                manufacturers under this part, contracts with 
                prescription drug plans under part D of title 
                XVIII and MA-PD plans under part C of such 
                title, and agreements under section 1197 with 
                group health plans and health insurance issuers 
                of health insurance coverage offered in the 
                individual or group market) under which the 
                maximum fair price for a selected drug is 
                provided to fair price eligible individuals, 
                who with respect to such drug are described in 
                subparagraph (A) of section 1191(c)(1), at 
                pharmacies or by mail order service at the 
                point-of-sale of the drug for the applicable 
                price period for such drug and providing that 
                such maximum fair price is used for determining 
                cost-sharing under such plans or coverage for 
                the selected drug.
                  (B) The establishment of procedures 
                (including through agreements with 
                manufacturers under this part and contracts 
                with hospitals, physicians, and other providers 
                of services and suppliers and agreements under 
                section 1197 with group health plans and health 
                insurance issuers of health insurance coverage 
                offered in the individual or group market) 
                under which, in the case of a selected drug 
                furnished or administered by such a hospital, 
                physician, or other provider of services or 
                supplier to fair price eligible individuals 
                (who with respect to such drug are described in 
                subparagraph (B) of section 1191(c)(1)), the 
                maximum fair price for the selected drug is 
                provided to such hospitals, physicians, and 
                other providers of services and suppliers (as 
                applicable) with respect to such individuals 
                and providing that such maximum fair price is 
                used for determining cost-sharing under the 
                respective part, plan, or coverage for the 
                selected drug.
                  (C) The establishment of procedures 
                (including through agreements and contracts 
                described in subparagraphs (A) and (B)) to 
                ensure that, not later than 90 days after the 
                dispensing of a selected drug to a fair price 
                eligible individual by a pharmacy or mail order 
                service, the pharmacy or mail order service is 
                reimbursed for an amount equal to the 
                difference between--
                          (i) the lesser of--
                                  (I) the wholesale acquisition 
                                cost of the drug;
                                  (II) the national average 
                                drug acquisition cost of the 
                                drug; and
                                  (III) any other similar 
                                determination of pharmacy 
                                acquisition costs of the drug, 
                                as determined by the Secretary; 
                                and
                          (ii) the maximum fair price for the 
                        drug.
                  (D) The establishment of procedures to ensure 
                that the maximum fair price for a selected drug 
                is applied before--
                          (i) any coverage or financial 
                        assistance under other health benefit 
                        plans or programs that provide coverage 
                        or financial assistance for the 
                        purchase or provision of prescription 
                        drug coverage on behalf of fair price 
                        eligible individuals as the Secretary 
                        may specify; and
                          (ii) any other discounts.
                  (E) The establishment of procedures to enter 
                into appropriate agreements and protocols for 
                the ongoing computation of AIM prices for 
                selected drugs, including, to the extent 
                possible, to compute the AIM price for selected 
                drugs and including by providing that the 
                manufacturer of such a selected drug should 
                provide information for such computation not 
                later than 3 months after the first date of the 
                voluntary negotiation period for such selected 
                drug.
                  (F) The establishment of procedures to 
                compute and apply the maximum fair price across 
                different strengths and dosage forms of a 
                selected drug and not based on the specific 
                formulation or package size or package type of 
                the drug.
                  (G) The establishment of procedures to 
                negotiate and apply the maximum fair price in a 
                manner that does not include any dispensing or 
                similar fee.
                  (H) The establishment of procedures to carry 
                out the provisions of this part, as applicable, 
                with respect to--
                          (i) fair price eligible individuals 
                        who are enrolled under a prescription 
                        drug plan under part D of title XVIII 
                        or an MA-PD plan under part C of such 
                        title; and
                          (ii) fair price eligible individuals 
                        who are enrolled under a group health 
                        plan or health insurance coverage 
                        offered by a health insurance issuer in 
                        the individual or group market with 
                        respect to which there is an agreement 
                        in effect under section 1197.
                  (I) The establishment of a negotiation 
                process and renegotiation process in accordance 
                with section 1194, including a process for 
                acquiring information described in subsection 
                (d) of such section and determining amounts 
                described in subsection (b) of such section.
                  (J) The provision of a reasonable dispute 
                resolution mechanism to resolve disagreements 
                between manufacturers, fair price eligible 
                individuals, and the third party with a 
                contract under subsection (c)(1).
          (2) Monitoring compliance.--
                  (A) In general.--The Secretary shall monitor 
                compliance by a manufacturer with the terms of 
                an agreement under section 1193, including by 
                establishing a mechanism through which 
                violations of such terms may be reported.
                  (B) Notification.--If a third party with a 
                contract under subsection (c)(1) determines 
                that the manufacturer is not in compliance with 
                such agreement, the third party shall notify 
                the Secretary of such noncompliance for 
                appropriate enforcement under section 4192 of 
                the Internal Revenue Code of 1986 or section 
                1198, as applicable.
  (b) Collection of Data.--
          (1) From prescription drug plans and ma-pd plans.--
        The Secretary may collect appropriate data from 
        prescription drug plans under part D of title XVIII and 
        MA-PD plans under part C of such title in a timeframe 
        that allows for maximum fair prices to be provided 
        under this part for selected drugs.
          (2) From health plans.--The Secretary may collect 
        appropriate data from group health plans or health 
        insurance issuers offering group or individual health 
        insurance coverage in a timeframe that allows for 
        maximum fair prices to be provided under this part for 
        selected drugs.
          (3) Coordination of data collection.--To the extent 
        feasible, as determined by the Secretary, the Secretary 
        shall ensure that data collected pursuant to this 
        subsection is coordinated with, and not duplicative of, 
        other data collection efforts.
  (c) Contract With Third Parties.--
          (1) In general.--The Secretary may enter into a 
        contract with 1 or more third parties to administer the 
        requirements established by the Secretary in order to 
        carry out this part. At a minimum, the contract with a 
        third party under the preceding sentence shall require 
        that the third party--
                  (A) receive and transmit information between 
                the Secretary, manufacturers, and other 
                individuals or entities the Secretary 
                determines appropriate;
                  (B) receive, distribute, or facilitate the 
                distribution of funds of manufacturers to 
                appropriate individuals or entities in order to 
                meet the obligations of manufacturers under 
                agreements under this part;
                  (C) provide adequate and timely information 
                to manufacturers, consistent with the agreement 
                with the manufacturer under this part, as 
                necessary for the manufacturer to fulfill its 
                obligations under this part; and
                  (D) permit manufacturers to conduct periodic 
                audits, directly or through contracts, of the 
                data and information used by the third party to 
                determine discounts for applicable drugs of the 
                manufacturer under the program.
          (2) Performance requirements.--The Secretary shall 
        establish performance requirements for a third party 
        with a contract under paragraph (1) and safeguards to 
        protect the independence and integrity of the 
        activities carried out by the third party under the 
        program under this part.
  (d) Coordination With 340B Program.--In the case of a 
manufacturer of a selected drug, with respect to an initial 
price applicability year, for each year with respect to which a 
maximum fair price is applied under this part for such drug, 
such drug shall not be considered a covered outpatient drug 
subject to an agreement under section 340B of the Public Health 
Service Act.

SEC. 1197. VOLUNTARY PARTICIPATION BY OTHER HEALTH PLANS.

  (a) Agreement to Participate Under Program.--
          (1) In general.--Subject to paragraph (2), under the 
        program under this part the Secretary shall be treated 
        as having in effect an agreement with a group health 
        plan or health insurance issuer offering health 
        insurance coverage (as such terms are defined in 
        section 2791 of the Public Health Service Act), with 
        respect to a price applicability period and a selected 
        drug with respect to such period--
                  (A) with respect to such selected drug 
                furnished or dispensed at a pharmacy or by mail 
                order service if coverage is provided under 
                such plan or coverage during such period for 
                such selected drug as so furnished or 
                dispensed; and
                  (B) with respect to such selected drug 
                furnished or administered by a hospital, 
                physician, or other provider of services or 
                supplier if coverage is provided under such 
                plan or coverage during such period for such 
                selected drug as so furnished or administered.
          (2) Opting out of agreement.--The Secretary shall not 
        be treated as having in effect an agreement under the 
        program under this part with a group health plan or 
        health insurance issuer offering health insurance 
        coverage with respect to a price applicability period 
        and a selected drug with respect to such period if such 
        a plan or issuer affirmatively elects, through a 
        process specified by the Secretary, not to participate 
        under the program with respect to such period and drug.
  (b) Publication of Election.--With respect to each price 
applicability period and each selected drug with respect to 
such period, the Secretary and the Secretary of Labor and the 
Secretary of the Treasury, as applicable, shall make public a 
list of each group health plan and each issuer of health 
insurance coverage, with respect to which coverage is provided 
under such plan or coverage for such drug, that has elected 
under subsection (a) not to participate under the program with 
respect to such period and drug.

SEC. 1198. CIVIL MONETARY PENALTY.

  (a) Violations Relating to Offering of Maximum Fair Price.--
Any manufacturer of a selected drug that has entered into an 
agreement under section 1193, with respect to a plan year 
during the price applicability period for such drug, that does 
not provide access to a price that is not more than the maximum 
fair price (or a lesser price) for such drug for such year--
          (1) to a fair price eligible individual who with 
        respect to such drug is described in subparagraph (A) 
        of section 1191(c)(1) and who is furnished or dispensed 
        such drug during such year; or
          (2) to a hospital, physician, or other provider of 
        services or supplier with respect to fair price 
        eligible individuals who with respect to such drug is 
        described in subparagraph (B) of such section and is 
        furnished or administered such drug by such hospital, 
        physician, or provider or supplier during such year;
shall be subject to a civil monetary penalty equal to ten times 
the amount equal to the difference between the price for such 
drug made available for such year by such manufacturer with 
respect to such individual or hospital, physician, provider, or 
supplier and the maximum fair price for such drug for such 
year.
  (b) Violations of Certain Terms of Agreement.--Any 
manufacturer of a selected drug that has entered into an 
agreement under section 1193, with respect to a plan year 
during the price applicability period for such drug, that is in 
violation of a requirement imposed pursuant to section 
1193(a)(6) shall be subject to a civil monetary penalty of not 
more than $1,000,000 for each such violation.
  (c) Application.--The provisions of section 1128A (other than 
subsections (a) and (b)) shall apply to a civil monetary 
penalty under this section in the same manner as such 
provisions apply to a penalty or proceeding under section 
1128A(a).

SEC. 1199. MISCELLANEOUS PROVISIONS.

  (a) Paperwork Reduction Act.--Chapter 35 of title 44, United 
States Code, shall not apply to data collected under this part.
  (b) National Academy of Medicine Study.--Not later than 
December 31, 2025, the National Academy of Medicine shall 
conduct a study, and submit to Congress a report, on 
recommendations for improvements to the program under this 
part, including the determination of the limits applied under 
section 1194(c).
  (c) Medpac Study.--Not later than December 31, 2025, the 
Medicare Payment Advisory Commission shall conduct a study, and 
submit to Congress a report, on the program under this part 
with respect to the Medicare program under title XVIII, 
including with respect to the effect of the program on 
individuals entitled to benefits or enrolled under such title.
  (d) Limitation on Judicial Review.--The following shall not 
be subject to judicial review:
          (1) The selection of drugs for publication under 
        section 1192(a).
          (2) The determination of whether a drug is a 
        negotiation-eligible drug under section 1192(d).
          (3) The determination of the maximum fair price of a 
        selected drug under section 1194.
          (4) The determination of units of a drug for purposes 
        of section 1191(c)(3).
  (e) Coordination.--In carrying out this part with respect to 
group health plans or health insurance coverage offered in the 
group market that are subject to oversight by the Secretary of 
Labor or the Secretary of the Treasury, the Secretary of Health 
and Human Services shall coordinate with such respective 
Secretary.
  (f) Data Sharing.--The Secretary shall share with the 
Secretary of the Treasury such information as is necessary to 
determine the tax imposed by section 4192 of the Internal 
Revenue Code of 1986.
  (g) GAO Study.--Not later than December 31, 2025, the 
Comptroller General of the United States shall conduct a study 
of, and submit to Congress a report on, the implementation of 
the Fair Price Negotiation Program under this part.
  (h) Inflation Rebate for Group Health Plans.--
          (1) In general.--Not later than December 31, 2021, 
        the Secretary of Labor shall, in consultation with the 
        Secretary of Health and Human Services and the 
        Secretary of the Treasury, submit to Congress a report 
        on the feasibility of the Secretary of Labor--
                  (A) establishing an agreement process with 
                manufacturers of prescription drugs under which 
                manufacturers provide for inflation rebates (in 
                a manner similar to rebates under section 
                1834(x) and 1860D-14B with respect to part B 
                and part D drugs, respectively) with respect to 
                drugs that are furnished or dispensed to 
                participants, enrollees, and beneficiaries of 
                health insurance coverage in connection with a 
                group health plan; and
                  (B) establishing an enforcement mechanism 
                with respect to such agreement process that 
                ensures that such inflation rebates are, 
                proportionally distributed, with respect to 
                costs, to--
                          (i) participants, enrollees, and 
                        beneficiaries of health insurance 
                        coverage offered in the group market; 
                        and
                          (ii) a health insurance issuer 
                        offering health insurance coverage in 
                        the group market.
          (2) Regulations.--Not later than December 31, 2022, 
        the Secretary of Labor shall, in consultation with the 
        Secretary of Health and Human Services and the 
        Secretary of the Treasury, promulgate regulations 
        consistent with the information contained in the report 
        submitted pursuant to paragraph (1) if--
                  (A) the Secretary of Labor determines the 
                prices of a sufficient number (as determined by 
                the Secretary of Labor) of drugs described in 
                paragraph (1)(A) have increased at a percentage 
                that exceeds the percentage by which the 
                consumer price index for all urban consumers 
                (United States city average) for a period of 
                time (as determined by the Secretary of Labor); 
                and
                  (B) the Secretary of Labor finds that the 
                agreement process identified pursuant to 
                subparagraph (A) of paragraph (1) and the 
                enforcement mechanism identified pursuant to 
                subparagraph (B) of such paragraph are 
                feasible.

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TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

           *       *       *       *       *       *       *


   Part B--Supplementary Medical Insurance Benefits for the Aged and 
Disabled

           *       *       *       *       *       *       *


                          PAYMENT OF BENEFITS

  Sec.  1833. (a) Except as provided in section 1876, and 
subject to the succeeding provisions of this section, there 
shall be paid from the Federal Supplementary Medical Insurance 
Trust Fund, in the case of each individual who is covered under 
the insurance program established by this part and incurs 
expenses for services with respect to which benefits are 
payable under this part, amounts equal to--(1) in the case of 
services described in section 1832(a)(1)--80 percent of the 
reasonable charges for the services; except that (A) an 
organization which provides medical and other health services 
(or arranges for their availability) on a prepayment basis (and 
either is sponsored by a union or employer, or does not 
provide, or arrange for the provision of, any inpatient 
hospital services) may elect to be paid 80 percent of the 
reasonable cost of services for which payment may be made under 
this part on behalf of individuals enrolled in such 
organization in lieu of 80 percent of the reasonable charges 
for such services if the organization undertakes to charge such 
individuals no more than 20 percent of such reasonable cost 
plus any amounts payable by them as a result of subsection (b), 
(B) with respect to items and services described in section 
1861(s)(10)(A), the amounts paid shall be 100 percent of the 
reasonable charges for such items and services, (C) with 
respect to expenses incurred for those physicians' services for 
which payment may be made under this part that are described in 
section 1862(a)(4), the amounts paid shall be subject to such 
limitations as may be prescribed by regulations, (D) with 
respect to clinical diagnostic laboratory tests for which 
payment is made under this part (i)(I) on the basis of a fee 
schedule under subsection (h)(1) (for tests furnished before 
January 1, 2017) or section 1834(d)(1), the amount paid shall 
be equal to 80 percent (or 100 percent, in the case of such 
tests for which payment is made on an assignment-related basis) 
of the lesser of the amount determined under such fee schedule, 
the limitation amount for that test determined under subsection 
(h)(4)(B), or the amount of the charges billed for the tests, 
or (II) undersection 1834A (for tests furnished on or after 
January1, 2017), the amount paid shall be equal to 80 
percent(or 100 percent, in the case of such tests for 
whichpayment is made on an assignment-related basis) ofthe 
lesser of the amount determined under such sectionor the amount 
of the charges billed for the tests, or (ii) for tests 
furnished before January 1, 2017,on the basis of a negotiated 
rate established under subsection (h)(6), the amount paid shall 
be equal to 100 percent of such negotiated rate,,(E) with 
respect to services furnished to individuals who have been 
determined to have end stage renal disease, the amounts paid 
shall be determined subject to the provisions of section 
1881,(F) with respect to clinical social worker services under 
section 1861(s)(2)(N), the amounts paid shall be 80 percent of 
the lesser of (i) the actual charge for the services or (ii) 75 
percent of the amount determined for payment of a psychologist 
under clause (L),
                  (G) with respect to facility services 
                furnished in connection with a surgical 
                procedure specified pursuant to subsection 
                (i)(1)(A) and furnished to an individual in an 
                ambulatory surgical center described in such 
                subsection, for services furnished beginning 
                with the implementation date of a revised 
                payment system for such services in such 
                facilities specified in subsection (i)(2)(D), 
                the amounts paid shall be 80 percent of the 
                lesser of the actual charge for the services or 
                the amount determined by the Secretary under 
                such revised payment system,
          (H) with respect to services of a certified 
        registered nurse anesthetist under section 1861(s)(11), 
        the amounts paid shall be 80 percent of the least of 
        the actual charge, the prevailing charge that would be 
        recognized (or, for services furnished on or after 
        January 1, 1992, the fee schedule amount provided under 
        section 1848) if the services had been performed by an 
        anesthesiologist, or the fee schedule for such services 
        established by the Secretary in accordance with 
        subsection (l), (I) with respect to covered items 
        (described in section 1834(a)(13)), the amounts paid 
        shall be the amounts described in section 1834(a)(1), 
        and(J) with respect to expenses incurred for 
        radiologist services (as defined in section 
        1834(b)(6)), subject to section 1848, the amounts paid 
        shall be 80 percent of the lesser of the actual charge 
        for the services or the amount provided under the fee 
        schedule established under section 1834(b), (K) with 
        respect to certified nurse-midwife services under 
        section 1861(s)(2)(L), the amounts paid shall be 80 
        percent of the lesser of the actual charge for the 
        services or the amount determined by a fee schedule 
        established by the Secretary for the purposes of this 
        subparagraph (but in no event shall such fee schedule 
        exceed 65 percent of the prevailing charge that would 
        be allowed for the same service performed by a 
        physician, or, for services furnished on or after 
        January 1, 1992, 65 percent (or 100 percent for 
        services furnished on or after January 1, 2011) of the 
        fee schedule amount provided under section 1848 for the 
        same service performed by a physician), (L) with 
        respect to qualified psychologist services under 
        section 1861(s)(2)(M), the amounts paid shall be 80 
        percent of the lesser of the actual charge for the 
        services or the amount determined by a fee schedule 
        established by the Secretary for the purposes of this 
        subparagraph, (M) with respect to prosthetic devices 
        and orthotics and prosthetics (as defined in section 
        1834(h)(4)), the amounts paid shall be the amounts 
        described in section 1834(h)(1), (N) with respect to 
        expenses incurred for physicians' services (as defined 
        in section 1848(j)(3)) other than personalized 
        prevention plan services (as defined in section 
        1861(hhh)(1)), the amounts paid shall be 80 percent of 
        the payment basis determined under section 1848(a)(1), 
        (O) with respect to services described in section 
        1861(s)(2)(K) (relating to services furnished by 
        physician assistants, nurse practitioners, or clinic 
        nurse specialists), the amounts paid shall be equal to 
        80 percent of (i) the lesser of the actual charge or 85 
        percent of the fee schedule amount provided under 
        section 1848, or (ii) in the case of services as an 
        assistant at surgery, the lesser of the actual charge 
        or 85 percent of the amount that would otherwise be 
        recognized if performed by a physician who is serving 
        as an assistant at surgery, (P) with respect to 
        surgical dressings, the amounts paid shall be the 
        amounts determined under section 1834(i), (Q) with 
        respect to items or services for which fee schedules 
        are established pursuant to section 1842(s), the 
        amounts paid shall be 80 percent of the lesser of the 
        actual charge or the fee schedule established in such 
        section, (R) with respect to ambulance services, (i) 
        the amounts paid shall be 80 percent of the lesser of 
        the actual charge for the services or the amount 
        determined by a fee schedule established by the 
        Secretary under section 1834(l) and (ii) with respect 
        to ambulance services described in section 1834(l)(8), 
        the amounts paid shall be the amounts determined under 
        section 1834(g) for outpatient critical access hospital 
        services, (S) [with respect to] subject to subparagraph 
        (DD), with respect to drugs and biologicals (including 
        intravenous immune globulin (as defined in section 
        1861(zz))) not paid on a cost or prospective payment 
        basis as otherwise provided in this part (other than 
        items and services described in subparagraph (B)), the 
        amounts paid shall be 80 percent of the lesser of the 
        actual charge or the payment amount established in 
        section 1842(o) (or, if applicable, under section 1847, 
        1847A, or 1847B), (T) with respect to medical nutrition 
        therapy services (as defined in section 1861(vv)), the 
        amount paid shall be 80 percent (or 100 percent if such 
        services are recommended with a grade of A or B by the 
        United States Preventive Services Task Force for any 
        indication or population and are appropriate for the 
        individual) of the lesser of the actual charge for the 
        services or 85 percent of the amount determined under 
        the fee schedule established under section 1848(b) for 
        the same services if furnished by a physician, (U) with 
        respect to facility fees described in section 
        1834(m)(2)(B), the amounts paid shall be 80 percent of 
        the lesser of the actual charge or the amounts 
        specified in such section, (V) notwithstanding 
        subparagraphs (I) (relating to durable medical 
        equipment), (M) (relating to prosthetic devices and 
        orthotics and prosthetics), and (Q) (relating to 
        1842(s) items), with respect to competitively priced 
        items and services (described in section 1847(a)(2)) 
        that are furnished in a competitive area, the amounts 
        paid shall be the amounts described in section 
        1847(b)(5), (W) with respect to additional preventive 
        services (as defined in section 1861(ddd)(1)), the 
        amount paid shall be (i) in the case of such services 
        which are clinical diagnostic laboratory tests, the 
        amount determined under subparagraph (D) (if such 
        subparagraph were applied, by substituting ``100 
        percent'' for ``80 percent''), and (ii) in the case of 
        all other such services, 100 percent of the lesser of 
        the actual charge for the service or the amount 
        determined under a fee schedule established by the 
        Secretary for purposes of this subparagraph, (X) with 
        respect to personalized prevention plan services (as 
        defined in section 1861(hhh)(1)), the amount paid shall 
        be 100 percent of the lesser of the actual charge for 
        the services or the amount determined under the payment 
        basis determined under section 1848, (Y) with respect 
        to preventive services described in subparagraphs (A) 
        and (B) of section 1861(ddd)(3) that are appropriate 
        for the individual and, in the case of such services 
        described in subparagraph (A), are recommended with a 
        grade of A or B by the United States Preventive 
        Services Task Force for any indication or population, 
        the amount paid shall be 100 percent of (i) except as 
        provided in clause (ii), the lesser of the actual 
        charge for the services or the amount determined under 
        the fee schedule that applies to such services under 
        this part, and (ii) in the case of such services that 
        are covered OPD services (as defined in subsection 
        (t)(1)(B)), the amount determined under subsection (t), 
        (Z) with respect to Federally qualified health center 
        services for which payment is made under section 
        1834(o), the amounts paid shall be 80 percent of the 
        lesser of the actual charge or the amount determined 
        under such section, (AA) with respect to an applicable 
        disposable device (as defined in paragraph (2) of 
        section 1834(s)) furnished to an individual pursuant to 
        paragraph (1) of such section, the amount paid shall be 
        equal to 80 percent of the lesser of the actual charge 
        or the amount determined under paragraph (3) of such 
        section, (BB) with respect to home infusion therapy, 
        the amount paid shall be an amount equal to 80 percent 
        of the lesser of the actual charge for the services or 
        the amount determined under section 1834(u), [and (CC)] 
        (CC) with respect to opioid use disorder treatment 
        services furnished during an episode of care, the 
        amount paid shall be equal to the amount payable under 
        section 1834(w) less any copayment required as 
        specified by the Secretary, and (DD) with respect to a 
        part B rebatable drug (as defined in paragraph (2) of 
        section 1834(x)) for which a rebate is payable under 
        such section, the amounts paid shall be the difference 
        between (i) the payment amount under paragraph 
        (3)(A)(ii)(I) of such section for such drug, and (ii) 
        20 percent of the inflation-adjusted payment amount 
        under paragraph (3)(A)(ii)(II) of such section for such 
        drug;
          (2) in the case of services described in section 
        1832(a)(2) (except those services described in 
        subparagraphs (C), (D), (E), (F), (G), (H), and (I) of 
        such section and unless otherwise specified in section 
        1881)--
                  (A) with respect to home health services 
                (other than a covered osteoporosis drug) (as 
                defined in section 1861(kk)), the amount 
                determined under the prospective payment system 
                under section 1895;
                  (B) with respect to other items and services 
                (except those described in subparagraph (C), 
                (D), or (E) of this paragraph and except as may 
                be provided in section 1886 or section 
                1888(e)(9))--
                          (i) furnished before January 1, 1999, 
                        the lesser of--
                                  (I) the reasonable cost of 
                                such services, as determined 
                                under section 1861(v), or
                                  (II) the customary charges 
                                with respect to such 
                                services,--less the amount a 
                                provider may charge as 
                                described in clause (ii) of 
                                section 1866(a)(2)(A), but in 
                                no case may the payment for 
                                such other services exceed 80 
                                percent of such reasonable 
                                cost, or
                          (ii) if such services are furnished 
                        before January 1, 1999, by a public 
                        provider of services, or by another 
                        provider which demonstrates to the 
                        satisfaction of the Secretary that a 
                        significant portion of its patients are 
                        low-income (and requests that payment 
                        be made under this clause), free of 
                        charge or at nominal charges to the 
                        public, 80 percent of the amount 
                        determined in accordance with section 
                        1814(b)(2), or
                          (iii) if such services are furnished 
                        on or after January 1, 1999, the amount 
                        determined under subsection (t), or
                          (iv) if (and for so long as) the 
                        conditions described in section 
                        1814(b)(3) are met, the amounts 
                        determined under the reimbursement 
                        system described in such section;
                  (C) with respect to services described in the 
                second sentence of section 1861(p), 80 percent 
                of the reasonable charges for such services;
                  (D) with respect to clinical diagnostic 
                laboratory tests for which payment is made 
                under this part (i)(I)on the basis of a fee 
                schedule determined under subsection(h)(1) (for 
                tests furnished before January 1, 2017) or 
                section 1834(d)(1), the amount paid shall be 
                equal to 80 percent (or 100 percent, in the 
                case of such tests for which payment is made on 
                an assignment-related basis or to a provider 
                having an agreement under section 1866) of the 
                lesser of the amount determined under such fee 
                schedule, the limitation amount for that test 
                determined under subsection (h)(4)(B), or the 
                amount of the charges billed for the tests, or 
                (II) under section 1834A (for tests furnished 
                on or after January 1, 2017), the amount paid 
                shall be equal to 80 percent (or 100 percent, 
                in the case of such tests for which payment is 
                made on an assignment-related basis or to a 
                provider having an agreement under section 
                1866) of the lesser of the amount determined 
                under such section or the amount of the charges 
                billed for the tests, or (ii) for tests 
                furnished before January 1, 2017, on the basis 
                of a negotiated rate established under 
                subsection (h)(6), the amount paid shall be 
                equal to 100 percent of such negotiated rate 
                for such tests;
                  (E) with respect to--
                          (i) outpatient hospital radiology 
                        services (including diagnostic and 
                        therapeutic radiology, nuclear medicine 
                        and CAT scan procedures, magnetic 
                        resonance imaging, and ultrasound and 
                        other imaging services, but excluding 
                        screening mammography and, for services 
                        furnished on or after January 1, 2005, 
                        diagnostic mammography), and
                          (ii) effective for procedures 
                        performed on or after October 1, 1989, 
                        diagnostic procedures (as defined by 
                        the Secretary) described in section 
                        1861(s)(3) (other than diagnostic x-ray 
                        tests and diagnostic laboratory tests),
                the amount determined under subsection (n) or, 
                for services or procedures performed on or 
                after January 1, 1999, subsection (t);
                  (F) with respect to a covered osteoporosis 
                drug (as defined in section 1861(kk)) furnished 
                by a home health agency, 80 percent of the 
                reasonable cost of such service, as determined 
                under section 1861(v);
                  (G) with respect to items and services 
                described in section 1861(s)(10)(A), the lesser 
                of--
                          (i) the reasonable cost of such 
                        services, as determined under section 
                        1861(v), or
                          (ii) the customary charges with 
                        respect to such services; and
                  (H) with respect to personalized prevention 
                plan services (as defined in section 
                1861(hhh)(1)) furnished by an outpatient 
                department of a hospital, the amount determined 
                under paragraph (1)(X),
                or, if such services are furnished by a public 
                provider of services, or by another provider 
                which demonstrates to the satisfaction of the 
                Secretary that a significant portion of its 
                patients are low-income (and requests that 
                payment be made under this provision), free of 
                charge or at nominal charges to the public, the 
                amount determined in accordance with section 
                1814(b)(2);
          (3) in the case of services described in section 
        1832(a)(2)(D)--
                  (A) except as provided in subparagraph (B), 
                the costs which are reasonable and related to 
                the cost of furnishing such services or which 
                are based on such other tests of reasonableness 
                as the Secretary may prescribe in regulations, 
                including those authorized under section 
                1861(v)(1)(A), less the amount a provider may 
                charge as described in clause (ii) of section 
                1866(a)(2)(A), but in no case may the payment 
                for such services (other than for items and 
                services described in section 1861(s)(10)(A)) 
                exceed 80 percent of such costs; or
                  (B) with respect to the services described in 
                clause (ii) of section 1832(a)(2)(D) that are 
                furnished to an individual enrolled with a MA 
                plan under part C pursuant to a written 
                agreement described in section 1853(a)(4), the 
                amount (if any) by which--
                          (i) the amount of payment that would 
                        have otherwise been provided (I) under 
                        subparagraph (A) (calculated as if 
                        ``100 percent'' were substituted for 
                        ``80 percent'' in such subparagraph) 
                        for such services if the individual had 
                        not been so enrolled, or (II) in the 
                        case of such services furnished on or 
                        after the implementation date of the 
                        prospective payment system under 
                        section 1834(o), under such section 
                        (calculated as if ``100 percent'' were 
                        substituted for ``80 percent'' in such 
                        section) for such services if the 
                        individual had not been so enrolled; 
                        exceeds
                          (ii) the amount of the payments 
                        received under such written agreement 
                        for such services (not including any 
                        financial incentives provided for in 
                        such agreement such as risk pool 
                        payments, bonuses, or withholds),
                less the amount the federally qualified health 
                center may charge as described in section 
                1857(e)(3)(B);
          (4) in the case of facility services described in 
        section 1832(a)(2)(F), and outpatient hospital facility 
        services furnished in connection with surgical 
        procedures specified by the Secretary pursuant to 
        section 1833(i)(1)(A), the applicable amount as 
        determined under paragraph (2) or (3) of subsection (i) 
        or subsection (t);
          (5) in the case of covered items (described in 
        section 1834(a)(13)) the amounts described in section 
        1834(a)(1);
          (6) in the case of outpatient critical access 
        hospital services, the amounts described in section 
        1834(g);
          (7) in the case of prosthetic devices and orthotics 
        and prosthetics (as described in section 1834(h)(4)), 
        the amounts described in section 1834(h);
          (8) in the case of--
                  (A) outpatient physical therapy services, 
                outpatient speech-language pathology services, 
                and outpatient occupational therapy services 
                furnished--
                          (i) by a rehabilitation agency, 
                        public health agency, clinic, 
                        comprehensive outpatient rehabilitation 
                        facility, or skilled nursing facility,
                          (ii) by a home health agency to an 
                        individual who is not homebound, or
                          (iii) by another entity under an 
                        arrangement with an entity described in 
                        clause (i) or (ii); and
                  (B) outpatient physical therapy services, 
                outpatient speech-language pathology services, 
                and outpatient occupational therapy services 
                furnished--
                          (i) by a hospital to an outpatient or 
                        to a hospital inpatient who is entitled 
                        to benefits under part A but has 
                        exhausted benefits for inpatient 
                        hospital services during a spell of 
                        illness or is not so entitled to 
                        benefits under part A, or
                          (ii) by another entity under an 
                        arrangement with a hospital described 
                        in clause (i),
        the amounts described in section 1834(k); and
          (9) in the case of services described in section 
        1832(a)(2)(E) that are not described in paragraph (8), 
        the amounts described in section 1834(k).
         Paragraph (3)(A) shall not apply to Federally 
        qualified health center services furnished on or after 
        the implementation date of the prospective payment 
        system under section 1834(0).
For purposes of applying paragraph (1)(DD) and section 
1834(x)(5), the Secretary shall make such estimates and use 
such data as the Secretary determines appropriate.
  (b) Before applying subsection (a) with respect to expenses 
incurred by an individual during any calendar year, the total 
amount of the expenses incurred by such individual during such 
year (which would, except for this subsection, constitute 
incurred expenses from which benefits payable under subsection 
(a) are determinable) shall be reduced by a deductible of $75 
for calendar years before 1991, $100 for 1991 through 2004, 
$110 for 2005, and for a subsequent year the amount of such 
deductible for the previous year increased by the annual 
percentage increase in the monthly actuarial rate under section 
1839(a)(1) ending with such subsequent year (rounded to the 
nearest $1); except that (1) such total amount shall not 
include expenses incurred for preventive services described in 
subparagraph (A) of section 1861(ddd)(3) that are recommended 
with a grade of A or B by the United States Preventive Services 
Task Force for any indication or population and are appropriate 
for the individual., (2) such deductible shall not apply with 
respect to home health services (other than a covered 
osteoporosis drug (as defined in section 1861(kk))), (3) such 
deductible shall not apply with respect to clinical diagnostic 
laboratory tests for which payment is made under this part (A) 
under subsection (a)(1)(D)(i) or (a)(2)(D)(i) on an assignment-
related basis, or to a provider having an agreement under 
section 1866, or (B) for tests furnished before January 1, 
2017,on the basis of a negotiated rate determined under 
subsection (h)(6), (4) such deductible shall not apply to 
Federally qualified health center services, (5) such deductible 
shall not apply with respect to screening mammography (as 
described in section 1861(jj)), (6) such deductible shall not 
apply with respect to screening pap smear and screening pelvic 
exam (as described in section 1861(nn)), (7) such deductible 
shall not apply with respect to ultrasound screening for 
abdominal aortic aneurysm (as defined in section 1861(bbb)), 
(8) such deductible shall not apply with respect to colorectal 
cancer screening tests (as described in section 1861(pp)(1)), 
(9) such deductible shall not apply with respect to an initial 
preventive physical examination (as defined in section 
1861(ww)), and (10) such deductible shall not apply with 
respect to personalized prevention plan services (as defined in 
section 1861(hhh)(1)). The total amount of the expenses 
incurred by an individual as determined under the preceding 
sentence shall, after the reduction specified in such sentence, 
be further reduced by an amount equal to the expenses incurred 
for the first three pints of whole blood (or equivalent 
quantities of packed red blood cells, as defined under 
regulations) furnished to the individual during the calendar 
year, except that such deductible for such blood shall in 
accordance with regulations be appropriately reduced to the 
extent that there has been a replacement of such blood (or 
equivalent quantities of packed red blood cells, as so 
defined); and for such purposes blood (or equivalent quantities 
of packed red blood cells, as so defined) furnished such 
individual shall be deemed replaced when the institution or 
other person furnishing such blood (or such equivalent 
quantities of packed red blood cells, as so defined) is given 
one pint of blood for each pint of blood (or equivalent 
quantities of packed red blood cells, as so defined) furnished 
such individual with respect to which a deduction is made under 
this sentence. The deductible under the previous sentence for 
blood or blood cells furnished an individual in a year shall be 
reduced to the extent that a deductible has been imposed under 
section 1813(a)(2) to blood or blood cells furnished the 
individual in the year. Paragraph (1) of the first sentence of 
this subsection shall apply with respect to a colorectal cancer 
screening test regardless of the code that is billed for the 
establishment of a diagnosis as a result of the test, or for 
the removal of tissue or other matter or other procedure that 
is furnished in connection with, as a result of, and in the 
same clinical encounter as the screening test.
  (c)(1) Notwithstanding any other provision of this part, with 
respect to expenses incurred in a calendar year in connection 
with the treatment of mental, psychoneurotic, and personality 
disorders of an individual who is not an inpatient of a 
hospital at the time such expenses are incurred, there shall be 
considered as incurred expenses for purposes of subsections (a) 
and (b)--
          (A) for expenses incurred in years prior to 2010, 
        only 62\1/2\ percent of such expenses;
          (B) for expenses incurred in 2010 or 2011, only 68\3/
        4\ percent of such expenses;
          (C) for expenses incurred in 2012, only 75 percent of 
        such expenses;
          (D) for expenses incurred in 2013, only 81\1/4\ 
        percent of such expenses; and
          (E) for expenses incurred in 2014 or any subsequent 
        calendar year, 100 percent of such expenses.
  (2) For purposes of subparagraphs (A) through (D) of 
paragraph (1), the term ``treatment'' does not include brief 
office visits (as defined by the Secretary) for the sole 
purpose of monitoring or changing drug prescriptions used in 
the treatment of such disorders or partial hospitalization 
services that are not directly provided by a physician
  (d) No payment may be made under this part with respect to 
any services furnished an individual to the extent that such 
individual is entitled (or would be entitled except for section 
1813) to have payment made with respect to such services under 
part A.
  (e) No payment shall be made to any provider of services or 
other person under this part unless there has been furnished 
such information as may be necessary in order to determine the 
amounts due such provider or other person under this part for 
the period with respect to which the amounts are being paid or 
for any prior period.
  (f) In establishing limits under subsection (a) on payment 
for rural health clinic services provided by rural health 
clinics (other than such clinics in hospitals with less than 50 
beds), the Secretary shall establish such limit, for services 
provided--
          (1) in 1988, after March 31, at $46 per visit, and
          (2) in a subsequent year, at the limit established 
        under this subsection for the previous year increased 
        by the percentage increase in the MEI (as defined in 
        section 1842(i)(3)) applicable to primary care services 
        (as defined in section 1842(i)(4)) furnished as of the 
        first day of that year.
  (g)(1)(A) Subject to paragraphs (4) and (5), in the case of 
physical therapy services of the type described in section 
1861(p) and speech-language pathology services of the type 
described in such section through the application of section 
1861(ll)(2), but (except as provided in paragraph (6)) not 
described in subsection (a)(8)(B), and physical therapy 
services and speech-language pathology services of such type 
which are furnished by a physician or as incident to 
physicians' services, with respect to expenses incurred in any 
calendar year, no more than the amount specified in paragraph 
(2) for the year shall be considered as incurred expenses for 
purposes of subsections (a) and (b). The preceding sentence 
shall not apply to expenses incurred with respect to services 
furnished after December 31, 2017.
  (B) With respect to services furnished during 2018 or a 
subsequent year, in the case of physical therapy services of 
the type described in section 1861(p), speech-language 
pathology services of the type described in such section 
through the application of section 1861(ll)(2), and physical 
therapy services and speech-language pathology services of such 
type which are furnished by a physician or as incident to 
physicians' services, with respect to expenses incurred in any 
calendar year, any amount that is more than the amount 
specified in paragraph (2) for the year shall not be considered 
as incurred expenses for purposes of subsections (a) and (b) 
unless the applicable requirements of paragraph (7) are met.
  (2) The amount specified in this paragraph--
          (A) for 1999, 2000, and 2001, is $1,500, and
          (B) for a subsequent year is the amount specified in 
        this paragraph for the preceding year increased by the 
        percentage increase in the MEI (as defined in section 
        1842(i)(3)) for such subsequent year;
except that if an increase under subparagraph (B) for a year is 
not a multiple of $10, it shall be rounded to the nearest 
multiple of $10.
  (3)(A) Subject to paragraphs (4) and (5), in the case of 
occupational therapy services (of the type that are described 
in section 1861(p) (but (except as provided in paragraph (6)) 
not described in subsection (a)(8)(B)) through the operation of 
section 1861(g) and of such type which are furnished by a 
physician or as incident to physicians' services), with respect 
to expenses incurred in any calendar year, no more than the 
amount specified in paragraph (2) for the year shall be 
considered as incurred expenses for purposes of subsections (a) 
and (b). The preceding sentence shall not apply to expenses 
incurred with respect to services furnished after December 31, 
2017.
  (B) With respect to services furnished during 2018 or a 
subsequent year, in the case of occupational therapy services 
(of the type that are described in section 1861(p) through the 
operation of section 1861(g) and of such type which are 
furnished by a physician or as incident to physicians' 
services), with respect to expenses incurred in any calendar 
year, any amount that is more than the amount specified in 
paragraph (2) for the year shall not be considered as incurred 
expenses for purposes of subsections (a) and (b) unless the 
applicable requirements of paragraph (7) are met.
  (4) This subsection shall not apply to expenses incurred with 
respect to services furnished during 2000, 2001, 2002, 2004, 
and 2005.
  (5)(A) With respect to expenses incurred during the period 
beginning on January 1, 2006, and ending on December 31, 2017, 
for services, the Secretary shall implement a process under 
which an individual enrolled under this part may, upon request 
of the individual or a person on behalf of the individual, 
obtain an exception from the uniform dollar limitation 
specified in paragraph (2), for services described in 
paragraphs (1) and (3) if the provision of such services is 
determined to be medically necessary and if the requirement of 
subparagraph (B) is met. Under such process, if the Secretary 
does not make a decision on such a request for an exception 
within 10 business days of the date of the Secretary's receipt 
of the request made in accordance with such requirement, the 
Secretary shall be deemed to have found the services to be 
medically necessary.
  (B) In the case of outpatient therapy services for which an 
exception is requested under the first sentence of subparagraph 
(A), the claim for such services shall contain an appropriate 
modifier (such as the KX modifier used as of the date of the 
enactment of this subparagraph) indicating that such services 
are medically necessary as justified by appropriate 
documentation in the medical record involved.
  (C)(i) In applying this paragraph with respect to a request 
for an exception with respect to expenses that would be 
incurred for outpatient therapy services (including services 
described in subsection (a)(8)(B)) that would exceed the 
threshold described in clause (ii) for a year, the request for 
such an exception, for services furnished on or after October 
1, 2012, shall be subject to a manual medical review process 
that, subject to subparagraph (E), is similar to the manual 
medical review process used for certain exceptions under this 
paragraph in 2006.
  (ii) The threshold under this clause for a year is $3,700. 
Such threshold shall be applied separately--
          (I) for physical therapy services and speech-language 
        pathology services; and
          (II) for occupational therapy services.
  (E)(i) In place of the manual medical review process under 
subparagraph (C)(i), the Secretary shall implement a process 
for medical review under this subparagraph under which the 
Secretary shall identify and conduct medical review for 
services described in subparagraph (C)(i) furnished by a 
provider of services or supplier (in this subparagraph referred 
to as a ``therapy provider'') using such factors as the 
Secretary determines to be appropriate.
  (ii) Such factors may include the following:
          (I) The therapy provider has had a high claims denial 
        percentage for therapy services under this part or is 
        less compliant with applicable requirements under this 
        title.
          (II) The therapy provider has a pattern of billing 
        for therapy services under this part that is aberrant 
        compared to peers or otherwise has questionable billing 
        practices for such services, such as billing medically 
        unlikely units of services in a day.
          (III) The therapy provider is newly enrolled under 
        this title or has not previously furnished therapy 
        services under this part.
          (IV) The services are furnished to treat a type of 
        medical condition.
          (V) The therapy provider is part of group that 
        includes another therapy provider identified using the 
        factors determined under this subparagraph.
  (iii) For purposes of carrying out this subparagraph, the 
Secretary shall provide for the transfer, from the Federal 
Supplementary Medical Insurance Trust Fund under section 1841, 
of $5,000,000 to the Centers for Medicare & Medicaid Services 
Program Management Account for fiscal years 2015 and 2016, to 
remain available until expended. Such funds may not be used by 
a contractor under section 1893(h) for medical reviews under 
this subparagraph.
  (iv) The targeted review process under this subparagraph 
shall not apply to services for which expenses are incurred 
beyond the period for which the exceptions process under 
subparagraph (A) is implemented, except as such process is 
applied under paragraph (7)(B).
  (6)(A) In applying paragraphs (1) and (3) to services 
furnished during the period beginning not later than October 1, 
2012, and ending on December 31, 2017, the exclusion of 
services described in subsection (a)(8)(B) from the uniform 
dollar limitation specified in paragraph (2) shall not apply to 
such services furnished during 2012 through 2017.
  (B)(i) With respect to outpatient therapy services furnished 
beginning on or after January 1, 2013, and before January 1, 
2014, for which payment is made under section 1834(g), the 
Secretary shall count toward the uniform dollar limitations 
described in paragraphs (1) and (3) and the threshold described 
in paragraph (5)(C) the amount that would be payable under this 
part if such services were paid under section 1834(k)(1)(B) 
instead of being paid under section 1834(g).
  (ii) Nothing in clause (i) shall be construed as changing the 
method of payment for outpatient therapy services under section 
1834(g).
  (7) For purposes of paragraphs (1)(B) and (3)(B), with 
respect to services described in such paragraphs, the 
requirements described in this paragraph are as follows:
          (A) Inclusion of appropriate modifier.--The claim for 
        such services contains an appropriate modifier (such as 
        the KX modifier described in paragraph (5)(B)) 
        indicating that such services are medically necessary 
        as justified by appropriate documentation in the 
        medical record involved.
          (B) Targeted medical review for certain services 
        above threshold.--
                  (i) In general.--In the case where expenses 
                that would be incurred for such services would 
                exceed the threshold described in clause (ii) 
                for the year, such services shall be subject to 
                the process for medical review implemented 
                under paragraph (5)(E).
                  (ii) Threshold.--The threshold under this 
                clause for--
                          (I) a year before 2028, is $3,000;
                          (II) 2028, is the amount specified in 
                        subclause (I) increased by the 
                        percentage increase in the MEI (as 
                        defined in section 1842(i)(3)) for 
                        2028; and
                          (III) a subsequent year, is the 
                        amount specified in this clause for the 
                        preceding year increased by the 
                        percentage increase in the MEI (as 
                        defined in section 1842(i)(3)) for such 
                        subsequent year;
                except that if an increase under subclause (II) 
                or (III) for a year is not a multiple of $10, 
                it shall be rounded to the nearest multiple of 
                $10.
                  (iii) Application.--The threshold under 
                clause (ii) shall be applied separately--
                          (I) for physical therapy services and 
                        speech-language pathology services; and
                          (II) for occupational therapy 
                        services.
                  (iv) Funding.--For purposes of carrying out 
                this subparagraph, the Secretary shall provide 
                for the transfer, from the Federal 
                Supplementary Medical Insurance Trust Fund 
                under section 1841 to the Centers for Medicare 
                & Medicaid Services Program Management Account, 
                of $5,000,000 for each fiscal year beginning 
                with fiscal year 2018, to remain available 
                until expended. Such funds may not be used by a 
                contractor under section 1893(h) for medical 
                reviews under this subparagraph.
  (8) With respect to services furnished on or after January 1, 
2013, where payment may not be made as a result of application 
of paragraphs (1) and (3), section 1879 shall apply in the same 
manner as such section applies to a denial that is made by 
reason of section 1862(a)(1).
  (h)(1)(A) Subject to section 1834(d)(1), the Secretary shall 
establish fee schedules for clinical diagnostic laboratory 
tests (including prostate cancer screening tests under section 
1861(oo) consisting of prostate-specific antigen blood tests) 
for which payment is made under this part, other than such 
tests performed by a provider of services for an inpatient of 
such provider.
  (B) In the case of clinical diagnostic laboratory tests 
performed by a physician or by a laboratory (other than tests 
performed by a qualified hospital laboratory (as defined in 
subparagraph (D)) for outpatients of such hospital), the fee 
schedules established under subparagraph (A) shall be 
established on a regional, statewide, or carrier service area 
basis (as the Secretary may determine to be appropriate) for 
tests furnished on or after July 1, 1984.
  (C) In the case of clinical diagnostic laboratory tests 
performed by a qualified hospital laboratory (as defined in 
subparagraph (D)) for outpatients of such hospital, the fee 
schedules established under subparagraph (A) shall be 
established on a regional, statewide, or carrier service area 
basis (as the Secretary may determine to be appropriate) for 
tests furnished on or after July 1, 1984.
  (D) In this subsection, the term ``qualified hospital 
laboratory'' means a hospital laboratory, in a sole community 
hospital (as defined in section 1886(d)(5)(D)(iii)), which 
provides some clinical diagnostic laboratory tests 24 hours a 
day in order to serve a hospital emergency room which is 
available to provide services 24 hours a day and 7 days a week.
  (2)(A)(i) Except as provided in clause (v), subparagraph (B), 
and paragraph (4), the Secretary shall set the fee schedules at 
60 percent (or, in the case of a test performed by a qualified 
hospital laboratory (as defined in paragraph (1)(D)) for 
outpatients of such hospital, 62 percent) of the prevailing 
charge level determined pursuant to the third and fourth 
sentences of section 1842(b)(3) for similar clinical diagnostic 
laboratory tests for the applicable region, State, or area for 
the 12-month period beginning July 1, 1984, adjusted annually 
(to become effective on January 1 of each year) by, subject to 
clause (iv), a percentage increase or decrease equal to the 
percentage increase or decrease in the Consumer Price Index for 
All Urban Consumers (United States city average) minus, for 
each of the years 2009 and 2010, 0.5 percentage points, and, 
for tests furnished before the dateof enactment of section 
1834A, subject to such other adjustments as the Secretary 
determines are justified by technological changes.
  (ii) Notwithstanding clause (i)--
          (I) any change in the fee schedules which would have 
        become effective under this subsection for tests 
        furnished on or after January 1, 1988, shall not be 
        effective for tests furnished during the 3-month period 
        beginning on January 1, 1988,
          (II) the Secretary shall not adjust the fee schedules 
        under clause (i) to take into account any increase in 
        the consumer price index for 1988,
          (III) the annual adjustment in the fee schedules 
        determined under clause (i) for each of the years 1991, 
        1992, and 1993 shall be 2 percent, and
          (IV) the annual adjustment in the fee schedules 
        determined under clause (i) for each of the years 1994 
        and 1995, 1998 through 2002, and 2004 through 2008 
        shall be 0 percent.
  (iii) In establishing fee schedules under clause (i) with 
respect to automated tests and tests (other than cytopathology 
tests) which before July 1, 1984, the Secretary made subject to 
a limit based on lowest charge levels under the sixth sentence 
of section 1842(b)(3) performed after March 31, 1988, the 
Secretary shall reduce by 8.3 percent the fee schedules 
otherwise established for 1988, and such reduced fee schedules 
shall serve as the base for 1989 and subsequent years.
  (iv) After determining the adjustment to the fee schedules 
under clause (i), the Secretary shall reduce such adjustment--
          (I) for 2011 and each subsequent year, by the 
        productivity adjustment described in section 
        1886(b)(3)(B)(xi)(II); and
          (II) for each of 2011 through 2015, by 1.75 
        percentage points.
Subclause (I) shall not apply in a year where the adjustment to 
the fee schedules determined under clause (i) is 0.0 or a 
percentage decrease for a year. The application of the 
productivity adjustment under subclause (I) shall not result in 
an adjustment to the fee schedules under clause (i) being less 
than 0.0 for a year. The application of subclause (II) may 
result in an adjustment to the fee schedules under clause (i) 
being less than 0.0 for a year, and may result in payment rates 
for a year being less than such payment rates for the preceding 
year.
  (v) The Secretary shall reduce by 2 percent the fee schedules 
otherwise determined under clause (i) for 2013, and such 
reduced fee schedules shall serve as the base for 2014 and 
subsequent years.
  (B) The Secretary may make further adjustments or exceptions 
to the fee schedules to assure adequate reimbursement of (i) 
emergency laboratory tests needed for the provision of bona 
fide emergency services, and (ii) certain low volume high-cost 
tests where highly sophisticated equipment or extremely skilled 
personnel are necessary to assure quality.
  (3) In addition to the amounts provided under the fee 
schedules (for tests furnished before January 1, 2017)or under 
section 1834A (for tests furnished on or afterJanuary 1, 2017), 
subject to subsection (b)(5) of such section, the Secretary 
shall provide for and establish (A) a nominal fee to cover the 
appropriate costs in collecting the sample on which a clinical 
diagnostic laboratory test was performed and for which payment 
is made under this part, except that not more than one such fee 
may be provided under this paragraph with respect to samples 
collected in the same encounter, and (B) a fee to cover the 
transportation and personnel expenses for trained personnel to 
travel to the location of an individual to collect the sample, 
except that such a fee may be provided only with respect to an 
individual who is homebound or an inpatient in an inpatient 
facility (other than a hospital). In establishing a fee to 
cover the transportation and personnel expenses for trained 
personnel to travel to the location of an individual to collect 
a sample, the Secretary shall provide a method for computing 
the fee based on the number of miles traveled and the personnel 
costs associated with the collection of each individual sample, 
but the Secretary shall only be required to apply such method 
in the case of tests furnished during the period beginning on 
April 1, 1989, and ending on December 31, 1990, by a laboratory 
that establishes to the satisfaction of the Secretary (based on 
data for the 12-month period ending June 30, 1988) that (i) the 
laboratory is dependent upon payments under this title for at 
least 80 percent of its collected revenues for clinical 
diagnostic laboratory tests, (ii) at least 85 percent of its 
gross revenues for such tests are attributable to tests 
performed with respect to individuals who are homebound or who 
are residents in a nursing facility, and (iii) the laboratory 
provided such tests for residents in nursing facilities 
representing at least 20 percent of the number of such 
facilities in the State in which the laboratory is located.
  (4)(A) In establishing any fee schedule under this 
subsection, the Secretary may provide for an adjustment to take 
into account, with respect to the portion of the expenses of 
clinical diagnostic laboratory tests attributable to wages, the 
relative difference between a region's or local area's wage 
rates and the wage rate presumed in the data on which the 
schedule is based.
  (B) For purposes of subsections (a)(1)(D)(i) and 
(a)(2)(D)(i), the limitation amount for a clinical diagnostic 
laboratory test performed--
          (i) on or after July 1, 1986, and before April 1, 
        1988, is equal to 115 percent of the median of all the 
        fee schedules established for that test for that 
        laboratory setting under paragraph (1),
          (ii) after March 31, 1988, and before January 1, 
        1990, is equal to the median of all the fee schedules 
        established for that test for that laboratory setting 
        under paragraph (1),
          (iii) after December 31, 1989, and before January 1, 
        1991, is equal to 93 percent of the median of all the 
        fee schedules established for that test for that 
        laboratory setting under paragraph (1),
          (iv) after December 31, 1990, and before January 1, 
        1994, is equal to 88 percent of such median,
          (v) after December 31, 1993, and before January 1, 
        1995, is equal to 84 percent of such median,
          (vi) after December 31, 1994, and before January 1, 
        1996, is equal to 80 percent of such median,
          (vii) after December 31, 1995, and before January 1, 
        1998, is equal to 76 percent of such median, and
          (viii) after December 31, 1997, is equal to 74 
        percent of such median (or 100 percent of such median 
        in the case of a clinical diagnostic laboratory test 
        performed on or after January 1, 2001, that the 
        Secretary determines is a new test for which no 
        limitation amount has previously been established under 
        this subparagraph).
  (5)(A) In the case of a bill or request for payment for a 
clinical diagnostic laboratory test for which payment may 
otherwise be made under this part on an assignment-related 
basis or under a provider agreement under section 1866, payment 
may be made only to the person or entity which performed or 
supervised the performance of such test; except that--
          (i) if a physician performed or supervised the 
        performance of such test, payment may be made to 
        another physician with whom he shares his practice,
          (ii) in the case of a test performed at the request 
        of a laboratory by another laboratory, payment may be 
        made to the referring laboratory but only if--
                  (I) the referring laboratory is located in, 
                or is part of, a rural hospital,
                  (II) the referring laboratory is wholly owned 
                by the entity performing such test, the 
                referring laboratory wholly owns the entity 
                performing such test, or both the referring 
                laboratory and the entity performing such test 
                are wholly-owned by a third entity, or
                  (III) not more than 30 percent of the 
                clinical diagnostic laboratory tests for which 
                such referring laboratory (but not including a 
                laboratory described in subclause (II)), 
                receives requests for testing during the year 
                in which the test is performed are performed by 
                another laboratory, and
          (iii) in the case of a clinical diagnostic laboratory 
        test provided under an arrangement (as defined in 
        section 1861(w)(1)) made by a hospital, critical access 
        hospital, or skilled nursing facility, payment shall be 
        made to the hospital or skilled nursing facility.
  (B) In the case of such a bill or request for payment for a 
clinical diagnostic laboratory test for which payment may 
otherwise be made under this part, and which is not described 
in subparagraph (A), payment may be made to the beneficiary 
only on the basis of the itemized bill of the person or entity 
which performed or supervised the performance of the test.
  (C) Payment for a clinical diagnostic laboratory test, 
including a test performed in a physician's office but 
excluding a test performed by a rural health clinic may only be 
made on an assignment-related basis or to a provider of 
services with an agreement in effect under section 1866.
  (D) A person may not bill for a clinical diagnostic 
laboratory test, including a test performed in a physician's 
office but excluding a test performed by a rural health clinic, 
other than on an assignment-related basis. If a person 
knowingly and willfully and on a repeated basis bills for a 
clinical diagnostic laboratory test in violation of the 
previous sentence, the Secretary may apply sanctions against 
the person in the same manner as the Secretary may apply 
sanctions against a physician in accordance with paragraph (2) 
of section 1842(j) in the same manner such paragraphs apply 
with respect to a physician. Paragraph (4) of such section 
shall apply in this subparagraph in the same manner as such 
paragraph applies to such section.
  (6) For tests furnished before January 1, 2017, inthe case of 
any diagnostic laboratory test payment for which is not made on 
the basis of a fee schedule under paragraph (1), the Secretary 
may establish a payment rate which is acceptable to the person 
or entity performing the test and which would be considered the 
full charge for such tests. Such negotiated rate shall be 
limited to an amount not in excess of the total payment that 
would have been made for the services in the absence of such 
rate.
  (7) Notwithstanding paragraphs (1) and (4)and section 1834A, 
the Secretary shall establish a national minimum payment amount 
under this part for a diagnostic or screening pap smear 
laboratory test (including all cervical cancer screening 
technologies that have been approved by the Food and Drug 
Administration as a primary screening method for detection of 
cervical cancer) equal to $14.60 for tests furnished in 2000. 
For such tests furnished in subsequent years, such national 
minimum payment amount shall be adjusted annually as provided 
in paragraph (2).
  (8)(A) The Secretary shall establish by regulation procedures 
for determining the basis for, and amount of, payment under 
this subsection for any clinical diagnostic laboratory test 
with respect to which a new or substantially revised HCPCS code 
is assigned on or after January 1, 2005 (in this paragraph 
referred to as ``new tests'').
  (B) Determinations under subparagraph (A) shall be made only 
after the Secretary--
          (i) makes available to the public (through an 
        Internet website and other appropriate mechanisms) a 
        list that includes any such test for which 
        establishment of a payment amount under this subsection 
        is being considered for a year;
          (ii) on the same day such list is made available, 
        causes to have published in the Federal Register notice 
        of a meeting to receive comments and recommendations 
        (and data on which recommendations are based) from the 
        public on the appropriate basis under this subsection 
        for establishing payment amounts for the tests on such 
        list;
          (iii) not less than 30 days after publication of such 
        notice convenes a meeting, that includes 
        representatives of officials of the Centers for 
        Medicare & Medicaid Services involved in determining 
        payment amounts, to receive such comments and 
        recommendations (and data on which the recommendations 
        are based);
          (iv) taking into account the comments and 
        recommendations (and accompanying data) received at 
        such meeting, develops and makes available to the 
        public (through an Internet website and other 
        appropriate mechanisms) a list of proposed 
        determinations with respect to the appropriate basis 
        for establishing a payment amount under this subsection 
        for each such code, together with an explanation of the 
        reasons for each such determination, the data on which 
        the determinations are based, and a request for public 
        written comments on the proposed determination; and
          (v) taking into account the comments received during 
        the public comment period, develops and makes available 
        to the public (through an Internet website and other 
        appropriate mechanisms) a list of final determinations 
        of the payment amounts for such tests under this 
        subsection, together with the rationale for each such 
        determination, the data on which the determinations are 
        based, and responses to comments and suggestions 
        received from the public.
  (C) Under the procedures established pursuant to subparagraph 
(A), the Secretary shall--
          (i) set forth the criteria for making determinations 
        under subparagraph (A); and
          (ii) make available to the public the data (other 
        than proprietary data) considered in making such 
        determinations.
  (D) The Secretary may convene such further public meetings to 
receive public comments on payment amounts for new tests under 
this subsection as the Secretary deems appropriate.
  (E) For purposes of this paragraph:
          (i) The term ``HCPCS'' refers to the Health Care 
        Procedure Coding System.
          (ii) A code shall be considered to be ``substantially 
        revised'' if there is a substantive change to the 
        definition of the test or procedure to which the code 
        applies (such as a new analyte or a new methodology for 
        measuring an existing analyte-specific test).
  (9) Notwithstanding any other provision in this part, in the 
case of any diagnostic laboratory test for HbA1c that is 
labeled by the Food and Drug Administration for home use and is 
furnished on or after April 1, 2008, the payment rate for such 
test shall be the payment rate established under this part for 
a glycated hemoglobin test (identified as of October 1, 2007, 
by HCPCS code 83036 (and any succeeding codes)).
  (i)(1) The Secretary shall, in consultation with appropriate 
medical organizations--
          (A) specify those surgical procedures which are 
        appropriately (when considered in terms of the proper 
        utilization of hospital inpatient facilities) performed 
        on an inpatient basis in a hospital but which also can 
        be performed safely on an ambulatory basis in an 
        ambulatory surgical center (meeting the standards 
        specified under section 1832(a)(2)(F)(i)), critical 
        access hospital, or hospital outpatient department, and
          (B) specify those surgical procedures which are 
        appropriately (when considered in terms of the proper 
        utilization of hospital inpatient facilities) performed 
        on an inpatient basis in a hospital but which also can 
        be performed safely on an ambulatory basis in a 
        physician's office.
The lists of procedures established under subparagraphs (A) and 
(B) shall be reviewed and updated not less often than every 2 
years, in consultation with appropriate trade and professional 
organizations.
  (2)(A) For services furnished prior to the implementation of 
the system described in subparagraph (D), subject to 
subparagraph (E), the amount of payment to be made for facility 
services furnished in connection with a surgical procedure 
specified pursuant to paragraph (1)(A) and furnished to an 
individual in an ambulatory surgical center described in such 
paragraph shall be equal to 80 percent of a standard overhead 
amount established by the Secretary (with respect to each such 
procedure) on the basis of the Secretary's estimate of a fair 
fee which--
          (i) takes into account the costs incurred by such 
        centers, or classes of centers, generally in providing 
        services furnished in connection with the performance 
        of such procedure, as determined in accordance with a 
        survey (based upon a representative sample of 
        procedures and facilities) of the actual audited costs 
        incurred by such centers in providing such services,
          (ii) takes such costs into account in such a manner 
        as will assure that the performance of the procedure in 
        such a center will result in substantially less amounts 
        paid under this title than would have been paid if the 
        procedure had been performed on an inpatient basis in a 
        hospital, and
          (iii) in the case of insertion of an intraocular lens 
        during or subsequent to cataract surgery includes 
        payment which is reasonable and related to the cost of 
        acquiring the class of lens involved.
Each amount so established shall be reviewed and updated not 
later than July 1, 1987, and annually thereafter to take 
account of varying conditions in different areas.
  (B) The amount of payment to be made under this part for 
facility services furnished, in connection with a surgical 
procedure specified pursuant to paragraph (1)(B), in a 
physician's office shall be equal to 80 percent of a standard 
overhead amount established by the Secretary (with respect to 
each such procedure) on the basis of the Secretary's estimate 
of a fair fee which--
          (i) takes into account additional costs, not usually 
        included in the professional fee, incurred by 
        physicians in securing, maintaining, and staffing the 
        facilities and ancillary services appropriate for the 
        performance of such procedure in the physician's 
        office, and
          (ii) takes such items into account in such a manner 
        which will assure that the performance of such 
        procedure in the physician's office will result in 
        substantially less amounts paid under this title than 
        would have been paid if the services had been furnished 
        on an inpatient basis in a hospital.
Each amount so established shall be reviewed and updated not 
later than July 1, 1987, and annually thereafter to take 
account of varying conditions in different areas.
  (C)(i) Notwithstanding the second sentence of each of 
subparagraphs (A) and (B), except as otherwise specified in 
clauses (ii), (iii), and (iv), if the Secretary has not updated 
amounts established under such subparagraphs or under 
subparagraph (D), with respect to facility services furnished 
during a fiscal year (beginning with fiscal year 1986 or a 
calendar year (beginning with 2006)), such amounts shall be 
increased by the percentage increase in the Consumer Price 
Index for all urban consumers (U.S. city average) as estimated 
by the Secretary for the 12-month period ending with the 
midpoint of the year involved.
  (ii) In each of the fiscal years 1998 through 2002, the 
increase under this subparagraph shall be reduced (but not 
below zero) by 2.0 percentage points.
  (iii) In fiscal year 2004, beginning with April 1, 2004, the 
increase under this subparagraph shall be the Consumer Price 
Index for all urban consumers (U.S. city average) as estimated 
by the Secretary for the 12-month period ending with March 31, 
2003, minus 3.0 percentage points.
  (iv) In fiscal year 2005, the last quarter of calendar year 
2005, and each of calendar years 2006 through 2009, the 
increase under this subparagraph shall be 0 percent.
  (D)(i) Taking into account the recommendations in the report 
under section 626(d) of Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003, the Secretary shall 
implement a revised payment system for payment of surgical 
services furnished in ambulatory surgical centers.
  (ii) In the year the system described in clause (i) is 
implemented, such system shall be designed to result in the 
same aggregate amount of expenditures for such services as 
would be made if this subparagraph did not apply, as estimated 
by the Secretary and taking into account reduced expenditures 
that would apply if subparagraph (E) were to continue to apply, 
as estimated by the Secretary.
  (iii) The Secretary shall implement the system described in 
clause (i) for periods in a manner so that it is first 
effective beginning on or after January 1, 2006, and not later 
than January 1, 2008.
  (iv) The Secretary may implement such system in a manner so 
as to provide for a reduction in any annual update for failure 
to report on quality measures in accordance with paragraph (7).
          (v) In implementing the system described in clause 
        (i) for 2011 and each subsequent year, any annual 
        update under such system for the year, after 
        application of clause (iv), shall be reduced by the 
        productivity adjustment described in section 
        1886(b)(3)(B)(xi)(II). The application of the preceding 
        sentence may result in such update being less than 0.0 
        for a year, and may result in payment rates under the 
        system described in clause (i) for a year being less 
        than such payment rates for the preceding year.
  (vi) There shall be no administrative or judicial review 
under section 1869, 1878, or otherwise, of the classification 
system, the relative weights, payment amounts, and the 
geographic adjustment factor, if any, under this subparagraph.
  (E) With respect to surgical procedures furnished on or after 
January 1, 2007, and before the effective date of the 
implementation of a revised payment system under subparagraph 
(D), if--
          (i) the standard overhead amount under subparagraph 
        (A) for a facility service for such procedure, without 
        the application of any geographic adjustment, exceeds
          (ii) the Medicare OPD fee schedule amount established 
        under the prospective payment system for hospital 
        outpatient department services under paragraph (3)(D) 
        of section 1833(t) for such service for such year, 
        determined without regard to geographic adjustment 
        under paragraph (2)(D) of such section,
the Secretary shall substitute under subparagraph (A) the 
amount described in clause (ii) for the standard overhead 
amount for such service referred to in clause (i).
  (3)(A) The aggregate amount of the payments to be made under 
this part for outpatient hospital facility services or critical 
access hospital services furnished before January 1, 1999, in 
connection with surgical procedures specified under paragraph 
(1)(A) shall be equal to the lesser of--
          (i) the amount determined with respect to such 
        services under subsection (a)(2)(B); or
          (ii) the blend amount (described in subparagraph 
        (B)).
  (B)(i) The blend amount for a cost reporting period is the 
sum of--
          (I) the cost proportion (as defined in clause 
        (ii)(I)) of the amount described in subparagraph 
        (A)(i), and
          (II) the ASC proportion (as defined in clause 
        (ii)(II)) of the standard overhead amount payable with 
        respect to the same surgical procedure as if it were 
        provided in an ambulatory surgical center in the same 
        area, as determined under paragraph (2)(A), less the 
        amount a provider may charge as described in clause 
        (ii) of section 1866(a)(2)(A).
  (ii) Subject to paragraph (4), in this paragraph:
          (I) The term ``cost proportion'' means 75 percent for 
        cost reporting periods beginning in fiscal year 1988, 
        50 percent for portions of cost reporting periods 
        beginning on or after October 1, 1988, and ending on or 
        before December 31, 1990, and 42 percent for portions 
        of cost reporting periods beginning on or after January 
        1, 1991.
          (II) The term ``ASC proportion'' means 25 percent for 
        cost reporting periods beginning in fiscal year 1988, 
        50 percent for portions of cost reporting periods 
        beginning on or after October 1, 1988, and ending on or 
        before December 31, 1990, and 58 percent for portions 
        of cost reporting periods beginning on or after January 
        1, 1991.
  (4)(A) In the case of a hospital that--
          (i) makes application to the Secretary and 
        demonstrates that it specializes in eye services or eye 
        and ear services (as determined by the Secretary),
          (ii) receives more than 30 percent of its total 
        revenues from outpatient services, and
          (iii) on October 1, 1987--
                  (I) was an eye specialty hospital or an eye 
                and ear specialty hospital, or
                  (II) was operated as an eye or eye and ear 
                unit (as defined in subparagraph (B)) of a 
                general acute care hospital which, on the date 
                of the application described in clause (i), 
                operates less than 20 percent of the beds that 
                the hospital operated on October 1, 1987, and 
                has sold or otherwise disposed of a substantial 
                portion of the hospital's other acute care 
                operations,
the cost proportion and ASC proportion in effect under 
subclauses (I) and (II) of paragraph (3)(B)(ii) for cost 
reporting periods beginning in fiscal year 1988 shall remain in 
effect for cost reporting periods beginning on or after October 
1, 1988, and before January 1, 1995.
  (B) For purposes of this subparagraph (A)(iii)(II), the term 
``eye or eye and ear unit'' means a physically separate or 
distinct unit containing separate surgical suites devoted 
solely to eye or eye and ear services.
  (5)(A) The Secretary is authorized to provide by regulations 
that in the case of a surgical procedure, specified by the 
Secretary pursuant to paragraph (1)(A), performed in an 
ambulatory surgical center described in such paragraph, there 
shall be paid (in lieu of any amounts otherwise payable under 
this part) with respect to the facility services furnished by 
such center and with respect to all related services (including 
physicians' services, laboratory, X-ray, and diagnostic 
services) a single all-inclusive fee established pursuant to 
subparagraph (B), if all parties furnishing all such services 
agree to accept such fee (to be divided among the parties 
involved in such manner as they shall have previously agreed 
upon) as full payment for the services furnished.
  (B) In implementing this paragraph, the Secretary shall 
establish with respect to each surgical procedure specified 
pursuant to paragraph (1)(A) the amount of the all-inclusive 
fee for such procedure, taking into account such factors as may 
be appropriate. The amount so established with respect to any 
surgical procedure shall be reviewed periodically and may be 
adjusted by the Secretary, when appropriate, to take account of 
varying conditions in different areas.
  (6) Any person, including a facility having an agreement 
under section 1832(a)(2)(F)(i), who knowingly and willfully 
presents, or causes to be presented, a bill or request for 
payment, for an intraocular lens inserted during or subsequent 
to cataract surgery for which payment may be made under 
paragraph (2)(A)(iii), is subject to a civil money penalty of 
not to exceed $2,000. The provisions of section 1128A (other 
than subsections (a) and (b)) shall apply to a civil money 
penalty under the previous sentence in the same manner as such 
provisions apply to a penalty or proceeding under section 
1128A(a).
  (7)(A) For purposes of paragraph (2)(D)(iv), the Secretary 
may provide, in the case of an ambulatory surgical center that 
does not submit, to the Secretary in accordance with this 
paragraph, data required to be submitted on measures selected 
under this paragraph with respect to a year, any annual 
increase provided under the system established under paragraph 
(2)(D) for such year shall be reduced by 2.0 percentage points. 
A reduction under this subparagraph shall apply only with 
respect to the year involved and the Secretary shall not take 
into account such reduction in computing any annual increase 
factor for a subsequent year.
  (B) Except as the Secretary may otherwise provide, the 
provisions of subparagraphs (B), (C), (D), and (E) of paragraph 
(17) of section 1833(t) shall apply with respect to services of 
ambulatory surgical centers under this paragraph in a similar 
manner to the manner in which they apply under such paragraph 
and, for purposes of this subparagraph, any reference to a 
hospital, outpatient setting, or outpatient hospital services 
is deemed a reference to an ambulatory surgical center, the 
setting of such a center, or services of such a center, 
respectively.
  (8) The Secretary shall conduct a similar type of review as 
required under paragraph (22) of section 1833(t)), including 
the second sentence of subparagraph (C) of such paragraph, to 
payment for services under this subsection, and make such 
revisions under this paragraph, in an appropriate manner (as 
determined by the Secretary).
  (j) Whenever a final determination is made that the amount of 
payment made under this part either to a provider of services 
or to another person pursuant to an assignment under section 
1842(b)(3)(B)(ii) was in excess of or less than the amount of 
payment that is due, and payment of such excess or deficit is 
not made (or effected by offset) within 30 days of the date of 
the determination, interest shall accrue on the balance of such 
excess or deficit not paid or offset (to the extent that the 
balance is owed by or owing to the provider) at a rate 
determined in accordance with the regulations of the Secretary 
of the Treasury applicable to charges for late payments.
  (k) With respect to services described in section 
1861(s)(10)(B), the Secretary may provide, instead of the 
amount of payment otherwise provided under this part, for 
payment of such an amount or amounts as reasonably reflects the 
general cost of efficiently providing such services.
  (l)(1)(A) The Secretary shall establish a fee schedule for 
services of certified registered nurse anesthetists under 
section 1861(s)(11).
  (B) In establishing the fee schedule under this paragraph the 
Secretary may utilize a system of time units, a system of base 
and time units, or any appropriate methodology.
  (C) The provisions of this subsection shall not apply to 
certain services furnished in certain hospitals in rural areas 
under the provisions of section 9320(k) of the Omnibus Budget 
Reconciliation Act of 1986, as amended by section 6132 of the 
Omnibus Budget Reconciliation Act of 1989.
  (2) Except as provided in paragraph (3), the fee schedule 
established under paragraph (1) shall be initially based on 
audited data from cost reporting periods ending in fiscal year 
1985 and such other data as the Secretary determines necessary.
  (3)(A) In establishing the initial fee schedule for those 
services, the Secretary shall adjust the fee schedule to the 
extent necessary to ensure that the estimated total amount 
which will be paid under this title for those services plus 
applicable coinsurance in 1989 will equal the estimated total 
amount which would be paid under this title for those services 
in 1989 if the services were included as inpatient hospital 
services and payment for such services was made under part A in 
the same manner as payment was made in fiscal year 1987, 
adjusted to take into account changes in prices and technology 
relating to the administration of anesthesia.
  (B) The Secretary shall also reduce the prevailing charge of 
physicians for medical direction of a certified registered 
nurse anesthetist, or the fee schedule for services of 
certified registered nurse anesthetists, or both, to the extent 
necessary to ensure that the estimated total amount which will 
be paid under this title plus applicable coinsurance for such 
medical direction and such services in 1989 and 1990 will not 
exceed the estimated total amount which would have been paid 
plus applicable coinsurance but for the enactment of the 
amendments made by section 9320 of the Omnibus Budget 
Reconciliation Act of 1986. A reduced prevailing charge under 
this subparagraph shall become the prevailing charge but for 
subsequent years for purposes of applying the economic index 
under the fourth sentence of section 1842(b)(3).
  (4)(A) Except as provided in subparagraphs (C) and (D), in 
determining the amount paid under the fee schedule under this 
subsection for services furnished on or after January 1, 1991, 
by a certified registered nurse anesthetist who is not 
medically directed--
          (i) the conversion factor shall be--
                  (I) for services furnished in 1991, $15.50,
                  (II) for services furnished in 1992, $15.75,
                  (III) for services furnished in 1993, $16.00,
                  (IV) for services furnished in 1994, $16.25,
                  (V) for services furnished in 1995, $16.50,
                  (VI) for services furnished in 1996, $16.75, 
                and
                  (VII) for services furnished in calendar 
                years after 1996, the previous year's 
                conversion factor increased by the update 
                determined under section 1848(d) for physician 
                anesthesia services for that year;
          (ii) the payment areas to be used shall be the fee 
        schedule areas used under section 1848 (or, in the case 
        of services furnished during 1991, the localities used 
        under section 1842(b)) for purposes of computing 
        payments for physicians' services that are anesthesia 
        services;
          (iii) the geographic adjustment factors to be applied 
        to the conversion factor under clause (i) for services 
        in a fee schedule area or locality is--
                  (I) in the case of services furnished in 
                1991, the geographic work index value and the 
                geographic practice cost index value specified 
                in section 1842(q)(1)(B) for physicians' 
                services that are anesthesia services furnished 
                in the area or locality, and
                  (II) in the case of services furnished after 
                1991, the geographic work index value, the 
                geographic practice cost index value, and the 
                geographic malpractice index value used for 
                determining payments for physicians' services 
                that are anesthesia services under section 
                1848,
        with 70 percent of the conversion factor treated as 
        attributable to work and 30 percent as attributable to 
        overhead for services furnished in 1991 (and the 
        portions attributable to work, practice expenses, and 
        malpractice expenses in 1992 and thereafter being the 
        same as is applied under section 1848).
  (B)(i) Except as provided in clause (ii) and subparagraph 
(D), in determining the amount paid under the fee schedule 
under this subsection for services furnished on or after 
January 1, 1991, and before January 1, 1994, by a certified 
registered nurse anesthetist who is medically directed, the 
Secretary shall apply the same methodology specified in 
subparagraph (A).
  (ii) The conversion factor used under clause (i) shall be--
          (I) for services furnished in 1991, $10.50,
          (II) for services furnished in 1992, $10.75, and
          (III) for services furnished in 1993, $11.00.
  (iii) In the case of services of a certified registered nurse 
anesthetist who is medically directed or medically supervised 
by a physician which are furnished on or after January 1, 1994, 
the fee schedule amount shall be one-half of the amount 
described in section 1848(a)(5)(B) with respect to the 
physician.
  (C) Notwithstanding subclauses (I) through (V) of 
subparagraph (A)(i)--
          (i) in the case of a 1990 conversion factor that is 
        greater than $16.50, the conversion factor for a 
        calendar year after 1990 and before 1996 shall be the 
        1990 conversion factor reduced by the product of the 
        last digit of the calendar year and one-fifth of the 
        amount by which the 1990 conversion factor exceeds 
        $16.50; and
          (ii) in the case of a 1990 conversion factor that is 
        greater than $15.49 but less than $16.51, the 
        conversion factor for a calendar year after 1990 and 
        before 1996 shall be the greater of--
                  (I) the 1990 conversion factor, or
                  (II) the conversion factor specified in 
                subparagraph (A)(i) for the year involved.
  (D) Notwithstanding subparagraph (C), in no case may the 
conversion factor used to determine payment for services in a 
fee schedule area or locality under this subsection, as 
adjusted by the adjustment factors specified in subparagraphs 
(A)(iii), exceed the conversion factor used to determine the 
amount paid for physicians' services that are anesthesia 
services in the area or locality.
  (5)(A) Payment for the services of a certified registered 
nurse anesthetist (for which payment may otherwise be made 
under this part) may be made on the basis of a claim or request 
for payment presented by the certified registered nurse 
anesthetist furnishing such services, or by a hospital, 
critical access hospital, physician, group practice, or 
ambulatory surgical center with which the certified registered 
nurse anesthetist furnishing such services has an employment or 
contractual relationship that provides for payment to be made 
under this part for such services to such hospital, critical 
access hospital, physician, group practice, or ambulatory 
surgical center.
  (B) No hospital or critical access hospital that presents a 
claim or request for payment for services of a certified nurse 
anesthetist under this part may treat any uncollected 
coinsurance amount imposed under this part with respect to such 
services as a bad debt of such hospital or critical access 
hospital for purposes of this title.
  (6) If an adjustment under paragraph (3)(B) results in a 
reduction in the reasonable charge for a physicians' service 
and a nonparticipating physician furnishes the service to an 
individual entitled to benefits under this part after the 
effective date of the reduction, the physician's actual charge 
is subject to a limit under section 1842(j)(1)(D).
  (m)(1) In the case of physicians' services furnished in a 
year to an individual, who is covered under the insurance 
program established by this part and who incurs expenses for 
such services, in an area that is designated (under section 
332(a)(1)(A) of the Public Health Service Act) as a health 
professional shortage area as identified by the Secretary prior 
to the beginning of such year, in addition to the amount 
otherwise paid under this part, there also shall be paid to the 
physician (or to an employer or facility in the cases described 
in clause (A) of section 1842(b)(6)) (on a monthly or quarterly 
basis) from the Federal Supplementary Medical Insurance Trust 
Fund an amount equal to 10 percent of the payment amount for 
the service under this part.
  (2) For each health professional shortage area identified in 
paragraph (1) that consists of an entire county, the Secretary 
shall provide for the additional payment under paragraph (1) 
without any requirement on the physician to identify the health 
professional shortage area involved. The Secretary may 
implement the previous sentence using the method specified in 
subsection (u)(4)(C).
  (3) The Secretary shall post on the Internet website of the 
Centers for Medicare & Medicaid Services a list of the health 
professional shortage areas identified in paragraph (1) that 
consist of a partial county to facilitate the additional 
payment under paragraph (1) in such areas.
  (4) There shall be no administrative or judicial review under 
section 1869, section 1878, or otherwise, respecting--
          (A) the identification of a county or area;
          (B) the assignment of a specialty of any physician 
        under this paragraph;
          (C) the assignment of a physician to a county under 
        this subsection; or
          (D) the assignment of a postal ZIP Code to a county 
        or other area under this subsection.
  (n)(1)(A) The aggregate amount of the payments to be made for 
all or part of a cost reporting period for services described 
in subsection (a)(2)(E)(i) furnished under this part on or 
after October 1, 1988, and before January 1, 1999, and for 
services described in subsection (a)(2)(E)(ii) furnished under 
this part on or after October 1, 1989, and before January 1, 
1999, shall be equal to the lesser of--
          (i) the amount determined with respect to such 
        services under subsection (a)(2)(B), or
          (ii) the blend amount for radiology services and 
        diagnostic procedures determined in accordance with 
        subparagraph (B).
  (B)(i) The blend amount for radiology services and diagnostic 
procedures for a cost reporting period is the sum of--
          (I) the cost proportion (as defined in clause (ii)) 
        of the amount described in subparagraph (A)(i); and
          (II) the charge proportion (as defined in clause 
        (ii)(II)) of 62 percent (for services described in 
        subsection (a)(2)(E)(i)), or (for procedures described 
        in subsection (a)(2)(E)(ii)), 42 percent or such other 
        percent established by the Secretary (or carriers 
        acting pursuant to guidelines issued by the Secretary) 
        based on prevailing charges established with actual 
        charge data, of the prevailing charge or (for services 
        described in subsection (a)(2)(E)(i) furnished on or 
        after January 1, 1989) the fee schedule amount 
        established for participating physicians for the same 
        services as if they were furnished in a physician's 
        office in the same locality as determined under section 
        1842(b), less the amount a provider may charge as 
        described in clause (ii) of section 1866(a)(2)(A).
  (ii) In this subparagraph:
          (I) The term ``cost proportion'' means 50 percent, 
        except that such term means 65 percent in the case of 
        outpatient radiology services for portions of cost 
        reporting periods which occur in fiscal year 1989 and 
        in the case of diagnostic procedures described in 
        subsection (a)(2)(E)(ii) for portions of cost reporting 
        periods which occur in fiscal year 1990, and such term 
        means 42 percent in the case of outpatient radiology 
        services for portions of cost reporting periods 
        beginning on or after January 1, 1991.
          (II) The term ``charge proportion'' means 100 percent 
        minus the cost proportion.
  (o)(1) In the case of shoes described in section 
1861(s)(12)--
          (A) no payment may be made under this part, with 
        respect to any individual for any year, for the 
        furnishing of--
                  (i) more than one pair of custom molded shoes 
                (including inserts provided with such shoes) 
                and 2 additional pairs of inserts for such 
                shoes, or
                  (ii) more than one pair of extra-depth shoes 
                (not including inserts provided with such 
                shoes) and 3 pairs of inserts for such shoes, 
                and
          (B) with respect to expenses incurred in any calendar 
        year, no more than the amount of payment applicable 
        under paragraph (2) shall be considered as incurred 
        expenses for purposes of subsections (a) and (b).
Payment for shoes (or inserts) under this part shall be 
considered to include payment for any expenses for the fitting 
of such shoes (or inserts).
  (2)(A) Except as provided by the Secretary under 
subparagraphs (B) and (C), the amount of payment under this 
paragraph for custom molded shoes, extra-depth shoes, and 
inserts shall be the amount determined for such items by the 
Secretary under section 1834(h).
  (B) The Secretary may establish payment amounts for shoes and 
inserts that are lower than the amount established under 
section 1834(h) if the Secretary finds that shoes and inserts 
of an appropriate quality are readily available at or below the 
amount established under such section.
  (C) In accordance with procedures established by the 
Secretary, an individual entitled to benefits with respect to 
shoes described in section 1861(s)(12) may substitute 
modification of such shoes instead of obtaining one (or more, 
as specified by the Secretary) pair of inserts (other than the 
original pair of inserts with respect to such shoes). In such 
case, the Secretary shall substitute, for the payment amount 
established under section 1834(h), a payment amount that the 
Secretary estimates will assure that there is no net increase 
in expenditures under this subsection as a result of this 
subparagraph.
  (3) In this title, the term ``shoes'' includes, except for 
purposes of subparagraphs (A)(ii) and (B) of paragraph (2), 
inserts for extra-depth shoes.
  [(p) Striken.]
  (q)(1) Each request for payment, or bill submitted, for an 
item or service furnished by an entity for which payment may be 
made under this part and for which the entity knows or has 
reason to believe there has been a referral by a referring 
physician (within the meaning of section 1877) shall include 
the name and unique physician identification number for the 
referring physician.
  (2)(A) In the case of a request for payment for an item or 
service furnished by an entity under this part on an 
assignment-related basis and for which information is required 
to be provided under paragraph (1) but not included, payment 
may be denied under this part.
  (B) In the case of a request for payment for an item or 
service furnished by an entity under this part not submitted on 
an assignment-related basis and for which information is 
required to be provided under paragraph (1) but not included--
          (i) if the entity knowingly and willfully fails to 
        provide such information promptly upon request of the 
        Secretary or a carrier, the entity may be subject to a 
        civil money penalty in an amount not to exceed $2,000, 
        and
          (ii) if the entity knowingly, willfully, and in 
        repeated cases fails, after being notified by the 
        Secretary of the obligations and requirements of this 
        subsection to provide the information required under 
        paragraph (1), the entity may be subject to exclusion 
        from participation in the programs under this Act for a 
        period not to exceed 5 years, in accordance with the 
        procedures of subsections (c), (f), and (g) of section 
        1128.
The provisions of section 1128A (other than subsections (a) and 
(b)) shall apply to civil money penalties under clause (i) in 
the same manner as they apply to a penalty or proceeding under 
section 1128A(a).
  (r)(1) With respect to services described in section 
1861(s)(2)(K)(ii) (relating to nurse practitioner or clinical 
nurse specialist services), payment may be made on the basis of 
a claim or request for payment presented by the nurse 
practitioner or clinical nurse specialist furnishing such 
services, or by a hospital, critical access hospital, skilled 
nursing facility or nursing facility (as defined in section 
1919(a)), physician, group practice, or ambulatory surgical 
center with which the nurse practitioner or clinical nurse 
specialist has an employment or contractual relationship that 
provides for payment to be made under this part for such 
services to such hospital, physician, group practice, or 
ambulatory surgical center.
  (2) No hospital or critical access hospital that presents a 
claim or request for payment under this part for services 
described in section 1861(s)(2)(K)(ii) may treat any 
uncollected coinsurance amount imposed under this part with 
respect to such services as a bad debt of such hospital for 
purposes of this title.
  (s) The Secretary may not provide for payment under 
subsection (a)(1)(A) with respect to an organization unless the 
organization provides assurances satisfactory to the Secretary 
that the organization meets the requirement of section 1866(f) 
(relating to maintaining written policies and procedures 
respecting advance directives).
  (t) Prospective Payment System for Hospital Outpatient 
Department Services.--
          (1) Amount of payment.--
                  (A) In general.--With respect to covered OPD 
                services (as defined in subparagraph (B)) 
                furnished during a year beginning with 1999, 
                the amount of payment under this part shall be 
                determined under a prospective payment system 
                established by the Secretary in accordance with 
                this subsection.
                  (B) Definition of covered opd services.--For 
                purposes of this subsection, the term ``covered 
                OPD services''--
                          (i) means hospital outpatient 
                        services designated by the Secretary;
                          (ii) subject to clause (iv), includes 
                        inpatient hospital services designated 
                        by the Secretary that are covered under 
                        this part and furnished to a hospital 
                        inpatient who (I) is entitled to 
                        benefits under part A but has exhausted 
                        benefits for inpatient hospital 
                        services during a spell of illness, or 
                        (II) is not so entitled;
                          (iii) includes implantable items 
                        described in paragraph (3), (6), or (8) 
                        of section 1861(s);
                          (iv) does not include any therapy 
                        services described in subsection (a)(8) 
                        or ambulance services, for which 
                        payment is made under a fee schedule 
                        described in section 1834(k) or section 
                        1834(l) and does not include screening 
                        mammography (as defined in section 
                        1861(jj)), diagnostic mammography, or 
                        personalized prevention plan services 
                        (as defined in section 1861(hhh)(1)); 
                        and
                          (v) does not include applicable items 
                        and services (as defined in 
                        subparagraph (A) of paragraph (21)) 
                        that are furnished on or after January 
                        1, 2017, by an off-campus outpatient 
                        department of a provider (as defined in 
                        subparagraph (B) of such paragraph).
          (2) System requirements.--Under the payment system--
                  (A) the Secretary shall develop a 
                classification system for covered OPD services;
                  (B) the Secretary may establish groups of 
                covered OPD services, within the classification 
                system described in subparagraph (A), so that 
                services classified within each group are 
                comparable clinically and with respect to the 
                use of resources and so that an implantable 
                item is classified to the group that includes 
                the service to which the item relates;
                  (C) the Secretary shall, using data on claims 
                from 1996 and using data from the most recent 
                available cost reports, establish relative 
                payment weights for covered OPD services (and 
                any groups of such services described in 
                subparagraph (B)) based on median (or, at the 
                election of the Secretary, mean) hospital costs 
                and shall determine projections of the 
                frequency of utilization of each such service 
                (or group of services) in 1999;
                  (D) subject to paragraph (19), the Secretary 
                shall determine a wage adjustment factor to 
                adjust the portion of payment and coinsurance 
                attributable to labor-related costs for 
                relative differences in labor and labor-related 
                costs across geographic regions in a budget 
                neutral manner;
                  (E) the Secretary shall establish, in a 
                budget neutral manner, outlier adjustments 
                under paragraph (5) and transitional pass-
                through payments under paragraph (6) and other 
                adjustments as determined to be necessary to 
                ensure equitable payments, such as adjustments 
                for certain classes of hospitals;
                  (F) the Secretary shall develop a method for 
                controlling unnecessary increases in the volume 
                of covered OPD services;
                  (G) the Secretary shall create additional 
                groups of covered OPD services that classify 
                separately those procedures that utilize 
                contrast agents from those that do not; and
                  (H) with respect to devices of brachytherapy 
                consisting of a seed or seeds (or radioactive 
                source), the Secretary shall create additional 
                groups of covered OPD services that classify 
                such devices separately from the other services 
                (or group of services) paid for under this 
                subsection in a manner reflecting the number, 
                isotope, and radioactive intensity of such 
                devices furnished, including separate groups 
                for palladium-103 and iodine-125 devices and 
                for stranded and non-stranded devices furnished 
                on or after July 1, 2007.
        For purposes of subparagraph (B), items and services 
        within a group shall not be treated as ``comparable 
        with respect to the use of resources'' if the highest 
        median cost (or mean cost, if elected by the Secretary 
        under subparagraph (C)) for an item or service within 
        the group is more than 2 times greater than the lowest 
        median cost (or mean cost, if so elected) for an item 
        or service within the group; except that the Secretary 
        may make exceptions in unusual cases, such as low 
        volume items and services, but may not make such an 
        exception in the case of a drug or biological that has 
        been designated as an orphan drug under section 526 of 
        the Federal Food, Drug and Cosmetic Act.
          (3) Calculation of base amounts.--
                  (A) Aggregate amounts that would be payable 
                if deductibles were disregarded.--The Secretary 
                shall estimate the sum of--
                          (i) the total amounts that would be 
                        payable from the Trust Fund under this 
                        part for covered OPD services in 1999, 
                        determined without regard to this 
                        subsection, as though the deductible 
                        under section 1833(b) did not apply, 
                        and
                          (ii) the total amounts of copayments 
                        estimated to be paid under this 
                        subsection by beneficiaries to 
                        hospitals for covered OPD services in 
                        1999, as though the deductible under 
                        section 1833(b) did not apply.
                  (B) Unadjusted copayment amount.--
                          (i) In general.--For purposes of this 
                        subsection, subject to clause (ii), the 
                        ``unadjusted copayment amount'' 
                        applicable to a covered OPD service (or 
                        group of such services) is 20 percent 
                        of the national median of the charges 
                        for the service (or services within the 
                        group) furnished during 1996, updated 
                        to 1999 using the Secretary's estimate 
                        of charge growth during the period.
                          (ii) Adjusted to be 20 percent when 
                        fully phased in.--If the pre-deductible 
                        payment percentage for a covered OPD 
                        service (or group of such services) 
                        furnished in a year would be equal to 
                        or exceed 80 percent, then the 
                        unadjusted copayment amount shall be 20 
                        percent of amount determined under 
                        subparagraph (D).
                          (iii) Rules for new services.--The 
                        Secretary shall establish rules for 
                        establishment of an unadjusted 
                        copayment amount for a covered OPD 
                        service not furnished during 1996, 
                        based upon its classification within a 
                        group of such services.
                  (C) Calculation of conversion factors.--
                          (i) For 1999.--
                                  (I) In general.--The 
                                Secretary shall establish a 
                                1999 conversion factor for 
                                determining the medicare OPD 
                                fee schedule amounts for each 
                                covered OPD service (or group 
                                of such services) furnished in 
                                1999. Such conversion factor 
                                shall be established on the 
                                basis of the weights and 
                                frequencies described in 
                                paragraph (2)(C) and in such a 
                                manner that the sum for all 
                                services and groups of the 
                                products (described in 
                                subclause (II) for each such 
                                service or group) equals the 
                                total projected amount 
                                described in subparagraph (A).
                                  (II) Product described.--The 
                                Secretary shall determine for 
                                each service or group the 
                                product of the medicare OPD fee 
                                schedule amounts (taking into 
                                account appropriate adjustments 
                                described in paragraphs (2)(D) 
                                and (2)(E)) and the estimated 
                                frequencies for such service or 
                                group.
                          (ii) Subsequent years.--Subject to 
                        paragraph (8)(B), the Secretary shall 
                        establish a conversion factor for 
                        covered OPD services furnished in 
                        subsequent years in an amount equal to 
                        the conversion factor established under 
                        this subparagraph and applicable to 
                        such services furnished in the previous 
                        year increased by the OPD fee schedule 
                        increase factor specified under clause 
                        (iv) for the year involved.
                          (iii) Adjustment for service mix 
                        changes.--Insofar as the Secretary 
                        determines that the adjustments for 
                        service mix under paragraph (2) for a 
                        previous year (or estimates that such 
                        adjustments for a future year) did (or 
                        are likely to) result in a change in 
                        aggregate payments under this 
                        subsection during the year that are a 
                        result of changes in the coding or 
                        classification of covered OPD services 
                        that do not reflect real changes in 
                        service mix, the Secretary may adjust 
                        the conversion factor computed under 
                        this subparagraph for subsequent years 
                        so as to eliminate the effect of such 
                        coding or classification changes.
                          (iv) OPD fee schedule increase 
                        factor.--For purposes of this 
                        subparagraph, subject to paragraph (17) 
                        and subparagraph (F) of this paragraph, 
                        the ``OPD fee schedule increase 
                        factor'' for services furnished in a 
                        year is equal to the market basket 
                        percentage increase applicable under 
                        section 1886(b)(3)(B)(iii) to hospital 
                        discharges occurring during the fiscal 
                        year ending in such year, reduced by 1 
                        percentage point for such factor for 
                        services furnished in each of 2000 and 
                        2002. In applying the previous sentence 
                        for years beginning with 2000, the 
                        Secretary may substitute for the market 
                        basket percentage increase an annual 
                        percentage increase that is computed 
                        and applied with respect to covered OPD 
                        services furnished in a year in the 
                        same manner as the market basket 
                        percentage increase is determined and 
                        applied to inpatient hospital services 
                        for discharges occurring in a fiscal 
                        year.
                  (D) Calculation of medicare opd fee schedule 
                amounts.--The Secretary shall compute a 
                medicare OPD fee schedule amount for each 
                covered OPD service (or group of such services) 
                furnished in a year, in an amount equal to the 
                product of--
                          (i) the conversion factor computed 
                        under subparagraph (C) for the year, 
                        and
                          (ii) the relative payment weight 
                        (determined under paragraph (2)(C)) for 
                        the service or group.
                  (E) Pre-deductible payment percentage.--The 
                pre-deductible payment percentage for a covered 
                OPD service (or group of such services) 
                furnished in a year is equal to the ratio of--
                          (i) the medicare OPD fee schedule 
                        amount established under subparagraph 
                        (D) for the year, minus the unadjusted 
                        copayment amount determined under 
                        subparagraph (B) for the service or 
                        group, to
                          (ii) the medicare OPD fee schedule 
                        amount determined under subparagraph 
                        (D) for the year for such service or 
                        group.
                  (F) Productivity and other adjustment.--After 
                determining the OPD fee schedule increase 
                factor under subparagraph (C)(iv), the 
                Secretary shall reduce such increase factor--
                          (i) for 2012 and subsequent years, by 
                        the productivity adjustment described 
                        in section 1886(b)(3)(B)(xi)(II); and
                          (ii) for each of 2010 through 2019, 
                        by the adjustment described in 
                        subparagraph (G).
                The application of this subparagraph may result 
                in the increase factor under subparagraph 
                (C)(iv) being less than 0.0 for a year, and may 
                result in payment rates under the payment 
                system under this subsection for a year being 
                less than such payment rates for the preceding 
                year.
                  (G) Other adjustment.--For purposes of 
                subparagraph (F)(ii), the adjustment described 
                in this subparagraph is--
                          (i) for each of 2010 and 2011, 0.25 
                        percentage point;
                          (ii) for each of 2012 and 2013, 0.1 
                        percentage point;
                          (iii) for 2014, 0.3 percentage point;
                          (iv) for each of 2015 and 2016, 0.2 
                        percentage point; and
                          (v) for each of 2017, 2018, and 2019, 
                        0.75 percentage point.
          (4) Medicare payment amount.--The amount of payment 
        made from the Trust Fund under this part for a covered 
        OPD service (and such services classified within a 
        group) furnished in a year is determined, subject to 
        paragraph (7), as follows:
                  (A) Fee schedule adjustments.--The medicare 
                OPD fee schedule amount (computed under 
                paragraph (3)(D)) for the service or group and 
                year is adjusted for relative differences in 
                the cost of labor and other factors determined 
                by the Secretary, as computed under paragraphs 
                (2)(D) and (2)(E).
                  (B) Subtract applicable deductible.--Reduce 
                the adjusted amount determined under 
                subparagraph (A) by the amount of the 
                deductible under section 1833(b), to the extent 
                applicable.
                  (C) Apply payment proportion to remainder.--
                The amount of payment is the amount so 
                determined under subparagraph (B) multiplied by 
                the pre-deductible payment percentage (as 
                determined under paragraph (3)(E)) for the 
                service or group and year involved, plus the 
                amount of any reduction in the copayment amount 
                attributable to paragraph (8)(C).
          (5) Outlier adjustment.--
                  (A) In general.--Subject to subparagraph (D), 
                the Secretary shall provide for an additional 
                payment for each covered OPD service (or group 
                of services) for which a hospital's charges, 
                adjusted to cost, exceed--
                          (i) a fixed multiple of the sum of--
                                  (I) the applicable medicare 
                                OPD fee schedule amount 
                                determined under paragraph 
                                (3)(D), as adjusted under 
                                paragraph (4)(A) (other than 
                                for adjustments under this 
                                paragraph or paragraph (6)); 
                                and
                                  (II) any transitional pass-
                                through payment under paragraph 
                                (6); and
                          (ii) at the option of the Secretary, 
                        such fixed dollar amount as the 
                        Secretary may establish.
                  (B) Amount of adjustment.--The amount of the 
                additional payment under subparagraph (A) shall 
                be determined by the Secretary and shall 
                approximate the marginal cost of care beyond 
                the applicable cutoff point under such 
                subparagraph.
                  (C) Limit on aggregate outlier adjustments.--
                          (i) In general.--The total of the 
                        additional payments made under this 
                        paragraph for covered OPD services 
                        furnished in a year (as estimated by 
                        the Secretary before the beginning of 
                        the year) may not exceed the applicable 
                        percentage (specified in clause (ii)) 
                        of the total program payments estimated 
                        to be made under this subsection for 
                        all covered OPD services furnished in 
                        that year. If this paragraph is first 
                        applied to less than a full year, the 
                        previous sentence shall apply only to 
                        the portion of such year.
                          (ii) Applicable percentage.--For 
                        purposes of clause (i), the term 
                        ``applicable percentage'' means a 
                        percentage specified by the Secretary 
                        up to (but not to exceed)--
                                  (I) for a year (or portion of 
                                a year) before 2004, 2.5 
                                percent; and
                                  (II) for 2004 and thereafter, 
                                3.0 percent.
                  (D) Transitional authority.--In applying 
                subparagraph (A) for covered OPD services 
                furnished before January 1, 2002, the Secretary 
                may--
                          (i) apply such subparagraph to a bill 
                        for such services related to an 
                        outpatient encounter (rather than for a 
                        specific service or group of services) 
                        using OPD fee schedule amounts and 
                        transitional pass-through payments 
                        covered under the bill; and
                          (ii) use an appropriate cost-to-
                        charge ratio for the hospital involved 
                        (as determined by the Secretary), 
                        rather than for specific departments 
                        within the hospital.
                  (E) Exclusion of separate drug and biological 
                apcs from outlier payments.--No additional 
                payment shall be made under subparagraph (A) in 
                the case of ambulatory payment classification 
                groups established separately for drugs or 
                biologicals.
          (6) Transitional pass-through for additional costs of 
        innovative medical devices, drugs, and biologicals.--
                  (A) In general.--The Secretary shall provide 
                for an additional payment under this paragraph 
                for any of the following that are provided as 
                part of a covered OPD service (or group of 
                services):
                          (i) Current orphan drugs.--A drug or 
                        biological that is used for a rare 
                        disease or condition with respect to 
                        which the drug or biological has been 
                        designated as an orphan drug under 
                        section 526 of the Federal Food, Drug 
                        and Cosmetic Act if payment for the 
                        drug or biological as an outpatient 
                        hospital service under this part was 
                        being made on the first date that the 
                        system under this subsection is 
                        implemented.
                          (ii) Current cancer therapy drugs and 
                        biologicals and brachytherapy.--A drug 
                        or biological that is used in cancer 
                        therapy, including (but not limited to) 
                        a chemotherapeutic agent, an 
                        antiemetic, a hematopoietic growth 
                        factor, a colony stimulating factor, a 
                        biological response modifier, a 
                        bisphosphonate, and a device of 
                        brachytherapy or temperature monitored 
                        cryoablation, if payment for such drug, 
                        biological, or device as an outpatient 
                        hospital service under this part was 
                        being made on such first date.
                          (iii) Current radiopharmaceutical 
                        drugs and biological products.--A 
                        radiopharmaceutical drug or biological 
                        product used in diagnostic, monitoring, 
                        and therapeutic nuclear medicine 
                        procedures if payment for the drug or 
                        biological as an outpatient hospital 
                        service under this part was being made 
                        on such first date.
                          (iv) New medical devices, drugs, and 
                        biologicals.--A medical device, drug, 
                        or biological not described in clause 
                        (i), (ii), or (iii) if--
                                  (I) payment for the device, 
                                drug, or biological as an 
                                outpatient hospital service 
                                under this part was not being 
                                made as of December 31, 1996; 
                                and
                                  (II) the cost of the drug or 
                                biological or the average cost 
                                of the category of devices is 
                                not insignificant in relation 
                                to the OPD fee schedule amount 
                                (as calculated under paragraph 
                                (3)(D)) payable for the service 
                                (or group of services) 
                                involved.
                  (B) Use of categories in determining 
                eligibility of a device for pass-through 
                payments.--The following provisions apply for 
                purposes of determining whether a medical 
                device qualifies for additional payments under 
                clause (ii) or (iv) of subparagraph (A):
                          (i) Establishment of initial 
                        categories.--
                                  (I) In general.--The 
                                Secretary shall initially 
                                establish under this clause 
                                categories of medical devices 
                                based on type of device by 
                                April 1, 2001. Such categories 
                                shall be established in a 
                                manner such that each medical 
                                device that meets the 
                                requirements of clause (ii) or 
                                (iv) of subparagraph (A) as of 
                                January 1, 2001, is included in 
                                such a category and no such 
                                device is included in more than 
                                one category. For purposes of 
                                the preceding sentence, whether 
                                a medical device meets such 
                                requirements as of such date 
                                shall be determined on the 
                                basis of the program memoranda 
                                issued before such date.
                                  (II) Authorization of 
                                implementation other than 
                                through regulations.--The 
                                categories may be established 
                                under this clause by program 
                                memorandum or otherwise, after 
                                consultation with groups 
                                representing hospitals, 
                                manufacturers of medical 
                                devices, and other affected 
                                parties.
                          (ii) Establishing criteria for 
                        additional categories.--
                                  (I) In general.--The 
                                Secretary shall establish 
                                criteria that will be used for 
                                creation of additional 
                                categories (other than those 
                                established under clause (i)) 
                                through rulemaking (which may 
                                include use of an interim final 
                                rule with comment period).
                                  (II) Standard.--Such 
                                categories shall be established 
                                under this clause in a manner 
                                such that no medical device is 
                                described by more than one 
                                category. Such criteria shall 
                                include a test of whether the 
                                average cost of devices that 
                                would be included in a category 
                                and are in use at the time the 
                                category is established is not 
                                insignificant, as described in 
                                subparagraph (A)(iv)(II).
                                  (III) Deadline.--Criteria 
                                shall first be established 
                                under this clause by July 1, 
                                2001. The Secretary may 
                                establish in compelling 
                                circumstances categories under 
                                this clause before the date 
                                such criteria are established.
                                  (IV) Adding categories.--The 
                                Secretary shall promptly 
                                establish a new category of 
                                medical devices under this 
                                clause for any medical device 
                                that meets the requirements of 
                                subparagraph (A)(iv) and for 
                                which none of the categories in 
                                effect (or that were previously 
                                in effect) is appropriate.
                          (iii) Period for which category is in 
                        effect.--A category of medical devices 
                        established under clause (i) or (ii) 
                        shall be in effect for a period of at 
                        least 2 years, but not more than 3 
                        years, that begins--
                                  (I) in the case of a category 
                                established under clause (i), 
                                on the first date on which 
                                payment was made under this 
                                paragraph for any device 
                                described by such category 
                                (including payments made during 
                                the period before April 1, 
                                2001); and
                                  (II) in the case of any other 
                                category, on the first date on 
                                which payment is made under 
                                this paragraph for any medical 
                                device that is described by 
                                such category.
                          (iv) Requirements treated as met.--A 
                        medical device shall be treated as 
                        meeting the requirements of 
                        subparagraph (A)(iv), regardless of 
                        whether the device meets the 
                        requirement of subclause (I) of such 
                        subparagraph, if--
                                  (I) the device is described 
                                by a category established and 
                                in effect under clause (i); or
                                  (II) the device is described 
                                by a category established and 
                                in effect under clause (ii) and 
                                an application under section 
                                515 of the Federal Food, Drug, 
                                and Cosmetic Act has been 
                                approved with respect to the 
                                device, or the device has been 
                                cleared for market under 
                                section 510(k) of such Act, or 
                                the device is exempt from the 
                                requirements of section 510(k) 
                                of such Act pursuant to 
                                subsection (l) or (m) of 
                                section 510 of such Act or 
                                section 520(g) of such Act.
                        Nothing in this clause shall be 
                        construed as requiring an application 
                        or prior approval (other than that 
                        described in subclause (II)) in order 
                        for a covered device described by a 
                        category to qualify for payment under 
                        this paragraph.
                  (C) Limited period of payment.--
                          (i) Drugs and biologicals.--Subject 
                        to subparagraph (G), the payment under 
                        this paragraph with respect to a drug 
                        or biological shall only apply during a 
                        period of at least 2 years, but not 
                        more than 3 years, that begins--
                                  (I) on the first date this 
                                subsection is implemented in 
                                the case of a drug or 
                                biological described in clause 
                                (i), (ii), or (iii) of 
                                subparagraph (A) and in the 
                                case of a drug or biological 
                                described in subparagraph 
                                (A)(iv) and for which payment 
                                under this part is made as an 
                                outpatient hospital service 
                                before such first date; or
                                  (II) in the case of a drug or 
                                biological described in 
                                subparagraph (A)(iv) not 
                                described in subclause (I), on 
                                the first date on which payment 
                                is made under this part for the 
                                drug or biological as an 
                                outpatient hospital service.
                          (ii) Medical devices.--Payment shall 
                        be made under this paragraph with 
                        respect to a medical device only if 
                        such device--
                                  (I) is described by a 
                                category of medical devices 
                                established and in effect under 
                                subparagraph (B); and
                                  (II) is provided as part of a 
                                service (or group of services) 
                                paid for under this subsection 
                                and provided during the period 
                                for which such category is in 
                                effect under such subparagraph.
                  (D) Amount of additional payment.--Subject to 
                subparagraph (E)(iii), the amount of the 
                payment under this paragraph with respect to a 
                device, drug, or biological provided as part of 
                a covered OPD service is--
                          (i) subject to subparagraph (H), in 
                        the case of a drug or biological, the 
                        amount by which the amount determined 
                        under section 1842(o) (or if the drug 
                        or biological is covered under a 
                        competitive acquisition contract under 
                        section 1847B, an amount determined by 
                        the Secretary equal to the average 
                        price for the drug or biological for 
                        all competitive acquisition areas and 
                        year established under such section as 
                        calculated and adjusted by the 
                        Secretary for purposes of this 
                        paragraph) for the drug or biological 
                        exceeds the portion of the otherwise 
                        applicable medicare OPD fee schedule 
                        that the Secretary determines is 
                        associated with the drug or biological; 
                        or
                          (ii) in the case of a medical device, 
                        the amount by which the hospital's 
                        charges for the device, adjusted to 
                        cost, exceeds the portion of the 
                        otherwise applicable medicare OPD fee 
                        schedule that the Secretary determines 
                        is associated with the device.
                  (E) Limit on aggregate annual adjustment.--
                          (i) In general.--The total of the 
                        additional payments made under this 
                        paragraph for covered OPD services 
                        furnished in a year (as estimated by 
                        the Secretary before the beginning of 
                        the year) may not exceed the applicable 
                        percentage (specified in clause (ii)) 
                        of the total program payments estimated 
                        to be made under this subsection for 
                        all covered OPD services furnished in 
                        that year. If this paragraph is first 
                        applied to less than a full year, the 
                        previous sentence shall apply only to 
                        the portion of such year. This clause 
                        shall not apply for 2018.
                          (ii) Applicable percentage.--For 
                        purposes of clause (i), the term 
                        ``applicable percentage'' means--
                                  (I) for a year (or portion of 
                                a year) before 2004, 2.5 
                                percent; and
                                  (II) for 2004 and thereafter, 
                                a percentage specified by the 
                                Secretary up to (but not to 
                                exceed) 2.0 percent.
                          (iii) Uniform prospective reduction 
                        if aggregate limit projected to be 
                        exceeded.--If the Secretary estimates 
                        before the beginning of a year that the 
                        amount of the additional payments under 
                        this paragraph for the year (or portion 
                        thereof) as determined under clause (i) 
                        without regard to this clause will 
                        exceed the limit established under such 
                        clause, the Secretary shall reduce pro 
                        rata the amount of each of the 
                        additional payments under this 
                        paragraph for that year (or portion 
                        thereof) in order to ensure that the 
                        aggregate additional payments under 
                        this paragraph (as so estimated) do not 
                        exceed such limit.
                  (F) Limitation of application of functional 
                equivalence standard.--
                          (i) In general.--The Secretary may 
                        not publish regulations that apply a 
                        functional equivalence standard to a 
                        drug or biological under this 
                        paragraph.
                          (ii) Application.--Clause (i) shall 
                        apply to the application of a 
                        functional equivalence standard to a 
                        drug or biological on or after the date 
                        of enactment of the Medicare 
                        Prescription Drug, Improvement, and 
                        Modernization Act of 2003 unless--
                                  (I) such application was 
                                being made to such drug or 
                                biological prior to such date 
                                of enactment; and
                                  (II) the Secretary applies 
                                such standard to such drug or 
                                biological only for the purpose 
                                of determining eligibility of 
                                such drug or biological for 
                                additional payments under this 
                                paragraph and not for the 
                                purpose of any other payments 
                                under this title.
                          (iii) Rule of construction.--Nothing 
                        in this subparagraph shall be construed 
                        to effect the Secretary's authority to 
                        deem a particular drug to be identical 
                        to another drug if the 2 products are 
                        pharmaceutically equivalent and 
                        bioequivalent, as determined by the 
                        Commissioner of Food and Drugs.
                  (G) Pass-through extension for certain drugs 
                and biologicals.--In the case of a drug or 
                biological whose period of pass-through status 
                under this paragraph ended on December 31, 
                2017, and for which payment under this 
                subsection was packaged into a payment for a 
                covered OPD service (or group of services) 
                furnished beginning January 1, 2018, such pass-
                through status shall be extended for a 2-year 
                period beginning on October 1, 2018.
                  (H) Temporary payment rule for certain drugs 
                and biologicals.--In the case of a drug or 
                biological whose period of pass-through status 
                under this paragraph ended on December 31, 
                2017, and for which payment under this 
                subsection was packaged into a payment for a 
                covered OPD service (or group of services) 
                furnished beginning January 1, 2018, the 
                payment amount for such drug or biological 
                under this subsection that is furnished during 
                the period beginning on October 1, 2018, and 
                ending on March 31, 2019, shall be the greater 
                of--
                          (i) the payment amount that would 
                        otherwise apply under subparagraph 
                        (D)(i) for such drug or biological 
                        during such period; or
                          (ii) the payment amount that applied 
                        under such subparagraph (D)(i) for such 
                        drug or biological on December 31, 
                        2017.
                  (I) Special payment adjustment rules for last 
                quarter of 2018.--In the case of a drug or 
                biological whose period of pass-through status 
                under this paragraph ended on December 31, 
                2017, and for which payment under this 
                subsection was packaged into a payment amount 
                for a covered OPD service (or group of 
                services) beginning January 1, 2018, the 
                following rules shall apply with respect to 
                payment amounts under this subsection for 
                covered a OPD service (or group of services) 
                furnished during the period beginning on 
                October 1, 2018, and ending on December 31, 
                2018:
                          (i) The Secretary shall remove the 
                        packaged costs of such drug or 
                        biological (as determined by the 
                        Secretary) from the payment amount 
                        under this subsection for the covered 
                        OPD service (or group of services) with 
                        which it is packaged.
                          (ii) The Secretary shall not make any 
                        adjustments to payment amounts under 
                        this subsection for a covered OPD 
                        service (or group of services) for 
                        which no costs were removed under 
                        clause (i).
          (7) Transitional adjustment to limit decline in 
        payment.--
                  (A) Before 2002.--Subject to subparagraph 
                (D), for covered OPD services furnished before 
                January 1, 2002, for which the PPS amount (as 
                defined in subparagraph (E)) is--
                          (i) at least 90 percent, but less 
                        than 100 percent, of the pre-BBA amount 
                        (as defined in subparagraph (F)), the 
                        amount of payment under this subsection 
                        shall be increased by 80 percent of the 
                        amount of such difference;
                          (ii) at least 80 percent, but less 
                        than 90 percent, of the pre-BBA amount, 
                        the amount of payment under this 
                        subsection shall be increased by the 
                        amount by which (I) the product of 0.71 
                        and the pre-BBA amount, exceeds (II) 
                        the product of 0.70 and the PPS amount;
                          (iii) at least 70 percent, but less 
                        than 80 percent, of the pre-BBA amount, 
                        the amount of payment under this 
                        subsection shall be increased by the 
                        amount by which (I) the product of 0.63 
                        and the pre-BBA amount, exceeds (II) 
                        the product of 0.60 and the PPS amount; 
                        or
                          (iv) less than 70 percent of the pre-
                        BBA amount, the amount of payment under 
                        this subsection shall be increased by 
                        21 percent of the pre-BBA amount.
                  (B) 2002.--Subject to subparagraph (D), for 
                covered OPD services furnished during 2002, for 
                which the PPS amount is--
                          (i) at least 90 percent, but less 
                        than 100 percent, of the pre-BBA 
                        amount, the amount of payment under 
                        this subsection shall be increased by 
                        70 percent of the amount of such 
                        difference;
                          (ii) at least 80 percent, but less 
                        than 90 percent, of the pre-BBA amount, 
                        the amount of payment under this 
                        subsection shall be increased by the 
                        amount by which (I) the product of 0.61 
                        and the pre-BBA amount, exceeds (II) 
                        the product of 0.60 and the PPS amount; 
                        or
                          (iii) less than 80 percent of the 
                        pre-BBA amount, the amount of payment 
                        under this subsection shall be 
                        increased by 13 percent of the pre-BBA 
                        amount.
                  (C) 2003.--Subject to subparagraph (D), for 
                covered OPD services furnished during 2003, for 
                which the PPS amount is--
                          (i) at least 90 percent, but less 
                        than 100 percent, of the pre-BBA 
                        amount, the amount of payment under 
                        this subsection shall be increased by 
                        60 percent of the amount of such 
                        difference; or
                          (ii) less than 90 percent of the pre-
                        BBA amount, the amount of payment under 
                        this subsection shall be increased by 6 
                        percent of the pre-BBA amount.
                  (D) Hold harmless provisions.--
                          (i) Temporary treatment for certain 
                        rural hospitals.--(I) In the case of a 
                        hospital located in a rural area and 
                        that has not more than 100 beds or a 
                        sole community hospital (as defined in 
                        section 1886(d)(5)(D)(iii)) located in 
                        a rural area, for covered OPD services 
                        furnished before January 1, 2006, for 
                        which the PPS amount is less than the 
                        pre-BBA amount, the amount of payment 
                        under this subsection shall be 
                        increased by the amount of such 
                        difference.
                          (II) In the case of a hospital 
                        located in a rural area and that has 
                        not more than 100 beds and that is not 
                        a sole community hospital (as defined 
                        in section 1886(d)(5)(D)(iii)), for 
                        covered OPD services furnished on or 
                        after January 1, 2006, and before 
                        January 1, 2013, for which the PPS 
                        amount is less than the pre-BBA amount, 
                        the amount of payment under this 
                        subsection shall be increased by the 
                        applicable percentage of the amount of 
                        such difference. For purposes of the 
                        preceding sentence, the applicable 
                        percentage shall be 95 percent with 
                        respect to covered OPD services 
                        furnished in 2006, 90 percent with 
                        respect to such services furnished in 
                        2007, and 85 percent with respect to 
                        such services furnished in 2008, 2009, 
                        2010, 2011, or 2012.
                          (III) In the case of a sole community 
                        hospital (as defined in section 
                        1886(d)(5)(D)(iii)) that has not more 
                        than 100 beds, for covered OPD services 
                        furnished on or after January 1, 2009, 
                        and before January 1, 2013, for which 
                        the PPS amount is less than the pre-BBA 
                        amount, the amount of payment under 
                        this subsection shall be increased by 
                        85 percent of the amount of such 
                        difference. In the case of covered OPD 
                        services furnished on or after January 
                        1, 2010, and before March 1, 2012, the 
                        preceding sentence shall be applied 
                        without regard to the 100-bed 
                        limitation.
                          (ii) Permanent treatment for cancer 
                        hospitals and children's hospitals.--In 
                        the case of a hospital described in 
                        clause (iii) or (v) of section 
                        1886(d)(1)(B), for covered OPD services 
                        for which the PPS amount is less than 
                        the pre-BBA amount, the amount of 
                        payment under this subsection shall be 
                        increased by the amount of such 
                        difference.
                  (E) PPS amount defined.--In this paragraph, 
                the term ``PPS amount'' means, with respect to 
                covered OPD services, the amount payable under 
                this title for such services (determined 
                without regard to this paragraph), including 
                amounts payable as copayment under paragraph 
                (8), coinsurance under section 
                1866(a)(2)(A)(ii), and the deductible under 
                section 1833(b).
                  (F) Pre-BBA amount defined.--
                          (i) In general.--In this paragraph, 
                        the ``pre-BBA amount'' means, with 
                        respect to covered OPD services 
                        furnished by a hospital in a year, an 
                        amount equal to the product of the 
                        reasonable cost of the hospital for 
                        such services for the portions of the 
                        hospital's cost reporting period (or 
                        periods) occurring in the year and the 
                        base OPD payment-to-cost ratio for the 
                        hospital (as defined in clause (ii)).
                          (ii) Base payment-to-cost-ratio 
                        defined.--For purposes of this 
                        subparagraph, the ``base payment-to-
                        cost ratio'' for a hospital means the 
                        ratio of--
                                  (I) the hospital's 
                                reimbursement under this part 
                                for covered OPD services 
                                furnished during the cost 
                                reporting period ending in 1996 
                                (or in the case of a hospital 
                                that did not submit a cost 
                                report for such period, during 
                                the first subsequent cost 
                                reporting period ending before 
                                2001 for which the hospital 
                                submitted a cost report), 
                                including any reimbursement for 
                                such services through cost-
                                sharing described in 
                                subparagraph (E), to
                                  (II) the reasonable cost of 
                                such services for such period.
                        The Secretary shall determine such 
                        ratios as if the amendments made by 
                        section 4521 of the Balanced Budget Act 
                        of 1997 were in effect in 1996.
                  (G) Interim payments.--The Secretary shall 
                make payments under this paragraph to hospitals 
                on an interim basis, subject to retrospective 
                adjustments based on settled cost reports.
                  (H) No effect on copayments.--Nothing in this 
                paragraph shall be construed to affect the 
                unadjusted copayment amount described in 
                paragraph (3)(B) or the copayment amount under 
                paragraph (8).
                  (I) Application without regard to budget 
                neutrality.--The additional payments made under 
                this paragraph--
                          (i) shall not be considered an 
                        adjustment under paragraph (2)(E); and
                          (ii) shall not be implemented in a 
                        budget neutral manner.
          (8) Copayment amount.--
                  (A) In general.--Except as provided in 
                subparagraphs (B) and (C), the copayment amount 
                under this subsection is the amount by which 
                the amount described in paragraph (4)(B) 
                exceeds the amount of payment determined under 
                paragraph (4)(C).
                  (B) Election to offer reduced copayment 
                amount.--The Secretary shall establish a 
                procedure under which a hospital, before the 
                beginning of a year (beginning with 1999), may 
                elect to reduce the copayment amount otherwise 
                established under subparagraph (A) for some or 
                all covered OPD services to an amount that is 
                not less than 20 percent of the medicare OPD 
                fee schedule amount (computed under paragraph 
                (3)(D)) for the service involved. Under such 
                procedures, such reduced copayment amount may 
                not be further reduced or increased during the 
                year involved and the hospital may disseminate 
                information on the reduction of copayment 
                amount effected under this subparagraph.
                  (C) Limitation on copayment amount.--
                          (i) To inpatient hospital deductible 
                        amount.--In no case shall the copayment 
                        amount for a procedure performed in a 
                        year exceed the amount of the inpatient 
                        hospital deductible established under 
                        section 1813(b) for that year.
                          (ii) To specified percentage.--The 
                        Secretary shall reduce the national 
                        unadjusted copayment amount for a 
                        covered OPD service (or group of such 
                        services) furnished in a year in a 
                        manner so that the effective copayment 
                        rate (determined on a national 
                        unadjusted basis) for that service in 
                        the year does not exceed the following 
                        percentage:
                                  (I) For procedures performed 
                                in 2001, on or after April 1, 
                                2001, 57 percent.
                                  (II) For procedures performed 
                                in 2002 or 2003, 55 percent.
                                  (III) For procedures 
                                performed in 2004, 50 percent.
                                  (IV) For procedures performed 
                                in 2005, 45 percent.
                                  (V) For procedures performed 
                                in 2006 and thereafter, 40 
                                percent.
                  (D) No impact on deductibles.--Nothing in 
                this paragraph shall be construed as affecting 
                a hospital's authority to waive the charging of 
                a deductible under section 1833(b).
                  (E) Computation ignoring outlier and pass-
                through adjustments.--The copayment amount 
                shall be computed under subparagraph (A) as if 
                the adjustments under paragraphs (5) and (6) 
                (and any adjustment made under paragraph (2)(E) 
                in relation to such adjustments) had not 
                occurred.
          (9) Periodic review and adjustments components of 
        prospective payment system.--
                  (A) Periodic review.--The Secretary shall 
                review not less often than annually and revise 
                the groups, the relative payment weights, and 
                the wage and other adjustments described in 
                paragraph (2) to take into account changes in 
                medical practice, changes in technology, the 
                addition of new services, new cost data, and 
                other relevant information and factors. The 
                Secretary shall consult with an expert outside 
                advisory panel composed of an appropriate 
                selection of representatives of providers to 
                review (and advise the Secretary concerning) 
                the clinical integrity of the groups and 
                weights. Such panel may use data collected or 
                developed by entities and organizations (other 
                than the Department of Health and Human 
                Services) in conducting such review.
                  (B) Budget neutrality adjustment.--If the 
                Secretary makes adjustments under subparagraph 
                (A), then the adjustments for a year may not 
                cause the estimated amount of expenditures 
                under this part for the year to increase or 
                decrease from the estimated amount of 
                expenditures under this part that would have 
                been made if the adjustments had not been made. 
                In determining adjustments under the preceding 
                sentence for 2004 and 2005, the Secretary shall 
                not take into account under this subparagraph 
                or paragraph (2)(E) any expenditures that would 
                not have been made but for the application of 
                paragraph (14).
                  (C) Update factor.--If the Secretary 
                determines under methodologies described in 
                paragraph (2)(F) that the volume of services 
                paid for under this subsection increased beyond 
                amounts established through those 
                methodologies, the Secretary may appropriately 
                adjust the update to the conversion factor 
                otherwise applicable in a subsequent year.
          (10) Special rule for ambulance services.--The 
        Secretary shall pay for hospital outpatient services 
        that are ambulance services on the basis described in 
        section 1861(v)(1)(U), or, if applicable, the fee 
        schedule established under section 1834(l).
          (11) Special rules for certain hospitals.--In the 
        case of hospitals described in clause (iii) or (v) of 
        section 1886(d)(1)(B)--
                  (A) the system under this subsection shall 
                not apply to covered OPD services furnished 
                before January 1, 2000; and
                  (B) the Secretary may establish a separate 
                conversion factor for such services in a manner 
                that specifically takes into account the unique 
                costs incurred by such hospitals by virtue of 
                their patient population and service intensity.
          (12) Limitation on review.--There shall be no 
        administrative or judicial review under section 1869, 
        1878, or otherwise of--
                  (A) the development of the classification 
                system under paragraph (2), including the 
                establishment of groups and relative payment 
                weights for covered OPD services, of wage 
                adjustment factors, other adjustments, and 
                methods described in paragraph (2)(F);
                  (B) the calculation of base amounts under 
                paragraph (3);
                  (C) periodic adjustments made under paragraph 
                (6);
                  (D) the establishment of a separate 
                conversion factor under paragraph (8)(B); and
                  (E) the determination of the fixed multiple, 
                or a fixed dollar cutoff amount, the marginal 
                cost of care, or applicable percentage under 
                paragraph (5) or the determination of 
                insignificance of cost, the duration of the 
                additional payments, the determination and 
                deletion of initial and new categories 
                (consistent with subparagraphs (B) and (C) of 
                paragraph (6)), the portion of the medicare OPD 
                fee schedule amount associated with particular 
                devices, drugs, or biologicals, and the 
                application of any pro rata reduction under 
                paragraph (6).
          (13) Authorization of adjustment for rural 
        hospitals.--
                  (A) Study.--The Secretary shall conduct a 
                study to determine if, under the system under 
                this subsection, costs incurred by hospitals 
                located in rural areas by ambulatory payment 
                classification groups (APCs) exceed those costs 
                incurred by hospitals located in urban areas.
                  (B) Authorization of adjustment.--Insofar as 
                the Secretary determines under subparagraph (A) 
                that costs incurred by hospitals located in 
                rural areas exceed those costs incurred by 
                hospitals located in urban areas, the Secretary 
                shall provide for an appropriate adjustment 
                under paragraph (2)(E) to reflect those higher 
                costs by January 1, 2006.
          (14) Drug apc payment rates.--
                  (A) In general.--The amount of payment under 
                this subsection for a specified covered 
                outpatient drug (defined in subparagraph (B)) 
                that is furnished as part of a covered OPD 
                service (or group of services)--
                          (i) in 2004, in the case of--
                                  (I) a sole source drug shall 
                                in no case be less than 88 
                                percent, or exceed 95 percent, 
                                of the reference average 
                                wholesale price for the drug;
                                  (II) an innovator multiple 
                                source drug shall in no case 
                                exceed 68 percent of the 
                                reference average wholesale 
                                price for the drug; or
                                  (III) a noninnovator multiple 
                                source drug shall in no case 
                                exceed 46 percent of the 
                                reference average wholesale 
                                price for the drug;
                          (ii) in 2005, in the case of--
                                  (I) a sole source drug shall 
                                in no case be less than 83 
                                percent, or exceed 95 percent, 
                                of the reference average 
                                wholesale price for the drug;
                                  (II) an innovator multiple 
                                source drug shall in no case 
                                exceed 68 percent of the 
                                reference average wholesale 
                                price for the drug; or
                                  (III) a noninnovator multiple 
                                source drug shall in no case 
                                exceed 46 percent of the 
                                reference average wholesale 
                                price for the drug; or
                          (iii) in a subsequent year, shall be 
                        equal, subject to subparagraph (E)--
                                  (I) to the average 
                                acquisition cost for the drug 
                                for that year (which, at the 
                                option of the Secretary, may 
                                vary by hospital group (as 
                                defined by the Secretary based 
                                on volume of covered OPD 
                                services or other relevant 
                                characteristics)), as 
                                determined by the Secretary 
                                taking into account the 
                                hospital acquisition cost 
                                survey data under subparagraph 
                                (D); or
                                  (II) if hospital acquisition 
                                cost data are not available, 
                                the average price for the drug 
                                in the year established under 
                                section 1842(o), section 1847A, 
                                or section 1847B, as the case 
                                may be, as calculated and 
                                adjusted by the Secretary as 
                                necessary for purposes of this 
                                paragraph.
                  (B) Specified covered outpatient drug 
                defined.--
                          (i) In general.--In this paragraph, 
                        the term ``specified covered outpatient 
                        drug'' means, subject to clause (ii), a 
                        covered outpatient drug (as defined in 
                        section 1927(k)(2)) for which a 
                        separate ambulatory payment 
                        classification group (APC) has been 
                        established and that is--
                                  (I) a radiopharmaceutical; or
                                  (II) a drug or biological for 
                                which payment was made under 
                                paragraph (6) (relating to 
                                pass-through payments) on or 
                                before December 31, 2002.
                          (ii) Exception.--Such term does not 
                        include--
                                  (I) a drug or biological for 
                                which payment is first made on 
                                or after January 1, 2003, under 
                                paragraph (6);
                                  (II) a drug or biological for 
                                which a temporary HCPCS code 
                                has not been assigned; or
                                  (III) during 2004 and 2005, 
                                an orphan drug (as designated 
                                by the Secretary).
                  (C) Payment for designated orphan drugs 
                during 2004 and 2005.--The amount of payment 
                under this subsection for an orphan drug 
                designated by the Secretary under subparagraph 
                (B)(ii)(III) that is furnished as part of a 
                covered OPD service (or group of services) 
                during 2004 and 2005 shall equal such amount as 
                the Secretary may specify.
                  (D) Acquisition cost survey for hospital 
                outpatient drugs.--
                          (i) Annual gao surveys in 2004 and 
                        2005.--
                                  (I) In general.--The 
                                Comptroller General of the 
                                United States shall conduct a 
                                survey in each of 2004 and 2005 
                                to determine the hospital 
                                acquisition cost for each 
                                specified covered outpatient 
                                drug. Not later than April 1, 
                                2005, the Comptroller General 
                                shall furnish data from such 
                                surveys to the Secretary for 
                                use in setting the payment 
                                rates under subparagraph (A) 
                                for 2006.
                                  (II) Recommendations.--Upon 
                                the completion of such surveys, 
                                the Comptroller General shall 
                                recommend to the Secretary the 
                                frequency and methodology of 
                                subsequent surveys to be 
                                conducted by the Secretary 
                                under clause (ii).
                          (ii) Subsequent secretarial 
                        surveys.--The Secretary, taking into 
                        account such recommendations, shall 
                        conduct periodic subsequent surveys to 
                        determine the hospital acquisition cost 
                        for each specified covered outpatient 
                        drug for use in setting the payment 
                        rates under subparagraph (A).
                          (iii) Survey requirements.--The 
                        surveys conducted under clauses (i) and 
                        (ii) shall have a large sample of 
                        hospitals that is sufficient to 
                        generate a statistically significant 
                        estimate of the average hospital 
                        acquisition cost for each specified 
                        covered outpatient drug. With respect 
                        to the surveys conducted under clause 
                        (i), the Comptroller General shall 
                        report to Congress on the justification 
                        for the size of the sample used in 
                        order to assure the validity of such 
                        estimates.
                          (iv) Differentiation in cost.--In 
                        conducting surveys under clause (i), 
                        the Comptroller General shall determine 
                        and report to Congress if there is (and 
                        the extent of any) variation in 
                        hospital acquisition costs for drugs 
                        among hospitals based on the volume of 
                        covered OPD services performed by such 
                        hospitals or other relevant 
                        characteristics of such hospitals (as 
                        defined by the Comptroller General).
                          (v) Comment on proposed rates.--Not 
                        later than 30 days after the date the 
                        Secretary promulgated proposed rules 
                        setting forth the payment rates under 
                        subparagraph (A) for 2006, the 
                        Comptroller General shall evaluate such 
                        proposed rates and submit to Congress a 
                        report regarding the appropriateness of 
                        such rates based on the surveys the 
                        Comptroller General has conducted under 
                        clause (i).
                  (E) Adjustment in payment rates for overhead 
                costs.--
                          (i) Medpac report on drug apc 
                        design.--The Medicare Payment Advisory 
                        Commission shall submit to the 
                        Secretary, not later than July 1, 2005, 
                        a report on adjustment of payment for 
                        ambulatory payment classifications for 
                        specified covered outpatient drugs to 
                        take into account overhead and related 
                        expenses, such as pharmacy services and 
                        handling costs. Such report shall 
                        include--
                                  (I) a description and 
                                analysis of the data available 
                                with regard to such expenses;
                                  (II) a recommendation as to 
                                whether such a payment 
                                adjustment should be made; and
                                  (III) if such adjustment 
                                should be made, a 
                                recommendation regarding the 
                                methodology for making such an 
                                adjustment.
                          (ii) Adjustment authorized.--The 
                        Secretary may adjust the weights for 
                        ambulatory payment classifications for 
                        specified covered outpatient drugs to 
                        take into account the recommendations 
                        contained in the report submitted under 
                        clause (i).
                  (F) Classes of drugs.--For purposes of this 
                paragraph:
                          (i) Sole source drugs.--The term 
                        ``sole source drug'' means--
                                  (I) a biological product (as 
                                defined under section 
                                1861(t)(1)); or
                                  (II) a single source drug (as 
                                defined in section 
                                1927(k)(7)(A)(iv)).
                          (ii) Innovator multiple source 
                        drugs.--The term ``innovator multiple 
                        source drug'' has the meaning given 
                        such term in section 1927(k)(7)(A)(ii).
                          (iii) Noninnovator multiple source 
                        drugs.--The term ``noninnovator 
                        multiple source drug'' has the meaning 
                        given such term in section 
                        1927(k)(7)(A)(iii).
                  (G) Reference average wholesale price.--The 
                term ``reference average wholesale price'' 
                means, with respect to a specified covered 
                outpatient drug, the average wholesale price 
                for the drug as determined under section 
                1842(o) as of May 1, 2003.
                  (H) Inapplicability of expenditures in 
                determining conversion, weighting, and other 
                adjustment factors.--Additional expenditures 
                resulting from this paragraph shall not be 
                taken into account in establishing the 
                conversion, weighting, and other adjustment 
                factors for 2004 and 2005 under paragraph (9), 
                but shall be taken into account for subsequent 
                years.
          (15) Payment for new drugs and biologicals until 
        hcpcs code assigned.--With respect to payment under 
        this part for an outpatient drug or biological that is 
        covered under this part and is furnished as part of 
        covered OPD services for which a HCPCS code has not 
        been assigned, the amount provided for payment for such 
        drug or biological under this part shall be equal to 95 
        percent of the average wholesale price for the drug or 
        biological.
          (16) Miscellaneous provisions.--
                  (A) Application of reclassification of 
                certain hospitals.--If a hospital is being 
                treated as being located in a rural area under 
                section 1886(d)(8)(E), that hospital shall be 
                treated under this subsection as being located 
                in that rural area.
                  (B) Threshold for establishment of separate 
                apcs for drugs.--The Secretary shall reduce the 
                threshold for the establishment of separate 
                ambulatory payment classification groups (APCs) 
                with respect to drugs or biologicals to $50 per 
                administration for drugs and biologicals 
                furnished in 2005 and 2006.
                  (C) Payment for devices of brachytherapy and 
                therapeutic radiopharmaceuticals at charges 
                adjusted to cost.--Notwithstanding the 
                preceding provisions of this subsection, for a 
                device of brachytherapy consisting of a seed or 
                seeds (or radioactive source) furnished on or 
                after January 1, 2004, and before January 1, 
                2010, and for therapeutic radiopharmaceuticals 
                furnished on or after January 1, 2008, and 
                before January 1, 2010, the payment basis for 
                the device or therapeutic radiopharmaceutical 
                under this subsection shall be equal to the 
                hospital's charges for each device or 
                therapeutic radiopharmaceutical furnished, 
                adjusted to cost. Charges for such devices or 
                therapeutic radiopharmaceuticals shall not be 
                included in determining any outlier payment 
                under this subsection.
                  (D) Special payment rule.--
                          (i) In general.--In the case of 
                        covered OPD services furnished on or 
                        after April 1, 2013, in a hospital 
                        described in clause (ii), if--
                                  (I) the payment rate that 
                                would otherwise apply under 
                                this subsection for 
                                stereotactic radiosurgery, 
                                complete course of treatment of 
                                cranial lesion(s) consisting of 
                                1 session that is multi-source 
                                Cobalt 60 based (identified as 
                                of January 1, 2013, by HCPCS 
                                code 77371 (and any succeeding 
                                code) and reimbursed as of such 
                                date under APC 0127 (and any 
                                succeeding classification 
                                group)); exceeds
                                  (II) the payment rate that 
                                would otherwise apply under 
                                this subsection for linear 
                                accelerator based stereotactic 
                                radiosurgery, complete course 
                                of therapy in one session 
                                (identified as of January 1, 
                                2013, by HCPCS code G0173 (and 
                                any succeeding code) and 
                                reimbursed as of such date 
                                under APC 0067 (and any 
                                succeeding classification 
                                group)),
                        the payment rate for the service 
                        described in subclause (I) shall be 
                        reduced to an amount equal to the 
                        payment rate for the service described 
                        in subclause (II).
                          (ii) Hospital described.--A hospital 
                        described in this clause is a hospital 
                        that is not--
                                  (I) located in a rural area 
                                (as defined in section 
                                1886(d)(2)(D));
                                  (II) classified as a rural 
                                referral center under section 
                                1886(d)(5)(C); or
                                  (III) a sole community 
                                hospital (as defined in section 
                                1886(d)(5)(D)(iii)).
                          (iii) Not budget neutral.--In making 
                        any budget neutrality adjustments under 
                        this subsection for 2013 (with respect 
                        to covered OPD services furnished on or 
                        after April 1, 2013, and before January 
                        1, 2014) or a subsequent year, the 
                        Secretary shall not take into account 
                        the reduced expenditures that result 
                        from the application of this 
                        subparagraph.
                  (E) Application of appropriate use criteria 
                for certain imaging services.--For provisions 
                relating to the application of appropriate use 
                criteria for certain imaging services, see 
                section 1834(q).
                  (F) Payment incentive for the transition from 
                traditional x-ray imaging to digital 
                radiography.--Notwithstanding the previous 
                provisions of this subsection:
                          (i) Limitation on payment for film x-
                        ray imaging services.--In the case of 
                        an imaging service that is an X-ray 
                        taken using film and that is furnished 
                        during 2017 or a subsequent year, the 
                        payment amount for such service 
                        (including the X-ray component of a 
                        packaged service) that would otherwise 
                        be determined under this section 
                        (without application of this paragraph 
                        and before application of any other 
                        adjustment under this subsection) for 
                        such year shall be reduced by 20 
                        percent.
                          (ii) Phased-in limitation on payment 
                        for computed radiography imaging 
                        services.--In the case of an imaging 
                        service that is an X-ray taken using 
                        computed radiography technology (as 
                        defined in section 1848(b)(9)(C))--
                                  (I) in the case of such a 
                                service furnished during 2018, 
                                2019, 2020, 2021, or 2022, the 
                                payment amount for such service 
                                (including the X-ray component 
                                of a packaged service) that 
                                would otherwise be determined 
                                under this section (without 
                                application of this paragraph 
                                and before application of any 
                                other adjustment under this 
                                subsection) for such year shall 
                                be reduced by 7 percent; and
                                  (II) in the case of such a 
                                service furnished during 2023 
                                or a subsequent year, the 
                                payment amount for such service 
                                (including the X-ray component 
                                of a packaged service) that 
                                would otherwise be determined 
                                under this section (without 
                                application of this paragraph 
                                and before application of any 
                                other adjustment under this 
                                subsection) for such year shall 
                                be reduced by 10 percent.
                          (iii) Application without regard to 
                        budget neutrality.--The reductions made 
                        under this subparagraph--
                                  (I) shall not be considered 
                                an adjustment under paragraph 
                                (2)(E); and
                                  (II) shall not be implemented 
                                in a budget neutral manner.
                          (iv) Implementation.--In order to 
                        implement this subparagraph, the 
                        Secretary shall adopt appropriate 
                        mechanisms which may include use of 
                        modifiers.
          (17) Quality reporting.--
                  (A) Reduction in update for failure to 
                report.--
                          (i) In general.--For purposes of 
                        paragraph (3)(C)(iv) for 2009 and each 
                        subsequent year, in the case of a 
                        subsection (d) hospital (as defined in 
                        section 1886(d)(1)(B)) that does not 
                        submit, to the Secretary in accordance 
                        with this paragraph, data required to 
                        be submitted on measures selected under 
                        this paragraph with respect to such a 
                        year, the OPD fee schedule increase 
                        factor under paragraph (3)(C)(iv) for 
                        such year shall be reduced by 2.0 
                        percentage points.
                          (ii) Non-cumulative application.--A 
                        reduction under this subparagraph shall 
                        apply only with respect to the year 
                        involved and the Secretary shall not 
                        take into account such reduction in 
                        computing the OPD fee schedule increase 
                        factor for a subsequent year.
                  (B) Form and manner of submission.--Each 
                subsection (d) hospital shall submit data on 
                measures selected under this paragraph to the 
                Secretary in a form and manner, and at a time, 
                specified by the Secretary for purposes of this 
                paragraph.
                  (C) Development of outpatient measures.--
                          (i) In general.--The Secretary shall 
                        develop measures that the Secretary 
                        determines to be appropriate for the 
                        measurement of the quality of care 
                        (including medication errors) furnished 
                        by hospitals in outpatient settings and 
                        that reflect consensus among affected 
                        parties and, to the extent feasible and 
                        practicable, shall include measures set 
                        forth by one or more national consensus 
                        building entities.
                          (ii) Construction.--Nothing in this 
                        paragraph shall be construed as 
                        preventing the Secretary from selecting 
                        measures that are the same as (or a 
                        subset of) the measures for which data 
                        are required to be submitted under 
                        section 1886(b)(3)(B)(viii).
                  (D) Replacement of measures.--For purposes of 
                this paragraph, the Secretary may replace any 
                measures or indicators in appropriate cases, 
                such as where all hospitals are effectively in 
                compliance or the measures or indicators have 
                been subsequently shown not to represent the 
                best clinical practice.
                  (E) Availability of data.--The Secretary 
                shall establish procedures for making data 
                submitted under this paragraph available to the 
                public. Such procedures shall ensure that a 
                hospital has the opportunity to review the data 
                that are to be made public with respect to the 
                hospital prior to such data being made public. 
                The Secretary shall report quality measures of 
                process, structure, outcome, patients' 
                perspectives on care, efficiency, and costs of 
                care that relate to services furnished in 
                outpatient settings in hospitals on the 
                Internet website of the Centers for Medicare & 
                Medicaid Services.
          (18) Authorization of adjustment for cancer 
        hospitals.--
                  (A) Study.--The Secretary shall conduct a 
                study to determine if, under the system under 
                this subsection, costs incurred by hospitals 
                described in section 1886(d)(1)(B)(v) with 
                respect to ambulatory payment classification 
                groups exceed those costs incurred by other 
                hospitals furnishing services under this 
                subsection (as determined appropriate by the 
                Secretary). In conducting the study under this 
                subparagraph, the Secretary shall take into 
                consideration the cost of drugs and biologicals 
                incurred by such hospitals.
                  (B) Authorization of adjustment.--Insofar as 
                the Secretary determines under subparagraph (A) 
                that costs incurred by hospitals described in 
                section 1886(d)(1)(B)(v) exceed those costs 
                incurred by other hospitals furnishing services 
                under this subsection, the Secretary shall, 
                subject to subparagraph (C), provide for an 
                appropriate adjustment under paragraph (2)(E) 
                to reflect those higher costs effective for 
                services furnished on or after January 1, 2011.
                  (C) Target pcr adjustment.--In applying 
                section 419.43(i) of title 42 of the Code of 
                Federal Regulations to implement the 
                appropriate adjustment under this paragraph for 
                services furnished on or after January 1, 2018, 
                the Secretary shall use a target PCR that is 
                1.0 percentage points less than the target PCR 
                that would otherwise apply. In addition to the 
                percentage point reduction under the previous 
                sentence, the Secretary may consider making an 
                additional percentage point reduction to such 
                target PCR that takes into account payment 
                rates for applicable items and services 
                described in paragraph (21)(C) other than for 
                services furnished by hospitals described in 
                section 1886(d)(1)(B)(v). In making any budget 
                neutrality adjustments under this subsection 
                for 2018 or a subsequent year, the Secretary 
                shall not take into account the reduced 
                expenditures that result from the application 
                of this subparagraph.
          (19) Floor on area wage adjustment factor for 
        hospital outpatient department services in frontier 
        states.--
                  (A) In general.--Subject to subparagraph (B), 
                with respect to covered OPD services furnished 
                on or after January 1, 2011, the area wage 
                adjustment factor applicable under the payment 
                system established under this subsection to any 
                hospital outpatient department which is located 
                in a frontier State (as defined in section 
                1886(d)(3)(E)(iii)(II)) may not be less than 
                1.00. The preceding sentence shall not be 
                applied in a budget neutral manner.
                  (B) Limitation.--This paragraph shall not 
                apply to any hospital outpatient department 
                located in a State that receives a non-labor 
                related share adjustment under section 
                1886(d)(5)(H).
          (20) Not budget neutral application of reduced 
        expenditures resulting from quality incentives for 
        computed tomography.--The Secretary shall not take into 
        account the reduced expenditures that result from the 
        application of section 1834(p) in making any budget 
        neutrality adjustments this subsection.
          (21) Services furnished by an off-campus outpatient 
        department of a provider.--
                  (A) Applicable items and services.--For 
                purposes of paragraph (1)(B)(v) and this 
                paragraph, the term ``applicable items and 
                services'' means items and services other than 
                items and services furnished by a dedicated 
                emergency department (as defined in section 
                489.24(b) of title 42 of the Code of Federal 
                Regulations).
                  (B) Off-campus outpatient department of a 
                provider.--
                          (i) In general.--For purposes of 
                        paragraph (1)(B)(v) and this paragraph, 
                        subject to the subsequent provisions of 
                        this subparagraph, the term ``off-
                        campus outpatient department of a 
                        provider'' means a department of a 
                        provider (as defined in section 
                        413.65(a)(2) of title 42 of the Code of 
                        Federal Regulations, as in effect as of 
                        the date of the enactment of this 
                        paragraph) that is not located--
                                  (I) on the campus (as defined 
                                in such section 413.65(a)(2)) 
                                of such provider; or
                                  (II) within the distance 
                                (described in such definition 
                                of campus) from a remote 
                                location of a hospital facility 
                                (as defined in such section 
                                413.65(a)(2)).
                          (ii) Exception.--For purposes of 
                        paragraph (1)(B)(v) and this paragraph, 
                        the term ``off-campus outpatient 
                        department of a provider'' shall not 
                        include a department of a provider (as 
                        so defined) that was billing under this 
                        subsection with respect to covered OPD 
                        services furnished prior to the date of 
                        the enactment of this paragraph.
                          (iii) Deemed treatment for 2017.--For 
                        purposes of applying clause (ii) with 
                        respect to applicable items and 
                        services furnished during 2017, a 
                        department of a provider (as so 
                        defined) not described in such clause 
                        is deemed to be billing under this 
                        subsection with respect to covered OPD 
                        services furnished prior to November 2, 
                        2015, if the Secretary received from 
                        the provider prior to December 2, 2015, 
                        an attestation (pursuant to section 
                        413.65(b)(3) of title 42 of the Code of 
                        Federal Regulations) that such 
                        department was a department of a 
                        provider (as so defined).
                          (iv) Alternative exception beginning 
                        with 2018.--For purposes of paragraph 
                        (1)(B)(v) and this paragraph with 
                        respect to applicable items and 
                        services furnished during 2018 or a 
                        subsequent year, the term ``off-campus 
                        outpatient department of a provider'' 
                        also shall not include a department of 
                        a provider (as so defined) that is not 
                        described in clause (ii) if--
                                  (I) the Secretary receives 
                                from the provider an 
                                attestation (pursuant to such 
                                section 413.65(b)(3)) not later 
                                than December 31, 2016 (or, if 
                                later, 60 days after the date 
                                of the enactment of this 
                                clause), that such department 
                                met the requirements of a 
                                department of a provider 
                                specified in section 413.65 of 
                                title 42 of the Code of Federal 
                                Regulations;
                                  (II) the provider includes 
                                such department as part of the 
                                provider on its enrollment form 
                                in accordance with the 
                                enrollment process under 
                                section 1866(j); and
                                  (III) the department met the 
                                mid-build requirement of clause 
                                (v) and the Secretary receives, 
                                not later than 60 days after 
                                the date of the enactment of 
                                this clause, from the chief 
                                executive officer or chief 
                                operating officer of the 
                                provider a written 
                                certification that the 
                                department met such 
                                requirement.
                          (v) Mid-build requirement 
                        described.--The mid-build requirement 
                        of this clause is, with respect to a 
                        department of a provider, that before 
                        November 2, 2015, the provider had a 
                        binding written agreement with an 
                        outside unrelated party for the actual 
                        construction of such department.
                          (vi) Exclusion for certain cancer 
                        hospitals.--For purposes of paragraph 
                        (1)(B)(v) and this paragraph with 
                        respect to applicable items and 
                        services furnished during 2017 or a 
                        subsequent year, the term ``off-campus 
                        outpatient department of a provider'' 
                        also shall not include a department of 
                        a provider (as so defined) that is not 
                        described in clause (ii) if the 
                        provider is a hospital described in 
                        section 1886(d)(1)(B)(v) and--
                                  (I) in the case of a 
                                department that met the 
                                requirements of section 413.65 
                                of title 42 of the Code of 
                                Federal Regulations after 
                                November 1, 2015, and before 
                                the date of the enactment of 
                                this clause, the Secretary 
                                receives from the provider an 
                                attestation that such 
                                department met such 
                                requirements not later than 60 
                                days after such date of 
                                enactment; or
                                  (II) in the case of a 
                                department that meets such 
                                requirements after such date of 
                                enactment, the Secretary 
                                receives from the provider an 
                                attestation that such 
                                department meets such 
                                requirements not later than 60 
                                days after the date such 
                                requirements are first met with 
                                respect to such department.
                          (vii) Audit.--Not later than December 
                        31, 2018, the Secretary shall audit the 
                        compliance with requirements of clause 
                        (iv) with respect to each department of 
                        a provider to which such clause 
                        applies. Not later than 2 years after 
                        the date the Secretary receives an 
                        attestation under clause (vi) relating 
                        to compliance of a department of a 
                        provider with requirements referred to 
                        in such clause, the Secretary shall 
                        audit the compliance with such 
                        requirements with respect to the 
                        department. If the Secretary finds as a 
                        result of an audit under this clause 
                        that the applicable requirements were 
                        not met with respect to such 
                        department, the department shall not be 
                        excluded from the term ``off-campus 
                        outpatient department of a provider'' 
                        under such clause.
                          (viii) Implementation.--For purposes 
                        of implementing clauses (iii) through 
                        (vii):
                                  (I) Notwithstanding any other 
                                provision of law, the Secretary 
                                may implement such clauses by 
                                program instruction or 
                                otherwise.
                                  (II) Subchapter I of chapter 
                                35 of title 44, United States 
                                Code, shall not apply.
                                  (III) For purposes of 
                                carrying out this subparagraph 
                                with respect to clauses (iii) 
                                and (iv) (and clause (vii) 
                                insofar as it relates to clause 
                                (iv)), $10,000,000 shall be 
                                available from the Federal 
                                Supplementary Medical Insurance 
                                Trust Fund under section 1841, 
                                to remain available until 
                                December 31, 2018. For purposes 
                                of carrying out this 
                                subparagraph with respect to 
                                clause (vi) (and clause (vii) 
                                insofar as it relates to such 
                                clause), $2,000,000 shall be 
                                available from the Federal 
                                Supplementary Medical Insurance 
                                Trust Fund under section 1841, 
                                to remain available until 
                                expended.
                  (C) Availability of payment under other 
                payment systems.--Payments for applicable items 
                and services furnished by an off-campus 
                outpatient department of a provider that are 
                described in paragraph (1)(B)(v) shall be made 
                under the applicable payment system under this 
                part (other than under this subsection) if the 
                requirements for such payment are otherwise 
                met.
                  (D) Information needed for implementation.--
                Each hospital shall provide to the Secretary 
                such information as the Secretary determines 
                appropriate to implement this paragraph and 
                paragraph (1)(B)(v) (which may include 
                reporting of information on a hospital claim 
                using a code or modifier and reporting 
                information about off-campus outpatient 
                departments of a provider on the enrollment 
                form described in section 1866(j)).
                  (E) Limitations.--There shall be no 
                administrative or judicial review under section 
                1869, section 1878, or otherwise of the 
                following:
                          (i) The determination of the 
                        applicable items and services under 
                        subparagraph (A) and applicable payment 
                        systems under subparagraph (C).
                          (ii) The determination of whether a 
                        department of a provider meets the term 
                        described in subparagraph (B).
                          (iii) Any information that hospitals 
                        are required to report pursuant to 
                        subparagraph (D).
                          (iv) The determination of an audit 
                        under subparagraph (B)(vii).
          (22) Review and revisions of payments for non-opioid 
        alternative treatments.--
                  (A) In general.--With respect to payments 
                made under this subsection for covered OPD 
                services (or groups of services), including 
                covered OPD services assigned to a 
                comprehensive ambulatory payment 
                classification, the Secretary--
                          (i) shall, as soon as practicable, 
                        conduct a review (part of which may 
                        include a request for information) of 
                        payments for opioids and evidence-based 
                        non-opioid alternatives for pain 
                        management (including drugs and 
                        devices, nerve blocks, surgical 
                        injections, and neuromodulation) with a 
                        goal of ensuring that there are not 
                        financial incentives to use opioids 
                        instead of non-opioid alternatives;
                          (ii) may, as the Secretary determines 
                        appropriate, conduct subsequent reviews 
                        of such payments; and
                          (iii) shall consider the extent to 
                        which revisions under this subsection 
                        to such payments (such as the creation 
                        of additional groups of covered OPD 
                        services to classify separately those 
                        procedures that utilize opioids and 
                        non-opioid alternatives for pain 
                        management) would reduce payment 
                        incentives to use opioids instead of 
                        non-opioid alternatives for pain 
                        management.
                  (B) Priority.--In conducting the review under 
                clause (i) of subparagraph (A) and considering 
                revisions under clause (iii) of such 
                subparagraph, the Secretary shall focus on 
                covered OPD services (or groups of services) 
                assigned to a comprehensive ambulatory payment 
                classification, ambulatory payment 
                classifications that primarily include surgical 
                services, and other services determined by the 
                Secretary which generally involve treatment for 
                pain management.
                  (C) Revisions.--If the Secretary identifies 
                revisions to payments pursuant to subparagraph 
                (A)(iii), the Secretary shall, as determined 
                appropriate, begin making such revisions for 
                services furnished on or after January 1, 2020. 
                Revisions under the previous sentence shall be 
                treated as adjustments for purposes of 
                application of paragraph (9)(B).
                  (D) Rules of construction.--Nothing in this 
                paragraph shall be construed to preclude the 
                Secretary--
                          (i) from conducting a demonstration 
                        before making the revisions described 
                        in subparagraph (C); or
                          (ii) prior to implementation of this 
                        paragraph, from changing payments under 
                        this subsection for covered OPD 
                        services (or groups of services) which 
                        include opioids or non-opioid 
                        alternatives for pain management.
  (u) Incentive Payments for Physician Scarcity Areas.--
          (1) In general.--In the case of physicians' services 
        furnished on or after January 1, 2005, and before July 
        1, 2008--
                  (A) by a primary care physician in a primary 
                care scarcity county (identified under 
                paragraph (4)); or
                  (B) by a physician who is not a primary care 
                physician in a specialist care scarcity county 
                (as so identified),
        in addition to the amount of payment that would 
        otherwise be made for such services under this part, 
        there also shall be paid an amount equal to 5 percent 
        of the payment amount for the service under this part.
          (2) Determination of ratios of physicians to medicare 
        beneficiaries in area.--Based upon available data, the 
        Secretary shall establish for each county or equivalent 
        area in the United States, the following:
                  (A) Number of physicians practicing in the 
                area.--The number of physicians who furnish 
                physicians' services in the active practice of 
                medicine or osteopathy in that county or area, 
                other than physicians whose practice is 
                exclusively for the Federal Government, 
                physicians who are retired, or physicians who 
                only provide administrative services. Of such 
                number, the number of such physicians who are--
                          (i) primary care physicians; or
                          (ii) physicians who are not primary 
                        care physicians.
                  (B) Number of medicare beneficiaries residing 
                in the area.--The number of individuals who are 
                residing in the county and are entitled to 
                benefits under part A or enrolled under this 
                part, or both (in this subsection referred to 
                as ``individuals'').
                  (C) Determination of ratios.--
                          (i) Primary care ratio.--The ratio 
                        (in this paragraph referred to as the 
                        ``primary care ratio'') of the number 
                        of primary care physicians (determined 
                        under subparagraph (A)(i)), to the 
                        number of individuals determined under 
                        subparagraph (B).
                          (ii) Specialist care ratio.--The 
                        ratio (in this paragraph referred to as 
                        the ``specialist care ratio'') of the 
                        number of other physicians (determined 
                        under subparagraph (A)(ii)), to the 
                        number of individuals determined under 
                        subparagraph (B).
          (3) Ranking of counties.--The Secretary shall rank 
        each such county or area based separately on its 
        primary care ratio and its specialist care ratio.
          (4) Identification of counties.--
                  (A) In general.--The Secretary shall 
                identify--
                          (i) those counties and areas (in this 
                        paragraph referred to as ``primary care 
                        scarcity counties'') with the lowest 
                        primary care ratios that represent, if 
                        each such county or area were weighted 
                        by the number of individuals determined 
                        under paragraph (2)(B), an aggregate 
                        total of 20 percent of the total of the 
                        individuals determined under such 
                        paragraph; and
                          (ii) those counties and areas (in 
                        this subsection referred to as 
                        ``specialist care scarcity counties'') 
                        with the lowest specialist care ratios 
                        that represent, if each such county or 
                        area were weighted by the number of 
                        individuals determined under paragraph 
                        (2)(B), an aggregate total of 20 
                        percent of the total of the individuals 
                        determined under such paragraph.
                  (B) Periodic revisions.--The Secretary shall 
                periodically revise the counties or areas 
                identified in subparagraph (A) (but not less 
                often than once every three years) unless the 
                Secretary determines that there is no new data 
                available on the number of physicians 
                practicing in the county or area or the number 
                of individuals residing in the county or area, 
                as identified in paragraph (2).
                  (C) Identification of counties where service 
                is furnished.--For purposes of paying the 
                additional amount specified in paragraph (1), 
                if the Secretary uses the 5-digit postal ZIP 
                Code where the service is furnished, the 
                dominant county of the postal ZIP Code (as 
                determined by the United States Postal Service, 
                or otherwise) shall be used to determine 
                whether the postal ZIP Code is in a scarcity 
                county identified in subparagraph (A) or 
                revised in subparagraph (B).
                  (D) Special rule.--With respect to 
                physicians' services furnished on or after 
                January 1, 2008, and before July 1, 2008, for 
                purposes of this subsection, the Secretary 
                shall use the primary care scarcity counties 
                and the specialty care scarcity counties (as 
                identified under the preceding provisions of 
                this paragraph) that the Secretary was using 
                under this subsection with respect to 
                physicians' services furnished on December 31, 
                2007.
                  (E) Judicial review.--There shall be no 
                administrative or judicial review under section 
                1869, 1878, or otherwise, respecting--
                          116.(i) the identification of a 
                        county or area;
                          (ii) the assignment of a specialty of 
                        any physician under this paragraph;
                          (iii) the assignment of a physician 
                        to a county under paragraph (2); or
                          (iv) the assignment of a postal ZIP 
                        Code to a county or other area under 
                        this subsection.
          (5) Rural census tracts.--To the extent feasible, the 
        Secretary shall treat a rural census tract of a 
        metropolitan statistical area (as determined under the 
        most recent modification of the Goldsmith Modification, 
        originally published in the Federal Register on 
        February 27, 1992 (57 Fed. Reg. 6725)), as an 
        equivalent area for purposes of qualifying as a primary 
        care scarcity county or specialist care scarcity county 
        under this subsection.
          (6) Physician Defined.--For purposes of this 
        paragraph, the term ``physician'' means a physician 
        described in section 1861(r)(1) and the term ``primary 
        care physician'' means a physician who is identified in 
        the available data as a general practitioner, family 
        practice practitioner, general internist, or 
        obstetrician or gynecologist.
          (7) Publication of list of counties; posting on 
        website.--With respect to a year for which a county or 
        area is identified or revised under paragraph (4), the 
        Secretary shall identify such counties or areas as part 
        of the proposed and final rule to implement the 
        physician fee schedule under section 1848 for the 
        applicable year. The Secretary shall post the list of 
        counties identified or revised under paragraph (4) on 
        the Internet website of the Centers for Medicare & 
        Medicaid Services.
  (v) Increase of FQHC Payment Limits.--In the case of services 
furnished by Federally qualified health centers (as defined in 
section 1861(aa)(4)), the Secretary shall establish payment 
limits with respect to such services under this part for 
services furnished--
          (1) in 2010, at the limits otherwise established 
        under this part for such year increased by $5; and
          (2) in a subsequent year, at the limits established 
        under this subsection for the previous year increased 
        by the percentage increase in the MEI (as defined in 
        section 1842(i)(3)) for such subsequent year.
  (w) Methods of Payment.--The Secretary may develop 
alternative methods of payment for items and services provided 
under clinical trials and comparative effectiveness studies 
sponsored or supported by an agency of the Department of Health 
and Human Services, as determined by the Secretary, to those 
that would otherwise apply under this section, to the extent 
such alternative methods are necessary to preserve the 
scientific validity of such trials or studies, such as in the 
case where masking the identity of interventions from patients 
and investigators is necessary to comply with the particular 
trial or study design.
  (x) Incentive Payments for Primary Care Services.--
          (1) In general.--In the case of primary care services 
        furnished on or after January 1, 2011, and before 
        January 1, 2016, by a primary care practitioner, in 
        addition to the amount of payment that would otherwise 
        be made for such services under this part, there also 
        shall be paid (on a monthly or quarterly basis) an 
        amount equal to 10 percent of the payment amount for 
        the service under this part.
          (2) Definitions.--In this subsection:
                  (A) Primary care practitioner.--The term 
                ``primary care practitioner'' means an 
                individual--
                          (i) who--
                                  (I) is a physician (as 
                                described in section 
                                1861(r)(1)) who has a primary 
                                specialty designation of family 
                                medicine, internal medicine, 
                                geriatric medicine, or 
                                pediatric medicine; or
                                  (II) is a nurse practitioner, 
                                clinical nurse specialist, or 
                                physician assistant (as those 
                                terms are defined in section 
                                1861(aa)(5)); and
                          (ii) for whom primary care services 
                        accounted for at least 60 percent of 
                        the allowed charges under this part for 
                        such physician or practitioner in a 
                        prior period as determined appropriate 
                        by the Secretary.
                  (B) Primary care services.--The term 
                ``primary care services'' means services 
                identified, as of January 1, 2009, by the 
                following HCPCS codes (and as subsequently 
                modified by the Secretary):
                          (i) 99201 through 99215.
                          (ii) 99304 through 99340.
                          (iii) 99341 through 99350.
          (3) Coordination with other payments.--The amount of 
        the additional payment for a service under this 
        subsection and subsection (m) shall be determined 
        without regard to any additional payment for the 
        service under subsection (m) and this subsection, 
        respectively. The amount of the additional payment for 
        a service under this subsection and subsection (z) 
        shall be determined without regard to any additional 
        payment for the service under subsection (z) and this 
        subsection, respectively.
          (4) Limitation on review.--There shall be no 
        administrative or judicial review under section 1869, 
        1878, or otherwise, respecting the identification of 
        primary care practitioners under this subsection.
  (y) Incentive Payments for Major Surgical Procedures 
Furnished in Health Professional Shortage Areas.--
          (1) In general.--In the case of major surgical 
        procedures furnished on or after January 1, 2011, and 
        before January 1, 2016, by a general surgeon in an area 
        that is designated (under section 332(a)(1)(A) of the 
        Public Health Service Act) as a health professional 
        shortage area as identified by the Secretary prior to 
        the beginning of the year involved, in addition to the 
        amount of payment that would otherwise be made for such 
        services under this part, there also shall be paid (on 
        a monthly or quarterly basis) an amount equal to 10 
        percent of the payment amount for the service under 
        this part.
          (2) Definitions.--In this subsection:
                  (A) General surgeon.--In this subsection, the 
                term ``general surgeon'' means a physician (as 
                described in section 1861(r)(1)) who has 
                designated CMS specialty code 02-General 
                Surgery as their primary specialty code in the 
                physician's enrollment under section 1866(j).
                  (B) Major surgical procedures.--The term 
                ``major surgical procedures'' means physicians' 
                services which are surgical procedures for 
                which a 10-day or 90-day global period is used 
                for payment under the fee schedule under 
                section 1848(b).
          (3) Coordination with other payments.--The amount of 
        the additional payment for a service under this 
        subsection and subsection (m) shall be determined 
        without regard to any additional payment for the 
        service under subsection (m) and this subsection, 
        respectively. The amount of the additional payment for 
        a service under this subsection and subsection (z) 
        shall be determined without regard to any additional 
        payment for the service under subsection (z) and this 
        subsection, respectively.
          (4) Application.--The provisions of paragraph (2) and 
        (4) of subsection (m) shall apply to the determination 
        of additional payments under this subsection in the 
        same manner as such provisions apply to the 
        determination of additional payments under subsection 
        (m).
  (z) Incentive Payments for Participation in Eligible 
Alternative Payment Models.--
          (1) Payment incentive.--
                  (A) In general.--In the case of covered 
                professional services furnished by an eligible 
                professional during a year that is in the 
                period beginning with 2019 and ending with 2024 
                and for which the professional is a qualifying 
                APM participant with respect to such year, in 
                addition to the amount of payment that would 
                otherwise be made for such covered professional 
                services under this part for such year, there 
                also shall be paid to such professional an 
                amount equal to 5 percent of the estimated 
                aggregate payment amounts for such covered 
                professional services under this part for the 
                preceding year. For purposes of the previous 
                sentence, the payment amount for the preceding 
                year may be an estimation for the full 
                preceding year based on a period of such 
                preceding year that is less than the full year. 
                The Secretary shall establish policies to 
                implement this subparagraph in cases in which 
                payment for covered professional services 
                furnished by a qualifying APM participant in an 
                alternative payment model--
                          (i) is made to an eligible 
                        alternative payment entity rather than 
                        directly to the qualifying APM 
                        participant; or
                          (ii) is made on a basis other than a 
                        fee-for-service basis (such as payment 
                        on a capitated basis).
                  (B) Form of payment.--Payments under this 
                subsection shall be made in a lump sum, on an 
                annual basis, as soon as practicable.
                  (C) Treatment of payment incentive.--Payments 
                under this subsection shall not be taken into 
                account for purposes of determining actual 
                expenditures under an alternative payment model 
                and for purposes of determining or rebasing any 
                benchmarks used under the alternative payment 
                model.
                  (D) Coordination.--The amount of the 
                additional payment under this subsection or 
                subsection (m) shall be determined without 
                regard to any additional payment under 
                subsection (m) and this subsection, 
                respectively. The amount of the additional 
                payment under this subsection or subsection (x) 
                shall be determined without regard to any 
                additional payment under subsection (x) and 
                this subsection, respectively. The amount of 
                the additional payment under this subsection or 
                subsection (y) shall be determined without 
                regard to any additional payment under 
                subsection (y) and this subsection, 
                respectively.
          (2) Qualifying apm participant.--For purposes of this 
        subsection, the term ``qualifying APM participant'' 
        means the following:
                  (A) 2019 and 2020.--With respect to 2019 and 
                2020, an eligible professional for whom the 
                Secretary determines that at least 25 percent 
                of payments under this part for covered 
                professional services furnished by such 
                professional during the most recent period for 
                which data are available (which may be less 
                than a year) were attributable to such services 
                furnished under this part through an eligible 
                alternative payment entity.
                  (B) 2021 and 2022.--With respect to 2021 and 
                2022, an eligible professional described in 
                either of the following clauses:
                          (i) Medicare payment threshold 
                        option.--An eligible professional for 
                        whom the Secretary determines that at 
                        least 50 percent of payments under this 
                        part for covered professional services 
                        furnished by such professional during 
                        the most recent period for which data 
                        are available (which may be less than a 
                        year) were attributable to such 
                        services furnished under this part 
                        through an eligible alternative payment 
                        entity.
                          (ii) Combination all-payer and 
                        medicare payment threshold option.--An 
                        eligible professional--
                                  (I) for whom the Secretary 
                                determines, with respect to 
                                items and services furnished by 
                                such professional during the 
                                most recent period for which 
                                data are available (which may 
                                be less than a year), that at 
                                least 50 percent of the sum 
                                of--
                                          (aa) payments 
                                        described in clause 
                                        (i); and
                                          (bb) all other 
                                        payments, regardless of 
                                        payer (other than 
                                        payments made by the 
                                        Secretary of Defense or 
                                        the Secretary of 
                                        Veterans Affairs and 
                                        other than payments 
                                        made under title XIX in 
                                        a State in which no 
                                        medical home or 
                                        alternative payment 
                                        model is available 
                                        under the State program 
                                        under that title),
                                meet the requirement described 
                                in clause (iii)(I) with respect 
                                to payments described in item 
                                (aa) and meet the requirement 
                                described in clause (iii)(II) 
                                with respect to payments 
                                described in item (bb);
                                  (II) for whom the Secretary 
                                determines at least 25 percent 
                                of payments under this part for 
                                covered professional services 
                                furnished by such professional 
                                during the most recent period 
                                for which data are available 
                                (which may be less than a year) 
                                were attributable to such 
                                services furnished under this 
                                part through an eligible 
                                alternative payment entity; and
                                  (III) who provides to the 
                                Secretary such information as 
                                is necessary for the Secretary 
                                to make a determination under 
                                subclause (I), with respect to 
                                such professional.
                          (iii) Requirement.--For purposes of 
                        clause (ii)(I)--
                                  (I) the requirement described 
                                in this subclause, with respect 
                                to payments described in item 
                                (aa) of such clause, is that 
                                such payments are made to an 
                                eligible alternative payment 
                                entity; and
                                  (II) the requirement 
                                described in this subclause, 
                                with respect to payments 
                                described in item (bb) of such 
                                clause, is that such payments 
                                are made under arrangements in 
                                which--
                                          (aa) quality measures 
                                        comparable to measures 
                                        under the performance 
                                        category described in 
                                        section 
                                        1848(q)(2)(B)(i) apply;
                                          (bb) certified EHR 
                                        technology is used; and
                                          (cc) the eligible 
                                        professional 
                                        participates in an 
                                        entity that--
                                                  (AA) bears 
                                                more than 
                                                nominal 
                                                financial risk 
                                                if actual 
                                                aggregate 
                                                expenditures 
                                                exceeds 
                                                expected 
                                                aggregate 
                                                expenditures; 
                                                or
                                                  (BB) with 
                                                respect to 
                                                beneficiaries 
                                                under title 
                                                XIX, is a 
                                                medical home 
                                                that meets 
                                                criteria 
                                                comparable to 
                                                medical homes 
                                                expanded under 
                                                section 
                                                1115A(c).
                  (C) Beginning in 2023.--With respect to 2023 
                and each subsequent year, an eligible 
                professional described in either of the 
                following clauses:
                          (i) Medicare payment threshold 
                        option.--An eligible professional for 
                        whom the Secretary determines that at 
                        least 75 percent of payments under this 
                        part for covered professional services 
                        furnished by such professional during 
                        the most recent period for which data 
                        are available (which may be less than a 
                        year) were attributable to such 
                        services furnished under this part 
                        through an eligible alternative payment 
                        entity.
                          (ii) Combination all-payer and 
                        medicare payment threshold option.--An 
                        eligible professional--
                                  (I) for whom the Secretary 
                                determines, with respect to 
                                items and services furnished by 
                                such professional during the 
                                most recent period for which 
                                data are available (which may 
                                be less than a year), that at 
                                least 75 percent of the sum 
                                of--
                                          (aa) payments 
                                        described in clause 
                                        (i); and
                                          (bb) all other 
                                        payments, regardless of 
                                        payer (other than 
                                        payments made by the 
                                        Secretary of Defense or 
                                        the Secretary of 
                                        Veterans Affairs and 
                                        other than payments 
                                        made under title XIX in 
                                        a State in which no 
                                        medical home or 
                                        alternative payment 
                                        model is available 
                                        under the State program 
                                        under that title),
                                meet the requirement described 
                                in clause (iii)(I) with respect 
                                to payments described in item 
                                (aa) and meet the requirement 
                                described in clause (iii)(II) 
                                with respect to payments 
                                described in item (bb);
                                  (II) for whom the Secretary 
                                determines at least 25 percent 
                                of payments under this part for 
                                covered professional services 
                                furnished by such professional 
                                during the most recent period 
                                for which data are available 
                                (which may be less than a year) 
                                were attributable to such 
                                services furnished under this 
                                part through an eligible 
                                alternative payment entity; and
                                  (III) who provides to the 
                                Secretary such information as 
                                is necessary for the Secretary 
                                to make a determination under 
                                subclause (I), with respect to 
                                such professional.
                          (iii) Requirement.--For purposes of 
                        clause (ii)(I)--
                                  (I) the requirement described 
                                in this subclause, with respect 
                                to payments described in item 
                                (aa) of such clause, is that 
                                such payments are made to an 
                                eligible alternative payment 
                                entity; and
                                  (II) the requirement 
                                described in this subclause, 
                                with respect to payments 
                                described in item (bb) of such 
                                clause, is that such payments 
                                are made under arrangements in 
                                which--
                                          (aa) quality measures 
                                        comparable to measures 
                                        under the performance 
                                        category described in 
                                        section 
                                        1848(q)(2)(B)(i) apply;
                                          (bb) certified EHR 
                                        technology is used; and
                                          (cc) the eligible 
                                        professional 
                                        participates in an 
                                        entity that--
                                                  (AA) bears 
                                                more than 
                                                nominal 
                                                financial risk 
                                                if actual 
                                                aggregate 
                                                expenditures 
                                                exceeds 
                                                expected 
                                                aggregate 
                                                expenditures; 
                                                or
                                                  (BB) with 
                                                respect to 
                                                beneficiaries 
                                                under title 
                                                XIX, is a 
                                                medical home 
                                                that meets 
                                                criteria 
                                                comparable to 
                                                medical homes 
                                                expanded under 
                                                section 
                                                1115A(c).
                  (D) Use of patient approach.--The Secretary 
                may base the determination of whether an 
                eligible professional is a qualifying APM 
                participant under this subsection and the 
                determination of whether an eligible 
                professional is a partial qualifying APM 
                participant under section 1848(q)(1)(C)(iii) by 
                using counts of patients in lieu of using 
                payments and using the same or similar 
                percentage criteria (as specified in this 
                subsection and such section, respectively), as 
                the Secretary determines appropriate.
          (3) Additional definitions.--In this subsection:
                  (A) Covered professional services.--The term 
                ``covered professional services'' has the 
                meaning given that term in section 
                1848(k)(3)(A).
                  (B) Eligible professional.--The term 
                ``eligible professional'' has the meaning given 
                that term in section 1848(k)(3)(B) and includes 
                a group that includes such professionals.
                  (C) Alternative payment model (apm).--The 
                term ``alternative payment model'' means, other 
                than for purposes of subparagraphs 
                (B)(ii)(I)(bb) and (C)(ii)(I)(bb) of paragraph 
                (2), any of the following:
                          (i) A model under section 1115A 
                        (other than a health care innovation 
                        award).
                          (ii) The shared savings program under 
                        section 1899.
                          (iii) A demonstration under section 
                        1866C.
                          (iv) A demonstration required by 
                        Federal law.
                  (D) Eligible alternative payment entity.--The 
                term ``eligible alternative payment entity'' 
                means, with respect to a year, an entity that--
                          (i) participates in an alternative 
                        payment model that--
                                  (I) requires participants in 
                                such model to use certified EHR 
                                technology (as defined in 
                                subsection (o)(4)); and
                                  (II) provides for payment for 
                                covered professional services 
                                based on quality measures 
                                comparable to measures under 
                                the performance category 
                                described in section 
                                1848(q)(2)(B)(i); and
                          (ii)(I) bears financial risk for 
                        monetary losses under such alternative 
                        payment model that are in excess of a 
                        nominal amount; or
                          (II) is a medical home expanded under 
                        section 1115A(c).
          (4) Limitation.--There shall be no administrative or 
        judicial review under section 1869, 1878, or otherwise, 
        of the following:
                  (A) The determination that an eligible 
                professional is a qualifying APM participant 
                under paragraph (2) and the determination that 
                an entity is an eligible alternative payment 
                entity under paragraph (3)(D).
                  (B) The determination of the amount of the 5 
                percent payment incentive under paragraph 
                (1)(A), including any estimation as part of 
                such determination.
  (aa) Medical Review of Spinal Subluxation Services.--
          (1) In general.--The Secretary shall implement a 
        process for the medical review (as described in 
        paragraph (2)) of treatment by a chiropractor described 
        in section 1861(r)(5) by means of manual manipulation 
        of the spine to correct a subluxation (as described in 
        such section) of an individual who is enrolled under 
        this part and apply such process to such services 
        furnished on or after January 1, 2017, focusing on 
        services such as--
                  (A) services furnished by a such a 
                chiropractor whose pattern of billing is 
                aberrant compared to peers; and
                  (B) services furnished by such a chiropractor 
                who, in a prior period, has a services denial 
                percentage in the 85th percentile or greater, 
                taking into consideration the extent that 
                service denials are overturned on appeal.
          (2) Medical review.--
                  (A) Prior authorization medical review.--
                          (i) In general.--Subject to clause 
                        (ii), the Secretary shall use prior 
                        authorization medical review for 
                        services described in paragraph (1) 
                        that are furnished to an individual by 
                        a chiropractor described in section 
                        1861(r)(5) that are part of an episode 
                        of treatment that includes more than 12 
                        services. For purposes of the preceding 
                        sentence, an episode of treatment shall 
                        be determined by the underlying cause 
                        that justifies the need for services, 
                        such as a diagnosis code.
                          (ii) Ending application of prior 
                        authorization medical review.--The 
                        Secretary shall end the application of 
                        prior authorization medical review 
                        under clause (i) to services described 
                        in paragraph (1) by such a chiropractor 
                        if the Secretary determines that the 
                        chiropractor has a low denial rate 
                        under such prior authorization medical 
                        review. The Secretary may subsequently 
                        reapply prior authorization medical 
                        review to such chiropractor if the 
                        Secretary determines it to be 
                        appropriate and the chiropractor has, 
                        in the time period subsequent to the 
                        determination by the Secretary of a low 
                        denial rate with respect to the 
                        chiropractor, furnished such services 
                        described in paragraph (1).
                          (iii) Early request for prior 
                        authorization review permitted.--
                        Nothing in this subsection shall be 
                        construed to prevent such a 
                        chiropractor from requesting prior 
                        authorization for services described in 
                        paragraph (1) that are to be furnished 
                        to an individual before the 
                        chiropractor furnishes the twelfth such 
                        service to such individual for an 
                        episode of treatment.
                  (B) Type of review.--The Secretary may use 
                pre-payment review or post-payment review of 
                services described in section 1861(r)(5) that 
                are not subject to prior authorization medical 
                review under subparagraph (A).
                  (C) Relationship to law enforcement 
                activities.--The Secretary may determine that 
                medical review under this subsection does not 
                apply in the case where potential fraud may be 
                involved.
          (3) No payment without prior authorization.--With 
        respect to a service described in paragraph (1) for 
        which prior authorization medical review under this 
        subsection applies, the following shall apply:
                  (A) Prior authorization determination.--The 
                Secretary shall make a determination, prior to 
                the service being furnished, of whether the 
                service would or would not meet the applicable 
                requirements of section 1862(a)(1)(A).
                  (B) Denial of payment.--Subject to paragraph 
                (5), no payment may be made under this part for 
                the service unless the Secretary determines 
                pursuant to subparagraph (A) that the service 
                would meet the applicable requirements of such 
                section 1862(a)(1)(A).
          (4) Submission of information.--A chiropractor 
        described in section 1861(r)(5) may submit the 
        information necessary for medical review by fax, by 
        mail, or by electronic means. The Secretary shall make 
        available the electronic means described in the 
        preceding sentence as soon as practicable.
          (5) Timeliness.--If the Secretary does not make a 
        prior authorization determination under paragraph 
        (3)(A) within 14 business days of the date of the 
        receipt of medical documentation needed to make such 
        determination, paragraph (3)(B) shall not apply.
          (6) Application of limitation on beneficiary 
        liability.--Where payment may not be made as a result 
        of the application of paragraph (2)(B), section 1879 
        shall apply in the same manner as such section applies 
        to a denial that is made by reason of section 
        1862(a)(1).
          (7) Review by contractors.--The medical review 
        described in paragraph (2) may be conducted by medicare 
        administrative contractors pursuant to section 
        1874A(a)(4)(G) or by any other contractor determined 
        appropriate by the Secretary that is not a recovery 
        audit contractor.
          (8) Multiple services.--The Secretary shall, where 
        practicable, apply the medical review under this 
        subsection in a manner so as to allow an individual 
        described in paragraph (1) to obtain, at a single time 
        rather than on a service-by-service basis, an 
        authorization in accordance with paragraph (3)(A) for 
        multiple services.
          (9) Construction.--With respect to a service 
        described in paragraph (1) that has been affirmed by 
        medical review under this subsection, nothing in this 
        subsection shall be construed to preclude the 
        subsequent denial of a claim for such service that does 
        not meet other applicable requirements under this Act.
          (10) Implementation.--
                  (A) Authority.--The Secretary may implement 
                the provisions of this subsection by interim 
                final rule with comment period.
                  (B) Administration.--Chapter 35 of title 44, 
                United States Code, shall not apply to medical 
                review under this subsection.
  (bb) Additional Payments for Certain Rural Health Clinics 
With Physicians or Practitioners Receiving DATA 2000 Waivers.--
          (1) In general.--In the case of a rural health clinic 
        with respect to which, beginning on or after January 1, 
        2019, rural health clinic services (as defined in 
        section 1861(aa)(1)) are furnished for the treatment of 
        opioid use disorder by a physician or practitioner who 
        meets the requirements described in paragraph (3), the 
        Secretary shall, subject to availability of funds under 
        paragraph (4), make a payment (at such time and in such 
        manner as specified by the Secretary) to such rural 
        health clinic after receiving and approving an 
        application described in paragraph (2). Such payment 
        shall be in an amount determined by the Secretary, 
        based on an estimate of the average costs of training 
        for purposes of receiving a waiver described in 
        paragraph (3)(B). Such payment may be made only one 
        time with respect to each such physician or 
        practitioner.
          (2) Application.--In order to receive a payment 
        described in paragraph (1), a rural health clinic shall 
        submit to the Secretary an application for such a 
        payment at such time, in such manner, and containing 
        such information as specified by the Secretary. A rural 
        health clinic may apply for such a payment for each 
        physician or practitioner described in paragraph (1) 
        furnishing services described in such paragraph at such 
        clinic.
          (3) Requirements.--For purposes of paragraph (1), the 
        requirements described in this paragraph, with respect 
        to a physician or practitioner, are the following:
                  (A) The physician or practitioner is employed 
                by or working under contract with a rural 
                health clinic described in paragraph (1) that 
                submits an application under paragraph (2).
                  (B) The physician or practitioner first 
                receives a waiver under section 303(g) of the 
                Controlled Substances Act on or after January 
                1, 2019.
          (4) Funding.--For purposes of making payments under 
        this subsection, there are appropriated, out of amounts 
        in the Treasury not otherwise appropriated, $2,000,000, 
        which shall remain available until expended.

        SPECIAL PAYMENT RULES FOR PARTICULAR ITEMS AND SERVICES

  Sec. 1834. (a) Payment for Durable Medical Equipment.--
          (1) General rule for payment.--
                  (A) In general.--With respect to a covered 
                item (as defined in paragraph (13)) for which 
                payment is determined under this subsection, 
                payment shall be made in the frequency 
                specified in paragraphs (2) through (7) and in 
                an amount equal to 80 percent of the payment 
                basis described in subparagraph (B).
                  (B) Payment basis.--Subject to subparagraph 
                (F)(i), the payment basis described in this 
                subparagraph is the lesser of--
                          (i) the actual charge for the item, 
                        or
                          (ii) the payment amount recognized 
                        under paragraphs (2) through (7) of 
                        this subsection for the item;
                except that clause (i) shall not apply if the 
                covered item is furnished by a public home 
                health agency (or by another home health agency 
                which demonstrates to the satisfaction of the 
                Secretary that a significant portion of its 
                patients are low income) free of charge or at 
                nominal charges to the public.
                  (C) Exclusive payment rule.--Subject to 
                subparagraph (F)(ii), this subsection shall 
                constitute the exclusive provision of this 
                title for payment for covered items under this 
                part or under part A to a home health agency.
                  (D) Reduction in fee schedules for certain 
                items.--With respect to a seat-lift chair or 
                transcutaneous electrical nerve stimulator 
                furnished on or after April 1, 1990, the 
                Secretary shall reduce the payment amount 
                applied under subparagraph (B)(ii) for such an 
                item by 15 percent, and, in the case of a 
                transcutaneous electrical nerve stimulator 
                furnished on or after January 1, 1991, the 
                Secretary shall further reduce such payment 
                amount (as previously reduced) by 45 percent.
                  (E) Clinical conditions for coverage.--
                          (i) In general.--The Secretary shall 
                        establish standards for clinical 
                        conditions for payment for covered 
                        items under this subsection.
                          (ii) Requirements.--The standards 
                        established under clause (i) shall 
                        include the specification of types or 
                        classes of covered items that require, 
                        as a condition of payment under this 
                        subsection, a face-to-face examination 
                        of the individual by a physician (as 
                        defined in section 1861(r)), a 
                        physician assistant, nurse 
                        practitioner, or a clinical nurse 
                        specialist (as those terms are defined 
                        in section 1861(aa)(5)) and a 
                        prescription for the item.
                          (iii) Priority of establishment of 
                        standards.--In establishing the 
                        standards under this subparagraph, the 
                        Secretary shall first establish 
                        standards for those covered items for 
                        which the Secretary determines there 
                        has been a proliferation of use, 
                        consistent findings of charges for 
                        covered items that are not delivered, 
                        or consistent findings of falsification 
                        of documentation to provide for payment 
                        of such covered items under this part.
                          (iv) Standards for power 
                        wheelchairs.--Effective on the date of 
                        the enactment of this subparagraph, in 
                        the case of a covered item consisting 
                        of a motorized or power wheelchair for 
                        an individual, payment may not be made 
                        for such covered item unless a 
                        physician (as defined in section 
                        1861(r)(1)), a physician assistant, 
                        nurse practitioner, or a clinical nurse 
                        specialist (as those terms are defined 
                        in section 1861(aa)(5)) has conducted a 
                        face-to-face examination of the 
                        individual and written a prescription 
                        for the item.
                          (v) Limitation on payment for covered 
                        items.--Payment may not be made for a 
                        covered item under this subsection 
                        unless the item meets any standards 
                        established under this subparagraph for 
                        clinical condition of coverage.
                  (F) Application of competitive acquisition; 
                limitation of inherent reasonableness 
                authority.--In the case of covered items 
                furnished on or after January 1, 2011, subject 
                to subparagraphs (G) and (H), that are included 
                in a competitive acquisition program in a 
                competitive acquisition area under section 
                1847(a)--
                          (i) the payment basis under this 
                        subsection for such items and services 
                        furnished in such area shall be the 
                        payment basis determined under such 
                        competitive acquisition program;
                          (ii) the Secretary may (and, in the 
                        case of covered items furnished on or 
                        after January 1, 2016, subject to 
                        clause (iii), shall) use information on 
                        the payment determined under such 
                        competitive acquisition programs to 
                        adjust the payment amount otherwise 
                        recognized under subparagraph (B)(ii) 
                        for an area that is not a competitive 
                        acquisition area under section 1847 and 
                        in the case of such adjustment, 
                        paragraph (10)(B) shall not be applied; 
                        and
                          (iii) in the case of covered items 
                        furnished on or after January 1, 2016, 
                        the Secretary shall continue to make 
                        such adjustments described in clause 
                        (ii) as, under such competitive 
                        acquisition programs, additional 
                        covered items are phased in or 
                        information is updated as contracts 
                        under section 1847 are recompeted in 
                        accordance with section 1847(b)(3)(B).
                  (G) Use of information on competitive bid 
                rates.--The Secretary shall specify by 
                regulation the methodology to be used in 
                applying the provisions of subparagraph (F)(ii) 
                and subsection (h)(1)(H)(ii). In promulgating 
                such regulation, the Secretary shall consider 
                the costs of items and services in areas in 
                which such provisions would be applied compared 
                to the payment rates for such items and 
                services in competitive acquisition areas.In 
                the case of items and services furnished on or 
                after January 1, 2019, in making any 
                adjustments under clause (ii) or (iii) of 
                subparagraph (F), under subsection 
                (h)(1)(H)(ii), or under section 1842(s)(3)(B), 
                the Secretary shall--
                          (i) solicit and take into account 
                        stakeholder input; and
                          (ii) take into account the highest 
                        amount bid by a winning supplier in a 
                        competitive acquisition area and a 
                        comparison of each of the following 
                        with respect to non-competitive 
                        acquisition areas and competitive 
                        acquisition areas:
                                  (I) The average travel 
                                distance and cost associated 
                                with furnishing items and 
                                services in the area.
                                  (II) The average volume of 
                                items and services furnished by 
                                suppliers in the area.
                                  (III) The number of suppliers 
                                in the area.
                  (H) Diabetic supplies.--
                          (i) In general.--On or after the date 
                        described in clause (ii), the payment 
                        amount under this part for diabetic 
                        supplies, including testing strips, 
                        that are non-mail order items (as 
                        defined by the Secretary) shall be 
                        equal to the single payment amounts 
                        established under the national mail 
                        order competition for diabetic supplies 
                        under section 1847.
                          (ii) Date described.--The date 
                        described in this clause is the date of 
                        the implementation of the single 
                        payment amounts under the national mail 
                        order competition for diabetic supplies 
                        under section 1847.
                  (I) Treatment of vacuum erection systems.--
                Effective for items and services furnished on 
                and after July 1, 2015, vacuum erection systems 
                described as prosthetic devices described in 
                section 1861(s)(8) shall be treated in the same 
                manner as erectile dysfunction drugs are 
                treated for purposes of section 1860D-
                2(e)(2)(A).
          (2) Payment for inexpensive and other routinely 
        purchased durable medical equipment.--
                  (A) In general.--Payment for an item of 
                durable medical equipment (as defined in 
                paragraph (13))--
                          (i) the purchase price of which does 
                        not exceed $150,
                          (ii) which the Secretary determines 
                        is acquired at least 75 percent of the 
                        time by purchase,
                          (iii) which is an accessory used in 
                        conjunction with a nebulizer, 
                        aspirator, or a ventilator excluded 
                        under paragraph (3)(A), or
                          (iv) in the case of devices furnished 
                        on or after October 1, 2015, which 
                        serves as a speech generating device or 
                        which is an accessory that is needed 
                        for the individual to effectively 
                        utilize such a device,
                shall be made on a rental basis or in a lump-
                sum amount for the purchase of the item. The 
                payment amount recognized for purchase or 
                rental of such equipment is the amount 
                specified in subparagraph (B) for purchase or 
                rental, except that the total amount of 
                payments with respect to an item may not exceed 
                the payment amount specified in subparagraph 
                (B) with respect to the purchase of the item.
                  (B) Payment amount.--For purposes of 
                subparagraph (A), the amount specified in this 
                subparagraph, with respect to the purchase or 
                rental of an item furnished in a carrier 
                service area--
                          (i) in 1989 and in 1990 is the 
                        average reasonable charge in the area 
                        for the purchase or rental, 
                        respectively, of the item for the 12-
                        month period ending on June 30, 1987, 
                        increased by the percentage increase in 
                        the consumer price index for all urban 
                        consumers (U.S. city average) for the 
                        6-month period ending with December 
                        1987;
                          (ii) in 1991 is the sum of (I) 67 
                        percent of the local payment amount for 
                        the item or device computed under 
                        subparagraph (C)(i)(I) for 1991, and 
                        (II) 33 percent of the national limited 
                        payment amount for the item or device 
                        computed under subparagraph (C)(ii) for 
                        1991;
                          (iii) in 1992 is the sum of (I) 33 
                        percent of the local payment amount for 
                        the item or device computed under 
                        subparagraph (C)(i)(II) for 1992, and 
                        (II) 67 percent of the national limited 
                        payment amount for the item or device 
                        computed under subparagraph (C)(ii) for 
                        1992; and
                          (iv) in 1993 and each subsequent year 
                        is the national limited payment amount 
                        for the item or device computed under 
                        subparagraph (C)(ii) for that year 
                        (reduced by 10 percent, in the case of 
                        a blood glucose testing strip furnished 
                        after 1997 for an individual with 
                        diabetes).
                  (C) Computation of local payment amount and 
                national limited payment amount.--For purposes 
                of subparagraph (B)--
                          (i) the local payment amount for an 
                        item or device for a year is equal to--
                                  (I) for 1991, the amount 
                                specified in subparagraph 
                                (B)(i) for 1990 increased by 
                                the covered item update for 
                                1991, and
                                  (II) for 1992, 1993, and 1994 
                                the amount determined under 
                                this clause for the preceding 
                                year increased by the covered 
                                item update for the year; and
                          (ii) the national limited payment 
                        amount for an item or device for a year 
                        is equal to--
                                  (I) for 1991, the local 
                                payment amount determined under 
                                clause (i) for such item or 
                                device for that year, except 
                                that the national limited 
                                payment amount may not exceed 
                                100 percent of the weighted 
                                average of all local payment 
                                amounts determined under such 
                                clause for such item for that 
                                year and may not be less than 
                                85 percent of the weighted 
                                average of all local payment 
                                amounts determined under such 
                                clause for such item,
                                  (II) for 1992 and 1993, the 
                                amount determined under this 
                                clause for the preceding year 
                                increased by the covered item 
                                update for such subsequent 
                                year,
                                  (III) for 1994, the local 
                                payment amount determined under 
                                clause (i) for such item or 
                                device for that year, except 
                                that the national limited 
                                payment amount may not exceed 
                                100 percent of the median of 
                                all local payment amounts 
                                determined under such clause 
                                for such item for that year and 
                                may not be less than 85 percent 
                                of the median of all local 
                                payment amounts determined 
                                under such clause for such item 
                                or device for that year, and
                                  (IV) for each subsequent 
                                year, the amount determined 
                                under this clause for the 
                                preceding year increased by the 
                                covered item update for such 
                                subsequent year.
          (3) Payment for items requiring frequent and 
        substantial servicing.--
                  (A) In general.--Payment for a covered item 
                (such as IPPB machines and ventilators, 
                excluding ventilators that are either 
                continuous airway pressure devices or 
                intermittent assist devices with continuous 
                airway pressure devices) for which there must 
                be frequent and substantial servicing in order 
                to avoid risk to the patient's health shall be 
                made on a monthly basis for the rental of the 
                item and the amount recognized is the amount 
                specified in subparagraph (B).
                  (B) Payment amount.--For purposes of 
                subparagraph (A), the amount specified in this 
                subparagraph, with respect to an item or device 
                furnished in a carrier service area--
                          (i) in 1989 and in 1990 is the 
                        average reasonable charge in the area 
                        for the rental of the item or device 
                        for the 12-month period ending with 
                        June 1987, increased by the percentage 
                        increase in the consumer price index 
                        for all urban consumers (U.S. city 
                        average) for the 6-month period ending 
                        with December 1987;
                          (ii) in 1991 is the sum of (I) 67 
                        percent of the local payment amount for 
                        the item or device computed under 
                        subparagraph (C)(i)(I) for 1991, and 
                        (II) 33 percent of the national limited 
                        payment amount for the item or device 
                        computed under subparagraph (C)(ii) for 
                        1991;
                          (iii) in 1992 is the sum of (I) 33 
                        percent of the local payment amount for 
                        the item or device computed under 
                        subparagraph (C)(i)(II) for 1992, and 
                        (II) 67 percent of the national limited 
                        payment amount for the item or device 
                        computed under subparagraph (C)(ii) for 
                        1992; and
                          (iv) in 1993 and each subsequent year 
                        is the national limited payment amount 
                        for the item or device computed under 
                        subparagraph (C)(ii) for that year.
                  (C) Computation of local payment amount and 
                national limited payment amount.--For purposes 
                of subparagraph (B)--
                          (i) the local payment amount for an 
                        item or device for a year is equal to--
                                  (I) for 1991, the amount 
                                specified in subparagraph 
                                (B)(i) for 1990 increased by 
                                the covered item update for 
                                1991, and
                                  (II) for 1992, 1993, and 1994 
                                the amount determined under 
                                this clause for the preceding 
                                year increased by the covered 
                                item update for the year; and
                          (ii) the national limited payment 
                        amount for an item or device for a year 
                        is equal to--
                                  (I) for 1991, the local 
                                payment amount determined under 
                                clause (i) for such item or 
                                device for that year, except 
                                that the national limited 
                                payment amount may not exceed 
                                100 percent of the weighted 
                                average of all local payment 
                                amounts determined under such 
                                clause for such item for that 
                                year and may not be less than 
                                85 percent of the weighted 
                                average of all local payment 
                                amounts determined under such 
                                clause for such item,
                                  (II) for 1992 and 1993, the 
                                amount determined under this 
                                clause for the preceding year 
                                increased by the covered item 
                                update for such subsequent 
                                year,
                                  (III) for 1994, the local 
                                payment amount determined under 
                                clause (i) for such item or 
                                device for that year, except 
                                that the national limited 
                                payment amount may not exceed 
                                100 percent of the median of 
                                all local payment amounts 
                                determined under such clause 
                                for such item for that year and 
                                may not be less than 85 percent 
                                of the median of all local 
                                payment amounts determined 
                                under such clause for such item 
                                or device for that year, and
                                  (IV) for each subsequent 
                                year, the amount determined 
                                under this clause for the 
                                preceding year increased by the 
                                covered item update for such 
                                subsequent year.
          (4) Payment for certain customized items.--Payment 
        with respect to a covered item that is uniquely 
        constructed or substantially modified to meet the 
        specific needs of an individual patient, and for that 
        reason cannot be grouped with similar items for 
        purposes of payment under this title, shall be made in 
        a lump-sum amount (A) for the purchase of the item in a 
        payment amount based upon the carrier's individual 
        consideration for that item, and (B) for the reasonable 
        and necessary maintenance and servicing for parts and 
        labor not covered by the supplier's or manufacturer's 
        warranty, when necessary during the period of medical 
        need, and the amount recognized for such maintenance 
        and servicing shall be paid on a lump-sum, as needed 
        basis based upon the carrier's individual consideration 
        for that item. In the case of a wheelchair furnished on 
        or after January 1, 1992, the wheelchair shall be 
        treated as a customized item for purposes of this 
        paragraph if the wheelchair has been measured, fitted, 
        or adapted in consideration of the patient's body size, 
        disability, period of need, or intended use, and has 
        been assembled by a supplier or ordered from a 
        manufacturer who makes available customized features, 
        modifications, or components for wheelchairs that are 
        intended for an individual patient's use in accordance 
        with instructions from the patient's physician.
          (5) Payment for oxygen and oxygen equipment.--
                  (A) In general.--Payment for oxygen and 
                oxygen equipment shall be made on a monthly 
                basis in the monthly payment amount recognized 
                under paragraph (9) for oxygen and oxygen 
                equipment (other than portable oxygen 
                equipment), subject to subparagraphs (B), (C), 
                (E), and (F).
                  (B) Add-on for portable oxygen equipment.--
                When portable oxygen equipment is used, but 
                subject to subparagraph (D), the payment amount 
                recognized under subparagraph (A) shall be 
                increased by the monthly payment amount 
                recognized under paragraph (9) for portable 
                oxygen equipment.
                  (C) Volume adjustment.--When the attending 
                physician prescribes an oxygen flow rate--
                          (i) exceeding 4 liters per minute, 
                        the payment amount recognized under 
                        subparagraph (A), subject to 
                        subparagraph (D), shall be increased by 
                        50 percent, or
                          (ii) of less than 1 liter per minute, 
                        the payment amount recognized under 
                        subparagraph (A) shall be decreased by 
                        50 percent.
                  (D) Limit on adjustment.--When portable 
                oxygen equipment is used and the attending 
                physician prescribes an oxygen flow rate 
                exceeding 4 liters per minute, there shall only 
                be an increase under either subparagraph (B) or 
                (C), whichever increase is larger, and not 
                under both such subparagraphs.
                  (E) Recertification for patients receiving 
                home oxygen therapy.--In the case of a patient 
                receiving home oxygen therapy services who, at 
                the time such services are initiated, has an 
                initial arterial blood gas value at or above a 
                partial pressure of 56 or an arterial oxygen 
                saturation at or above 89 percent (or such 
                other values, pressures, or criteria as the 
                Secretary may specify) no payment may be made 
                under this part for such services after the 
                expiration of the 90-day period that begins on 
                the date the patient first receives such 
                services unless the patient's attending 
                physician certifies that, on the basis of a 
                follow-up test of the patient's arterial blood 
                gas value or arterial oxygen saturation 
                conducted during the final 30 days of such 90-
                day period, there is a medical need for the 
                patient to continue to receive such services.
                  (F) Rental Cap.--
                          (i) In general.--Payment for oxygen 
                        equipment (including portable oxygen 
                        equipment) under this paragraph may not 
                        extend over a period of continuous use 
                        (as determined by the Secretary) of 
                        longer than 36 months.
                          (ii) Payments and rules after rental 
                        cap.--After the 36th continuous month 
                        during which payment is made for the 
                        equipment under this paragraph--
                                  (I) the supplier furnishing 
                                such equipment under this 
                                subsection shall continue to 
                                furnish the equipment during 
                                any period of medical need for 
                                the remainder of the reasonable 
                                useful lifetime of the 
                                equipment, as determined by the 
                                Secretary;
                                  (II) payments for oxygen 
                                shall continue to be made in 
                                the amount recognized for 
                                oxygen under paragraph (9) for 
                                the period of medical need; and
                                  (III) maintenance and 
                                servicing payments shall, if 
                                the Secretary determines such 
                                payments are reasonable and 
                                necessary, be made (for parts 
                                and labor not covered by the 
                                supplier's or manufacturer's 
                                warranty, as determined by the 
                                Secretary to be appropriate for 
                                the equipment), and such 
                                payments shall be in an amount 
                                determined to be appropriate by 
                                the Secretary.
          (6) Payment for other covered items (other than 
        durable medical equipment).--Payment for other covered 
        items (other than durable medical equipment and other 
        covered items described in paragraph (3), (4), or (5)) 
        shall be made in a lump-sum amount for the purchase of 
        the item in the amount of the purchase price recognized 
        under paragraph (8).
          (7) Payment for other items of durable medical 
        equipment.--
                  (A) Payment.--In the case of an item of 
                durable medical equipment not described in 
                paragraphs (2) through (6), the following rules 
                shall apply:
                          (i) Rental.--
                                  (I) In general.--Except as 
                                provided in clause (iii), 
                                payment for the item shall be 
                                made on a monthly basis for the 
                                rental of the item during the 
                                period of medical need (but 
                                payments under this clause may 
                                not extend over a period of 
                                continuous use (as determined 
                                by the Secretary) of longer 
                                than 13 months).
                                  (II) Payment amount.--Subject 
                                to subclause (III) and 
                                subparagraph (B), the amount 
                                recognized for the item, for 
                                each of the first 3 months of 
                                such period, is 10 percent of 
                                the purchase price recognized 
                                under paragraph (8) with 
                                respect to the item, and, for 
                                each of the remaining months of 
                                such period, is 7.5 percent of 
                                such purchase price.
                                  (III) Special rule for power-
                                driven wheelchairs.--For 
                                purposes of payment for power-
                                driven wheelchairs, subclause 
                                (II) shall be applied by 
                                substituting ``15 percent'' and 
                                ``6 percent'' for ``10 
                                percent'' and ``7.5 percent'', 
                                respectively.
                          (ii) Ownership after rental.--On the 
                        first day that begins after the 13th 
                        continuous month during which payment 
                        is made for the rental of an item under 
                        clause (i), the supplier of the item 
                        shall transfer title to the item to the 
                        individual.
                          (iii) Purchase agreement option for 
                        complex, rehabilitative power-driven 
                        wheelchairs.--In the case of a complex, 
                        rehabilitative power-driven wheelchair, 
                        at the time the supplier furnishes the 
                        item, the supplier shall offer the 
                        individual the option to purchase the 
                        item, and payment for such item shall 
                        be made on a lump-sum basis if the 
                        individual exercises such option.
                          (iv) Maintenance and servicing.--
                        After the supplier transfers title to 
                        the item under clause (ii) or in the 
                        case of a power-driven wheelchair for 
                        which a purchase agreement has been 
                        entered into under clause (iii), 
                        maintenance and servicing payments 
                        shall, if the Secretary determines such 
                        payments are reasonable and necessary, 
                        be made (for parts and labor not 
                        covered by the supplier's or 
                        manufacturer's warranty, as determined 
                        by the Secretary to be appropriate for 
                        the particular type of durable medical 
                        equipment), and such payments shall be 
                        in an amount determined to be 
                        appropriate by the Secretary.
                  (B) Range for rental amounts.--
                          (i) For 1989.--For items furnished 
                        during 1989, the payment amount 
                        recognized under subparagraph (A)(i) 
                        shall not be more than 115 percent, and 
                        shall not be less than 85 percent, of 
                        the prevailing charge established for 
                        rental of the item in January 1987, 
                        increased by the percentage increase in 
                        the consumer price index for all urban 
                        consumers (U.S. city average) for the 
                        6-month period ending with December 
                        1987.
                          (ii) For 1990.--For items furnished 
                        during 1990, clause (i) shall apply in 
                        the same manner as it applies to items 
                        furnished during 1989.
                  (C) Replacement of items.--
                          (i) Establishment of reasonable 
                        useful lifetime.--In accordance with 
                        clause (iii), the Secretary shall 
                        determine and establish a reasonable 
                        useful lifetime for items of durable 
                        medical equipment for which payment may 
                        be made under this paragraph.
                          (ii) Payment for replacement items.--
                        If the reasonable lifetime of such an 
                        item, as so established, has been 
                        reached during a continuous period of 
                        medical need, or the carrier determines 
                        that the item is lost or irreparably 
                        damaged, the patient may elect to have 
                        payment for an item serving as a 
                        replacement for such item made--
                                  (I) on a monthly basis for 
                                the rental of the replacement 
                                item in accordance with 
                                subparagraph (A); or
                                  (II) in the case of an item 
                                for which a purchase agreement 
                                has been entered into under 
                                subparagraph (A)(iii), in a 
                                lump-sum amount for the 
                                purchase of the item.
                          (iii) Length of reasonable useful 
                        lifetime.--The reasonable useful 
                        lifetime of an item of durable medical 
                        equipment under this subparagraph shall 
                        be equal to 5 years, except that, if 
                        the Secretary determines that, on the 
                        basis of prior experience in making 
                        payments for such an item under this 
                        title, a reasonable useful lifetime of 
                        5 years is not appropriate with respect 
                        to a particular item, the Secretary 
                        shall establish an alternative 
                        reasonable lifetime for such item.
          (8) Purchase price recognized for miscellaneous 
        devices and items.--For purposes of paragraphs (6) and 
        (7), the amount that is recognized under this paragraph 
        as the purchase price for a covered item is the amount 
        described in subparagraph (C) of this paragraph, 
        determined as follows:
                  (A) Computation of local purchase price.--
                Each carrier under section 1842 shall compute a 
                base local purchase price for the item as 
                follows:
                          (i) The carrier shall compute a base 
                        local purchase price, for each item 
                        described--
                                  (I) in paragraph (6) equal to 
                                the average reasonable charge 
                                in the locality for the 
                                purchase of the item for the 
                                12-month period ending with 
                                June 1987, or
                                  (II) in paragraph (7) equal 
                                to the average of the purchase 
                                prices on the claims submitted 
                                on an assignment-related basis 
                                for the unused item supplied 
                                during the 6-month period 
                                ending with December 1986.
                          (ii) The carrier shall compute a 
                        local purchase price, with respect to 
                        the furnishing of each particular 
                        item--
                                  (I) in 1989 and 1990, equal 
                                to the base local purchase 
                                price computed under clause (i) 
                                increased by the percentage 
                                increase in the consumer price 
                                index for all urban consumers 
                                (U.S. city average) for the 6-
                                month period ending with 
                                December 1987,
                                  (II) in 1991, equal to the 
                                local purchase price computed 
                                under this clause for the 
                                previous year, increased by the 
                                covered item update for 1991, 
                                and decreased by the percentage 
                                by which the average of the 
                                reasonable charges for claims 
                                paid for all items described in 
                                paragraph (7) is lower than the 
                                average of the purchase prices 
                                submitted for such items during 
                                the final 9 months of 1988; or
                                  (III) in 1992, 1993, and 1994 
                                equal to the local purchase 
                                price computed under this 
                                clause for the previous year 
                                increased by the covered item 
                                update for the year.
                  (B) Computation of national limited purchase 
                price.--With respect to the furnishing of a 
                particular item in a year, the Secretary shall 
                compute a national limited purchase price--
                          (i) for 1991, equal to the local 
                        purchase price computed under 
                        subparagraph (A)(ii) for the item for 
                        the year, except that such national 
                        limited purchase price may not exceed 
                        100 percent of the weighted average of 
                        all local purchase prices for the item 
                        computed under such subparagraph for 
                        the year, and may not be less than 85 
                        percent of the weighted average of all 
                        local purchase prices for the item 
                        computed under such subparagraph for 
                        the year;
                          (ii) for 1992 and 1993, the amount 
                        determined under this subparagraph for 
                        the preceding year increased by the 
                        covered item update for such subsequent 
                        year;
                          (iii) for 1994, the local purchase 
                        price computed under subparagraph 
                        (A)(ii) for the item for the year, 
                        except that such national limited 
                        purchase price may not exceed 100 
                        percent of the median of all local 
                        purchase prices computed for the item 
                        under such subparagraph for the year 
                        and may not be less than 85 percent of 
                        the median of all local purchase prices 
                        computed under such subparagraph for 
                        the item for the year; and
                          (iv) for each subsequent year, equal 
                        to the amount determined under this 
                        subparagraph for the preceding year 
                        increased by the covered item update 
                        for such subsequent year.
                  (C) Purchase price recognized.--For purposes 
                of paragraphs (6) and (7), the amount that is 
                recognized under this paragraph as the purchase 
                price for each item furnished--
                          (i) in 1989 or 1990, is 100 percent 
                        of the local purchase price computed 
                        under subparagraph (A)(ii)(I);
                          (ii) in 1991, is the sum of (I) 67 
                        percent of the local purchase price 
                        computed under subparagraph (A)(ii)(II) 
                        for 1991, and (II) 33 percent of the 
                        national limited purchase price 
                        computed under subparagraph (B) for 
                        1991;
                          (iii) in 1992, is the sum of (I) 33 
                        percent of the local purchase price 
                        computed under subparagraph 
                        (A)(ii)(III) for 1992, and (II) 67 
                        percent of the national limited 
                        purchase price computed under 
                        subparagraph (B) for 1992; and
                          (iv) in 1993 or a subsequent year, is 
                        the national limited purchase price 
                        computed under subparagraph (B) for 
                        that year.
          (9) Monthly payment amount recognized with respect to 
        oxygen and oxygen equipment.--For purposes of paragraph 
        (5), the amount that is recognized under this paragraph 
        for payment for oxygen and oxygen equipment is the 
        monthly payment amount described in subparagraph (C) of 
        this paragraph. Such amount shall be computed 
        separately (i) for all items of oxygen and oxygen 
        equipment (other than portable oxygen equipment) and 
        (ii) for portable oxygen equipment (each such group 
        referred to in this paragraph as an ``item'').
                  (A) Computation of local monthly payment 
                rate.--Each carrier under this section shall 
                compute a base local payment rate for each item 
                as follows:
                          (i) The carrier shall compute a base 
                        local average monthly payment rate per 
                        beneficiary as an amount equal to (I) 
                        the total reasonable charges for the 
                        item during the 12-month period ending 
                        with December 1986, divided by (II) the 
                        total number of months for all 
                        beneficiaries receiving the item in the 
                        area during the 12-month period for 
                        which the carrier made payment for the 
                        item under this title.
                          (ii) The carrier shall compute a 
                        local average monthly payment rate for 
                        the item applicable--
                                  (I) to 1989 and 1990, equal 
                                to 95 percent of the base local 
                                average monthly payment rate 
                                computed under clause (i) for 
                                the item increased by the 
                                percentage increase in the 
                                consumer price index for all 
                                urban consumers (U.S. city 
                                average) for the 6-month period 
                                ending with December 1987, or
                                  (II) to 1991, 1992, 1993, and 
                                1994 equal to the local average 
                                monthly payment rate computed 
                                under this clause for the item 
                                for the previous year increased 
                                by the covered item increase 
                                for the year.
                  (B) Computation of national limited monthly 
                payment rate.--With respect to the furnishing 
                of an item in a year, the Secretary shall 
                compute a national limited monthly payment rate 
                equal to--
                          (i) for 1991, the local monthly 
                        payment rate computed under 
                        subparagraph (A)(ii)(II) for the item 
                        for the year, except that such national 
                        limited monthly payment rate may not 
                        exceed 100 percent of the weighted 
                        average of all local monthly payment 
                        rates computed for the item under such 
                        subparagraph for the year, and may not 
                        be less than 85 percent of the weighted 
                        average of all local monthly payment 
                        rates computed for the item under such 
                        subparagraph for the year;
                          (ii) for 1992 and 1993, the amount 
                        determined under this subparagraph for 
                        the preceding year increased by the 
                        covered item update for such subsequent 
                        year;
                          (iii) for 1994, the local monthly 
                        payment rate computed under 
                        subparagraph (A)(ii) for the item for 
                        the year, except that such national 
                        limited monthly payment rate may not 
                        exceed 100 percent of the median of all 
                        local monthly payment rates computed 
                        for the item under such subparagraph 
                        for the year and may not be less than 
                        85 percent of the median of all local 
                        monthly payment rates computed for the 
                        item under such subparagraph for the 
                        year;
                          (iv) for 1995, 1996, and 1997, equal 
                        to the amount determined under this 
                        subparagraph for the preceding year 
                        increased by the covered item update 
                        for such subsequent year;
                          (v) for 1998, 75 percent of the 
                        amount determined under this 
                        subparagraph for 1997; and
                          (vi) for 1999 and each subsequent 
                        year, 70 percent of the amount 
                        determined under this subparagraph for 
                        1997.
                  (C) Monthly payment amount recognized.--For 
                purposes of paragraph (5), the amount that is 
                recognized under this paragraph as the base 
                monthly payment amount for each item 
                furnished--
                          (i) in 1989 and in 1990, is 100 
                        percent of the local average monthly 
                        payment rate computed under 
                        subparagraph (A)(ii) for the item;
                          (ii) in 1991, is the sum of (I) 67 
                        percent of the local average monthly 
                        payment rate computed under 
                        subparagraph (A)(ii)(II) for the item 
                        for 1991, and (II) 33 percent of the 
                        national limited monthly payment rate 
                        computed under subparagraph (B)(i) for 
                        the item for 1991;
                          (iii) in 1992, is the sum of (I) 33 
                        percent of the local average monthly 
                        payment rate computed under 
                        subparagraph (A)(ii)(II) for the item 
                        for 1992, and (II) 67 percent of the 
                        national limited monthly payment rate 
                        computed under subparagraph (B)(ii) for 
                        the item for 1992; and
                          (iv) in a subsequent year, is the 
                        national limited monthly payment rate 
                        computed under subparagraph (B) for the 
                        item for that year.
          (10) Exceptions and adjustments.--
                  (A) Areas outside continental united 
                states.--Exceptions to the amounts recognized 
                under the previous provisions of this 
                subsection shall be made to take into account 
                the unique circumstances of covered items 
                furnished in Alaska, Hawaii, or Puerto Rico.
                  (B) Adjustment for inherent reasonableness.--
                The Secretary is authorized to apply the 
                provisions of paragraphs (8) and (9) of section 
                1842(b) to covered items and suppliers of such 
                items and payments under this subsection in an 
                area and with respect to covered items and 
                services for which the Secretary does not make 
                a payment amount adjustment under paragraph 
                (1)(F).
                  (C) Transcutaneous electrical nerve 
                stimulator (tens).--In order to permit an 
                attending physician time to determine whether 
                the purchase of a transcutaneous electrical 
                nerve stimulator is medically appropriate for a 
                particular patient, the Secretary may determine 
                an appropriate payment amount for the initial 
                rental of such item for a period of not more 
                than 2 months. If such item is subsequently 
                purchased, the payment amount with respect to 
                such purchase is the payment amount determined 
                under paragraph (2).
          (11) Improper billing and requirement of physician 
        order.--
                  (A) Improper billing for certain rental 
                items.--Notwithstanding any other provision of 
                this title, a supplier of a covered item for 
                which payment is made under this subsection and 
                which is furnished on a rental basis shall 
                continue to supply the item without charge 
                (other than a charge provided under this 
                subsection for the maintenance and servicing of 
                the item) after rental payments may no longer 
                be made under this subsection. If a supplier 
                knowingly and willfully violates the previous 
                sentence, the Secretary may apply sanctions 
                against the supplier under section 1842(j)(2) 
                in the same manner such sanctions may apply 
                with respect to a physician.
                  (B) Requirement of physician order.--
                          (i) In general.--The Secretary is 
                        authorized to require, for specified 
                        covered items, that payment may be made 
                        under this subsection with respect to 
                        the item only if a physician enrolled 
                        under section 1866(j) or an eligible 
                        professional under section 
                        1848(k)(3)(B) that is enrolled under 
                        section 1866(j) has communicated to the 
                        supplier, before delivery of the item, 
                        a written order for the item.
                          (ii) Requirement for face to face 
                        encounter.--The Secretary shall require 
                        that such an order be written pursuant 
                        to a physician, a physician assistant, 
                        a nurse practitioner, or a clinical 
                        nurse specialist (as those terms are 
                        defined in section 1861(aa)(5)) 
                        documenting such physician, physician 
                        assistant, practitioner, or specialist 
                        has had a face-to-face encounter 
                        (including through use of telehealth 
                        under subsection (m) and other than 
                        with respect to encounters that are 
                        incident to services involved) with the 
                        individual involved during the 6-month 
                        period preceding such written order, or 
                        other reasonable timeframe as 
                        determined by the Secretary.
          (12) Regional carriers.--The Secretary may designate, 
        by regulation under section 1842, one carrier for one 
        or more entire regions to process all claims within the 
        region for covered items under this section.
          (13) Covered item.--In this subsection, the term 
        ``covered item'' means durable medical equipment (as 
        defined in section 1861(n)), including such equipment 
        described in section 1861(m)(5), but not including 
        implantable items for which payment may be made under 
        section 1833(t).
          (14) Covered item update.--In this subsection, the 
        term ``covered item update'' means, with respect to a 
        year--
                  (A) for 1991 and 1992, the percentage 
                increase in the consumer price index for all 
                urban consumers (U.S. city average) for the 12-
                month period ending with June of the previous 
                year reduced by 1 percentage point;
                  (B) for 1993, 1994, 1995, 1996, and 1997, the 
                percentage increase in the consumer price index 
                for all urban consumers (U.S. city average) for 
                the 12-month period ending with June of the 
                previous year;
                  (C) for each of the years 1998 through 2000, 
                0 percentage points;
                  (D) for 2001, the percentage increase in the 
                consumer price index for all urban consumers 
                (U.S. city average) for the 12-month period 
                ending with June 2000;
                  (E) for 2002, 0 percentage points;
                  (F) for 2003, the percentage increase in the 
                consumer price index for all urban consumers 
                (U.S. urban average) for the 12-month period 
                ending with June of 2002;
                  (G) for 2004 through 2006--
                          (i) subject to clause (ii), in the 
                        case of class III medical devices 
                        described in section 513(a)(1)(C) of 
                        the Federal Food, Drug, and Cosmetic 
                        Act (21 U.S.C. 360(c)(1)(C)), the 
                        percentage increase described in 
                        subparagraph (B) for the year involved; 
                        and
                          (ii) in the case of covered items not 
                        described in clause (i), 0 percentage 
                        points;
                  (H) for 2007--
                          (i) subject to clause (ii), in the 
                        case of class III medical devices 
                        described in section 513(a)(1)(C) of 
                        the Federal Food, Drug, and Cosmetic 
                        Act (21 U.S.C. 360(c)(1)(C)), the 
                        percentage change determined by the 
                        Secretary to be appropriate taking into 
                        account recommendations contained in 
                        the report of the Comptroller General 
                        of the United States under section 
                        302(c)(1)(B) of the Medicare 
                        Prescription Drug, Improvement, and 
                        Modernization Act of 2003; and
                          (ii) in the case of covered items not 
                        described in clause (i), 0 percentage 
                        points;
                  (I) for 2008--
                          (i) subject to clause (ii), in the 
                        case of class III medical devices 
                        described in section 513(a)(1)(C) of 
                        the Federal Food, Drug, and Cosmetic 
                        Act (21 U.S.C. 360(c)(1)(C)), the 
                        percentage increase described in 
                        subparagraph (B) (as applied to the 
                        payment amount for 2007 determined 
                        after the application of the percentage 
                        change under subparagraph (H)(i)); and
                          (ii) in the case of covered items not 
                        described in clause (i), 0 percentage 
                        points;
                  (J) for 2009--
                          (i) in the case of items and services 
                        furnished in any geographic area, if 
                        such items or services were selected 
                        for competitive acquisition in any area 
                        under the competitive acquisition 
                        program under section 
                        1847(a)(1)(B)(i)(I) before July 1, 
                        2008, including related accessories but 
                        only if furnished with such items and 
                        services selected for such competition 
                        and diabetic supplies but only if 
                        furnished through mail order, - 9.5 
                        percent; or
                          (ii) in the case of other items and 
                        services, the percentage increase in 
                        the consumer price index for all urban 
                        consumers (U.S. urban average) for the 
                        12-month period ending with June 2008;
                  (K) for 2010, the percentage increase in the 
                consumer price index for all urban consumers 
                (U.S. urban average) for the 12-month period 
                ending with June of the previous year; and
                  (L) for 2011 and each subsequent year--
                          (i) the percentage increase in the 
                        consumer price index for all urban 
                        consumers (United States city average) 
                        for the 12-month period ending with 
                        June of the previous year, reduced by--
                          (ii) the productivity adjustment 
                        described in section 
                        1886(b)(3)(B)(xi)(II).
        The application of subparagraph (L)(ii) may result in 
        the covered item update under this paragraph being less 
        than 0.0 for a year, and may result in payment rates 
        under this subsection for a year being less than such 
        payment rates for the preceding year.
          (15) Advance determinations of coverage for certain 
        items.--
                  (A) Development of lists of items by 
                secretary.--The Secretary may develop and 
                periodically update a list of items for which 
                payment may be made under this subsection that 
                the Secretary determines, on the basis of prior 
                payment experience, are frequently subject to 
                unnecessary utilization throughout a carrier's 
                entire service area or a portion of such area.
                  (B) Development of lists of suppliers by 
                secretary.--The Secretary may develop and 
                periodically update a list of suppliers of 
                items for which payment may be made under this 
                subsection with respect to whom--
                          (i) the Secretary has found that a 
                        substantial number of claims for 
                        payment under this part for items 
                        furnished by the supplier have been 
                        denied on the basis of the application 
                        of section 1862(a)(1); or
                          (ii) the Secretary has identified a 
                        pattern of overutilization resulting 
                        from the business practice of the 
                        supplier.
                  (C) Determinations of coverage in advance.--A 
                carrier shall determine in advance of delivery 
                of an item whether payment for the item may not 
                be made because the item is not covered or 
                because of the application of section 
                1862(a)(1) if--
                          (i) the item is included on the list 
                        developed by the Secretary under 
                        subparagraph (A);
                          (ii) the item is furnished by a 
                        supplier included on the list developed 
                        by the Secretary under subparagraph 
                        (B); or
                          (iii) the item is a customized item 
                        (other than inexpensive items specified 
                        by the Secretary) and the patient to 
                        whom the item is to be furnished or the 
                        supplier requests that such advance 
                        determination be made.
          (16) Disclosure of information and surety bond.--The 
        Secretary shall not provide for the issuance (or 
        renewal) of a provider number for a supplier of durable 
        medical equipment, for purposes of payment under this 
        part for durable medical equipment furnished by the 
        supplier, unless the supplier provides the Secretary on 
        a continuing basis--
                  (A) with--
                          (i) full and complete information as 
                        to the identity of each person with an 
                        ownership or control interest (as 
                        defined in section 1124(a)(3)) in the 
                        supplier or in any subcontractor (as 
                        defined by the Secretary in 
                        regulations) in which the supplier 
                        directly or indirectly has a 5 percent 
                        or more ownership interest; and
                          (ii) to the extent determined to be 
                        feasible under regulations of the 
                        Secretary, the name of any disclosing 
                        entity (as defined in section 
                        1124(a)(2)) with respect to which a 
                        person with such an ownership or 
                        control interest in the supplier is a 
                        person with such an ownership or 
                        control interest in the disclosing 
                        entity; and
                  (B) with a surety bond in a form specified by 
                the Secretary and in an amount that is not less 
                than $50,000 that the Secretary determines is 
                commensurate with the volume of the billing of 
                the supplier.
        The Secretary may waive the requirement of a bond under 
        subparagraph (B) in the case of a supplier that 
        provides a comparable surety bond under State law. The 
        Secretary, at the Secretary's discretion, may impose 
        the requirements of the first sentence with respect to 
        some or all providers of items or services under part A 
        or some or all suppliers or other persons (other than 
        physicians or other practitioners, as defined in 
        section 1842(b)(18)(C)) who furnish items or services 
        under this part.
          (17) Prohibition against unsolicited telephone 
        contacts by suppliers.--
                  (A) In general.--A supplier of a covered item 
                under this subsection may not contact an 
                individual enrolled under this part by 
                telephone regarding the furnishing of a covered 
                item to the individual unless 1 of the 
                following applies:
                          (i) The individual has given written 
                        permission to the supplier to make 
                        contact by telephone regarding the 
                        furnishing of a covered item.
                          (ii) The supplier has furnished a 
                        covered item to the individual and the 
                        supplier is contacting the individual 
                        only regarding the furnishing of such 
                        covered item.
                          (iii) If the contact is regarding the 
                        furnishing of a covered item other than 
                        a covered item already furnished to the 
                        individual, the supplier has furnished 
                        at least 1 covered item to the 
                        individual during the 15-month period 
                        preceding the date on which the 
                        supplier makes such contact.
                  (B) Prohibiting payment for items furnished 
                subsequent to unsolicited contacts.--If a 
                supplier knowingly contacts an individual in 
                violation of subparagraph (A), no payment may 
                be made under this part for any item 
                subsequently furnished to the individual by the 
                supplier.
                  (C) Exclusion from program for suppliers 
                engaging in pattern of unsolicited contacts.--
                If a supplier knowingly contacts individuals in 
                violation of subparagraph (A) to such an extent 
                that the supplier's conduct establishes a 
                pattern of contacts in violation of such 
                subparagraph, the Secretary shall exclude the 
                supplier from participation in the programs 
                under this Act, in accordance with the 
                procedures set forth in subsections (c), (f), 
                and (g) of section 1128.
          (18) Refund of amounts collected for certain 
        disallowed items.--
                  (A) In general.--If a nonparticipating 
                supplier furnishes to an individual enrolled 
                under this part a covered item for which no 
                payment may be made under this part by reason 
                of paragraph (17)(B), the supplier shall refund 
                on a timely basis to the patient (and shall be 
                liable to the patient for) any amounts 
                collected from the patient for the item, 
                unless--
                          (i) the supplier establishes that the 
                        supplier did not know and could not 
                        reasonably have been expected to know 
                        that payment may not be made for the 
                        item by reason of paragraph (17)(B), or
                          (ii) before the item was furnished, 
                        the patient was informed that payment 
                        under this part may not be made for 
                        that item and the patient has agreed to 
                        pay for that item.
                  (B) Sanctions.--If a supplier knowingly and 
                willfully fails to make refunds in violation of 
                subparagraph (A), the Secretary may apply 
                sanctions against the supplier in accordance 
                with section 1842(j)(2).
                  (C) Notice.--Each carrier with a contract in 
                effect under this part with respect to 
                suppliers of covered items shall send any 
                notice of denial of payment for covered items 
                by reason of paragraph (17)(B) and for which 
                payment is not requested on an assignment-
                related basis to the supplier and the patient 
                involved.
                  (D) Timely basis defined.--A refund under 
                subparagraph (A) is considered to be on a 
                timely basis only if--
                          (i) in the case of a supplier who 
                        does not request reconsideration or 
                        seek appeal on a timely basis, the 
                        refund is made within 30 days after the 
                        date the supplier receives a denial 
                        notice under subparagraph (C), or
                          (ii) in the case in which such a 
                        reconsideration or appeal is taken, the 
                        refund is made within 15 days after the 
                        date the supplier receives notice of an 
                        adverse determination on 
                        reconsideration or appeal.
          (19) Certain upgraded items.--
                  (A) Individual's right to choose upgraded 
                item.--Notwithstanding any other provision of 
                this title, the Secretary may issue regulations 
                under which an individual may purchase or rent 
                from a supplier an item of upgraded durable 
                medical equipment for which payment would be 
                made under this subsection if the item were a 
                standard item.
                  (B) Payments to supplier.--In the case of the 
                purchase or rental of an upgraded item under 
                subparagraph (A)--
                          (i) the supplier shall receive 
                        payment under this subsection with 
                        respect to such item as if such item 
                        were a standard item; and
                          (ii) the individual purchasing or 
                        renting the item shall pay the supplier 
                        an amount equal to the difference 
                        between the supplier's charge and the 
                        amount under clause (i).
                In no event may the supplier's charge for an 
                upgraded item exceed the applicable fee 
                schedule amount (if any) for such item.
                  (C) Consumer protection safeguards.--Any 
                regulations under subparagraph (A) shall 
                provide for consumer protection standards with 
                respect to the furnishing of upgraded equipment 
                under subparagraph (A). Such regulations shall 
                provide for--
                          (i) determination of fair market 
                        prices with respect to an upgraded 
                        item;
                          (ii) full disclosure of the 
                        availability and price of standard 
                        items and proof of receipt of such 
                        disclosure information by the 
                        beneficiary before the furnishing of 
                        the upgraded item;
                          (iii) conditions of participation for 
                        suppliers in the billing arrangement;
                          (iv) sanctions of suppliers who are 
                        determined to engage in coercive or 
                        abusive practices, including exclusion; 
                        and
                          (v) such other safeguards as the 
                        Secretary determines are necessary.
          (20) Identification of quality standards.--
                  (A) In general.--Subject to subparagraph (C), 
                the Secretary shall establish and implement 
                quality standards for suppliers of items and 
                services described in subparagraph (D) to be 
                applied by recognized independent accreditation 
                organizations (as designated under subparagraph 
                (B)) and with which such suppliers shall be 
                required to comply in order to--
                          (i) furnish any such item or service 
                        for which payment is made under this 
                        part; and
                          (ii) receive or retain a provider or 
                        supplier number used to submit claims 
                        for reimbursement for any such item or 
                        service for which payment may be made 
                        under this title.
                  (B) Designation of independent accreditation 
                organizations.--Not later than the date that is 
                1 year after the date on which the Secretary 
                implements the quality standards under 
                subparagraph (A), notwithstanding section 
                1865(a), the Secretary shall designate and 
                approve one or more independent accreditation 
                organizations for purposes of such 
                subparagraph.
                  (C) Quality standards.--The quality standards 
                described in subparagraph (A) may not be less 
                stringent than the quality standards that would 
                otherwise apply if this paragraph did not apply 
                and shall include consumer services standards.
                  (D) Items and services described.--The items 
                and services described in this subparagraph are 
                the following items and services, as the 
                Secretary determines appropriate:
                          (i) Covered items (as defined in 
                        paragraph (13)) for which payment may 
                        otherwise be made under this 
                        subsection.
                          (ii) Prosthetic devices and orthotics 
                        and prosthetics described in section 
                        1834(h)(4).
                          (iii) Items and services described in 
                        section 1842(s)(2).
                  (E) Implementation.--The Secretary may 
                establish by program instruction or otherwise 
                the quality standards under this paragraph, 
                including subparagraph (F), after consultation 
                with representatives of relevant parties. Such 
                standards shall be applied prospectively and 
                shall be published on the Internet website of 
                the Centers for Medicare & Medicaid Services.
                  (F) Application of accreditation 
                requirement.--In implementing quality standards 
                under this paragraph--
                          (i) subject to clause (ii) and 
                        subparagraph (G), the Secretary shall 
                        require suppliers furnishing items and 
                        services described in subparagraph (D) 
                        on or after October 1, 2009, directly 
                        or as a subcontractor for another 
                        entity, to have submitted to the 
                        Secretary evidence of accreditation by 
                        an accreditation organization 
                        designated under subparagraph (B) as 
                        meeting applicable quality standards, 
                        except that the Secretary shall not 
                        require under this clause pharmacies to 
                        obtain such accreditation before 
                        January 1, 2010, except that the 
                        Secretary shall not require a pharmacy 
                        to have submitted to the Secretary such 
                        evidence of accreditation prior to 
                        January 1, 2011; and
                          (ii) in applying such standards and 
                        the accreditation requirement of clause 
                        (i) with respect to eligible 
                        professionals (as defined in section 
                        1848(k)(3)(B)), and including such 
                        other persons, such as orthotists and 
                        prosthetists, as specified by the 
                        Secretary, furnishing such items and 
                        services--
                                  (I) such standards and 
                                accreditation requirement shall 
                                not apply to such professionals 
                                and persons unless the 
                                Secretary determines that the 
                                standards being applied are 
                                designed specifically to be 
                                applied to such professionals 
                                and persons; and
                                  (II) the Secretary may exempt 
                                such professionals and persons 
                                from such standards and 
                                requirement if the Secretary 
                                determines that licensing, 
                                accreditation, or other 
                                mandatory quality requirements 
                                apply to such professionals and 
                                persons with respect to the 
                                furnishing of such items and 
                                services.
                  (G) Application of accreditation requirement 
                to certain pharmacies.--
                          (i) In general.--With respect to 
                        items and services furnished on or 
                        after January 1, 2011, in implementing 
                        quality standards under this 
                        paragraph--
                                  (I) subject to subclause 
                                (II), in applying such 
                                standards and the accreditation 
                                requirement of subparagraph 
                                (F)(i) with respect to 
                                pharmacies described in clause 
                                (ii) furnishing such items and 
                                services, such standards and 
                                accreditation requirement shall 
                                not apply to such pharmacies; 
                                and
                                  (II) the Secretary may apply 
                                to such pharmacies an 
                                alternative accreditation 
                                requirement established by the 
                                Secretary if the Secretary 
                                determines such alternative 
                                accreditation requirement is 
                                more appropriate for such 
                                pharmacies.
                          (ii) Pharmacies described.--A 
                        pharmacy described in this clause is a 
                        pharmacy that meets each of the 
                        following criteria:
                                  (I) The total billings by the 
                                pharmacy for such items and 
                                services under this title are 
                                less than 5 percent of total 
                                pharmacy sales, as determined 
                                based on the average total 
                                pharmacy sales for the previous 
                                3 calendar years, 3 fiscal 
                                years, or other yearly period 
                                specified by the Secretary.
                                  (II) The pharmacy has been 
                                enrolled under section 1866(j) 
                                as a supplier of durable 
                                medical equipment, prosthetics, 
                                orthotics, and supplies, has 
                                been issued (which may include 
                                the renewal of) a provider 
                                number for at least 5 years, 
                                and for which a final adverse 
                                action (as defined in section 
                                424.57(a) of title 42, Code of 
                                Federal Regulations) has not 
                                been imposed in the past 5 
                                years.
                                  (III) The pharmacy submits to 
                                the Secretary an attestation, 
                                in a form and manner, and at a 
                                time, specified by the 
                                Secretary, that the pharmacy 
                                meets the criteria described in 
                                subclauses (I) and (II). Such 
                                attestation shall be subject to 
                                section 1001 of title 18, 
                                United States Code.
                                  (IV) The pharmacy agrees to 
                                submit materials as requested 
                                by the Secretary, or during the 
                                course of an audit conducted on 
                                a random sample of pharmacies 
                                selected annually, to verify 
                                that the pharmacy meets the 
                                criteria described in 
                                subclauses (I) and (II). 
                                Materials submitted under the 
                                preceding sentence shall 
                                include a certification by an 
                                accountant on behalf of the 
                                pharmacy or the submission of 
                                tax returns filed by the 
                                pharmacy during the relevant 
                                periods, as requested by the 
                                Secretary.
          (21) Special payment rule for specified items and 
        supplies.--
                  (A) In general.--Notwithstanding the 
                preceding provisions of this subsection, for 
                specified items and supplies (described in 
                subparagraph (B)) furnished during 2005, the 
                payment amount otherwise determined under this 
                subsection for such specified items and 
                supplies shall be reduced by the percentage 
                difference between--
                          (i) the amount of payment otherwise 
                        determined for the specified item or 
                        supply under this subsection for 2002, 
                        and
                          (ii) the amount of payment for the 
                        specified item or supply under chapter 
                        89 of title 5, United States Code, as 
                        identified in the column entitled 
                        ``Median FEHP Price'' in the table 
                        entitled ``SUMMARY OF MEDICARE PRICES 
                        COMPARED TO VA, MEDICAID, RETAIL, AND 
                        FEHP PRICES FOR 16 ITEMS'' included in 
                        the Testimony of the Inspector General 
                        before the Senate Committee on 
                        Appropriations, June 12, 2002, or any 
                        subsequent report by the Inspector 
                        General.
                  (B) Specified item or supply described.--For 
                purposes of subparagraph (A), a specified item 
                or supply means oxygen and oxygen equipment, 
                standard wheelchairs (including standard power 
                wheelchairs), nebulizers, diabetic supplies 
                consisting of lancets and testing strips, 
                hospital beds, and air mattresses, but only if 
                the HCPCS code for the item or supply is 
                identified in a table referred to in 
                subparagraph (A)(ii).
                  (C) Application of update to special payment 
                amount.--The covered item update under 
                paragraph (14) for specified items and supplies 
                for 2006 and each subsequent year shall be 
                applied to the payment amount under 
                subparagraph (A) unless payment is made for 
                such items and supplies under section 1847.
          (22) Special payment rule for diabetic supplies.--
        Notwithstanding the preceding provisions of this 
        subsection, for purposes of determining the payment 
        amount under this subsection for diabetic supplies 
        furnished on or after the first day of the calendar 
        quarter during 2013 that is at least 30 days after the 
        date of the enactment of this paragraph and before the 
        date described in paragraph (1)(H)(ii), the Secretary 
        shall recalculate and apply the covered item update 
        under paragraph (14) as if subparagraph (J)(i) of such 
        paragraph was amended by striking ``but only if 
        furnished through mail order''.
  (b) Fee Schedules for Radiologist Services.--
          (1) Development.--The Secretary shall develop--
                  (A) a relative value scale to serve as the 
                basis for the payment for radiologist services 
                under this part, and
                  (B) using such scale and appropriate 
                conversion factors and subject to subsection 
                (c)(1)(A), fee schedules (on a regional, 
                statewide, locality, or carrier service area 
                basis) for payment for radiologist services 
                under this part, to be implemented for such 
                services furnished during 1989.
          (2) Consultation.--In carrying out paragraph (1), the 
        Secretary shall regularly consult closely with the 
        Physician Payment Review Commission, the American 
        College of Radiology, and other organizations 
        representing physicians or suppliers who furnish 
        radiologist services and shall share with them the data 
        and data analysis being used to make the determinations 
        under paragraph (1), including data on variations in 
        current medicare payments by geographic area, and by 
        service and physician specialty.
          (3) Considerations.--In developing the relative value 
        scale and fee schedules under paragraph (1), the 
        Secretary--
                  (A) shall take into consideration variations 
                in the cost of furnishing such services among 
                geographic areas and among different sites 
                where services are furnished, and
                  (B) may also take into consideration such 
                other factors respecting the manner in which 
                physicians in different specialties furnish 
                such services as may be appropriate to assure 
                that payment amounts are equitable and designed 
                to promote effective and efficient provision of 
                radiologist services by physicians in the 
                different specialties.
          (4) Savings.--
                  (A) Budget neutral fee schedules.--The 
                Secretary shall develop preliminary fee 
                schedules for 1989, which are designed to 
                result in the same amount of aggregate payments 
                (net of any coinsurance and deductibles under 
                sections 1833(a)(1)(J) and 1833(b)) for 
                radiologist services furnished in 1989 as would 
                have been made if this subsection had not been 
                enacted.
                  (B) Initial savings.--The fee schedules 
                established for payment purposes under this 
                subsection for services furnished in 1989 shall 
                be 97 percent of the amounts permitted under 
                these preliminary fee schedules developed under 
                subparagraph (A).
                  (C)  1990 fee schedules.--For radiologist 
                services (other than portable X-ray services) 
                furnished under this part during 1990, after 
                March 31 of such year, the conversion factors 
                used under this subsection shall be 96 percent 
                of the conversion factors that applied under 
                this subsection as of December 31, 1989.
                  (D)  1991 fee schedules.--For radiologist 
                services (other than portable X-ray services) 
                furnished under this part during 1991, the 
                conversion factors used in a locality under 
                this subsection shall, subject to clause (vii), 
                be reduced to the adjusted conversion factor 
                for the locality determined as follows:
                          (i) National weighted average 
                        conversion factor.--The Secretary shall 
                        estimate the national weighted average 
                        of the conversion factors used under 
                        this subsection for services furnished 
                        during 1990 beginning on April 1, using 
                        the best available data.
                          (ii) Reduced national weighted 
                        average.--The national weighted average 
                        estimated under clause (i) shall be 
                        reduced by 13 percent.
                          (iii) Computation of 1990 locality 
                        index relative to national average.--
                        The Secretary shall establish an index 
                        which reflects, for each locality, the 
                        ratio of the conversion factor used in 
                        the locality under this subsection to 
                        the national weighted average estimated 
                        under clause (i).
                          (iv) Adjusted conversion factor.--The 
                        adjusted conversion factor for the 
                        professional or technical component of 
                        a service in a locality is the sum of 
                        \1/2\ of the locally-adjusted amount 
                        determined under clause (v) and \1/2\ 
                        of the GPCI-adjusted amount determined 
                        under clause (vi).
                          (v) Locally-adjusted amount.--For 
                        purposes of clause (iv), the locally 
                        adjusted amount determined under this 
                        clause is the product of (I) the 
                        national weighted average conversion 
                        factor computed under clause (ii), and 
                        (II) the index value established under 
                        clause (iii) for the locality.
                          (vi) GPCI-adjusted amount.--For 
                        purposes of clause (iv), the GPCI-
                        adjusted amount determined under this 
                        clause is the sum of--
                                  (I) the product of (a) the 
                                portion of the reduced national 
                                weighted average conversion 
                                factor computed under clause 
                                (ii) which is attributable to 
                                physician work and (b) the 
                                geographic work index value for 
                                the locality (specified in 
                                Addendum C to the Model Fee 
                                Schedule for Physician Services 
                                (published on September 4, 
                                1990, 55 Federal Register pp. 
                                36238-36243)); and
                                  (II) the product of (a) the 
                                remaining portion of the 
                                reduced national weighted 
                                average conversion factor 
                                computed under clause (ii), and 
                                (b) the geographic practice 
                                cost index value specified in 
                                section 1842(b)(14)(C)(iv) for 
                                the locality.
                        In applying this clause with respect to 
                        the professional component of a 
                        service, 80 percent of the conversion 
                        factor shall be considered to be 
                        attributable to physician work and with 
                        respect to the technical component of 
                        the service, 0 percent shall be 
                        considered to be attributable to 
                        physician work.
                          (vii) Limits on conversion factor.--
                        The conversion factor to be applied to 
                        a locality to the professional or 
                        technical component of a service shall 
                        not be reduced under this subparagraph 
                        by more than 9.5 percent below the 
                        conversion factor applied in the 
                        locality under subparagraph (C) to such 
                        component, but in no case shall the 
                        conversion factor be less than 60 
                        percent of the national weighted 
                        average of the conversion factors 
                        (computed under clause (i)).
                  (E) Rule for certain scanning services.--In 
                the case of the technical components of 
                magnetic resonance imaging (MRI) services and 
                computer assisted tomography (CAT) services 
                furnished after December 31, 1990, the amount 
                otherwise payable shall be reduced by 10 
                percent.
                  (F) Subsequent updating.--For radiologist 
                services furnished in subsequent years, the fee 
                schedules shall be the schedules for the 
                previous year updated by the percentage 
                increase in the MEI (as defined in section 
                1842(i)(3)) for the year.
                  (G) Nonparticipating physicians and 
                suppliers.--Each fee schedule so established 
                shall provide that the payment rate recognized 
                for nonparticipating physicians and suppliers 
                is equal to the appropriate percent (as defined 
                in section 1842(b)(4)(A)(iv)) of the payment 
                rate recognized for participating physicians 
                and suppliers.
          (5) Limiting charges of nonparticipating physicians 
        and suppliers.--
                  (A) In general.--In the case of radiologist 
                services furnished after January 1, 1989, for 
                which payment is made under a fee schedule 
                under this subsection, if a nonparticipating 
                physician or supplier furnishes the service to 
                an individual entitled to benefits under this 
                part, the physician or supplier may not charge 
                the individual more than the limiting charge 
                (as defined in subparagraph (B)).
                  (B) Limiting charge defined.--In subparagraph 
                (A), the term ``limiting charge'' means, with 
                respect to a service furnished--
                          (i) in 1989, 125 percent of the 
                        amount specified for the service in the 
                        appropriate fee schedule established 
                        under paragraph (1),
                          (ii) in 1990, 120 percent of the 
                        amount specified for the service in the 
                        appropriate fee schedule established 
                        under paragraph (1), and
                          (iii) after 1990, 115 percent of the 
                        amount specified for the service in the 
                        appropriate fee schedule established 
                        under paragraph (1).
                  (C) Enforcement.--If a physician or supplier 
                knowingly and willfully bills in violation of 
                subparagraph (A), the Secretary may apply 
                sanctions against such physician or supplier in 
                accordance with section 1842(j)(2) in the same 
                manner as such sanctions may apply to a 
                physician.
          (6) Radiologist services defined.--For the purposes 
        of this subsection and section 1833(a)(1)(J), the term 
        ``radiologist services'' only includes radiology 
        services performed by, or under the direction or 
        supervision of, a physician--
                  (A) who is certified, or eligible to be 
                certified, by the American Board of Radiology, 
                or
                  (B) for whom radiology services account for 
                at least 50 percent of the total amount of 
                charges made under this part.
  (c) Payment and Standards for Screening Mammography.--
          (1) In general.--With respect to expenses incurred 
        for screening mammography (as defined in section 
        1861(jj)), payment may be made only--
                  (A) for screening mammography conducted 
                consistent with the frequency permitted under 
                paragraph (2); and
                  (B) if the screening mammography is conducted 
                by a facility that has a certificate (or 
                provisional certificate) issued under section 
                354 of the Public Health Service Act.
          (2) Frequency covered.--
                  (A) In general.--Subject to revision by the 
                Secretary under subparagraph (B)--
                          (i) no payment may be made under this 
                        part for screening mammography 
                        performed on a woman under 35 years of 
                        age;
                          (ii) payment may be made under this 
                        part for only one screening mammography 
                        performed on a woman over 34 years of 
                        age, but under 40 years of age; and
                          (iii) in the case of a woman over 39 
                        years of age, payment may not be made 
                        under this part for screening 
                        mammography performed within 11 months 
                        following the month in which a previous 
                        screening mammography was performed.
                  (B) Revision of frequency.--
                          (i) Review.--The Secretary, in 
                        consultation with the Director of the 
                        National Cancer Institute, shall review 
                        periodically the appropriate frequency 
                        for performing screening mammography, 
                        based on age and such other factors as 
                        the Secretary believes to be pertinent.
                          (ii) Revision of frequency.--The 
                        Secretary, taking into consideration 
                        the review made under clause (i), may 
                        revise from time to time the frequency 
                        with which screening mammography may be 
                        paid for under this subsection.
  (d) Frequency Limits and Payment for Colorectal Cancer 
Screening Tests.--
          (1) Screening fecal-occult blood tests.--
                  (A) Payment amount.--The payment amount for 
                colorectal cancer screening tests consisting of 
                screening fecal-occult blood tests is equal to 
                the payment amount established for diagnostic 
                fecal-occult blood tests under section 1833(h).
                  (B) Frequency limit.--No payment may be made 
                under this part for a colorectal cancer 
                screening test consisting of a screening fecal-
                occult blood test--
                          (i) if the individual is under 50 
                        years of age; or
                          (ii) if the test is performed within 
                        the 11 months after a previous 
                        screening fecal-occult blood test.
          (2) Screening flexible sigmoidoscopies.--
                  (A) Fee schedule.--With respect to colorectal 
                cancer screening tests consisting of screening 
                flexible sigmoidoscopies, payment under section 
                1848 shall be consistent with payment under 
                such section for similar or related services.
                  (B) Payment limit.--In the case of screening 
                flexible sigmoidoscopy services, payment under 
                this part shall not exceed such amount as the 
                Secretary specifies, based upon the rates 
                recognized for diagnostic flexible 
                sigmoidoscopy services.
                  (C) Facility payment limit.--
                          (i) In general.--Notwithstanding 
                        subsections (i)(2)(A) and (t) of 
                        section 1833, in the case of screening 
                        flexible sigmoidoscopy services 
                        furnished on or after January 1, 1999, 
                        that--
                                  (I) in accordance with 
                                regulations, may be performed 
                                in an ambulatory surgical 
                                center and for which the 
                                Secretary permits ambulatory 
                                surgical center payments under 
                                this part, and
                                  (II) are performed in an 
                                ambulatory surgical center or 
                                hospital outpatient department,
                        payment under this part shall be based 
                        on the lesser of the amount under the 
                        fee schedule that would apply to such 
                        services if they were performed in a 
                        hospital outpatient department in an 
                        area or the amount under the fee 
                        schedule that would apply to such 
                        services if they were performed in an 
                        ambulatory surgical center in the same 
                        area.
                          (ii) Limitation on coinsurance.--
                        Notwithstanding any other provision of 
                        this title, in the case of a 
                        beneficiary who receives the services 
                        described in clause (i)--
                                  (I) in computing the amount 
                                of any applicable copayment, 
                                the computation of such 
                                coinsurance shall be based upon 
                                the fee schedule under which 
                                payment is made for the 
                                services, and
                                  (II) the amount of such 
                                coinsurance is equal to 25 
                                percent of the payment amount 
                                under the fee schedule 
                                described in subclause (I).
                  (D) Special rule for detected lesions.--If 
                during the course of such screening flexible 
                sigmoidoscopy, a lesion or growth is detected 
                which results in a biopsy or removal of the 
                lesion or growth, payment under this part shall 
                not be made for the screening flexible 
                sigmoidoscopy but shall be made for the 
                procedure classified as a flexible 
                sigmoidoscopy with such biopsy or removal.
                  (E) Frequency limit.--No payment may be made 
                under this part for a colorectal cancer 
                screening test consisting of a screening 
                flexible sigmoidoscopy--
                          (i) if the individual is under 50 
                        years of age; or
                          (ii) if the procedure is performed 
                        within the 47 months after a previous 
                        screening flexible sigmoidoscopy or, in 
                        the case of an individual who is not at 
                        high risk for colorectal cancer, if the 
                        procedure is performed within the 119 
                        months after a previous screening 
                        colonoscopy.
          (3) Screening colonoscopy.--
                  (A) Fee schedule.--With respect to colorectal 
                cancer screening test consisting of a screening 
                colonoscopy, payment under section 1848 shall 
                be consistent with payment amounts under such 
                section for similar or related services.
                  (B) Payment limit.--In the case of screening 
                colonoscopy services, payment under this part 
                shall not exceed such amount as the Secretary 
                specifies, based upon the rates recognized for 
                diagnostic colonoscopy services.
                  (C) Facility payment limit.--
                          (i) In general.--Notwithstanding 
                        subsections (i)(2)(A) and (t) of 
                        section 1833, in the case of screening 
                        colonoscopy services furnished on or 
                        after January 1, 1999, that are 
                        performed in an ambulatory surgical 
                        center or a hospital outpatient 
                        department, payment under this part 
                        shall be based on the lesser of the 
                        amount under the fee schedule that 
                        would apply to such services if they 
                        were performed in a hospital outpatient 
                        department in an area or the amount 
                        under the fee schedule that would apply 
                        to such services if they were performed 
                        in an ambulatory surgical center in the 
                        same area.
                          (ii) Limitation on coinsurance.--
                        Notwithstanding any other provision of 
                        this title, in the case of a 
                        beneficiary who receives the services 
                        described in clause (i)--
                                  (I) in computing the amount 
                                of any applicable coinsurance, 
                                the computation of such 
                                coinsurance shall be based upon 
                                the fee schedule under which 
                                payment is made for the 
                                services, and
                                  (II) the amount of such 
                                coinsurance is equal to 25 
                                percent of the payment amount 
                                under the fee schedule 
                                described in subclause (I).
                  (D) Special rule for detected lesions.--If 
                during the course of such screening 
                colonoscopy, a lesion or growth is detected 
                which results in a biopsy or removal of the 
                lesion or growth, payment under this part shall 
                not be made for the screening colonoscopy but 
                shall be made for the procedure classified as a 
                colonoscopy with such biopsy or removal.
                  (E) Frequency limit.--No payment may be made 
                under this part for a colorectal cancer 
                screening test consisting of a screening 
                colonoscopy for individuals at high risk for 
                colorectal cancer if the procedure is performed 
                within the 23 months after a previous screening 
                colonoscopy or for other individuals if the 
                procedure is performed within the 119 months 
                after a previous screening colonoscopy or 
                within 47 months after a previous screening 
                flexible sigmoidoscopy.
  (e) Accreditation Requirement for Advanced Diagnostic Imaging 
Services.--
          (1) In general.--
                  (A) In general.--Beginning with January 1, 
                2012, with respect to the technical component 
                of advanced diagnostic imaging services for 
                which payment is made under the fee schedule 
                established under section 1848(b) and that are 
                furnished by a supplier, payment may only be 
                made if such supplier is accredited by an 
                accreditation organization designated by the 
                Secretary under paragraph (2)(B)(i).
                  (B) Advanced diagnostic imaging services 
                defined.--In this subsection, the term 
                ``advanced diagnostic imaging services'' 
                includes--
                          (i) diagnostic magnetic resonance 
                        imaging, computed tomography, and 
                        nuclear medicine (including positron 
                        emission tomography); and
                          (ii) such other diagnostic imaging 
                        services, including services described 
                        in section 1848(b)(4)(B) (excluding X-
                        ray, ultrasound, and fluoroscopy), as 
                        specified by the Secretary in 
                        consultation with physician specialty 
                        organizations and other stakeholders.
                  (C) Supplier defined.--In this subsection, 
                the term ``supplier'' has the meaning given 
                such term in section 1861(d).
          (2) Accreditation organizations.--
                  (A) Factors for designation of accreditation 
                organizations.--The Secretary shall consider 
                the following factors in designating 
                accreditation organizations under subparagraph 
                (B)(i) and in reviewing and modifying the list 
                of accreditation organizations designated 
                pursuant to subparagraph (C):
                          (i) The ability of the organization 
                        to conduct timely reviews of 
                        accreditation applications.
                          (ii) Whether the organization has 
                        established a process for the timely 
                        integration of new advanced diagnostic 
                        imaging services into the 
                        organization's accreditation program.
                          (iii) Whether the organization uses 
                        random site visits, site audits, or 
                        other strategies for ensuring 
                        accredited suppliers maintain adherence 
                        to the criteria described in paragraph 
                        (3).
                          (iv) The ability of the organization 
                        to take into account the capacities of 
                        suppliers located in a rural area (as 
                        defined in section 1886(d)(2)(D)).
                          (v) Whether the organization has 
                        established reasonable fees to be 
                        charged to suppliers applying for 
                        accreditation.
                          (vi) Such other factors as the 
                        Secretary determines appropriate.
                  (B) Designation.--Not later than January 1, 
                2010, the Secretary shall designate 
                organizations to accredit suppliers furnishing 
                the technical component of advanced diagnostic 
                imaging services. The list of accreditation 
                organizations so designated may be modified 
                pursuant to subparagraph (C).
                  (C) Review and modification of list of 
                accreditation organizations.--
                          (i) In general.--The Secretary shall 
                        review the list of accreditation 
                        organizations designated under 
                        subparagraph (B) taking into account 
                        the factors under subparagraph (A). 
                        Taking into account the results of such 
                        review, the Secretary may, by 
                        regulation, modify the list of 
                        accreditation organizations designated 
                        under subparagraph (B).
                          (ii) Special rule for accreditations 
                        done prior to removal from list of 
                        designated accreditation 
                        organizations.--In the case where the 
                        Secretary removes an organization from 
                        the list of accreditation organizations 
                        designated under subparagraph (B), any 
                        supplier that is accredited by the 
                        organization during the period 
                        beginning on the date on which the 
                        organization is designated as an 
                        accreditation organization under 
                        subparagraph (B) and ending on the date 
                        on which the organization is removed 
                        from such list shall be considered to 
                        have been accredited by an organization 
                        designated by the Secretary under 
                        subparagraph (B) for the remaining 
                        period such accreditation is in effect.
          (3) Criteria for accreditation.--The Secretary shall 
        establish procedures to ensure that the criteria used 
        by an accreditation organization designated under 
        paragraph (2)(B) to evaluate a supplier that furnishes 
        the technical component of advanced diagnostic imaging 
        services for the purpose of accreditation of such 
        supplier is specific to each imaging modality. Such 
        criteria shall include--
                  (A) standards for qualifications of medical 
                personnel who are not physicians and who 
                furnish the technical component of advanced 
                diagnostic imaging services;
                  (B) standards for qualifications and 
                responsibilities of medical directors and 
                supervising physicians, including standards 
                that recognize the considerations described in 
                paragraph (4);
                  (C) procedures to ensure that equipment used 
                in furnishing the technical component of 
                advanced diagnostic imaging services meets 
                performance specifications;
                  (D) standards that require the supplier have 
                procedures in place to ensure the safety of 
                persons who furnish the technical component of 
                advanced diagnostic imaging services and 
                individuals to whom such services are 
                furnished;
                  (E) standards that require the establishment 
                and maintenance of a quality assurance and 
                quality control program by the supplier that is 
                adequate and appropriate to ensure the 
                reliability, clarity, and accuracy of the 
                technical quality of diagnostic images produced 
                by such supplier; and
                  (F) any other standards or procedures the 
                Secretary determines appropriate.
          (4) Recognition in standards for the evaluation of 
        medical directors and supervising physicians.--The 
        standards described in paragraph (3)(B) shall recognize 
        whether a medical director or supervising physician--
                  (A) in a particular specialty receives 
                training in advanced diagnostic imaging 
                services in a residency program;
                  (B) has attained, through experience, the 
                necessary expertise to be a medical director or 
                a supervising physician;
                  (C) has completed any continuing medical 
                education courses relating to such services; or
                  (D) has met such other standards as the 
                Secretary determines appropriate.
          (5) Rule for accreditations made prior to 
        designation.--In the case of a supplier that is 
        accredited before January 1, 2010, by an accreditation 
        organization designated by the Secretary under 
        paragraph (2)(B) as of January 1, 2010, such supplier 
        shall be considered to have been accredited by an 
        organization designated by the Secretary under such 
        paragraph as of January 1, 2012, for the remaining 
        period such accreditation is in effect.
  (f) Reduction in Payments for Physician Pathology Services 
During 1991.--
          (1) In general.--For physician pathology services 
        furnished under this part during 1991, the prevailing 
        charges used in a locality under this part shall be 7 
        percent below the prevailing charges used in the 
        locality under this part in 1990 after March 31.
          (2) Limitation.--The prevailing charge for the 
        technical and professional components of an physician 
        pathology service furnished by a physician through an 
        independent laboratory shall not be reduced pursuant to 
        paragraph (1) to the extent that such reduction would 
        reduce such prevailing charge below 115 percent of the 
        prevailing charge for the professional component of 
        such service when furnished by a hospital-based 
        physician in the same locality. For purposes of the 
        preceding sentence, an independent laboratory is a 
        laboratory that is independent of a hospital and 
        separate from the attending or consulting physicians' 
        office.
  (g) Payment for Outpatient Critical Access Hospital 
Services.--
          (1) In general.--The amount of payment for outpatient 
        critical access hospital services of a critical access 
        hospital is equal to 101 percent of the reasonable 
        costs of the hospital in providing such services, 
        unless the hospital makes the election under paragraph 
        (2).
          (2) Election of cost-based hospital outpatient 
        service payment plus fee schedule for professional 
        services.--A critical access hospital may elect to be 
        paid for outpatient critical access hospital services 
        amounts equal to the sum of the following, less the 
        amount that such hospital may charge as described in 
        section 1866(a)(2)(A):
                  (A) Facility fee.--With respect to facility 
                services, not including any services for which 
                payment may be made under subparagraph (B), 101 
                percent of the reasonable costs of the critical 
                access hospital in providing such services.
                  (B) Fee schedule for professional services.--
                With respect to professional services otherwise 
                included within outpatient critical access 
                hospital services, 115 percent of such amounts 
                as would otherwise be paid under this part if 
                such services were not included in outpatient 
                critical access hospital services. Subsections 
                (x) and (y) of section 1833 shall not be taken 
                into account in determining the amounts that 
                would otherwise be paid pursuant to the 
                preceding sentence.
        The Secretary may not require, as a condition for 
        applying subparagraph (B) with respect to a critical 
        access hospital, that each physician or other 
        practitioner providing professional services in the 
        hospital must assign billing rights with respect to 
        such services, except that such subparagraph shall not 
        apply to those physicians and practitioners who have 
        not assigned such billing rights.
          (3) Disregarding charges.--The payment amounts under 
        this subsection shall be determined without regard to 
        the amount of the customary or other charge.
          (4) Treatment of clinical diagnostic laboratory 
        services.--No coinsurance, deductible, copayment, or 
        other cost-sharing otherwise applicable under this part 
        shall apply with respect to clinical diagnostic 
        laboratory services furnished as an outpatient critical 
        access hospital service. Nothing in this title shall be 
        construed as providing for payment for clinical 
        diagnostic laboratory services furnished as part of 
        outpatient critical access hospital services, other 
        than on the basis described in this subsection. For 
        purposes of the preceding sentence and section 
        1861(mm)(3), clinical diagnostic laboratory services 
        furnished by a critical access hospital shall be 
        treated as being furnished as part of outpatient 
        critical access services without regard to whether the 
        individual with respect to whom such services are 
        furnished is physically present in the critical access 
        hospital, or in a skilled nursing facility or a clinic 
        (including a rural health clinic) that is operated by a 
        critical access hospital, at the time the specimen is 
        collected.
          (5) Coverage of costs for certain emergency room on-
        call providers.--In determining the reasonable costs of 
        outpatient critical access hospital services under 
        paragraphs (1) and (2)(A), the Secretary shall 
        recognize as allowable costs, amounts (as defined by 
        the Secretary) for reasonable compensation and related 
        costs for physicians, physician assistants, nurse 
        practitioners, and clinical nurse specialists who are 
        on-call (as defined by the Secretary) to provide 
        emergency services but who are not present on the 
        premises of the critical access hospital involved, and 
        are not otherwise furnishing services covered under 
        this title and are not on-call at any other provider or 
        facility.
  (h) Payment for Prosthetic Devices and Orthotics and 
Prosthetics.--
          (1) General rule for payment.--
                  (A) In general.--Payment under this 
                subsection for prosthetic devices and orthotics 
                and prosthetics shall be made in a lump-sum 
                amount for the purchase of the item in an 
                amount equal to 80 percent of the payment basis 
                described in subparagraph (B).
                  (B) Payment basis.--Except as provided in 
                subparagraphs (C), (E), and (H)(i), the payment 
                basis described in this subparagraph is the 
                lesser of--
                          (i) the actual charge for the item; 
                        or
                          (ii) the amount recognized under 
                        paragraph (2) as the purchase price for 
                        the item.
                  (C) Exception for certain public home health 
                agencies.--Subparagraph (B)(i) shall not apply 
                to an item furnished by a public home health 
                agency (or by another home health agency which 
                demonstrates to the satisfaction of the 
                Secretary that a significant portion of its 
                patients are low income) free of charge or at 
                nominal charges to the public.
                  (D) Exclusive payment rule.--Subject to 
                subparagraph (H)(ii), this subsection shall 
                constitute the exclusive provision of this 
                title for payment for prosthetic devices, 
                orthotics, and prosthetics under this part or 
                under part A to a home health agency.
                  (E) Exception for certain items.--Payment for 
                ostomy supplies, tracheostomy supplies, and 
                urologicals shall be made in accordance with 
                subparagraphs (B) and (C) of section 
                1834(a)(2).
                  (F) Special payment rules for certain 
                prosthetics and custom-fabricated orthotics.--
                          (i) In general.--No payment shall be 
                        made under this subsection for an item 
                        of custom-fabricated orthotics 
                        described in clause (ii) or for an item 
                        of prosthetics unless such item is--
                                  (I) furnished by a qualified 
                                practitioner; and
                                  (II) fabricated by a 
                                qualified practitioner or a 
                                qualified supplier at a 
                                facility that meets such 
                                criteria as the Secretary 
                                determines appropriate.
                          (ii) Description of custom-fabricated 
                        item.--
                                  (I) In general.--An item 
                                described in this clause is an 
                                item of custom-fabricated 
                                orthotics that requires 
                                education, training, and 
                                experience to custom-fabricate 
                                and that is included in a list 
                                established by the Secretary in 
                                subclause (II). Such an item 
                                does not include shoes and shoe 
                                inserts.
                                  (II) List of items.--The 
                                Secretary, in consultation with 
                                appropriate experts in 
                                orthotics (including national 
                                organizations representing 
                                manufacturers of orthotics), 
                                shall establish and update as 
                                appropriate a list of items to 
                                which this subparagraph 
                                applies. No item may be 
                                included in such list unless 
                                the item is individually 
                                fabricated for the patient over 
                                a positive model of the 
                                patient.
                          (iii) Qualified practitioner 
                        defined.--In this subparagraph, the 
                        term ``qualified practitioner'' means a 
                        physician or other individual who--
                                  (I) is a qualified physical 
                                therapist or a qualified 
                                occupational therapist;
                                  (II) in the case of a State 
                                that provides for the licensing 
                                of orthotics and prosthetics, 
                                is licensed in orthotics or 
                                prosthetics by the State in 
                                which the item is supplied; or
                                  (III) in the case of a State 
                                that does not provide for the 
                                licensing of orthotics and 
                                prosthetics, is specifically 
                                trained and educated to provide 
                                or manage the provision of 
                                prosthetics and custom-designed 
                                or -fabricated orthotics, and 
                                is certified by the American 
                                Board for Certification in 
                                Orthotics and Prosthetics, Inc. 
                                or by the Board for Orthotist/
                                Prosthetist Certification, or 
                                is credentialed and approved by 
                                a program that the Secretary 
                                determines, in consultation 
                                with appropriate experts in 
                                orthotics and prosthetics, has 
                                training and education 
                                standards that are necessary to 
                                provide such prosthetics and 
                                orthotics.
                          (iv) Qualified supplier defined.--In 
                        this subparagraph, the term ``qualified 
                        supplier'' means any entity that is 
                        accredited by the American Board for 
                        Certification in Orthotics and 
                        Prosthetics, Inc. or by the Board for 
                        Orthotist/Prosthetist Certification, or 
                        accredited and approved by a program 
                        that the Secretary determines has 
                        accreditation and approval standards 
                        that are essentially equivalent to 
                        those of such Board.
                  (G) Replacement of prosthetic devices and 
                parts.--
                          (i) In general.--Payment shall be 
                        made for the replacement of prosthetic 
                        devices which are artificial limbs, or 
                        for the replacement of any part of such 
                        devices, without regard to continuous 
                        use or useful lifetime restrictions if 
                        an ordering physician determines that 
                        the provision of a replacement device, 
                        or a replacement part of such a device, 
                        is necessary because of any of the 
                        following:
                                  (I) A change in the 
                                physiological condition of the 
                                patient.
                                  (II) An irreparable change in 
                                the condition of the device, or 
                                in a part of the device.
                                  (III) The condition of the 
                                device, or the part of the 
                                device, requires repairs and 
                                the cost of such repairs would 
                                be more than 60 percent of the 
                                cost of a replacement device, 
                                or, as the case may be, of the 
                                part being replaced.
                          (ii) Confirmation may be required if 
                        device or part being replaced is less 
                        than 3 years old.--If a physician 
                        determines that a replacement device, 
                        or a replacement part, is necessary 
                        pursuant to clause (i)--
                                  (I) such determination shall 
                                be controlling; and
                                  (II) such replacement device 
                                or part shall be deemed to be 
                                reasonable and necessary for 
                                purposes of section 
                                1862(a)(1)(A);
                        except that if the device, or part, 
                        being replaced is less than 3 years old 
                        (calculated from the date on which the 
                        beneficiary began to use the device or 
                        part), the Secretary may also require 
                        confirmation of necessity of the 
                        replacement device or replacement part, 
                        as the case may be.
                  (H) Application of competitive acquisition to 
                orthotics; limitation of inherent 
                reasonableness authority.--In the case of 
                orthotics described in paragraph (2)(C) of 
                section 1847(a) furnished on or after January 
                1, 2009, subject to subsection (a)(1)(G), that 
                are included in a competitive acquisition 
                program in a competitive acquisition area under 
                such section--
                          (i) the payment basis under this 
                        subsection for such orthotics furnished 
                        in such area shall be the payment basis 
                        determined under such competitive 
                        acquisition program; and
                          (ii) subject to subsection (a)(1)(G), 
                        the Secretary may use information on 
                        the payment determined under such 
                        competitive acquisition programs to 
                        adjust the payment amount otherwise 
                        recognized under subparagraph (B)(ii) 
                        for an area that is not a competitive 
                        acquisition area under section 1847, 
                        and in the case of such adjustment, 
                        paragraphs (8) and (9) of section 
                        1842(b) shall not be applied.
          (2) Purchase price recognized.--For purposes of 
        paragraph (1), the amount that is recognized under this 
        paragraph as the purchase price for prosthetic devices, 
        orthotics, and prosthetics is the amount described in 
        subparagraph (C) of this paragraph, determined as 
        follows:
                  (A) Computation of local purchase price.--
                Each carrier under section 1842 shall compute a 
                base local purchase price for the item as 
                follows:
                          (i) The carrier shall compute a base 
                        local purchase price for each item 
                        equal to the average reasonable charge 
                        in the locality for the purchase of the 
                        item for the 12-month period ending 
                        with June 1987.
                          (ii) The carrier shall compute a 
                        local purchase price, with respect to 
                        the furnishing of each particular 
                        item--
                                  (I) in 1989 and 1990, equal 
                                to the base local purchase 
                                price computed under clause (i) 
                                increased by the percentage 
                                increase in the consumer price 
                                index for all urban consumers 
                                (United States city average) 
                                for the 6-month period ending 
                                with December 1987, or
                                  (II) in 1991, 1992 or 1993, 
                                equal to the local purchase 
                                price computed under this 
                                clause for the previous year 
                                increased by the applicable 
                                percentage increase for the 
                                year.
                  (B) Computation of regional purchase price.--
                With respect to the furnishing of a particular 
                item in each region (as defined by the 
                Secretary), the Secretary shall compute a 
                regional purchase price--
                          (i) for 1992, equal to the average 
                        (weighted by relative volume of all 
                        claims among carriers) of the local 
                        purchase prices for the carriers in the 
                        region computed under subparagraph 
                        (A)(ii)(II) for the year, and
                          (ii) for each subsequent year, equal 
                        to the regional purchase price computed 
                        under this subparagraph for the 
                        previous year increased by the 
                        applicable percentage increase for the 
                        year.
                  (C) Purchase price recognized.--For purposes 
                of paragraph (1) and subject to subparagraph 
                (D), the amount that is recognized under this 
                paragraph as the purchase price for each item 
                furnished--
                          (i) in 1989, 1990, or 1991, is 100 
                        percent of the local purchase price 
                        computed under subparagraph (A)(ii);
                          (ii) in 1992, is the sum of (I) 75 
                        percent of the local purchase price 
                        computed under subparagraph (A)(ii)(II) 
                        for 1992, and (II) 25 percent of the 
                        regional purchase price computed under 
                        subparagraph (B) for 1992;
                          (iii) in 1993, is the sum of (I) 50 
                        percent of the local purchase price 
                        computed under subparagraph (A)(ii)(II) 
                        for 1993, and (II) 50 percent of the 
                        regional purchase price computed under 
                        subparagraph (B) for 1993; and
                          (iv) in 1994 or a subsequent year, is 
                        the regional purchase price computed 
                        under subparagraph (B) for that year.
                  (D) Range on amount recognized.--The amount 
                that is recognized under subparagraph (C) as 
                the purchase price for an item furnished--
                          (i) in 1992, may not exceed 125 
                        percent, and may not be lower than 85 
                        percent, of the average of the purchase 
                        prices recognized under such 
                        subparagraph for all the carrier 
                        service areas in the United States in 
                        that year; and
                          (ii) in a subsequent year, may not 
                        exceed 120 percent, and may not be 
                        lower than 90 percent, of the average 
                        of the purchase prices recognized under 
                        such subparagraph for all the carrier 
                        service areas in the United States in 
                        that year.
          (3) Applicability of certain provisions relating to 
        durable medical equipment.--Paragraphs (12) and (17) 
        and subparagraphs (A) and (B) of paragraph (10) and 
        paragraph (11) of subsection (a) shall apply to 
        prosthetic devices, orthotics, and prosthetics in the 
        same manner as such provisions apply to covered items 
        under such subsection.
          (4) Definitions.--In this subsection--
                  (A) the term ``applicable percentage 
                increase'' means--
                          (i) for 1991, 0 percent;
                          (ii) for 1992 and 1993, the 
                        percentage increase in the consumer 
                        price index for all urban consumers 
                        (United States city average) for the 
                        12-month period ending with June of the 
                        previous year;
                          (iii) for 1994 and 1995, 0 percent;
                          (iv) for 1996 and 1997, the 
                        percentage increase in the consumer 
                        price index for all urban consumers 
                        (United States city average) for the 
                        12-month period ending with June of the 
                        previous year;
                          (v) for each of the years 1998 
                        through 2000, 1 percent;
                          (vi) for 2001, the percentage 
                        increase in the consumer price index 
                        for all urban consumers (U.S. city 
                        average) for the 12-month period ending 
                        with June 2000;
                          (vii) for 2002, 1 percent;
                          (viii) for 2003, the percentage 
                        increase in the consumer price index 
                        for all urban consumers (United States 
                        city average) for the 12-month period 
                        ending with June of the previous year;
                          (ix) for 2004, 2005, and 2006, 0 
                        percent;
                          (x) for for each of 2007 through 
                        2010, the percentage increase in the 
                        consumer price index for all urban 
                        consumers (United States city average) 
                        for the 12-month period ending with 
                        June of the previous year; and
                          (xi) for 2011 and each subsequent 
                        year--
                                  (I) the percentage increase 
                                in the consumer price index for 
                                all urban consumers (United 
                                States city average) for the 
                                12-month period ending with 
                                June of the previous year, 
                                reduced by--
                                  (II) the productivity 
                                adjustment described in section 
                                1886(b)(3)(B)(xi)(II).
                  (B) the term ``prosthetic devices'' has the 
                meaning given such term in section 1861(s)(8), 
                except that such term does not include 
                parenteral and enteral nutrition nutrients, 
                supplies, and equipment and does not include an 
                implantable item for which payment may be made 
                under section 1833(t); and
                  (C) the term ``orthotics and prosthetics'' 
                has the meaning given such term in section 
                1861(s)(9) (and includes shoes described in 
                section 1861(s)(12)), but does not include 
                intraocular lenses or medical supplies 
                (including catheters, catheter supplies, ostomy 
                bags, and supplies related to ostomy care) 
                furnished by a home health agency under section 
                1861(m)(5).
        The application of subparagraph (A)(xi)(II) may result 
        in the applicable percentage increase under 
        subparagraph (A) being less than 0.0 for a year, and 
        may result in payment rates under this subsection for a 
        year being less than such payment rates for the 
        preceding year.
          (5) Documentation created by orthotists and 
        prosthetists.--For purposes of determining the 
        reasonableness and medical necessity of orthotics and 
        prosthetics, documentation created by an orthotist or 
        prosthetist shall be considered part of the 
        individual's medical record to support documentation 
        created by eligible professionals described in section 
        1848(k)(3)(B).
  (i) Payment for Surgical Dressings.--
          (1) In general.--Payment under this subsection for 
        surgical dressings (described in section 1861(s)(5)) 
        shall be made in a lump sum amount for the purchase of 
        the item in an amount equal to 80 percent of the lesser 
        of--
                  (A) the actual charge for the item; or
                  (B) a payment amount determined in accordance 
                with the methodology described in subparagraphs 
                (B) and (C) of subsection (a)(2) (except that 
                in applying such methodology, the national 
                limited payment amount referred to in such 
                subparagraphs shall be initially computed based 
                on local payment amounts using average 
                reasonable charges for the 12-month period 
                ending December 31, 1992, increased by the 
                covered item updates described in such 
                subsection for 1993 and 1994).
          (2) Exceptions.--Paragraph (1) shall not apply to 
        surgical dressings that are--
                  (A) furnished as an incident to a physician's 
                professional service; or
                  (B) furnished by a home health agency.
  (j) Requirements for Suppliers of Medical Equipment and 
Supplies.--
          (1) Issuance and renewal of supplier number.--
                  (A) Payment.--Except as provided in 
                subparagraph (C), no payment may be made under 
                this part after the date of the enactment of 
                the Social Security Act Amendments of 1994 for 
                items furnished by a supplier of medical 
                equipment and supplies unless such supplier 
                obtains (and renews at such intervals as the 
                Secretary may require) a supplier number.
                  (B) Standards for possessing a supplier 
                number.--A supplier may not obtain a supplier 
                number unless--
                          (i) for medical equipment and 
                        supplies furnished on or after the date 
                        of the enactment of the Social Security 
                        Act Amendments of 1994 and before 
                        January 1, 1996, the supplier meets 
                        standards prescribed by the Secretary 
                        in regulations issued on June 18, 1992; 
                        and
                          (ii) for medical equipment and 
                        supplies furnished on or after January 
                        1, 1996, the supplier meets revised 
                        standards prescribed by the Secretary 
                        (in consultation with representatives 
                        of suppliers of medical equipment and 
                        supplies, carriers, and consumers) that 
                        shall include requirements that the 
                        supplier--
                                  (I) comply with all 
                                applicable State and Federal 
                                licensure and regulatory 
                                requirements;
                                  (II) maintain a physical 
                                facility on an appropriate 
                                site;
                                  (III) have proof of 
                                appropriate liability 
                                insurance; and
                                  (IV) meet such other 
                                requirements as the Secretary 
                                may specify.
                  (C) Exception for items furnished as incident 
                to a physician's service.--Subparagraph (A) 
                shall not apply with respect to medical 
                equipment and supplies furnished incident to a 
                physician's service.
                  (D) Prohibition against multiple supplier 
                numbers.--The Secretary may not issue more than 
                one supplier number to any supplier of medical 
                equipment and supplies unless the issuance of 
                more than one number is appropriate to identify 
                subsidiary or regional entities under the 
                supplier's ownership or control.
                  (E) Prohibition against delegation of 
                supplier determinations.--The Secretary may not 
                delegate (other than by contract under section 
                1842) the responsibility to determine whether 
                suppliers meet the standards necessary to 
                obtain a supplier number.
          (2) Certificates of medical necessity.--
                  (A) Limitation on information provided by 
                suppliers on certificates of medical 
                necessity.--
                          (i) In general.--Effective 60 days 
                        after the date of the enactment of the 
                        Social Security Act Amendments of 1994, 
                        a supplier of medical equipment and 
                        supplies may distribute to physicians, 
                        or to individuals entitled to benefits 
                        under this part, a certificate of 
                        medical necessity for commercial 
                        purposes which contains no more than 
                        the following information completed by 
                        the supplier:
                                  (I) An identification of the 
                                supplier and the beneficiary to 
                                whom such medical equipment and 
                                supplies are furnished.
                                  (II) A description of such 
                                medical equipment and supplies.
                                  (III) Any product code 
                                identifying such medical 
                                equipment and supplies.
                                  (IV) Any other administrative 
                                information (other than 
                                information relating to the 
                                beneficiary's medical 
                                condition) identified by the 
                                Secretary.
                          (ii) Information on payment amount 
                        and charges.--If a supplier distributes 
                        a certificate of medical necessity 
                        containing any of the information 
                        permitted to be supplied under clause 
                        (i), the supplier shall also list on 
                        the certificate of medical necessity 
                        the fee schedule amount and the 
                        supplier's charge for the medical 
                        equipment or supplies being furnished 
                        prior to distribution of such 
                        certificate to the physician.
                          (iii) Penalty.--Any supplier of 
                        medical equipment and supplies who 
                        knowingly and willfully distributes a 
                        certificate of medical necessity in 
                        violation of clause (i) or fails to 
                        provide the information required under 
                        clause (ii) is subject to a civil money 
                        penalty in an amount not to exceed 
                        $1,000 for each such certificate of 
                        medical necessity so distributed. The 
                        provisions of section 1128A (other than 
                        subsections (a) and (b)) shall apply to 
                        civil money penalties under this 
                        subparagraph in the same manner as they 
                        apply to a penalty or proceeding under 
                        section 1128A(a).
                  (B) Definition.--For purposes of this 
                paragraph, the term ``certificate of medical 
                necessity'' means a form or other document 
                containing information required by the carrier 
                to be submitted to show that an item is 
                reasonable and necessary for the diagnosis or 
                treatment of illness or injury or to improve 
                the functioning of a malformed body member.
          (3) Coverage and review criteria.--The Secretary 
        shall annually review the coverage and utilization of 
        items of medical equipment and supplies to determine 
        whether such items should be made subject to coverage 
        and utilization review criteria, and if appropriate, 
        shall develop and apply such criteria to such items.
          (4) Limitation on patient liability.--If a supplier 
        of medical equipment and supplies (as defined in 
        paragraph (5))--
                  (A) furnishes an item or service to a 
                beneficiary for which no payment may be made by 
                reason of paragraph (1);
                  (B) furnishes an item or service to a 
                beneficiary for which payment is denied in 
                advance under subsection (a)(15); or
                  (C) furnishes an item or service to a 
                beneficiary for which payment is denied under 
                section 1862(a)(1);
        any expenses incurred for items and services furnished 
        to an individual by such a supplier not on an assigned 
        basis shall be the responsibility of such supplier. The 
        individual shall have no financial responsibility for 
        such expenses and the supplier shall refund on a timely 
        basis to the individual (and shall be liable to the 
        individual for) any amounts collected from the 
        individual for such items or services. The provisions 
        of subsection (a)(18) shall apply to refunds required 
        under the previous sentence in the same manner as such 
        provisions apply to refunds under such subsection.
          (5) Definition.--The term ``medical equipment and 
        supplies'' means--
                  (A) durable medical equipment (as defined in 
                section 1861(n));
                  (B) prosthetic devices (as described in 
                section 1861(s)(8));
                  (C) orthotics and prosthetics (as described 
                in section 1861(s)(9));
                  (D) surgical dressings (as described in 
                section 1861(s)(5));
                  (E) such other items as the Secretary may 
                determine; and
                  (F) for purposes of paragraphs (1) and (3)--
                          (i) home dialysis supplies and 
                        equipment (as described in section 
                        1861(s)(2)(F)),
                          (ii) immunosuppressive drugs (as 
                        described in section 1861(s)(2)(J)),
                          (iii) therapeutic shoes for diabetics 
                        (as described in section 1861(s)(12)),
                          (iv) oral drugs prescribed for use as 
                        an anticancer therapeutic agent (as 
                        described in section 1861(s)(2)(Q)), 
                        and
                          (v) self-administered erythropoetin 
                        (as described in section 
                        1861(s)(2)(P)).
  (k) Payment for Outpatient Therapy Services and Comprehensive 
Outpatient Rehabilitation Services.--
          (1) In general.--With respect to services described 
        in section 1833(a)(8) or 1833(a)(9) for which payment 
        is determined under this subsection, the payment basis 
        shall be--
                  (A) for services furnished during 1998, the 
                amount determined under paragraph (2); or
                  (B) for services furnished during a 
                subsequent year, 80 percent of the lesser of--
                          (i) the actual charge for the 
                        services, or
                          (ii) the applicable fee schedule 
                        amount (as defined in paragraph (3)) 
                        for the services.
          (2) Payment in 1998 based upon adjusted reasonable 
        costs.--The amount under this paragraph for services is 
        the lesser of--
                  (A) the charges imposed for the services, or
                  (B) the adjusted reasonable costs (as defined 
                in paragraph (4)) for the services,
        less 20 percent of the amount of the charges imposed 
        for such services.
          (3) Applicable fee schedule amount.--In this 
        subsection, the term ``applicable fee schedule amount'' 
        means, with respect to services furnished in a year, 
        the amount determined under the fee schedule 
        established under section 1848 for such services 
        furnished during the year or, if there is no such fee 
        schedule established for such services, the amount 
        determined under the fee schedule established for such 
        comparable services as the Secretary specifies.
          (4) Adjusted reasonable costs.--In paragraph (2), the 
        term ``adjusted reasonable costs'' means, with respect 
        to any services, reasonable costs determined for such 
        services, reduced by 10 percent. The 10-percent 
        reduction shall not apply to services described in 
        section 1833(a)(8)(B) (relating to services provided by 
        hospitals).
          (5) Uniform coding.--For claims for services 
        submitted on or after April 1, 1998, for which the 
        amount of payment is determined under this subsection, 
        the claim shall include a code (or codes) under a 
        uniform coding system specified by the Secretary that 
        identifies the services furnished.
          (6) Restraint on billing.--The provisions of 
        subparagraphs (A) and (B) of section 1842(b)(18) shall 
        apply to therapy services for which payment is made 
        under this subsection in the same manner as they apply 
        to services provided by a practitioner described in 
        section 1842(b)(18)(C).
          (7) Adjustment in discount for certain multiple 
        therapy services.--In the case of therapy services 
        furnished on or after April 1, 2013, and for which 
        payment is made under this subsection pursuant to the 
        applicable fee schedule amount (as defined in paragraph 
        (3)), instead of the 25 percent multiple procedure 
        payment reduction specified in the final rule published 
        by the Secretary in the Federal Register on November 
        29, 2010, the reduction percentage shall be 50 percent.
  (l) Establishment of Fee Schedule for Ambulance Services.--
          (1) In general.--The Secretary shall establish a fee 
        schedule for payment for ambulance services whether 
        provided directly by a supplier or provider or under 
        arrangement with a provider under this part through a 
        negotiated rulemaking process described in title 5, 
        United States Code, and in accordance with the 
        requirements of this subsection.
          (2) Considerations.--In establishing such fee 
        schedule, the Secretary shall--
                  (A) establish mechanisms to control increases 
                in expenditures for ambulance services under 
                this part;
                  (B) establish definitions for ambulance 
                services which link payments to the type of 
                services provided;
                  (C) consider appropriate regional and 
                operational differences;
                  (D) consider adjustments to payment rates to 
                account for inflation and other relevant 
                factors; and
                  (E) phase in the application of the payment 
                rates under the fee schedule in an efficient 
                and fair manner consistent with paragraph (11), 
                except that such phase-in shall provide for 
                full payment of any national mileage rate for 
                ambulance services provided by suppliers that 
                are paid by carriers in any of the 50 States 
                where payment by a carrier for such services 
                for all such suppliers in such State did not, 
                prior to the implementation of the fee 
                schedule, include a separate amount for all 
                mileage within the county from which the 
                beneficiary is transported.
          (3) Savings.--In establishing such fee schedule, the 
        Secretary shall--
                  (A) ensure that the aggregate amount of 
                payments made for ambulance services under this 
                part during 2000 does not exceed the aggregate 
                amount of payments which would have been made 
                for such services under this part during such 
                year if the amendments made by section 4531(a) 
                of the Balanced Budget Act of 1997 continued in 
                effect, except that in making such 
                determination the Secretary shall assume an 
                update in such payments for 2002 equal to 
                percentage increase in the consumer price index 
                for all urban consumers (U.S. city average) for 
                the 12-month period ending with June of the 
                previous year reduced in the case of 2002 by 
                1.0 percentage points;
                  (B) set the payment amounts provided under 
                the fee schedule for services furnished in 2001 
                and each subsequent year at amounts equal to 
                the payment amounts under the fee schedule for 
                services furnished during the previous year, 
                increased, subject to subparagraph (C) and the 
                succeeding sentence of this paragraph, by the 
                percentage increase in the consumer price index 
                for all urban consumers (U.S. city average) for 
                the 12-month period ending with June of the 
                previous year reduced in the case of 2002 by 
                1.0 percentage points; and
                  (C) for 2011 and each subsequent year, after 
                determining the percentage increase under 
                subparagraph (B) for the year, reduce such 
                percentage increase by the productivity 
                adjustment described in section 
                1886(b)(3)(B)(xi)(II).
        The application of subparagraph (C) may result in the 
        percentage increase under subparagraph (B) being less 
        than 0.0 for a year, and may result in payment rates 
        under the fee schedule under this subsection for a year 
        being less than such payment rates for the preceding 
        year.
          (4) Consultation.--In establishing the fee schedule 
        for ambulance services under this subsection, the 
        Secretary shall consult with various national 
        organizations representing individuals and entities who 
        furnish and regulate ambulance services and share with 
        such organizations relevant data in establishing such 
        schedule.
          (5) Limitation on review.--There shall be no 
        administrative or judicial review under section 1869 or 
        otherwise of the amounts established under the fee 
        schedule for ambulance services under this subsection, 
        including matters described in paragraph (2).
          (6) Restraint on billing.--The provisions of 
        subparagraphs (A) and (B) of section 1842(b)(18) shall 
        apply to ambulance services for which payment is made 
        under this subsection in the same manner as they apply 
        to services provided by a practitioner described in 
        section 1842(b)(18)(C).
          (7) Coding system.--The Secretary may require the 
        claim for any services for which the amount of payment 
        is determined under this subsection to include a code 
        (or codes) under a uniform coding system specified by 
        the Secretary that identifies the services furnished.
          (8) Services furnished by critical access 
        hospitals.--Notwithstanding any other provision of this 
        subsection, the Secretary shall pay 101 percent of the 
        reasonable costs incurred in furnishing ambulance 
        services if such services are furnished--
                  (A) by a critical access hospital (as defined 
                in section 1861(mm)(1)), or
                  (B) by an entity that is owned and operated 
                by a critical access hospital,
        but only if the critical access hospital or entity is 
        the only provider or supplier of ambulance services 
        that is located within a 35-mile drive of such critical 
        access hospital.
          (9) Transitional assistance for rural providers.--In 
        the case of ground ambulance services furnished on or 
        after July 1, 2001, and before January 1, 2004, for 
        which the transportation originates in a rural area (as 
        defined in section 1886(d)(2)(D)) or in a rural census 
        tract of a metropolitan statistical area (as determined 
        under the most recent modification of the Goldsmith 
        Modification, originally published in the Federal 
        Register on February 27, 1992 (57 Fed. Reg. 6725)), the 
        fee schedule established under this subsection shall 
        provide that, with respect to the payment rate for 
        mileage for a trip above 17 miles, and up to 50 miles, 
        the rate otherwise established shall be increased by 
        not less than \1/2\ of the additional payment per mile 
        established for the first 17 miles of such a trip 
        originating in a rural area.
          (10) Phase-in providing floor using blend of fee 
        schedule and regional fee schedules.--In carrying out 
        the phase-in under paragraph (2)(E) for each level of 
        ground service furnished in a year, the portion of the 
        payment amount that is based on the fee schedule shall 
        be the greater of the amount determined under such fee 
        schedule (without regard to this paragraph) or the 
        following blended rate of the fee schedule under 
        paragraph (1) and of a regional fee schedule for the 
        region involved:
                  (A) For 2004 (for services furnished on or 
                after July 1, 2004), the blended rate shall be 
                based 20 percent on the fee schedule under 
                paragraph (1) and 80 percent on the regional 
                fee schedule.
                  (B) For 2005, the blended rate shall be based 
                40 percent on the fee schedule under paragraph 
                (1) and 60 percent on the regional fee 
                schedule.
                  (C) For 2006, the blended rate shall be based 
                60 percent on the fee schedule under paragraph 
                (1) and 40 percent on the regional fee 
                schedule.
                  (D) For 2007, 2008, and 2009, the blended 
                rate shall be based 80 percent on the fee 
                schedule under paragraph (1) and 20 percent on 
                the regional fee schedule.
                  (E) For 2010 and each succeeding year, the 
                blended rate shall be based 100 percent on the 
                fee schedule under paragraph (1).
        For purposes of this paragraph, the Secretary shall 
        establish a regional fee schedule for each of the nine 
        census divisions (referred to in section 1886(d)(2)) 
        using the methodology (used in establishing the fee 
        schedule under paragraph (1)) to calculate a regional 
        conversion factor and a regional mileage payment rate 
        and using the same payment adjustments and the same 
        relative value units as used in the fee schedule under 
        such paragraph.
          (11) Adjustment in payment for certain long trips.--
        In the case of ground ambulance services furnished on 
        or after July 1, 2004, and before January 1, 2009, 
        regardless of where the transportation originates, the 
        fee schedule established under this subsection shall 
        provide that, with respect to the payment rate for 
        mileage for a trip above 50 miles the per mile rate 
        otherwise established shall be increased by \1/4\ of 
        the payment per mile otherwise applicable to miles in 
        excess of 50 miles in such trip.
          (12) Assistance for rural providers furnishing 
        services in low population density areas.--
                  (A) In general.--In the case of ground 
                ambulance services furnished on or after July 
                1, 2004, and before January 1, 2023, for which 
                the transportation originates in a qualified 
                rural area (identified under subparagraph 
                (B)(iii)), the Secretary shall provide for a 
                percent increase in the base rate of the fee 
                schedule for a trip established under this 
                subsection. In establishing such percent 
                increase, the Secretary shall estimate the 
                average cost per trip for such services (not 
                taking into account mileage) in the lowest 
                quartile as compared to the average cost per 
                trip for such services (not taking into account 
                mileage) in the highest quartile of all rural 
                county populations.
                  (B) Identification of qualified rural 
                areas.--
                          (i) Determination of population 
                        density in area.--Based upon data from 
                        the United States decennial census for 
                        the year 2000, the Secretary shall 
                        determine, for each rural area, the 
                        population density for that area.
                          (ii) Ranking of areas.--The Secretary 
                        shall rank each such area based on such 
                        population density.
                          (iii) Identification of qualified 
                        rural areas.--The Secretary shall 
                        identify those areas (in subparagraph 
                        (A) referred to as ``qualified rural 
                        areas'') with the lowest population 
                        densities that represent, if each such 
                        area were weighted by the population of 
                        such area (as used in computing such 
                        population densities), an aggregate 
                        total of 25 percent of the total of the 
                        population of all such areas.
                          (iv) Rural area.--For purposes of 
                        this paragraph, the term ``rural area'' 
                        has the meaning given such term in 
                        section 1886(d)(2)(D). If feasible, the 
                        Secretary shall treat a rural census 
                        tract of a metropolitan statistical 
                        area (as determined under the most 
                        recent modification of the Goldsmith 
                        Modification, originally published in 
                        the Federal Register on February 27, 
                        1992 (57 Fed. Reg. 6725) as a rural 
                        area for purposes of this paragraph.
                          (v) Judicial review.--There shall be 
                        no administrative or judicial review 
                        under section 1869, 1878, or otherwise, 
                        respecting the identification of an 
                        area under this subparagraph.
          (13) Temporary increase for ground ambulance 
        services.--
                  (A) In general.--After computing the rates 
                with respect to ground ambulance services under 
                the other applicable provisions of this 
                subsection, in the case of such services 
                furnished on or after July 1, 2004, and before 
                January 1, 2007, and for such services 
                furnished on or after July 1, 2008, and before 
                January 1, 2023, for which the transportation 
                originates in--
                          (i) a rural area described in 
                        paragraph (9) or in a rural census 
                        tract described in such paragraph, the 
                        fee schedule established under this 
                        section shall provide that the rate for 
                        the service otherwise established, 
                        after the application of any increase 
                        under paragraphs (11) and (12), shall 
                        be increased by 2 percent (or 3 percent 
                        if such service is furnished on or 
                        after July 1, 2008, and before January 
                        1, 2023); and
                          (ii) an area not described in clause 
                        (i), the fee schedule established under 
                        this subsection shall provide that the 
                        rate for the service otherwise 
                        established, after the application of 
                        any increase under paragraph (11), 
                        shall be increased by 1 percent (or 2 
                        percent if such service is furnished on 
                        or after July 1, 2008, and before 
                        January 1, 2023).
                  (B) Application of increased payments after 
                applicable period.--The increased payments 
                under subparagraph (A) shall not be taken into 
                account in calculating payments for services 
                furnished after the applicable period specified 
                in such subparagraph.
          (14) Providing appropriate coverage of rural air 
        ambulance services.--
                  (A) In general.--The regulations described in 
                section 1861(s)(7) shall provide, to the extent 
                that any ambulance services (whether ground or 
                air) may be covered under such section, that a 
                rural air ambulance service (as defined in 
                subparagraph (C)) is reimbursed under this 
                subsection at the air ambulance rate if the air 
                ambulance service--
                          (i) is reasonable and necessary based 
                        on the health condition of the 
                        individual being transported at or 
                        immediately prior to the time of the 
                        transport; and
                          (ii) complies with equipment and crew 
                        requirements established by the 
                        Secretary.
                  (B) Satisfaction of requirement of medically 
                necessary.--The requirement of subparagraph 
                (A)(i) is deemed to be met for a rural air 
                ambulance service if--
                          (i) subject to subparagraph (D), such 
                        service is requested by a physician or 
                        other qualified medical personnel (as 
                        specified by the Secretary) who 
                        certifies or reasonably determines that 
                        the individual's condition is such that 
                        the time needed to transport the 
                        individual by land or the instability 
                        of transportation by land poses a 
                        threat to the individual's survival or 
                        seriously endangers the individual's 
                        health; or
                          (ii) such service is furnished 
                        pursuant to a protocol that is 
                        established by a State or regional 
                        emergency medical service (EMS) agency 
                        and recognized or approved by the 
                        Secretary under which the use of an air 
                        ambulance is recommended, if such 
                        agency does not have an ownership 
                        interest in the entity furnishing such 
                        service.
                  (C) Rural air ambulance service defined.--For 
                purposes of this paragraph, the term ``rural 
                air ambulance service'' means fixed wing and 
                rotary wing air ambulance service in which the 
                point of pick up of the individual occurs in a 
                rural area (as defined in section 
                1886(d)(2)(D)) or in a rural census tract of a 
                metropolitan statistical area (as determined 
                under the most recent modification of the 
                Goldsmith Modification, originally published in 
                the Federal Register on February 27, 1992 (57 
                Fed. Reg. 6725)).
                  (D) Limitation.--
                          (i) In general.--Subparagraph (B)(i) 
                        shall not apply if there is a financial 
                        or employment relationship between the 
                        person requesting the rural air 
                        ambulance service and the entity 
                        furnishing the ambulance service, or an 
                        entity under common ownership with the 
                        entity furnishing the air ambulance 
                        service, or a financial relationship 
                        between an immediate family member of 
                        such requester and such an entity.
                          (ii) Exception.--Where a hospital and 
                        the entity furnishing rural air 
                        ambulance services are under common 
                        ownership, clause (i) shall not apply 
                        to remuneration (through employment or 
                        other relationship) by the hospital of 
                        the requester or immediate family 
                        member if the remuneration is for 
                        provider-based physician services 
                        furnished in a hospital (as described 
                        in section 1887) which are reimbursed 
                        under part A and the amount of the 
                        remuneration is unrelated directly or 
                        indirectly to the provision of rural 
                        air ambulance services.
          (15) Payment adjustment for non-emergency ambulance 
        transports for esrd beneficiaries.--The fee schedule 
        amount otherwise applicable under the preceding 
        provisions of this subsection shall be reduced by 10 
        percent for ambulance services furnished during the 
        period beginning on October 1, 2013, and ending on 
        September 30, 2018, and by 23 percent for such services 
        furnished on or after October 1, 2018, consisting of 
        non-emergency basic life support services involving 
        transport of an individual with end-stage renal disease 
        for renal dialysis services (as described in section 
        1881(b)(14)(B)) furnished other than on an emergency 
        basis by a provider of services or a renal dialysis 
        facility.
          (16) Prior authorization for repetitive scheduled 
        non-emergent ambulance transports.--
                  (A) In general.--Beginning January 1, 2017, 
                if the expansion to all States of the model of 
                prior authorization described in paragraph (2) 
                of section 515(a) of the Medicare Access and 
                CHIP Reauthorization Act of 2015 meets the 
                requirements described in paragraphs (1) 
                through (3) of section 1115A(c), then the 
                Secretary shall expand such model to all 
                States.
                  (B) Funding.--The Secretary shall use funds 
                made available under section 1893(h)(10) to 
                carry out this paragraph.
                  (C) Clarification regarding budget 
                neutrality.--Nothing in this paragraph may be 
                construed to limit or modify the application of 
                section 1115A(b)(3)(B) to models described in 
                such section, including with respect to the 
                model described in subparagraph (A) and 
                expanded beginning on January 1, 2017, under 
                such subparagraph.
          (17) Submission of cost and other information.--
                  (A) Development of data collection system.--
                The Secretary shall develop a data collection 
                system (which may include use of a cost survey) 
                to collect cost, revenue, utilization, and 
                other information determined appropriate by the 
                Secretary with respect to providers of services 
                (in this paragraph referred to as 
                ``providers'') and suppliers of ground 
                ambulance services. Such system shall be 
                designed to collect information--
                          (i) needed to evaluate the extent to 
                        which reported costs relate to payment 
                        rates under this subsection;
                          (ii) on the utilization of capital 
                        equipment and ambulance capacity, 
                        including information consistent with 
                        the type of information described in 
                        section 1121(a); and
                          (iii) on different types of ground 
                        ambulance services furnished in 
                        different geographic locations, 
                        including rural areas and low 
                        population density areas described in 
                        paragraph (12).
                  (B) Specification of data collection 
                system.--
                          (i) In general.--The Secretary 
                        shall--
                                  (I) not later than December 
                                31, 2019, specify the data 
                                collection system under 
                                subparagraph (A); and
                                  (II) identify the providers 
                                and suppliers of ground 
                                ambulance services that would 
                                be required to submit 
                                information under such data 
                                collection system, including 
                                the representative sample 
                                described in clause (ii).
                          (ii) Determination of representative 
                        sample.--
                                  (I) In general.--Not later 
                                than December 31, 2019, with 
                                respect to the data collection 
                                for the first year under such 
                                system, and for each subsequent 
                                year through 2024, the 
                                Secretary shall determine a 
                                representative sample to submit 
                                information under the data 
                                collection system.
                                  (II) Requirements.--The 
                                sample under subclause (I) 
                                shall be representative of the 
                                different types of providers 
                                and suppliers of ground 
                                ambulance services (such as 
                                those providers and suppliers 
                                that are part of an emergency 
                                service or part of a government 
                                organization) and the 
                                geographic locations in which 
                                ground ambulance services are 
                                furnished (such as urban, 
                                rural, and low population 
                                density areas).
                                  (III) Limitation.--The 
                                Secretary shall not include an 
                                individual provider or supplier 
                                of ground ambulance services in 
                                the sample under subclause (I) 
                                in 2 consecutive years, to the 
                                extent practicable.
                  (C) Reporting of cost information.--For each 
                year, a provider or supplier of ground 
                ambulance services identified by the Secretary 
                under subparagraph (B)(i)(II) as being required 
                to submit information under the data collection 
                system with respect to a period for the year 
                shall submit to the Secretary information 
                specified under the system. Such information 
                shall be submitted in a form and manner, and at 
                a time, specified by the Secretary for purposes 
                of this subparagraph.
                  (D) Payment reduction for failure to 
                report.--
                          (i) In general.--Beginning January 1, 
                        2022, subject to clause (ii), a 10 
                        percent reduction to payments under 
                        this subsection shall be made for the 
                        applicable period (as defined in clause 
                        (ii)) to a provider or supplier of 
                        ground ambulance services that--
                                  (I) is required to submit 
                                information under the data 
                                collection system with respect 
                                to a period under subparagraph 
                                (C); and
                                  (II) does not sufficiently 
                                submit such information, as 
                                determined by the Secretary.
                          (ii) Applicable period defined.--For 
                        purposes of clause (i), the term 
                        ``applicable period'' means, with 
                        respect to a provider or supplier of 
                        ground ambulance services, a year 
                        specified by the Secretary not more 
                        than 2 years after the end of the 
                        period with respect to which the 
                        Secretary has made a determination 
                        under clause (i)(II) that the provider 
                        or supplier of ground ambulance 
                        services failed to sufficiently submit 
                        information under the data collection 
                        system.
                          (iii) Hardship exemption.--The 
                        Secretary may exempt a provider or 
                        supplier from the payment reduction 
                        under clause (i) with respect to an 
                        applicable period in the event of 
                        significant hardship, such as a natural 
                        disaster, bankruptcy, or other similar 
                        situation that the Secretary determines 
                        interfered with the ability of the 
                        provider or supplier of ground 
                        ambulance services to submit such 
                        information in a timely manner for the 
                        specified period.
                          (iv) Informal review.--The Secretary 
                        shall establish a process under which a 
                        provider or supplier of ground 
                        ambulance services may seek an informal 
                        review of a determination that the 
                        provider or supplier is subject to the 
                        payment reduction under clause (i).
                  (E) Ongoing data collection.--
                          (i) Revision of data collection 
                        system.--The Secretary may, as the 
                        Secretary determines appropriate and, 
                        if available, taking into consideration 
                        the report (or reports) under 
                        subparagraph (F), revise the data 
                        collection system under subparagraph 
                        (A).
                          (ii) Subsequent data collection.--In 
                        order to continue to evaluate the 
                        extent to which reported costs relate 
                        to payment rates under this subsection 
                        and for other purposes the Secretary 
                        deems appropriate, the Secretary shall 
                        require providers and suppliers of 
                        ground ambulance services to submit 
                        information for years after 2024 as the 
                        Secretary determines appropriate, but 
                        in no case less often than once every 3 
                        years.
                  (F) Ground ambulance data collection system 
                study.--
                          (i) In general.--Not later than March 
                        15, 2023, and as determined necessary 
                        by the Medicare Payment Advisory 
                        Commission thereafter, such Commission 
                        shall assess, and submit to Congress a 
                        report on, information submitted by 
                        providers and suppliers of ground 
                        ambulance services through the data 
                        collection system under subparagraph 
                        (A), the adequacy of payments for 
                        ground ambulance services under this 
                        subsection, and geographic variations 
                        in the cost of furnishing such 
                        services.
                          (ii) Contents.--A report under clause 
                        (i) shall contain the following:
                                  (I) An analysis of 
                                information submitted through 
                                the data collection system.
                                  (II) An analysis of any 
                                burden on providers and 
                                suppliers of ground ambulance 
                                services associated with the 
                                data collection system.
                                  (III) A recommendation as to 
                                whether information should 
                                continue to be submitted 
                                through such data collection 
                                system or if such system should 
                                be revised under subparagraph 
                                (E)(i).
                                  (IV) Other information 
                                determined appropriate by the 
                                Commission.
                  (G) Public availability.--The Secretary shall 
                post information on the results of the data 
                collection under this paragraph on the Internet 
                website of the Centers for Medicare & Medicaid 
                Services, as determined appropriate by the 
                Secretary.
                  (H) Implementation.--The Secretary shall 
                implement this paragraph through notice and 
                comment rulemaking.
                  (I) Administration.--Chapter 35 of title 44, 
                United States Code, shall not apply to the 
                collection of information required under this 
                subsection.
                  (J) Limitations on review.--There shall be no 
                administrative or judicial review under section 
                1869, section 1878, or otherwise of the data 
                collection system or identification of 
                respondents under this paragraph.
                  (K) Funding for implementation.--For purposes 
                of carrying out subparagraph (A), the Secretary 
                shall provide for the transfer, from the 
                Federal Supplementary Medical Insurance Trust 
                Fund under section 1841, of $15,000,000 to the 
                Centers for Medicare & Medicaid Services 
                Program Management Account for fiscal year 
                2018. Amounts transferred under this 
                subparagraph shall remain available until 
                expended.
  (m) Payment for Telehealth Services.--
          (1) In general.--The Secretary shall pay for 
        telehealth services that are furnished via a 
        telecommunications system by a physician (as defined in 
        section 1861(r)) or a practitioner (described in 
        section 1842(b)(18)(C)) to an eligible telehealth 
        individual enrolled under this part notwithstanding 
        that the individual physician or practitioner providing 
        the telehealth service is not at the same location as 
        the beneficiary. For purposes of the preceding 
        sentence, in the case of any Federal telemedicine 
        demonstration program conducted in Alaska or Hawaii, 
        the term ``telecommunications system'' includes store-
        and-forward technologies that provide for the 
        asynchronous transmission of health care information in 
        single or multimedia formats.
          (2) Payment amount.--
                  (A) Distant site.--The Secretary shall pay to 
                a physician or practitioner located at a 
                distant site that furnishes a telehealth 
                service to an eligible telehealth individual an 
                amount equal to the amount that such physician 
                or practitioner would have been paid under this 
                title had such service been furnished without 
                the use of a telecommunications system.
                  (B) Facility fee for originating site.--
                          (i) In general.--Subject to clause 
                        (ii) and paragraph (6)(C), with respect 
                        to a telehealth service, subject to 
                        section 1833(a)(1)(U), there shall be 
                        paid to the originating site a facility 
                        fee equal to--
                                  (I) for the period beginning 
                                on October 1, 2001, and ending 
                                on December 31, 2001, and for 
                                2002, $20; and
                                  (II) for a subsequent year, 
                                the facility fee specified in 
                                subclause (I) or this subclause 
                                for the preceding year 
                                increased by the percentage 
                                increase in the MEI (as defined 
                                in section 1842(i)(3)) for such 
                                subsequent year.
                          (ii) No facility fee if originating 
                        site is the home.--No facility fee 
                        shall be paid under this subparagraph 
                        to an originating site described in 
                        paragraph (4)(C)(ii)(X).
                  (C) Telepresenter not required.--Nothing in 
                this subsection shall be construed as requiring 
                an eligible telehealth individual to be 
                presented by a physician or practitioner at the 
                originating site for the furnishing of a 
                service via a telecommunications system, unless 
                it is medically necessary (as determined by the 
                physician or practitioner at the distant site).
          (3) Limitation on beneficiary charges.--
                  (A) Physician and practitioner.--The 
                provisions of section 1848(g) and subparagraphs 
                (A) and (B) of section 1842(b)(18) shall apply 
                to a physician or practitioner receiving 
                payment under this subsection in the same 
                manner as they apply to physicians or 
                practitioners under such sections.
                  (B) Originating site.--The provisions of 
                section 1842(b)(18) shall apply to originating 
                sites receiving a facility fee in the same 
                manner as they apply to practitioners under 
                such section.
          (4) Definitions.--For purposes of this subsection:
                  (A) Distant site.--The term ``distant site'' 
                means the site at which the physician or 
                practitioner is located at the time the service 
                is provided via a telecommunications system.
                  (B) Eligible telehealth individual.--The term 
                ``eligible telehealth individual'' means an 
                individual enrolled under this part who 
                receives a telehealth service furnished at an 
                originating site.
                  (C) Originating site.--
                          (i) In general.--Except as provided 
                        in paragraphs (5), (6), and (7), the 
                        term``originating site'' means only 
                        those sites described in clause (ii) at 
                        which the eligible telehealth 
                        individual is located at the time the 
                        service is furnished via a 
                        telecommunications system and only if 
                        such site is located--
                                  (I) in an area that is 
                                designated as a rural health 
                                professional shortage area 
                                under section 332(a)(1)(A) of 
                                the Public Health Service Act 
                                (42 U.S.C. 254e(a)(1)(A));
                                  (II) in a county that is not 
                                included in a Metropolitan 
                                Statistical Area; or
                                  (III) from an entity that 
                                participates in a Federal 
                                telemedicine demonstration 
                                project that has been approved 
                                by (or receives funding from) 
                                the Secretary of Health and 
                                Human Services as of December 
                                31, 2000.
                          (ii) Sites described.--The sites 
                        referred to in clause (i) are the 
                        following sites:
                                  (I) The office of a physician 
                                or practitioner.
                                  (II) A critical access 
                                hospital (as defined in section 
                                1861(mm)(1)).
                                  (III) A rural health clinic 
                                (as defined in section 
                                1861(aa)(2)).
                                  (IV) A Federally qualified 
                                health center (as defined in 
                                section 1861(aa)(4)).
                                  (V) A hospital (as defined in 
                                section 1861(e)).
                                  (VI) A hospital-based or 
                                critical access hospital-based 
                                renal dialysis center 
                                (including satellites).
                                  (VII) A skilled nursing 
                                facility (as defined in section 
                                1819(a)).
                                  (VIII) A community mental 
                                health center (as defined in 
                                section 1861(ff)(3)(B)).
                                  (IX) A renal dialysis 
                                facility, but only for purposes 
                                of section 1881(b)(3)(B).
                                  (X) The home of an 
                                individual, but only for 
                                purposes of section 
                                1881(b)(3)(B) or telehealth 
                                services described in paragraph 
                                (7).
                  (D) Physician.--The term ``physician'' has 
                the meaning given that term in section 1861(r).
                  (E) Practitioner.--The term ``practitioner'' 
                has the meaning given that term in section 
                1842(b)(18)(C).
                  (F) Telehealth service.--
                          (i) In general.--The term 
                        ``telehealth service'' means 
                        professional consultations, office 
                        visits, and office psychiatry services 
                        (identified as of July 1, 2000, by 
                        HCPCS codes 99241-99275, 99201-99215, 
                        90804-90809, and 90862 (and as 
                        subsequently modified by the 
                        Secretary)), and any additional service 
                        specified by the Secretary.
                          (ii) Yearly update.--The Secretary 
                        shall establish a process that 
                        provides, on an annual basis, for the 
                        addition or deletion of services (and 
                        HCPCS codes), as appropriate, to those 
                        specified in clause (i) for authorized 
                        payment under paragraph (1).
          (5) Treatment of home dialysis monthly esrd-related 
        visit.--The geographic requirements described in 
        paragraph (4)(C)(i) shall not apply with respect to 
        telehealth services furnished on or after January 1, 
        2019, for purposes of section 1881(b)(3)(B), at an 
        originating site described in subclause (VI), (IX), or 
        (X) of paragraph (4)(C)(ii).
          (6) Treatment of stroke telehealth services.--
                  (A) Non-application of originating site 
                requirements.--The requirements described in 
                paragraph (4)(C) shall not apply with respect 
                to telehealth services furnished on or after 
                January 1, 2019, for purposes of diagnosis, 
                evaluation, or treatment of symptoms of an 
                acute stroke, as determined by the Secretary.
                  (B) Inclusion of certain sites.--With respect 
                to telehealth services described in 
                subparagraph (A), the term ``originating site'' 
                shall include any hospital (as defined in 
                section 1861(e)) or critical access hospital 
                (as defined in section 1861(mm)(1)), any mobile 
                stroke unit (as defined by the Secretary), or 
                any other site determined appropriate by the 
                Secretary, at which the eligible telehealth 
                individual is located at the time the service 
                is furnished via a telecommunications system.
                  (C) No originating site facility fee for new 
                sites.--No facility fee shall be paid under 
                paragraph (2)(B) to an originating site with 
                respect to a telehealth service described in 
                subparagraph (A) if the originating site does 
                not otherwise meet the requirements for an 
                originating site under paragraph (4)(C).
          (7) Treatment of substance use disorder services 
        furnished through telehealth.--The geographic 
        requirements described in paragraph (4)(C)(i) shall not 
        apply with respect to telehealth services furnished on 
        or after July 1, 2019, to an eligible telehealth 
        individual with a substance use disorder diagnosis for 
        purposes of treatment of such disorder or co-occurring 
        mental health disorder, as determined by the Secretary, 
        at an originating site described in paragraph 
        (4)(C)(ii) (other than an originating site described in 
        subclause (IX) of such paragraph).
  (n) Authority To Modify or Eliminate Coverage of Certain 
Preventive Services.--Notwithstanding any other provision of 
this title, effective beginning on January 1, 2010, if the 
Secretary determines appropriate, the Secretary may--
          (1) modify--
                  (A) the coverage of any preventive service 
                described in subparagraph (A) of section 
                1861(ddd)(3) to the extent that such 
                modification is consistent with the 
                recommendations of the United States Preventive 
                Services Task Force; and
                  (B) the services included in the initial 
                preventive physical examination described in 
                subparagraph (B) of such section; and
          (2) provide that no payment shall be made under this 
        title for a preventive service described in 
        subparagraph (A) of such section that has not received 
        a grade of A, B, C, or I by such Task Force.
  (o) Development and Implementation of Prospective Payment 
System.--
          (1) Development.--
                  (A) In general.--The Secretary shall develop 
                a prospective payment system for payment for 
                Federally qualified health center services 
                furnished by Federally qualified health centers 
                under this title. Such system shall include a 
                process for appropriately describing the 
                services furnished by Federally qualified 
                health centers and shall establish payment 
                rates for specific payment codes based on such 
                appropriate descriptions of services. Such 
                system shall be established to take into 
                account the type, intensity, and duration of 
                services furnished by Federally qualified 
                health centers. Such system may include 
                adjustments, including geographic adjustments, 
                determined appropriate by the Secretary.
                  (B) Collection of data and evaluation.--By 
                not later than January 1, 2011, the Secretary 
                shall require Federally qualified health 
                centers to submit to the Secretary such 
                information as the Secretary may require in 
                order to develop and implement the prospective 
                payment system under this subsection, including 
                the reporting of services using HCPCS codes.
          (2) Implementation.--
                  (A) In general.--Notwithstanding section 
                1833(a)(3)(A), the Secretary shall provide, for 
                cost reporting periods beginning on or after 
                October 1, 2014, for payments of prospective 
                payment rates for Federally qualified health 
                center services furnished by Federally 
                qualified health centers under this title in 
                accordance with the prospective payment system 
                developed by the Secretary under paragraph (1).
                  (B) Payments.--
                          (i) Initial payments.--The Secretary 
                        shall implement such prospective 
                        payment system so that the estimated 
                        aggregate amount of prospective payment 
                        rates (determined prior to the 
                        application of section 1833(a)(1)(Z)) 
                        under this title for Federally 
                        qualified health center services in the 
                        first year that such system is 
                        implemented is equal to 100 percent of 
                        the estimated amount of reasonable 
                        costs (determined without the 
                        application of a per visit payment 
                        limit or productivity screen and prior 
                        to the application of section 
                        1866(a)(2)(A)(ii)) that would have 
                        occurred for such services under this 
                        title in such year if the system had 
                        not been implemented.
                          (ii) Payments in subsequent years.--
                        Payment rates in years after the year 
                        of implementation of such system shall 
                        be the payment rates in the previous 
                        year increased--
                                  (I) in the first year after 
                                implementation of such system, 
                                by the percentage increase in 
                                the MEI (as defined in section 
                                1842(i)(3)) for the year 
                                involved; and
                                  (II) in subsequent years, by 
                                the percentage increase in a 
                                market basket of Federally 
                                qualified health center goods 
                                and services as promulgated 
                                through regulations, or if such 
                                an index is not available, by 
                                the percentage increase in the 
                                MEI (as defined in section 
                                1842(i)(3)) for the year 
                                involved.
                  (C) Preparation for pps implementation.--
                Notwithstanding any other provision of law, the 
                Secretary may establish and implement by 
                program instruction or otherwise the payment 
                codes to be used under the prospective payment 
                system under this section.
          (3) Additional payments for certain fqhcs with 
        physicians or other practitioners receiving data 2000 
        waivers.--
                  (A) In general.--In the case of a Federally 
                qualified health center with respect to which, 
                beginning on or after January 1, 2019, 
                Federally qualified health center services (as 
                defined in section 1861(aa)(3)) are furnished 
                for the treatment of opioid use disorder by a 
                physician or practitioner who meets the 
                requirements described in subparagraph (C), the 
                Secretary shall, subject to availability of 
                funds under subparagraph (D), make a payment 
                (at such time and in such manner as specified 
                by the Secretary) to such Federally qualified 
                health center after receiving and approving an 
                application submitted by such Federally 
                qualified health center under subparagraph (B). 
                Such a payment shall be in an amount determined 
                by the Secretary, based on an estimate of the 
                average costs of training for purposes of 
                receiving a waiver described in subparagraph 
                (C)(ii). Such a payment may be made only one 
                time with respect to each such physician or 
                practitioner.
                  (B) Application.--In order to receive a 
                payment described in subparagraph (A), a 
                Federally qualified health center shall submit 
                to the Secretary an application for such a 
                payment at such time, in such manner, and 
                containing such information as specified by the 
                Secretary. A Federally qualified health center 
                may apply for such a payment for each physician 
                or practitioner described in subparagraph (A) 
                furnishing services described in such 
                subparagraph at such center.
                  (C) Requirements.--For purposes of 
                subparagraph (A), the requirements described in 
                this subparagraph, with respect to a physician 
                or practitioner, are the following:
                          (i) The physician or practitioner is 
                        employed by or working under contract 
                        with a Federally qualified health 
                        center described in subparagraph (A) 
                        that submits an application under 
                        subparagraph (B).
                          (ii) The physician or practitioner 
                        first receives a waiver under section 
                        303(g) of the Controlled Substances Act 
                        on or after January 1, 2019.
                  (D) Funding.--For purposes of making payments 
                under this paragraph, there are appropriated, 
                out of amounts in the Treasury not otherwise 
                appropriated, $6,000,000, which shall remain 
                available until expended.
  (p) Quality Incentives To Promote Patient Safety and Public 
Health in Computed Tomography.--
          (1) Quality incentives.--In the case of an applicable 
        computed tomography service (as defined in paragraph 
        (2)) for which payment is made under an applicable 
        payment system (as defined in paragraph (3)) and that 
        is furnished on or after January 1, 2016, using 
        equipment that is not consistent with the CT equipment 
        standard (described in paragraph (4)), the payment 
        amount for such service shall be reduced by the 
        applicable percentage (as defined in paragraph (5)).
          (2) Applicable computed tomography services 
        defined.--In this subsection, the term ``applicable 
        computed tomography service'' means a service billed 
        using diagnostic radiological imaging codes for 
        computed tomography (identified as of January 1, 2014, 
        by HCPCS codes 70450-70498, 71250-71275, 72125-72133, 
        72191-72194, 73200-73206, 73700-73706, 74150-74178, 
        74261-74263, and 75571-75574 (and any succeeding 
        codes).
          (3) Applicable payment system defined.--In this 
        subsection, the term ``applicable payment system'' 
        means the following:
                  (A) The technical component and the technical 
                component of the global fee under the fee 
                schedule established under section 1848(b).
                  (B) The prospective payment system for 
                hospital outpatient department services under 
                section 1833(t).
          (4) Consistency with ct equipment standard.--In this 
        subsection, the term ``not consistent with the CT 
        equipment standard'' means, with respect to an 
        applicable computed tomography service, that the 
        service was furnished using equipment that does not 
        meet each of the attributes of the National Electrical 
        Manufacturers Association (NEMA) Standard XR-29-2013, 
        entitled ``Standard Attributes on CT Equipment Related 
        to Dose Optimization and Management''. Through 
        rulemaking, the Secretary may apply successor 
        standards.
          (5) Applicable percentage defined.--In this 
        subsection, the term ``applicable percentage'' means--
                  (A) for 2016, 5 percent; and
                  (B) for 2017 and subsequent years, 15 
                percent.
          (6) Implementation.--
                  (A) Information.--The Secretary shall require 
                that information be provided and attested to by 
                a supplier and a hospital outpatient department 
                that indicates whether an applicable computed 
                tomography service was furnished that was not 
                consistent with the CT equipment standard 
                (described in paragraph (4)). Such information 
                may be included on a claim and may be a 
                modifier. Such information shall be verified, 
                as appropriate, as part of the periodic 
                accreditation of suppliers under section 
                1834(e) and hospitals under section 1865(a).
                  (B) Administration.--Chapter 35 of title 44, 
                United States Code, shall not apply to 
                information described in subparagraph (A).
  (q) Recognizing Appropriate Use Criteria for Certain Imaging 
Services.--
          (1) Program established.--
                  (A) In general.--The Secretary shall 
                establish a program to promote the use of 
                appropriate use criteria (as defined in 
                subparagraph (B)) for applicable imaging 
                services (as defined in subparagraph (C)) 
                furnished in an applicable setting (as defined 
                in subparagraph (D)) by ordering professionals 
                and furnishing professionals (as defined in 
                subparagraphs (E) and (F), respectively).
                  (B) Appropriate use criteria defined.--In 
                this subsection, the term ``appropriate use 
                criteria'' means criteria, only developed or 
                endorsed by national professional medical 
                specialty societies or other provider-led 
                entities, to assist ordering professionals and 
                furnishing professionals in making the most 
                appropriate treatment decision for a specific 
                clinical condition for an individual. To the 
                extent feasible, such criteria shall be 
                evidence-based.
                  (C) Applicable imaging service defined.--In 
                this subsection, the term ``applicable imaging 
                service'' means an advanced diagnostic imaging 
                service (as defined in subsection (e)(1)(B)) 
                for which the Secretary determines--
                          (i) one or more applicable 
                        appropriate use criteria specified 
                        under paragraph (2) apply;
                          (ii) there are one or more qualified 
                        clinical decision support mechanisms 
                        listed under paragraph (3)(C); and
                          (iii) one or more of such mechanisms 
                        is available free of charge.
                  (D) Applicable setting defined.--In this 
                subsection, the term ``applicable setting'' 
                means a physician's office, a hospital 
                outpatient department (including an emergency 
                department), an ambulatory surgical center, and 
                any other provider-led outpatient setting 
                determined appropriate by the Secretary.
                  (E) Ordering professional defined.--In this 
                subsection, the term ``ordering professional'' 
                means a physician (as defined in section 
                1861(r)) or a practitioner described in section 
                1842(b)(18)(C) who orders an applicable imaging 
                service.
                  (F) Furnishing professional defined.--In this 
                subsection, the term ``furnishing 
                professional'' means a physician (as defined in 
                section 1861(r)) or a practitioner described in 
                section 1842(b)(18)(C) who furnishes an 
                applicable imaging service.
          (2) Establishment of applicable appropriate use 
        criteria.--
                  (A) In general.--Not later than November 15, 
                2015, the Secretary shall through rulemaking, 
                and in consultation with physicians, 
                practitioners, and other stakeholders, specify 
                applicable appropriate use criteria for 
                applicable imaging services only from among 
                appropriate use criteria developed or endorsed 
                by national professional medical specialty 
                societies or other provider-led entities.
                  (B) Considerations.--In specifying applicable 
                appropriate use criteria under subparagraph 
                (A), the Secretary shall take into account 
                whether the criteria--
                          (i) have stakeholder consensus;
                          (ii) are scientifically valid and 
                        evidence based; and
                          (iii) are based on studies that are 
                        published and reviewable by 
                        stakeholders.
                  (C) Revisions.--The Secretary shall review, 
                on an annual basis, the specified applicable 
                appropriate use criteria to determine if there 
                is a need to update or revise (as appropriate) 
                such specification of applicable appropriate 
                use criteria and make such updates or revisions 
                through rulemaking.
                  (D) Treatment of multiple applicable 
                appropriate use criteria.--In the case where 
                the Secretary determines that more than one 
                appropriate use criterion applies with respect 
                to an applicable imaging service, the Secretary 
                shall apply one or more applicable appropriate 
                use criteria under this paragraph for the 
                service.
          (3) Mechanisms for consultation with applicable 
        appropriate use criteria.--
                  (A) Identification of mechanisms to consult 
                with applicable appropriate use criteria.--
                          (i) In general.--The Secretary shall 
                        specify qualified clinical decision 
                        support mechanisms that could be used 
                        by ordering professionals to consult 
                        with applicable appropriate use 
                        criteria for applicable imaging 
                        services.
                          (ii) Consultation.--The Secretary 
                        shall consult with physicians, 
                        practitioners, health care technology 
                        experts, and other stakeholders in 
                        specifying mechanisms under this 
                        paragraph.
                          (iii) Inclusion of certain 
                        mechanisms.--Mechanisms specified under 
                        this paragraph may include any or all 
                        of the following that meet the 
                        requirements described in subparagraph 
                        (B)(ii):
                                  (I) Use of clinical decision 
                                support modules in certified 
                                EHR technology (as defined in 
                                section 1848(o)(4)).
                                  (II) Use of private sector 
                                clinical decision support 
                                mechanisms that are independent 
                                from certified EHR technology, 
                                which may include use of 
                                clinical decision support 
                                mechanisms available from 
                                medical specialty 
                                organizations.
                                  (III) Use of a clinical 
                                decision support mechanism 
                                established by the Secretary.
                  (B) Qualified clinical decision support 
                mechanisms.--
                          (i) In general.--For purposes of this 
                        subsection, a qualified clinical 
                        decision support mechanism is a 
                        mechanism that the Secretary determines 
                        meets the requirements described in 
                        clause (ii).
                          (ii) Requirements.--The requirements 
                        described in this clause are the 
                        following:
                                  (I) The mechanism makes 
                                available to the ordering 
                                professional applicable 
                                appropriate use criteria 
                                specified under paragraph (2) 
                                and the supporting 
                                documentation for the 
                                applicable imaging service 
                                ordered.
                                  (II) In the case where there 
                                is more than one applicable 
                                appropriate use criterion 
                                specified under such paragraph 
                                for an applicable imaging 
                                service, the mechanism 
                                indicates the criteria that it 
                                uses for the service.
                                  (III) The mechanism 
                                determines the extent to which 
                                an applicable imaging service 
                                ordered is consistent with the 
                                applicable appropriate use 
                                criteria so specified.
                                  (IV) The mechanism generates 
                                and provides to the ordering 
                                professional a certification or 
                                documentation that documents 
                                that the qualified clinical 
                                decision support mechanism was 
                                consulted by the ordering 
                                professional.
                                  (V) The mechanism is updated 
                                on a timely basis to reflect 
                                revisions to the specification 
                                of applicable appropriate use 
                                criteria under such paragraph.
                                  (VI) The mechanism meets 
                                privacy and security standards 
                                under applicable provisions of 
                                law.
                                  (VII) The mechanism performs 
                                such other functions as 
                                specified by the Secretary, 
                                which may include a requirement 
                                to provide aggregate feedback 
                                to the ordering professional.
                  (C) List of mechanisms for consultation with 
                applicable appropriate use criteria.--
                          (i) Initial list.--Not later than 
                        April 1, 2016, the Secretary shall 
                        publish a list of mechanisms specified 
                        under this paragraph.
                          (ii) Periodic updating of list.--The 
                        Secretary shall identify on an annual 
                        basis the list of qualified clinical 
                        decision support mechanisms specified 
                        under this paragraph.
          (4) Consultation with applicable appropriate use 
        criteria.--
                  (A) Consultation by ordering professional.--
                Beginning with January 1, 2017, subject to 
                subparagraph (C), with respect to an applicable 
                imaging service ordered by an ordering 
                professional that would be furnished in an 
                applicable setting and paid for under an 
                applicable payment system (as defined in 
                subparagraph (D)), an ordering professional 
                shall--
                          (i) consult with a qualified decision 
                        support mechanism listed under 
                        paragraph (3)(C); and
                          (ii) provide to the furnishing 
                        professional the information described 
                        in clauses (i) through (iii) of 
                        subparagraph (B).
                  (B) Reporting by furnishing professional.--
                Beginning with January 1, 2017, subject to 
                subparagraph (C), with respect to an applicable 
                imaging service furnished in an applicable 
                setting and paid for under an applicable 
                payment system (as defined in subparagraph 
                (D)), payment for such service may only be made 
                if the claim for the service includes the 
                following:
                          (i) Information about which qualified 
                        clinical decision support mechanism was 
                        consulted by the ordering professional 
                        for the service.
                          (ii) Information regarding--
                                  (I) whether the service 
                                ordered would adhere to the 
                                applicable appropriate use 
                                criteria specified under 
                                paragraph (2);
                                  (II) whether the service 
                                ordered would not adhere to 
                                such criteria; or
                                  (III) whether such criteria 
                                was not applicable to the 
                                service ordered.
                          (iii) The national provider 
                        identifier of the ordering professional 
                        (if different from the furnishing 
                        professional).
                  (C) Exceptions.--The provisions of 
                subparagraphs (A) and (B) and paragraph (6)(A) 
                shall not apply to the following:
                          (i) Emergency services.--An 
                        applicable imaging service ordered for 
                        an individual with an emergency medical 
                        condition (as defined in section 
                        1867(e)(1)).
                          (ii) Inpatient services.--An 
                        applicable imaging service ordered for 
                        an inpatient and for which payment is 
                        made under part A.
                          (iii) Significant hardship.--An 
                        applicable imaging service ordered by 
                        an ordering professional who the 
                        Secretary may, on a case-by-case basis, 
                        exempt from the application of such 
                        provisions if the Secretary determines, 
                        subject to annual renewal, that 
                        consultation with applicable 
                        appropriate use criteria would result 
                        in a significant hardship, such as in 
                        the case of a professional who 
                        practices in a rural area without 
                        sufficient Internet access.
                  (D) Applicable payment system defined.--In 
                this subsection, the term ``applicable payment 
                system'' means the following:
                          (i) The physician fee schedule 
                        established under section 1848(b).
                          (ii) The prospective payment system 
                        for hospital outpatient department 
                        services under section 1833(t).
                          (iii) The ambulatory surgical center 
                        payment systems under section 1833(i).
          (5) Identification of outlier ordering 
        professionals.--
                  (A) In general.--With respect to applicable 
                imaging services furnished beginning with 2017, 
                the Secretary shall determine, on an annual 
                basis, no more than five percent of the total 
                number of ordering professionals who are 
                outlier ordering professionals.
                  (B) Outlier ordering professionals.--The 
                determination of an outlier ordering 
                professional shall--
                          (i) be based on low adherence to 
                        applicable appropriate use criteria 
                        specified under paragraph (2), which 
                        may be based on comparison to other 
                        ordering professionals; and
                          (ii) include data for ordering 
                        professionals for whom prior 
                        authorization under paragraph (6)(A) 
                        applies.
                  (C) Use of two years of data.--The Secretary 
                shall use two years of data to identify outlier 
                ordering professionals under this paragraph.
                  (D) Process.--The Secretary shall establish a 
                process for determining when an outlier 
                ordering professional is no longer an outlier 
                ordering professional.
                  (E) Consultation with stakeholders.--The 
                Secretary shall consult with physicians, 
                practitioners and other stakeholders in 
                developing methods to identify outlier ordering 
                professionals under this paragraph.
          (6) Prior authorization for ordering professionals 
        who are outliers.--
                  (A) In general.--Beginning January 1, 2020, 
                subject to paragraph (4)(C), with respect to 
                services furnished during a year, the Secretary 
                shall, for a period determined appropriate by 
                the Secretary, apply prior authorization for 
                applicable imaging services that are ordered by 
                an outlier ordering professional identified 
                under paragraph (5).
                  (B) Appropriate use criteria in prior 
                authorization.--In applying prior authorization 
                under subparagraph (A), the Secretary shall 
                utilize only the applicable appropriate use 
                criteria specified under this subsection.
                  (C) Funding.--For purposes of carrying out 
                this paragraph, the Secretary shall provide for 
                the transfer, from the Federal Supplementary 
                Medical Insurance Trust Fund under section 
                1841, of $5,000,000 to the Centers for Medicare 
                & Medicaid Services Program Management Account 
                for each of fiscal years 2019 through 2021. 
                Amounts transferred under the preceding 
                sentence shall remain available until expended.
          (7) Construction.--Nothing in this subsection shall 
        be construed as granting the Secretary the authority to 
        develop or initiate the development of clinical 
        practice guidelines or appropriate use criteria.
  (r) Payment for Renal Dialysis Services for Individuals With 
Acute Kidney Injury.--
          (1) Payment rate.--In the case of renal dialysis 
        services (as defined in subparagraph (B) of section 
        1881(b)(14)) furnished under this part by a renal 
        dialysis facility or provider of services paid under 
        such section during a year (beginning with 2017) to an 
        individual with acute kidney injury (as defined in 
        paragraph (2)), the amount of payment under this part 
        for such services shall be the base rate for renal 
        dialysis services determined for such year under such 
        section, as adjusted by any applicable geographic 
        adjustment factor applied under subparagraph 
        (D)(iv)(II) of such section and may be adjusted by the 
        Secretary (on a budget neutral basis for payments under 
        this paragraph) by any other adjustment factor under 
        subparagraph (D) of such section.
          (2) Individual with acute kidney injury defined.--In 
        this subsection, the term ``individual with acute 
        kidney injury'' means an individual who has acute loss 
        of renal function and does not receive renal dialysis 
        services for which payment is made under section 
        1881(b)(14).
  (s) Payment for Applicable Disposable Devices.--
          (1) Separate payment.--The Secretary shall make a 
        payment (separate from the payments otherwise made 
        under section 1895) in the amount established under 
        paragraph (3) to a home health agency for an applicable 
        disposable device (as defined in paragraph (2)) when 
        furnished on or after January 1, 2017, to an individual 
        who receives home health services for which payment is 
        made under section 1895(b).
          (2) Applicable disposable device.--In this 
        subsection, the term applicable disposable device means 
        a disposable device that, as determined by the 
        Secretary, is--
                  (A) a disposable negative pressure wound 
                therapy device that is an integrated system 
                comprised of a non-manual vacuum pump, a 
                receptacle for collecting exudate, and 
                dressings for the purposes of wound therapy; 
                and
                  (B) a substitute for, and used in lieu of, a 
                negative pressure wound therapy durable medical 
                equipment item that is an integrated system of 
                a negative pressure vacuum pump, a separate 
                exudate collection canister, and dressings that 
                would otherwise be covered for individuals for 
                such wound therapy.
          (3) Payment amount.--The separate payment amount 
        established under this paragraph for an applicable 
        disposable device for a year shall be equal to the 
        amount of the payment that would be made under section 
        1833(t) (relating to payment for covered OPD services) 
        for the year for the Level I Healthcare Common 
        Procedure Coding System (HCPCS) code for which the 
        description for a professional service includes the 
        furnishing of such device.
  (t) Site-of-Service Price Transparency.--
          (1) In general.--In order to facilitate price 
        transparency with respect to items and services for 
        which payment may be made either to a hospital 
        outpatient department or to an ambulatory surgical 
        center under this title, the Secretary shall, for 2018 
        and each year thereafter, make available to the public 
        via a searchable Internet website, with respect to an 
        appropriate number of such items and services--
                  (A) the estimated payment amount for the item 
                or service under the outpatient department fee 
                schedule under subsection (t) of section 1833 
                and the ambulatory surgical center payment 
                system under subsection (i) of such section; 
                and
                  (B) the estimated amount of beneficiary 
                liability applicable to the item or service.
          (2) Calculation of estimated beneficiary liability.--
        For purposes of paragraph (1)(B), the estimated amount 
        of beneficiary liability, with respect to an item or 
        service, is the amount for such item or service for 
        which an individual who does not have coverage under a 
        Medicare supplemental policy certified under section 
        1882 or any other supplemental insurance coverage is 
        responsible.
          (3) Implementation.--In carrying out this subsection, 
        the Secretary--
                  (A) shall include in the notice described in 
                section 1804(a) a notification of the 
                availability of the estimated amounts made 
                available under paragraph (1); and
                  (B) may utilize mechanisms in existence on 
                the date of enactment of this subsection, such 
                as the portion of the Internet website of the 
                Centers for Medicare & Medicaid Services on 
                which information comparing physician 
                performance is posted (commonly referred to as 
                the Physician Compare Internet website), to 
                make available such estimated amounts under 
                such paragraph.
          (4) Funding.--For purposes of implementing this 
        subsection, the Secretary shall provide for the 
        transfer, from the Federal Supplementary Medical 
        Insurance Trust Fund under section 1841 to the Centers 
        for Medicare & Medicaid Services Program Management 
        Account, of $6,000,000 for fiscal year 2017, to remain 
        available until expended.
  (u) Payment and Related Requirements for Home Infusion 
Therapy.--
          (1) Payment.--
                  (A) Single payment.--
                          (i) In general.--Subject to clause 
                        (iii) and subparagraphs (B) and (C), 
                        the Secretary shall implement a payment 
                        system under which a single payment is 
                        made under this title to a qualified 
                        home infusion therapy supplier for 
                        items and services described in 
                        subparagraphs (A) and (B) of section 
                        1861(iii)(2)) furnished by a qualified 
                        home infusion therapy supplier (as 
                        defined in section 1861(iii)(3)(D)) in 
                        coordination with the furnishing of 
                        home infusion drugs (as defined in 
                        section 1861(iii)(3)(C)) under this 
                        part.
                          (ii) Unit of single payment.--A unit 
                        of single payment under the payment 
                        system implemented under this 
                        subparagraph is for each infusion drug 
                        administration calendar day in the 
                        individual's home. The Secretary shall, 
                        as appropriate, establish single 
                        payment amounts for types of infusion 
                        therapy, including to take into account 
                        variation in utilization of nursing 
                        services by therapy type.
                          (iii) Limitation.--The single payment 
                        amount determined under this 
                        subparagraph after application of 
                        subparagraph (B) and paragraph (3) 
                        shall not exceed the amount determined 
                        under the fee schedule under section 
                        1848 for infusion therapy services 
                        furnished in a calendar day if 
                        furnished in a physician office 
                        setting, except such single payment 
                        shall not reflect more than 5 hours of 
                        infusion for a particular therapy in a 
                        calendar day.
                  (B) Required adjustments.--The Secretary 
                shall adjust the single payment amount 
                determined under subparagraph (A) for home 
                infusion therapy services under section 
                1861(iii)(1) to reflect other factors such as--
                          (i) a geographic wage index and other 
                        costs that may vary by region; and
                          (ii) patient acuity and complexity of 
                        drug administration.
                  (C) Discretionary adjustments.--
                          (i) In general.--Subject to clause 
                        (ii), the Secretary may adjust the 
                        single payment amount determined under 
                        subparagraph (A) (after application of 
                        subparagraph (B)) to reflect outlier 
                        situations and other factors as the 
                        Secretary determines appropriate.
                          (ii) Requirement of budget 
                        neutrality.--Any adjustment under this 
                        subparagraph shall be made in a budget 
                        neutral manner.
          (2) Considerations.--In developing the payment system 
        under this subsection, the Secretary may consider the 
        costs of furnishing infusion therapy in the home, 
        consult with home infusion therapy suppliers, consider 
        payment amounts for similar items and services under 
        this part and part A, and consider payment amounts 
        established by Medicare Advantage plans under part C 
        and in the private insurance market for home infusion 
        therapy (including average per treatment day payment 
        amounts by type of home infusion therapy).
          (3) Annual updates.--
                  (A) In general.--Subject to subparagraph (B), 
                the Secretary shall update the single payment 
                amount under this subsection from year to year 
                beginning in 2022 by increasing the single 
                payment amount from the prior year by the 
                percentage increase in the Consumer Price Index 
                for all urban consumers (United States city 
                average) for the 12-month period ending with 
                June of the preceding year.
                  (B) Adjustment.--For each year, the Secretary 
                shall reduce the percentage increase described 
                in subparagraph (A) by the productivity 
                adjustment described in section 
                1886(b)(3)(B)(xi)(II). The application of the 
                preceding sentence may result in a percentage 
                being less than 0.0 for a year, and may result 
                in payment being less than such payment rates 
                for the preceding year.
          (4) Authority to apply prior authorization.--The 
        Secretary may, as determined appropriate by the 
        Secretary, apply prior authorization for home infusion 
        therapy services under section 1861(iii)(1).
          (5) Accreditation of qualified home infusion therapy 
        suppliers.--
                  (A) Factors for designation of accreditation 
                organizations.--The Secretary shall consider 
                the following factors in designating 
                accreditation organizations under subparagraph 
                (B) and in reviewing and modifying the list of 
                accreditation organizations designated pursuant 
                to subparagraph (C):
                          (i) The ability of the organization 
                        to conduct timely reviews of 
                        accreditation applications.
                          (ii) The ability of the organization 
                        to take into account the capacities of 
                        suppliers located in a rural area (as 
                        defined in section 1886(d)(2)(D)).
                          (iii) Whether the organization has 
                        established reasonable fees to be 
                        charged to suppliers applying for 
                        accreditation.
                          (iv) Such other factors as the 
                        Secretary determines appropriate.
                  (B) Designation.--Not later than January 1, 
                2021, the Secretary shall designate 
                organizations to accredit suppliers furnishing 
                home infusion therapy. The list of 
                accreditation organizations so designated may 
                be modified pursuant to subparagraph (C).
                  (C) Review and modification of list of 
                accreditation organizations.--
                          (i) In general.--The Secretary shall 
                        review the list of accreditation 
                        organizations designated under 
                        subparagraph (B) taking into account 
                        the factors under subparagraph (A). 
                        Taking into account the results of such 
                        review, the Secretary may, by 
                        regulation, modify the list of 
                        accreditation organizations designated 
                        under subparagraph (B).
                          (ii) Special rule for accreditations 
                        done prior to removal from list of 
                        designated accreditation 
                        organizations.--In the case where the 
                        Secretary removes an organization from 
                        the list of accreditation organizations 
                        designated under subparagraph (B), any 
                        supplier that is accredited by the 
                        organization during the period 
                        beginning on the date on which the 
                        organization is designated as an 
                        accreditation organization under 
                        subparagraph (B) and ending on the date 
                        on which the organization is removed 
                        from such list shall be considered to 
                        have been accredited by an organization 
                        designated by the Secretary under 
                        subparagraph (B) for the remaining 
                        period such accreditation is in effect.
                  (D) Rule for accreditations made prior to 
                designation.--In the case of a supplier that is 
                accredited before January 1, 2021, by an 
                accreditation organization designated by the 
                Secretary under subparagraph (B) as of January 
                1, 2019, such supplier shall be considered to 
                have been accredited by an organization 
                designated by the Secretary under such 
                paragraph as of January 1, 2023, for the 
                remaining period such accreditation is in 
                effect.
          (6) Notification of infusion therapy options 
        available prior to furnishing home infusion therapy.--
        Prior to the furnishing of home infusion therapy to an 
        individual, the physician who establishes the plan 
        described in section 1861(iii)(1) for the individual 
        shall provide notification (in a form, manner, and 
        frequency determined appropriate by the Secretary) of 
        the options available (such as home, physician's 
        office, hospital outpatient department) for the 
        furnishing of infusion therapy under this part.
          (7) Home infusion therapy services temporary 
        transitional payment.--
                  (A) Temporary transitional payment.--
                          (i) In general.--The Secretary shall, 
                        in accordance with the payment 
                        methodology described in subparagraph 
                        (B) and subject to the provisions of 
                        this paragraph, provide a home infusion 
                        therapy services temporary transitional 
                        payment under this part to an eligible 
                        home infusion supplier (as defined in 
                        subparagraph (F)) for items and 
                        services described in subparagraphs (A) 
                        and (B) of section 1861(iii)(2)) 
                        furnished during the period specified 
                        in clause (ii) by such supplier in 
                        coordination with the furnishing of 
                        transitional home infusion drugs (as 
                        defined in clause (iii)).
                          (ii) Period specified.--For purposes 
                        of clause (i), the period specified in 
                        this clause is the period beginning on 
                        January 1, 2019, and ending on the day 
                        before the date of the implementation 
                        of the payment system under paragraph 
                        (1)(A).
                          (iii) Transitional home infusion drug 
                        defined.--For purposes of this 
                        paragraph, the term ``transitional home 
                        infusion drug'' has the meaning given 
                        to the term ``home infusion drug'' 
                        under section 1861(iii)(3)(C)), except 
                        that clause (ii) of such section shall 
                        not apply if a drug described in such 
                        clause is identified in clauses (i), 
                        (ii), (iii) or (iv) of subparagraph (C) 
                        as of the date of the enactment of this 
                        paragraph.
                  (B) Payment methodology.--For purposes of 
                this paragraph, the Secretary shall establish a 
                payment methodology, with respect to items and 
                services described in subparagraph (A)(i). 
                Under such payment methodology the Secretary 
                shall--
                          (i) create the three payment 
                        categories described in clauses (i), 
                        (ii), and (iii) of subparagraph (C);
                          (ii) assign drugs to such categories, 
                        in accordance with such clauses;
                          (iii) assign appropriate Healthcare 
                        Common Procedure Coding System (HCPCS) 
                        codes to each payment category; and
                          (iv) establish a single payment 
                        amount for each such payment category, 
                        in accordance with subparagraph (D), 
                        for each infusion drug administration 
                        calendar day in the individual's home 
                        for drugs assigned to such category.
                  (C) Payment categories.--
                          (i) Payment category 1.--The 
                        Secretary shall create a payment 
                        category 1 and assign to such category 
                        drugs which are covered under the Local 
                        Coverage Determination on External 
                        Infusion Pumps (LCD number L33794) and 
                        billed with the following HCPCS codes 
                        (as identified as of January 1, 2018, 
                        and as subsequently modified by the 
                        Secretary): J0133, J0285, J0287, J0288, 
                        J0289, J0895, J1170, J1250, J1265, 
                        J1325, J1455, J1457, J1570, J2175, 
                        J2260, J2270, J2274, J2278, J3010, or 
                        J3285.
                          (ii) Payment category 2.--The 
                        Secretary shall create a payment 
                        category 2 and assign to such category 
                        drugs which are covered under such 
                        local coverage determination and billed 
                        with the following HCPCS codes (as 
                        identified as of January 1, 2018, and 
                        as subsequently modified by the 
                        Secretary): J1555 JB, J1559 JB, J1561 
                        JB, J1562 JB, J1569 JB, or J1575 JB.
                          (iii) Payment category 3.--The 
                        Secretary shall create a payment 
                        category 3 and assign to such category 
                        drugs which are covered under such 
                        local coverage determination and billed 
                        with the following HCPCS codes (as 
                        identified as of January 1, 2018, and 
                        as subsequently modified by the 
                        Secretary): J9000, J9039, J9040, J9065, 
                        J9100, J9190, J9200, J9360, or J9370.
                          (iv) Infusion drugs not otherwise 
                        included.--With respect to drugs that 
                        are not included in payment category 1, 
                        2, or 3 under clause (i), (ii), or 
                        (iii), respectively, the Secretary 
                        shall assign to the most appropriate of 
                        such categories, as determined by the 
                        Secretary, drugs which are--
                                  (I) covered under such local 
                                coverage determination and 
                                billed under HCPCS codes J7799 
                                or J7999 (as identified as of 
                                July 1, 2017, and as 
                                subsequently modified by the 
                                Secretary); or
                                  (II) billed under any code 
                                that is implemented after the 
                                date of the enactment of this 
                                paragraph and included in such 
                                local coverage determination or 
                                included in subregulatory 
                                guidance as a home infusion 
                                drug described in subparagraph 
                                (A)(i).
                  (D) Payment amounts.--
                          (i) In general.--Under the payment 
                        methodology, the Secretary shall pay 
                        eligible home infusion suppliers, with 
                        respect to items and services described 
                        in subparagraph (A)(i) furnished during 
                        the period described in subparagraph 
                        (A)(ii) by such supplier to an 
                        individual, at amounts equal to the 
                        amounts determined under the physician 
                        fee schedule established under section 
                        1848 for services furnished during the 
                        year for codes and units of such codes 
                        described in clauses (ii), (iii), and 
                        (iv) with respect to drugs included in 
                        the payment category under subparagraph 
                        (C) specified in the respective clause, 
                        determined without application of the 
                        geographic adjustment under subsection 
                        (e) of such section.
                          (ii) Payment amount for category 1.--
                        For purposes of clause (i), the codes 
                        and units described in this clause, 
                        with respect to drugs included in 
                        payment category 1 described in 
                        subparagraph (C)(i), are one unit of 
                        HCPCS code 96365 plus three units of 
                        HCPCS code 96366 (as identified as of 
                        January 1, 2018, and as subsequently 
                        modified by the Secretary).
                          (iii) Payment amount for category 
                        2.--For purposes of clause (i), the 
                        codes and units described in this 
                        clause, with respect to drugs included 
                        in payment category 2 described in 
                        subparagraph (C)(i), are one unit of 
                        HCPCS code 96369 plus three units of 
                        HCPCS code 96370 (as identified as of 
                        January 1, 2018, and as subsequently 
                        modified by the Secretary).
                          (iv) Payment amount for category 3.--
                        For purposes of clause (i), the codes 
                        and units described in this clause, 
                        with respect to drugs included in 
                        payment category 3 described in 
                        subparagraph (C)(i), are one unit of 
                        HCPCS code 96413 plus three units of 
                        HCPCS code 96415 (as identified as of 
                        January 1, 2018, and as subsequently 
                        modified by the Secretary).
                  (E) Clarifications.--
                          (i) Infusion drug administration 
                        day.--For purposes of this subsection, 
                        with respect to the furnishing of 
                        transitional home infusion drugs or 
                        home infusion drugs to an individual by 
                        an eligible home infusion supplier or a 
                        qualified home infusion therapy 
                        supplier, a reference to payment to 
                        such supplier for an infusion drug 
                        administration calendar day in the 
                        individual's home shall refer to 
                        payment only for the date on which 
                        professional services (as described in 
                        section 1861(iii)(2)(A)) were furnished 
                        to administer such drugs to such 
                        individual. For purposes of the 
                        previous sentence, an infusion drug 
                        administration calendar day shall 
                        include all such drugs administered to 
                        such individual on such day.
                          (ii) Treatment of multiple drugs 
                        administered on same infusion drug 
                        administration day.--In the case that 
                        an eligible home infusion supplier, 
                        with respect to an infusion drug 
                        administration calendar day in an 
                        individual's home, furnishes to such 
                        individual transitional home infusion 
                        drugs which are not all assigned to the 
                        same payment category under 
                        subparagraph (C), payment to such 
                        supplier for such infusion drug 
                        administration calendar day in the 
                        individual's home shall be a single 
                        payment equal to the amount of payment 
                        under this paragraph for the drug, 
                        among all such drugs so furnished to 
                        such individual during such calendar 
                        day, for which the highest payment 
                        would be made under this paragraph.
                  (F) Eligible home infusion suppliers.--In 
                this paragraph, the term ``eligible home 
                infusion supplier'' means a supplier that is 
                enrolled under this part as a pharmacy that 
                provides external infusion pumps and external 
                infusion pump supplies and that maintains all 
                pharmacy licensure requirements in the State in 
                which the applicable infusion drugs are 
                administered.
                  (G) Implementation.--Notwithstanding any 
                other provision of law, the Secretary may 
                implement this paragraph by program instruction 
                or otherwise.
  (v) Payment for Outpatient Physical Therapy Services and 
Outpatient Occupational Therapy Services Furnished by a Therapy 
Assistant.--
          (1) In general.--In the case of an outpatient 
        physical therapy service or outpatient occupational 
        therapy service furnished on or after January 1, 2022, 
        for which payment is made under section 1848 or 
        subsection (k), that is furnished in whole or in part 
        by a therapy assistant (as defined by the Secretary), 
        the amount of payment for such service shall be an 
        amount equal to 85 percent of the amount of payment 
        otherwise applicable for the service under this part. 
        Nothing in the preceding sentence shall be construed to 
        change applicable requirements with respect to such 
        services.
          (2) Use of modifier.--
                  (A) Establishment.--Not later than January 1, 
                2019, the Secretary shall establish a modifier 
                to indicate (in a form and manner specified by 
                the Secretary), in the case of an outpatient 
                physical therapy service or outpatient 
                occupational therapy service furnished in whole 
                or in part by a therapy assistant (as so 
                defined), that the service was furnished by a 
                therapy assistant.
                  (B) Required use.--Each request for payment, 
                or bill submitted, for an outpatient physical 
                therapy service or outpatient occupational 
                therapy service furnished in whole or in part 
                by a therapy assistant (as so defined) on or 
                after January 1, 2020, shall include the 
                modifier established under subparagraph (A) for 
                each such service.
          (3) Implementation.--The Secretary shall implement 
        this subsection through notice and comment rulemaking.
  (w) Opioid Use Disorder Treatment Services.--
          (1) In general.--The Secretary shall pay to an opioid 
        treatment program (as defined in paragraph (2) of 
        section 1861(jjj)) an amount that is equal to 100 
        percent of a bundled payment under this part for opioid 
        use disorder treatment services (as defined in 
        paragraph (1) of such section) that are furnished by 
        such program to an individual during an episode of care 
        (as defined by the Secretary) beginning on or after 
        January 1, 2020. The Secretary shall ensure, as 
        determined appropriate by the Secretary, that no 
        duplicative payments are made under this part or part D 
        for items and services furnished by an opioid treatment 
        program.
          (2) Considerations.--The Secretary may implement this 
        subsection through one or more bundles based on the 
        type of medication provided (such as buprenorphine, 
        methadone, naltrexone, or a new innovative drug), the 
        frequency of services, the scope of services furnished, 
        characteristics of the individuals furnished such 
        services, or other factors as the Secretary determine 
        appropriate. In developing such bundles, the Secretary 
        may consider payment rates paid to opioid treatment 
        programs for comparable services under State plans 
        under title XIX or under the TRICARE program under 
        chapter 55 of title 10 of the United States Code.
          (3) Annual updates.--The Secretary shall provide an 
        update each year to the bundled payment amounts under 
        this subsection.
  (x) Rebate by Manufacturers for Single Source Drugs With 
Prices Increasing Faster Than Inflation.--
          (1) Requirements.--
                  (A) Secretarial provision of information.--
                Not later than 6 months after the end of each 
                calendar quarter beginning on or after July 1, 
                2021, the Secretary shall, for each part B 
                rebatable drug, report to each manufacturer of 
                such part B rebatable drug the following for 
                such calendar quarter:
                          (i) Information on the total number 
                        of billing units described in 
                        subparagraph (A)(i) of paragraph (3) 
                        with respect to such drug and calendar 
                        quarter.
                          (ii) Information on the amount (if 
                        any) of the excess average sales price 
                        increase described in subparagraph 
                        (A)(ii) of such paragraph for such drug 
                        and calendar quarter.
                          (iii) The rebate amount specified 
                        under such paragraph for such part B 
                        rebatable drug and calendar quarter.
                  (B) Manufacturer requirement.--For each 
                calendar quarter beginning on or after July 1, 
                2021, the manufacturer of a part B rebatable 
                drug shall, for such drug, not later than 30 
                days after the date of receipt from the 
                Secretary of the information described in 
                subparagraph (A) for such calendar quarter, 
                provide to the Secretary a rebate that is equal 
                to the amount specified in paragraph (3) for 
                such drug for such calendar quarter.
          (2) Part b rebatable drug defined.--
                  (A) In general.--In this subsection, the term 
                ``part B rebatable drug'' means a single source 
                drug or biological (as defined in subparagraph 
                (D) of section 1847A(c)(6)), including a 
                biosimilar biological product (as defined in 
                subparagraph (H) of such section), paid for 
                under this part, except such term shall not 
                include such a drug or biological--
                          (i) if the average total allowed 
                        charges for a year per individual that 
                        uses such a drug or biological, as 
                        determined by the Secretary, are less 
                        than, subject to subparagraph (B), 
                        $100; or
                          (ii) that is a vaccine described in 
                        subparagraph (A) or (B) of section 
                        1861(s)(10).
                  (B) Increase.--The dollar amount applied 
                under subparagraph (A)(i)--
                          (i) for 2022, shall be the dollar 
                        amount specified under such 
                        subparagraph for 2021, increased by the 
                        percentage increase in the consumer 
                        price index for all urban consumers 
                        (United States city average) as of the 
                        first quarter of the previous year; and
                          (ii) for a subsequent year, shall be 
                        the dollar amount specified in this 
                        clause (or clause (i)) for the previous 
                        year, increased by the percentage 
                        increase in the consumer price index 
                        for all urban consumers (United States 
                        city average) as of the first quarter 
                        of the previous year.
                Any dollar amount specified under this 
                subparagraph that is not a multiple of $10 
                shall be rounded to the nearest multiple of 
                $10.
          (3) Rebate amount.--
                  (A) In general.--For purposes of paragraph 
                (1)(B), the amount specified in this paragraph 
                for a part B rebatable drug assigned to a 
                billing and payment code for a calendar quarter 
                is, subject to paragraph (4), the amount equal 
                to the product of--
                          (i) subject to subparagraph (B), the 
                        total number of billing units, as 
                        described in section 1847A(b)(6)(B), 
                        for such part B rebatable drug 
                        furnished under this part during the 
                        calendar quarter; and
                          (ii) the amount (if any) by which--
                                  (I) the payment amount under 
                                subparagraph (B) or (C) of 
                                section 1847A(b)(1), as 
                                applicable, for such part B 
                                rebatable drug during the 
                                calendar quarter; exceeds
                                  (II) the inflation-adjusted 
                                payment amount determined under 
                                subparagraph (C) for such part 
                                B rebatable drug during the 
                                calendar quarter.
                  (B) Excluded units.--For purposes of 
                subparagraph (A)(i), the total number of 
                billing units for part B rebatable drugs 
                furnished during a calendar quarter shall not 
                include--
                          (i) units packaged into the payment 
                        for a related procedure or service 
                        under section 1833(t) or under section 
                        1833(i) (instead of separately payable 
                        under such respective section);
                          (ii) units included under the single 
                        payment system for renal dialysis 
                        services under section 1881(b)(14); or
                          (iii) units of a part B rebatable 
                        drug of a manufacturer that is 
                        furnished to an individual, if such 
                        manufacturer, with respect to the 
                        furnishing of such units of such drug, 
                        provides for discounts under section 
                        340B of the Public Health Service Act 
                        or for rebates under section 1927.
                  (C) Determination of inflation-adjusted 
                payment amount.--The inflation-adjusted payment 
                amount determined under this subparagraph for a 
                part B rebatable drug for a calendar quarter 
                is--
                          (i) the payment amount for the 
                        billing and payment code for such drug 
                        in the payment amount benchmark quarter 
                        (as defined in subparagraph (D)); 
                        increased by
                          (ii) the percentage by which the 
                        rebate period CPI-U (as defined in 
                        subparagraph (F)) for the calendar 
                        quarter exceeds the benchmark period 
                        CPI-U (as defined in subparagraph (E)).
                  (D) Payment amount benchmark quarter.--The 
                term ``payment amount benchmark quarter'' means 
                the calendar quarter beginning January 1, 2016.
                  (E) Benchmark period cpi-u.--The term 
                ``benchmark period CPI-U'' means the consumer 
                price index for all urban consumers (United 
                States city average) for July 2015.
                  (F) Rebate period cpi-u.--The term ``rebate 
                period CPI-U'' means, with respect to a 
                calendar quarter described in subparagraph (C), 
                the greater of the benchmark period CPI-U and 
                the consumer price index for all urban 
                consumers (United States city average) for the 
                first month of the calendar quarter that is two 
                calendar quarters prior to such described 
                calendar quarter.
          (4) Special treatment of certain drugs and 
        exemption.--
                  (A) Subsequently approved drugs.--Subject to 
                subparagraph (B), in the case of a part B 
                rebatable drug first approved by the Food and 
                Drug Administration after July 1, 2015, clause 
                (i) of paragraph (3)(C) shall be applied as if 
                the term ``payment amount benchmark quarter'' 
                were defined under paragraph (3)(D) as the 
                third full calendar quarter after the day on 
                which the drug was first marketed and clause 
                (ii) of paragraph (3)(C) shall be applied as if 
                the term ``benchmark period CPI-U'' were 
                defined under paragraph (3)(E) as if the 
                reference to ``July 2015'' under such paragraph 
                were a reference to ``the first month of the 
                first full calendar quarter after the day on 
                which the drug was first marketed''.
                  (B) Timeline for provision of rebates for new 
                drugs.--In the case of a part B rebatable drug 
                first approved by the Food and Drug 
                Administration after July 1, 2015, clause (i) 
                of paragraph (1)(B) shall be applied as if the 
                reference to ``July 1, 2021'' under such 
                paragraph were a reference to the later of the 
                6th full calendar quarter after the day on 
                which the drug was first marketed or July 1, 
                2021.
                  (C) Exemption for shortages.--The Secretary 
                may reduce or waive the rebate under paragraph 
                (1)(B) with respect to a part B rebatable drug 
                that appears on the drug shortage list in 
                effect under section 506(e) of the Federal 
                Food, Drug, and Cosmetic Act or in the case of 
                other exigent circumstances, as determined by 
                the Secretary.
                  (D) Selected drugs.--In the case of a part B 
                rebatable drug that is a selected drug (as 
                defined in section 1192(c)), for each 
                applicable year beginning after the price 
                applicability period (as defined in section 
                1191(b)(2) with respect to such drug, clause 
                (i) of paragraph (3)(C) shall be applied as if 
                the term ``payment amount benchmark quarter'' 
                were defined under paragraph (3)(D) as the 
                calendar quarter beginning January 1 of the 
                last year beginning during such price 
                applicability period with respect to such 
                selected drug and clause (ii) of paragraph 
                (3)(C) shall be applied as if the term 
                ``benchmark period CPI-U'' were defined under 
                paragraph (3)(E) as if the reference to ``July 
                2015'' under such paragraph were a reference to 
                the July of the year preceding such last year.
          (5) Application to beneficiary coinsurance.--In the 
        case of a part B rebatable drug for which a rebate is 
        payable under this subsection--
                  (A) in computing the amount of any 
                coinsurance applicable under this title to an 
                individual with respect to such drug, the 
                computation of such coinsurance shall be based 
                on the inflation-adjusted payment amount 
                determined under paragraph (3)(C) for such part 
                B rebatable drug; and
                  (B) the amount of such coinsurance is equal 
                to 20 percent of such inflation-adjusted 
                payment amount so determined.
          (6) Rebate deposits.--Amounts paid as rebates under 
        paragraph (1)(B) shall be deposited into the Federal 
        Supplementary Medical Insurance Trust Fund established 
        under section 1841.
          (7) Civil money penalty.--If a manufacturer of a part 
        B rebatable drug has failed to comply with the 
        requirements under paragraph (1)(B) for such drug for a 
        calendar quarter, the manufacturer shall be subject to, 
        in accordance with a process established by the 
        Secretary pursuant to regulations, a civil money 
        penalty in an amount equal to at least 125 percent of 
        the amount specified in paragraph (3) for such drug for 
        such calendar quarter. The provisions of section 1128A 
        (other than subsections (a) (with respect to amounts of 
        penalties or additional assessments) and (b)) shall 
        apply to a civil money penalty under this paragraph in 
        the same manner as such provisions apply to a penalty 
        or proceeding under section 1128A(a).
          (8) Study and report.--
                  (A) Study.--The Secretary shall conduct a 
                study of the feasibility of and operational 
                issues involved with the following:
                          (i) Including multiple source drugs 
                        (as defined in section 1847A(c)(6)(C)) 
                        in the rebate system under this 
                        subsection.
                          (ii) Including drugs and biologicals 
                        paid for under MA plans under part C in 
                        the rebate system under this 
                        subsection.
                          (iii) Including drugs excluded under 
                        paragraph (2)(A) and billing units of 
                        drugs excluded under paragraph (3)(B) 
                        in the rebate system under this 
                        subsection.
                  (B) Report.--Not later than 3 years after the 
                date of the enactment of this subsection, the 
                Secretary shall submit to Congress a report on 
                the study conducted under subparagraph (A).
          (9) Application to multiple source drugs.--The 
        Secretary may, based on the report submitted under 
        paragraph (8) and pursuant to rulemaking, apply the 
        provisions of this subsection to multiple source drugs 
        (as defined in section 1847A(c)(6)(C)), including, for 
        purposes of determining the rebate amount under 
        paragraph (3), by calculating manufacturer-specific 
        average sales prices for the benchmark period and the 
        rebate period.

           *       *       *       *       *       *       *


             use of average sales price payment methodology

  Sec. 1847A. (a) Application.--
          (1) In general.--Except as provided in paragraph (2), 
        this section shall apply to payment for drugs and 
        biologicals that are described in section 1842(o)(1)(C) 
        and that are furnished on or after January 1, 2005.
          (2) Election.--This section shall not apply in the 
        case of a physician who elects under subsection 
        (a)(1)(A)(ii) of section 1847B for that section to 
        apply instead of this section for the payment for drugs 
        and biologicals.
  (b) Payment Amount.--
          (1) In general.--Subject to paragraph (7) and 
        subsections (d)(3)(C) and (e), the amount of payment 
        determined under this section for the billing and 
        payment code for a drug or biological (based on a 
        minimum dosage unit) is, subject to applicable 
        deductible and coinsurance--
                  (A) in the case of a multiple source drug (as 
                defined in subsection (c)(6)(C)), 106 percent 
                of the amount determined under paragraph (3) 
                for a multiple source drug furnished before 
                April 1, 2008, or 106 percent of the amount 
                determined under paragraph (6) for a multiple 
                source drug furnished on or after April 1, 
                2008;
                  (B) in the case of a single source drug or 
                biological (as defined in subsection 
                (c)(6)(D)), 106 percent of the amount 
                determined under paragraph (4); or
                  (C) in the case of a biosimilar biological 
                product (as defined in subsection (c)(6)(H)), 
                the amount determined under paragraph (8).
          (2) Specification of unit.--
                  (A) Specification by manufacturer.--The 
                manufacturer of a drug or biological shall 
                specify the unit associated with each National 
                Drug Code (including package size) as part of 
                the submission of data under section 
                1927(b)(3)(A)(iii).
                  (B) Unit defined.--In this section, the term 
                ``unit'' means, with respect to each National 
                Drug Code (including package size) associated 
                with a drug or biological, the lowest 
                identifiable quantity (such as a capsule or 
                tablet, milligram of molecules, or grams) of 
                the drug or biological that is dispensed, 
                exclusive of any diluent without reference to 
                volume measures pertaining to liquids. For 
                years after 2004, the Secretary may establish 
                the unit for a manufacturer to report and 
                methods for counting units as the Secretary 
                determines appropriate to implement this 
                section.
          (3) Multiple source drug.--For all drug products 
        included within the same multiple source drug billing 
        and payment code, the amount specified in this 
        paragraph is the volume-weighted average of the average 
        sales prices reported under section 1927(b)(3)(A)(iii) 
        determined by--
                  (A) computing the sum of the products (for 
                each National Drug Code assigned to such drug 
                products) of--
                          (i) the manufacturer's average sales 
                        price (as defined in subsection (c)); 
                        and
                          (ii) the total number of units 
                        specified under paragraph (2) sold; and
                  (B) dividing the sum determined under 
                subparagraph (A) by the sum of the total number 
                of units under subparagraph (A)(ii) for all 
                National Drug Codes assigned to such drug 
                products.
          (4) Single source drug or biological.--The amount 
        specified in this paragraph for a single source drug or 
        biological is the lesser of the following:
                  (A) Average sales price.--The average sales 
                price as determined using the methodology 
                applied under paragraph (3) for single source 
                drugs and biologicals furnished before April 1, 
                2008, and using the methodology applied under 
                paragraph (6) for single source drugs and 
                biologicals furnished on or after April 1, 
                2008, for all National Drug Codes assigned to 
                such drug or biological product.
                  (B) Wholesale acquisition cost (wac).--The 
                wholesale acquisition cost (as defined in 
                subsection (c)(6)(B)) using the methodology 
                applied under paragraph (3) for single source 
                drugs and biologicals furnished before April 1, 
                2008, and using the methodology applied under 
                paragraph (6) for single source drugs and 
                biologicals furnished on or after April 1, 
                2008, for all National Drug Codes assigned to 
                such drug or biological product.
          (5) Basis for payment amount.--The payment amount 
        shall be determined under this subsection based on 
        information reported under subsection (f) and without 
        regard to any special packaging, labeling, or 
        identifiers on the dosage form or product or package.
          (6) Use of volume-weighted average sales prices in 
        calculation of average sales price.--
                  (A) In general.--For all drug products 
                included within the same multiple source drug 
                billing and payment code, the amount specified 
                in this paragraph is the volume-weighted 
                average of the average sales prices reported 
                under section 1927(b)(3)(A)(iii) determined 
                by--
                          (i) computing the sum of the products 
                        (for each National Drug Code assigned 
                        to such drug products) of--
                                  (I) the manufacturer's 
                                average sales price (as defined 
                                in subsection (c)), determined 
                                by the Secretary without 
                                dividing such price by the 
                                total number of billing units 
                                for the National Drug Code for 
                                the billing and payment code; 
                                and
                                  (II) the total number of 
                                units specified under paragraph 
                                (2) sold; and
                          (ii) dividing the sum determined 
                        under clause (i) by the sum of the 
                        products (for each National Drug Code 
                        assigned to such drug products) of--
                                  (I) the total number of units 
                                specified under paragraph (2) 
                                sold; and
                                  (II) the total number of 
                                billing units for the National 
                                Drug Code for the billing and 
                                payment code.
                  (B) Billing unit defined.--For purposes of 
                this subsection, the term ``billing unit'' 
                means the identifiable quantity associated with 
                a billing and payment code, as established by 
                the Secretary.
          (7) Special rule.--Beginning with April 1, 2008, the 
        payment amount for--
                  (A) each single source drug or biological 
                described in section 1842(o)(1)(G) that is 
                treated as a multiple source drug because of 
                the application of subsection (c)(6)(C)(ii) is 
                the lower of--
                          (i) the payment amount that would be 
                        determined for such drug or biological 
                        applying such subsection; or
                          (ii) the payment amount that would 
                        have been determined for such drug or 
                        biological if such subsection were not 
                        applied; and
                  (B) a multiple source drug described in 
                section 1842(o)(1)(G) (excluding a drug or 
                biological that is treated as a multiple source 
                drug because of the application of such 
                subsection) is the lower of--
                          (i) the payment amount that would be 
                        determined for such drug or biological 
                        taking into account the application of 
                        such subsection; or
                          (ii) the payment amount that would 
                        have been determined for such drug or 
                        biological if such subsection were not 
                        applied.
          (8) Biosimilar biological product.--The amount 
        specified in this paragraph for a biosimilar biological 
        product described in paragraph (1)(C) is the sum of--
                  (A) the average sales price as determined 
                using the methodology described under paragraph 
                (6) applied to a biosimilar biological product 
                for all National Drug Codes assigned to such 
                product in the same manner as such paragraph is 
                applied to drugs described in such paragraph; 
                and
                  (B) 6 percent of the amount determined under 
                paragraph (4) for the reference biological 
                product (as defined in subsection (c)(6)(I)).
  (c) Manufacturer's Average Sales Price.--
          (1) In general.--For purposes of this section, 
        subject to paragraphs (2) and (3), the manufacturer's 
        ``average sales price'' means, of a drug or biological 
        for a National Drug Code for a calendar quarter for a 
        manufacturer for a unit--
                  (A) the manufacturer's sales to all 
                purchasers (excluding sales exempted in 
                paragraph (2)) in the United States for such 
                drug or biological in the calendar quarter; 
                divided by
                  (B) the total number of such units of such 
                drug or biological sold by the manufacturer in 
                such quarter.
          (2) Certain sales exempted from computation.--In 
        calculating the manufacturer's average sales price 
        under this subsection, the following sales shall be 
        excluded:
                  (A) Sales exempt from best price.--Sales 
                exempt from the inclusion in the determination 
                of ``best price' under section 
                1927(c)(1)(C)(i).
                  (B) Sales at nominal charge.--Such other 
                sales as the Secretary identifies as sales to 
                an entity that are merely nominal in amount (as 
                applied for purposes of section 
                1927(c)(1)(C)(ii)(III), except as the Secretary 
                may otherwise provide).
          (3) Sale price net of discounts.--In calculating the 
        manufacturer's average sales price under this 
        subsection, such price shall include volume discounts, 
        prompt pay discounts, cash discounts, free goods that 
        are contingent on any purchase requirement, 
        chargebacks, and rebates (other than rebates under 
        section 1927 or section 1834(x)). For years after 2004, 
        the Secretary may include in such price other price 
        concessions, which may be based on recommendations of 
        the Inspector General, that would result in a reduction 
        of the cost to the purchaser.
          (4) Payment methodology in cases where average sales 
        price during first quarter of sales is unavailable.--In 
        the case of a drug or biological during an initial 
        period (not to exceed a full calendar quarter) in which 
        data on the prices for sales for the drug or biological 
        is not sufficiently available from the manufacturer to 
        compute an average sales price for the drug or 
        biological, the Secretary may determine the amount 
        payable under this section--
                  (A) in the case of a drug or biological 
                furnished prior to January 1, 2019, based on--
                          (i) the wholesale acquisition cost; 
                        or
                          (ii) the methodologies in effect 
                        under this part on November 1, 2003, to 
                        determine payment amounts for drugs or 
                        biologicals; and
                  (B) in the case of a drug or biological 
                furnished on or after January 1, 2019--
                          (i) at an amount not to exceed 103 
                        percent of the wholesale acquisition 
                        cost; or
                          (ii) based on the methodologies in 
                        effect under this part on November 1, 
                        2003, to determine payment amounts for 
                        drugs or biologicals.
          (5) Frequency of determinations.--
                  (A) In general on a quarterly basis.--The 
                manufacturer's average sales price, for a drug 
                or biological of a manufacturer, shall be 
                calculated by such manufacturer under this 
                subsection on a quarterly basis. In making such 
                calculation insofar as there is a lag in the 
                reporting of the information on rebates and 
                chargebacks under paragraph (3) so that 
                adequate data are not available on a timely 
                basis, the manufacturer shall apply a 
                methodology based on a 12-month rolling average 
                for the manufacturer to estimate costs 
                attributable to rebates and chargebacks. For 
                years after 2004, the Secretary may establish a 
                uniform methodology under this subparagraph to 
                estimate and apply such costs.
                  (B) Updates in payment amounts.--The payment 
                amounts under subsection (b) shall be updated 
                by the Secretary on a quarterly basis and shall 
                be applied based upon the manufacturer's 
                average sales price calculated for the most 
                recent calendar quarter for which data is 
                available.
                  (C) Use of contractors; implementation.--The 
                Secretary may contract with appropriate 
                entities to calculate the payment amount under 
                subsection (b). Notwithstanding any other 
                provision of law, the Secretary may implement, 
                by program instruction or otherwise, any of the 
                provisions of this section.
          (6) Definitions and other rules.--In this section:
                  (A) Manufacturer.--The term ``manufacturer'' 
                means, with respect to a drug or biological, 
                the manufacturer (as defined in section 
                1927(k)(5)).
                  (B) Wholesale acquisition cost.--The term 
                ``wholesale acquisition cost'' means, with 
                respect to a drug or biological, the 
                manufacturer's list price for the drug or 
                biological to wholesalers or direct purchasers 
                in the United States, not including prompt pay 
                or other discounts, rebates or reductions in 
                price, for the most recent month for which the 
                information is available, as reported in 
                wholesale price guides or other publications of 
                drug or biological pricing data.
                  (C) Multiple source drug.--
                          (i) In general.--The term ``multiple 
                        source drug'' means, for a calendar 
                        quarter, a drug for which there are 2 
                        or more drug products which--
                                  (I) are rated as 
                                therapeutically equivalent 
                                (under the Food and Drug 
                                Administration's most recent 
                                publication of ``Approved Drug 
                                Products with Therapeutic 
                                Equivalence Evaluations''),
                                  (II) except as provided in 
                                subparagraph (E), are 
                                pharmaceutically equivalent and 
                                bioequivalent, as determined 
                                under subparagraph (F) and as 
                                determined by the Food and Drug 
                                Administration, and
                                  (III) are sold or marketed in 
                                the United States during the 
                                quarter.
                          (ii) Exception.--With respect to 
                        single source drugs or biologicals that 
                        are within the same billing and payment 
                        code as of October 1, 2003, the 
                        Secretary shall treat such single 
                        source drugs or biologicals as if the 
                        single source drugs or biologicals were 
                        multiple source drugs.
                  (D) Single source drug or biological.--The 
                term ``single source drug or biological'' 
                means--
                          (i) a biological; or
                          (ii) a drug which is not a multiple 
                        source drug and which is produced or 
                        distributed under a new drug 
                        application approved by the Food and 
                        Drug Administration, including a drug 
                        product marketed by any cross-licensed 
                        producers or distributors operating 
                        under the new drug application.
                  (E) Exception from pharmaceutical equivalence 
                and bioequivalence requirement.--Subparagraph 
                (C)(ii) shall not apply if the Food and Drug 
                Administration changes by regulation the 
                requirement that, for purposes of the 
                publication described in subparagraph (C)(i), 
                in order for drug products to be rated as 
                therapeutically equivalent, they must be 
                pharmaceutically equivalent and bioequivalent, 
                as defined in subparagraph (F).
                  (F) Determination of pharmaceutical 
                equivalence and bioequivalence.--For purposes 
                of this paragraph--
                          (i) drug products are 
                        pharmaceutically equivalent if the 
                        products contain identical amounts of 
                        the same active drug ingredient in the 
                        same dosage form and meet compendial or 
                        other applicable standards of strength, 
                        quality, purity, and identity; and
                          (ii) drugs are bioequivalent if they 
                        do not present a known or potential 
                        bioequivalence problem, or, if they do 
                        present such a problem, they are shown 
                        to meet an appropriate standard of 
                        bioequivalence.
                  (G) Inclusion of vaccines.--In applying 
                provisions of section 1927 under this section, 
                ``other than a vaccine'' is deemed deleted from 
                section 1927(k)(2)(B).
                  (H) Biosimilar biological product.--The term 
                ``biosimilar biological product'' means a 
                biological product approved under an 
                abbreviated application for a license of a 
                biological product that relies in part on data 
                or information in an application for another 
                biological product licensed under section 351 
                of the Public Health Service Act.
                  (I) Reference biological product.--The term 
                ``reference biological product'' means the 
                biological product licensed under such section 
                351 that is referred to in the application 
                described in subparagraph (H) of the biosimilar 
                biological product.
  (d) Monitoring of Market Prices.--
          (1) In general.--The Inspector General of the 
        Department of Health and Human Services shall conduct 
        studies, which may include surveys, to determine the 
        widely available market prices of drugs and biologicals 
        to which this section applies, as the Inspector 
        General, in consultation with the Secretary, determines 
        to be appropriate.
          (2) Comparison of prices.--Based upon such studies 
        and other data for drugs and biologicals, the Inspector 
        General shall compare the average sales price under 
        this section for drugs and biologicals with--
                  (A) the widely available market price for 
                such drugs and biologicals (if any); and
                  (B) the average manufacturer price (as 
                determined under section 1927(k)(1)) for such 
                drugs and biologicals.
          (3) Limitation on average sales price.--
                  (A) In general.--The Secretary may disregard 
                the average sales price for a drug or 
                biological that exceeds the widely available 
                market price or the average manufacturer price 
                for such drug or biological by the applicable 
                threshold percentage (as defined in 
                subparagraph (B)).
                  (B) Applicable threshold percentage 
                defined.--In this paragraph, the term 
                ``applicable threshold percentage'' means--
                          (i) in 2005, in the case of an 
                        average sales price for a drug or 
                        biological that exceeds widely 
                        available market price or the average 
                        manufacturer price, 5 percent; and
                          (ii) in 2006 and subsequent years, 
                        the percentage applied under this 
                        subparagraph subject to such adjustment 
                        as the Secretary may specify for the 
                        widely available market price or the 
                        average manufacturer price, or both.
                  (C) Authority to adjust average sales 
                price.--If the Inspector General finds that the 
                average sales price for a drug or biological 
                exceeds such widely available market price or 
                average manufacturer price for such drug or 
                biological by the applicable threshold 
                percentage, the Inspector General shall inform 
                the Secretary (at such times as the Secretary 
                may specify to carry out this subparagraph) and 
                the Secretary shall, effective as of the next 
                quarter, substitute for the amount of payment 
                otherwise determined under this section for 
                such drug or biological the lesser of--
                          (i) the widely available market price 
                        for the drug or biological (if any); or
                          (ii) 103 percent of the average 
                        manufacturer price (as determined under 
                        section 1927(k)(1)) for the drug or 
                        biological.
          (4) Civil money penalty.--
                  (A) In general.--If the Secretary determines 
                that a manufacturer has made a 
                misrepresentation in the reporting of the 
                manufacturer's average sales price for a drug 
                or biological, the Secretary may apply a civil 
                money penalty in an amount of up to $10,000 for 
                each such price misrepresentation and for each 
                day in which such price misrepresentation was 
                applied.
                  (B) Procedures.--The provisions of section 
                1128A (other than subsections (a) and (b)) 
                shall apply to civil money penalties under 
                subparagraph (B) in the same manner as they 
                apply to a penalty or proceeding under section 
                1128A(a).
          (5) Widely available market price.--
                  (A) In general.--In this subsection, the term 
                ``widely available market price'' means the 
                price that a prudent physician or supplier 
                would pay for the drug or biological. In 
                determining such price, the Inspector General 
                shall take into account the discounts, rebates, 
                and other price concessions routinely made 
                available to such prudent physicians or 
                suppliers for such drugs or biologicals.
                  (B) Considerations.--In determining the price 
                under subparagraph (A), the Inspector General 
                shall consider information from one or more of 
                the following sources:
                          (i) Manufacturers.
                          (ii) Wholesalers.
                          (iii) Distributors.
                          (iv) Physician supply houses.
                          (v) Specialty pharmacies.
                          (vi) Group purchasing arrangements.
                          (vii) Surveys of physicians.
                          (viii) Surveys of suppliers.
                          (ix) Information on such market 
                        prices from insurers.
                          (x) Information on such market prices 
                        from private health plans.
  (e) Authority To Use Alternative Payment in Response to 
Public Health Emergency.--In the case of a public health 
emergency under section 319 of the Public Health Service Act in 
which there is a documented inability to access drugs and 
biologicals, and a concomitant increase in the price, of a drug 
or biological which is not reflected in the manufacturer's 
average sales price for one or more quarters, the Secretary may 
use the wholesale acquisition cost (or other reasonable measure 
of drug or biological price) instead of the manufacturer's 
average sales price for such quarters and for subsequent 
quarters until the price and availability of the drug or 
biological has stabilized and is substantially reflected in the 
applicable manufacturer's average sales price.
  (f) Quarterly Report on Average Sales Price.--For 
requirements for reporting the manufacturer's average sales 
price (and, if required to make payment, the manufacturer's 
wholesale acquisition cost) for the drug or biological under 
this section, see section 1927(b)(3).
  (g) Judicial Review.--There shall be no administrative or 
judicial review under section 1869, section 1878, or otherwise, 
of--
          (1) determinations of payment amounts under this 
        section, including the assignment of National Drug 
        Codes to billing and payment codes;
          (2) the identification of units (and package size) 
        under subsection (b)(2);
          (3) the method to allocate rebates, chargebacks, and 
        other price concessions to a quarter if specified by 
        the Secretary;
          (4) the manufacturer's average sales price when it is 
        used for the determination of a payment amount under 
        this section; and
          (5) the disclosure of the average manufacturer price 
        by reason of an adjustment under subsection (d)(3)(C) 
        or (e).

           *       *       *       *       *       *       *


Part C--Medicare+Choice Program

           *       *       *       *       *       *       *


              contracts with medicare+choice organizations

  Sec. 1857. (a) In General.--The Secretary shall not permit 
the election under section 1851 of a Medicare+Choice plan 
offered by a Medicare+Choice organization under this part, and 
no payment shall be made under section 1853 to an organization, 
unless the Secretary has entered into a contract under this 
section with the organization with respect to the offering of 
such plan. Such a contract with an organization may cover more 
than 1 Medicare+Choice plan. Such contract shall provide that 
the organization agrees to comply with the applicable 
requirements and standards of this part and the terms and 
conditions of payment as provided for in this part.
  (b) Minimum Enrollment Requirements.--
          (1) In general.--Subject to paragraph (2), the 
        Secretary may not enter into a contract under this 
        section with a Medicare+Choice organization unless the 
        organization has--
                  (A) at least 5,000 individuals (or 1,500 
                individuals in the case of an organization that 
                is a provider-sponsored organization) who are 
                receiving health benefits through the 
                organization, or
                  (B) at least 1,500 individuals (or 500 
                individuals in the case of an organization that 
                is a provider-sponsored organization) who are 
                receiving health benefits through the 
                organization if the organization primarily 
                serves individuals residing outside of 
                urbanized areas.
          (2) Application to msa plans.--In applying paragraph 
        (1) in the case of a Medicare+Choice organization that 
        is offering an MSA plan, paragraph (1) shall be applied 
        by substituting covered lives for individuals.
          (3) Allowing transition.--The Secretary may waive the 
        requirement of paragraph (1) during the first 3 
        contract years with respect to an organization.
  (c) Contract Period and Effectiveness.--
          (1) Period.--Each contract under this section shall 
        be for a term of at least 1 year, as determined by the 
        Secretary, and may be made automatically renewable from 
        term to term in the absence of notice by either party 
        of intention to terminate at the end of the current 
        term.
          (2) Termination authority.--In accordance with 
        procedures established under subsection (h), the 
        Secretary may at any time terminate any such contract 
        if the Secretary determines that the organization--
                  (A) has failed substantially to carry out the 
                contract;
                  (B) is carrying out the contract in a manner 
                inconsistent with the efficient and effective 
                administration of this part; or
                  (C) no longer substantially meets the 
                applicable conditions of this part.
          (3) Effective date of contracts.--The effective date 
        of any contract executed pursuant to this section shall 
        be specified in the contract, except that in no case 
        shall a contract under this section which provides for 
        coverage under an MSA plan be effective before January 
        1999 with respect to such coverage.
          (4) Previous terminations.--
                  (A) In general.--The Secretary may not enter 
                into a contract with a Medicare+Choice 
                organization if a previous contract with that 
                organization under this section was terminated 
                at the request of the organization within the 
                preceding 2-year period, except as provided in 
                subparagraph (B) and except in such other 
                circumstances which warrant special 
                consideration, as determined by the Secretary.
                  (B) Earlier re-entry permitted where change 
                in payment policy.--Subparagraph (A) shall not 
                apply with respect to the offering by a 
                Medicare+Choice organization of a 
                Medicare+Choice plan in a Medicare+Choice 
                payment area if during the 6-month period 
                beginning on the date the organization notified 
                the Secretary of the intention to terminate the 
                most recent previous contract, there was a 
                legislative change enacted (or a regulatory 
                change adopted) that has the effect of 
                increasing payment amounts under section 1853 
                for that Medicare+Choice payment area.
          (5) Contracting authority.--The authority vested in 
        the Secretary by this part may be performed without 
        regard to such provisions of law or regulations 
        relating to the making, performance, amendment, or 
        modification of contracts of the United States as the 
        Secretary may determine to be inconsistent with the 
        furtherance of the purpose of this title.
  (d) Protections Against Fraud and Beneficiary Protections.--
          (1) Periodic auditing.--The Secretary shall provide 
        for the annual auditing of the financial records 
        (including data relating to medicare utilization and 
        costs, including allowable costs under section 1858(c)) 
        of at least one-third of the Medicare+Choice 
        organizations offering Medicare+Choice plans under this 
        part. The Comptroller General shall monitor auditing 
        activities conducted under this subsection.
          (2) Inspection and audit.--Each contract under this 
        section shall provide that the Secretary, or any person 
        or organization designated by the Secretary--
                  (A) shall have the right to timely inspect or 
                otherwise evaluate (i) the quality, 
                appropriateness, and timeliness of services 
                performed under the contract, and (ii) the 
                facilities of the organization when there is 
                reasonable evidence of some need for such 
                inspection, and
                  (B) shall have the right to timely audit and 
                inspect any books and records of the 
                Medicare+Choice organization that pertain (i) 
                to the ability of the organization to bear the 
                risk of potential financial losses, or (ii) to 
                services performed or determinations of amounts 
                payable under the contract.
          (3) Enrollee notice at time of termination.--Each 
        contract under this section shall require the 
        organization to provide (and pay for) written notice in 
        advance of the contract's termination, as well as a 
        description of alternatives for obtaining benefits 
        under this title, to each individual enrolled with the 
        organization under this part.
          (4) Disclosure.--
                  (A) In general.--Each Medicare+Choice 
                organization shall, in accordance with 
                regulations of the Secretary, report to the 
                Secretary financial information which shall 
                include the following:
                          (i) Such information as the Secretary 
                        may require demonstrating that the 
                        organization has a fiscally sound 
                        operation.
                          (ii) A copy of the report, if any, 
                        filed with the Secretary containing the 
                        information required to be reported 
                        under section 1124 by disclosing 
                        entities.
                          (iii) A description of transactions, 
                        as specified by the Secretary, between 
                        the organization and a party in 
                        interest. Such transactions shall 
                        include--
                                  (I) any sale or exchange, or 
                                leasing of any property between 
                                the organization and a party in 
                                interest;
                                  (II) any furnishing for 
                                consideration of goods, 
                                services (including management 
                                services), or facilities 
                                between the organization and a 
                                party in interest, but not 
                                including salaries paid to 
                                employees for services provided 
                                in the normal course of their 
                                employment and health services 
                                provided to members by 
                                hospitals and other providers 
                                and by staff, medical group (or 
                                groups), individual practice 
                                association (or associations), 
                                or any combination thereof; and
                                  (III) any lending of money or 
                                other extension of credit 
                                between an organization and a 
                                party in interest.
                The Secretary may require that information 
                reported respecting an organization which 
                controls, is controlled by, or is under common 
                control with, another entity be in the form of 
                a consolidated financial statement for the 
                organization and such entity.
                  (B) Party in interest defined.--For the 
                purposes of this paragraph, the term ``party in 
                interest'' means--
                          (i) any director, officer, partner, 
                        or employee responsible for management 
                        or administration of a Medicare+Choice 
                        organization, any person who is 
                        directly or indirectly the beneficial 
                        owner of more than 5 percent of the 
                        equity of the organization, any person 
                        who is the beneficial owner of a 
                        mortgage, deed of trust, note, or other 
                        interest secured by, and valuing more 
                        than 5 percent of the organization, 
                        and, in the case of a Medicare+Choice 
                        organization organized as a nonprofit 
                        corporation, an incorporator or member 
                        of such corporation under applicable 
                        State corporation law;
                          (ii) any entity in which a person 
                        described in clause (i)--
                                  (I) is an officer or 
                                director;
                                  (II) is a partner (if such 
                                entity is organized as a 
                                partnership);
                                  (III) has directly or 
                                indirectly a beneficial 
                                interest of more than 5 percent 
                                of the equity; or
                                  (IV) has a mortgage, deed of 
                                trust, note, or other interest 
                                valuing more than 5 percent of 
                                the assets of such entity;
                          (iii) any person directly or 
                        indirectly controlling, controlled by, 
                        or under common control with an 
                        organization; and
                          (iv) any spouse, child, or parent of 
                        an individual described in clause (i).
                  (C) Access to information.--Each 
                Medicare+Choice organization shall make the 
                information reported pursuant to subparagraph 
                (A) available to its enrollees upon reasonable 
                request.
          (5) Loan information.--The contract shall require the 
        organization to notify the Secretary of loans and other 
        special financial arrangements which are made between 
        the organization and subcontractors, affiliates, and 
        related parties.
          (6) Review to ensure compliance with care management 
        requirements for specialized medicare advantage plans 
        for special needs individuals.--In conjunction with the 
        periodic audit of a specialized Medicare Advantage plan 
        for special needs individuals under paragraph (1), the 
        Secretary shall conduct a review to ensure that such 
        organization offering the plan meets the requirements 
        described in section 1859(f)(5).
  (e) Additional Contract Terms.--
          (1) In general.--The contract shall contain such 
        other terms and conditions not inconsistent with this 
        part (including requiring the organization to provide 
        the Secretary with such information) as the Secretary 
        may find necessary and appropriate.
          (2) Cost-sharing in enrollment-related costs.--
                  (A) In general.--A Medicare+Choice 
                organization and a PDP sponsor under part D 
                shall pay the fee established by the Secretary 
                under subparagraph (B).
                  (B) Authorization.--The Secretary is 
                authorized to charge a fee to each 
                Medicare+Choice organization with a contract 
                under this part and each PDP sponsor with a 
                contract under part D that is equal to the 
                organization' or sponsor's pro rata share (as 
                determined by the Secretary) of the aggregate 
                amount of fees which the Secretary is directed 
                to collect in a fiscal year. Any amounts 
                collected shall be available without further 
                appropriation to the Secretary for the purpose 
                of carrying out section 1851 (relating to 
                enrollment and dissemination of information), 
                section 1860D-1(c), and section 4360 of the 
                Omnibus Budget Reconciliation Act of 1990 
                (relating to the health insurance counseling 
                and assistance program).
                  (C) Authorization of appropriations.--There 
                are authorized to be appropriated for the 
                purposes described in subparagraph (B) for each 
                fiscal year beginning with fiscal year 2001 and 
                ending with fiscal year 2005 an amount equal to 
                $100,000,000, and for each fiscal year 
                beginning with fiscal year 2006 an amount equal 
                to $200,000,000, reduced by the amount of fees 
                authorized to be collected under this paragraph 
                and section 1860D-12(b)(3)(D) for the fiscal 
                year.
                  (D) Limitation.--In any fiscal year the fees 
                collected by the Secretary under subparagraph 
                (B) shall not exceed the lesser of--
                          (i) the estimated costs to be 
                        incurred by the Secretary in the fiscal 
                        year in carrying out the activities 
                        described in section 1851 and section 
                        1860D-1(c) and section 4360 of the 
                        Omnibus Budget Reconciliation Act of 
                        1990; or
                          (ii)(I) $200,000,000 in fiscal year 
                        1998;
                          (II) $150,000,000 in fiscal year 
                        1999;
                          (III) $100,000,000 in fiscal year 
                        2000;
                          (IV) the Medicare+Choice portion (as 
                        defined in subparagraph (E)) of 
                        $100,000,000 in fiscal year 2001 and 
                        each succeeding fiscal year before 
                        fiscal year 2006; and
                          (V) the applicable portion (as 
                        defined in subparagraph (F)) of 
                        $200,000,000 in fiscal year 2006 and 
                        each succeeding fiscal year.
                  (E) Medicare+choice portion defined.--In this 
                paragraph, the term ``Medicare+Choice portion'' 
                means, for a fiscal year, the ratio, as 
                estimated by the Secretary, of--
                          (i) the average number of individuals 
                        enrolled in Medicare+Choice plans 
                        during the fiscal year, to
                          (ii) the average number of 
                        individuals entitled to benefits under 
                        part A, and enrolled under part B, 
                        during the fiscal year.
                  (F) Applicable portion defined.--In this 
                paragraph, the term ``applicable portion'' 
                means, for a fiscal year--
                          (i) with respect to MA organizations, 
                        the Secretary's estimate of the total 
                        proportion of expenditures under this 
                        title that are attributable to 
                        expenditures made under this part 
                        (including payments under part D that 
                        are made to such organizations); or
                          (ii) with respect to PDP sponsors, 
                        the Secretary's estimate of the total 
                        proportion of expenditures under this 
                        title that are attributable to 
                        expenditures made to such sponsors 
                        under part D.
          (3) Agreements with federally qualified health 
        centers.--
                  (A) Payment levels and amounts.--A contract 
                under this section with an MA organization 
                shall require the organization to provide, in 
                any written agreement described in section 
                1853(a)(4) between the organization and a 
                federally qualified health center, for a level 
                and amount of payment to the federally 
                qualified health center for services provided 
                by such health center that is not less than the 
                level and amount of payment that the plan would 
                make for such services if the services had been 
                furnished by a entity providing similar 
                services that was not a federally qualified 
                health center.
                  (B) Cost-sharing.--Under the written 
                agreement referred to in subparagraph (A), a 
                federally qualified health center must accept 
                the payment amount referred to in such 
                subparagraph plus the Federal payment provided 
                for in section 1833(a)(3)(B) as payment in full 
                for services covered by the agreement, except 
                that such a health center may collect any 
                amount of cost-sharing permitted under the 
                contract under this section, so long as the 
                amounts of any deductible, coinsurance, or 
                copayment comply with the requirements under 
                section 1854(e).
          (4) Requirement for minimum medical loss ratio.--If 
        the Secretary determines for a contract year (beginning 
        with 2014) that an MA plan has failed to have a medical 
        loss ratio of at least .85--
                  (A) the MA plan shall remit to the Secretary 
                an amount equal to the product of--
                          (i) the total revenue of the MA plan 
                        under this part for the contract year; 
                        and
                          (ii) the difference between .85 and 
                        the medical loss ratio;
                  (B) for 3 consecutive contract years, the 
                Secretary shall not permit the enrollment of 
                new enrollees under the plan for coverage 
                during the second succeeding contract year; and
                  (C) the Secretary shall terminate the plan 
                contract if the plan fails to have such a 
                medical loss ratio for 5 consecutive contract 
                years.
          (5) Communicating plan corrective actions against 
        opioids over-prescribers.--
                  (A) In general.--Beginning with plan years 
                beginning on or after January 1, 2021, a 
                contract under this section with an MA 
                organization shall require the organization to 
                submit to the Secretary, through the process 
                established under subparagraph (B), information 
                on the investigations, credible evidence of 
                suspicious activities of a provider of services 
                (including a prescriber) or supplier related to 
                fraud, and other actions taken by such plans 
                related to inappropriate prescribing of 
                opioids.
                  (B) Process.--Not later than January 1, 2021, 
                the Secretary shall, in consultation with 
                stakeholders, establish a process under which 
                MA plans and prescription drug plans shall 
                submit to the Secretary information described 
                in subparagraph (A).
                  (C) Regulations.--For purposes of this 
                paragraph, including as applied under section 
                1860D-12(b)(3)(D), the Secretary shall, 
                pursuant to rulemaking--
                          (i) specify a definition for the term 
                        ``inappropriate prescribing'' and a 
                        method for determining if a provider of 
                        services prescribes inappropriate 
                        prescribing; and
                          (ii) establish the process described 
                        in subparagraph (B) and the types of 
                        information that shall be submitted 
                        through such process.
  (f) Prompt Payment by Medicare+Choice Organization.--
          (1) Requirement.--A contract under this part shall 
        require a Medicare+Choice organization to provide 
        prompt payment (consistent with the provisions of 
        sections 1816(c)(2) and 1842(c)(2)) of claims submitted 
        for services and supplies furnished to enrollees 
        pursuant to the contract, if the services or supplies 
        are not furnished under a contract between the 
        organization and the provider or supplier (or in the 
        case of a Medicare+Choice private fee-for-service plan, 
        if a claim is submitted to such organization by an 
        enrollee).
          (2) Secretary's option to bypass noncomplying 
        organization.--In the case of a Medicare+Choice 
        eligible organization which the Secretary determines, 
        after notice and opportunity for a hearing, has failed 
        to make payments of amounts in compliance with 
        paragraph (1), the Secretary may provide for direct 
        payment of the amounts owed to providers and suppliers 
        (or, in the case of a Medicare+Choice private fee-for-
        service plan, amounts owed to the enrollees) for 
        covered services and supplies furnished to individuals 
        enrolled under this part under the contract. If the 
        Secretary provides for the direct payments, the 
        Secretary shall provide for an appropriate reduction in 
        the amount of payments otherwise made to the 
        organization under this part to reflect the amount of 
        the Secretary's payments (and the Secretary's costs in 
        making the payments).
          (3) Incorporation of certain prescription drug plan 
        contract requirements.--The following provisions shall 
        apply to contracts with a Medicare Advantage 
        organization offering an MA-PD plan in the same manner 
        as they apply to contracts with a PDP sponsor offering 
        a prescription drug plan under part D:
                  (A) Prompt payment.--Section 1860D-12(b)(4).
                  (B) Submission of claims by pharmacies 
                located in or contracting with long-term care 
                facilities.--Section 1860D-12(b)(5).
                  (C) Regular update of prescription drug 
                pricing standard.--Section 1860D-12(b)(6).
                  (D) Suspension of payments pending 
                investigation of credible allegations of fraud 
                by pharmacies.--Section 1860D-12(b)(7).
                  (E) Provision of information related to 
                maximum fair prices.--Section 1860D-12(b)(8).
  (g) Intermediate Sanctions.--
          (1) In general.--If the Secretary determines that a 
        Medicare+Choice organization with a contract under this 
        section--
                  (A) fails substantially to provide medically 
                necessary items and services that are required 
                (under law or under the contract) to be 
                provided to an individual covered under the 
                contract, if the failure has adversely affected 
                (or has substantial likelihood of adversely 
                affecting) the individual;
                  (B) imposes premiums on individuals enrolled 
                under this part in excess of the amount of the 
                Medicare+Choice monthly basic and supplemental 
                beneficiary premiums permitted under section 
                1854;
                  (C) acts to expel or to refuse to re-enroll 
                an individual in violation of the provisions of 
                this part;
                  (D) engages in any practice that would 
                reasonably be expected to have the effect of 
                denying or discouraging enrollment (except as 
                permitted by this part) by eligible individuals 
                with the organization whose medical condition 
                or history indicates a need for substantial 
                future medical services;
                  (E) misrepresents or falsifies information 
                that is furnished--
                          (i) to the Secretary under this part, 
                        or
                          (ii) to an individual or to any other 
                        entity under this part;
                  (F) fails to comply with the applicable 
                requirements of section 1852(j)(3) or 
                1852(k)(2)(A)(ii);
                  (G) employs or contracts with any individual 
                or entity that is excluded from participation 
                under this title under section 1128 or 1128A 
                for the provision of health care, utilization 
                review, medical social work, or administrative 
                services or employs or contracts with any 
                entity for the provision (directly or 
                indirectly) through such an excluded individual 
                or entity of such services;
                  (H) except as provided under subparagraph (C) 
                or (D) of section 1860D-1(b)(1), enrolls an 
                individual in any plan under this part without 
                the prior consent of the individual or the 
                designee of the individual;
                  (I) transfers an individual enrolled under 
                this part from one plan to another without the 
                prior consent of the individual or the designee 
                of the individual or solely for the purpose of 
                earning a commission;
                  (J) fails to comply with marketing 
                restrictions described in subsections (h) and 
                (j) of section 1851 or applicable implementing 
                regulations or guidance; or
                  (K) employs or contracts with any individual 
                or entity who engages in the conduct described 
                in subparagraphs (A) through (J) of this 
                paragraph;
        the Secretary may provide, in addition to any other 
        remedies authorized by law, for any of the remedies 
        described in paragraph (2). The Secretary may provide, 
        in addition to any other remedies authorized by law, 
        for any of the remedies described in paragraph (2), if 
        the Secretary determines that any employee or agent of 
        such organization, or any provider or supplier who 
        contracts with such organization, has engaged in any 
        conduct described in subparagraphs (A) through (K) of 
        this paragraph.
          (2) Remedies.--The remedies described in this 
        paragraph are--
                  (A) civil money penalties of not more than 
                $25,000 for each determination under paragraph 
                (1) or, with respect to a determination under 
                subparagraph (D) or (E)(i) of such paragraph, 
                of not more than $100,000 for each such 
                determination, except with respect to a 
                determination under subparagraph (E), an 
                assessment of not more than the amount claimed 
                by such plan or plan sponsor based upon the 
                misrepresentation or falsified information 
                involved, plus, with respect to a determination 
                under paragraph (1)(B), double the excess 
                amount charged in violation of such paragraph 
                (and the excess amount charged shall be 
                deducted from the penalty and returned to the 
                individual concerned), and plus, with respect 
                to a determination under paragraph (1)(D), 
                $15,000 for each individual not enrolled as a 
                result of the practice involved,
                  (B) suspension of enrollment of individuals 
                under this part after the date the Secretary 
                notifies the organization of a determination 
                under paragraph (1) and until the Secretary is 
                satisfied that the basis for such determination 
                has been corrected and is not likely to recur, 
                or
                  (C) suspension of payment to the organization 
                under this part for individuals enrolled after 
                the date the Secretary notifies the 
                organization of a determination under paragraph 
                (1) and until the Secretary is satisfied that 
                the basis for such determination has been 
                corrected and is not likely to recur.
          (3) Other intermediate sanctions.--In the case of a 
        Medicare+Choice organization for which the Secretary 
        makes a determination under subsection (c)(2) the basis 
        of which is not described in paragraph (1), the 
        Secretary may apply the following intermediate 
        sanctions:
                  (A) Civil money penalties of not more than 
                $25,000 for each determination under subsection 
                (c)(2) if the deficiency that is the basis of 
                the determination has directly adversely 
                affected (or has the substantial likelihood of 
                adversely affecting) an individual covered 
                under the organization's contract.
                  (B) Civil money penalties of not more than 
                $10,000 for each week beginning after the 
                initiation of civil money penalty procedures by 
                the Secretary during which the deficiency that 
                is the basis of a determination under 
                subsection (c)(2) exists.
                  (C) Suspension of enrollment of individuals 
                under this part after the date the Secretary 
                notifies the organization of a determination 
                under subsection (c)(2) and until the Secretary 
                is satisfied that the deficiency that is the 
                basis for the determination has been corrected 
                and is not likely to recur.
                  (D) Civil monetary penalties of not more than 
                $100,000, or such higher amount as the 
                Secretary may establish by regulation, where 
                the finding under subsection (c)(2)(A) is based 
                on the organization's termination of its 
                contract under this section other than at a 
                time and in a manner provided for under 
                subsection (a).
          (4) Civil money penalties.--The provisions of section 
        1128A (other than subsections (a) and (b)) shall apply 
        to a civil money penalty under paragraph (2) or (3) in 
        the same manner as they apply to a civil money penalty 
        or proceeding under section 1128A(a).
  (h) Procedures for Termination.--
          (1) In general.--The Secretary may terminate a 
        contract with a Medicare+Choice organization under this 
        section in accordance with formal investigation and 
        compliance procedures established by the Secretary 
        under which--
                  (A) the Secretary provides the organization 
                with the reasonable opportunity to develop and 
                implement a corrective action plan to correct 
                the deficiencies that were the basis of the 
                Secretary's determination under subsection 
                (c)(2); and
                  (B) the Secretary provides the organization 
                with reasonable notice and opportunity for 
                hearing (including the right to appeal an 
                initial decision) before terminating the 
                contract.
          (2) Exception for imminent and serious risk to 
        health.--Paragraph (1) shall not apply if the Secretary 
        determines that a delay in termination, resulting from 
        compliance with the procedures specified in such 
        paragraph prior to termination, would pose an imminent 
        and serious risk to the health of individuals enrolled 
        under this part with the organization.
          (3) Delay in contract termination authority for plans 
        failing to achieve minimum quality rating.--During the 
        period beginning on the date of the enactment of this 
        paragraph and through the end of plan year 2018, the 
        Secretary may not terminate a contract under this 
        section with respect to the offering of an MA plan by a 
        Medicare Advantage organization solely because the MA 
        plan has failed to achieve a minimum quality rating 
        under the 5-star rating system under section 
        1853(o)(4).
  (i) Medicare+Choice Program Compatibility With Employer or 
Union Group Health Plans.--
          (1) Contracts with ma organizations.--To facilitate 
        the offering of Medicare+Choice plans under contracts 
        between Medicare+Choice organizations and employers, 
        labor organizations, or the trustees of a fund 
        established by one or more employers or labor 
        organizations (or combination thereof) to furnish 
        benefits to the entity's employees, former employees 
        (or combination thereof) or members or former members 
        (or combination thereof) of the labor organizations, 
        the Secretary may waive or modify requirements that 
        hinder the design of, the offering of, or the 
        enrollment in such Medicare+Choice plans.
          (2) Employer sponsored ma plans.--To facilitate the 
        offering of MA plans by employers, labor organizations, 
        or the trustees of a fund established by one or more 
        employers or labor organizations (or combination 
        thereof) to furnish benefits to the entity's employees, 
        former employees (or combination thereof) or members or 
        former members (or combination thereof) of the labor 
        organizations, the Secretary may waive or modify 
        requirements that hinder the design of, the offering 
        of, or the enrollment in such MA plans. Notwithstanding 
        section 1851(g), an MA plan described in the previous 
        sentence may restrict the enrollment of individuals 
        under this part to individuals who are beneficiaries 
        and participants in such plan.

           *       *       *       *       *       *       *


          Part D--Voluntary Prescription Drug Benefit Program

Subpart 1--Part D Eligible Individuals and Prescription Drug Benefits

           *       *       *       *       *       *       *


                       prescription drug benefits

  Sec. 1860D-2. (a) Requirements.--
          (1) In general.--For purposes of this part and part 
        C, the term ``qualified prescription drug coverage'' 
        means either of the following:
                  (A) Standard prescription drug coverage with 
                access to negotiated prices.--Standard 
                prescription drug coverage (as defined in 
                subsection (b)) and access to negotiated prices 
                under subsection (d).
                  (B) Alternative prescription drug coverage 
                with at least actuarially equivalent benefits 
                and access to negotiated prices.--Coverage of 
                covered part D drugs which meets the 
                alternative prescription drug coverage 
                requirements of subsection (c) and access to 
                negotiated prices under subsection (d), but 
                only if the benefit design of such coverage is 
                approved by the Secretary, as provided under 
                subsection (c).
          (2) Permitting supplemental prescription drug 
        coverage.--
                  (A) In general.--Subject to subparagraph (B), 
                qualified prescription drug coverage may 
                include supplemental prescription drug coverage 
                consisting of either or both of the following:
                          (i) Certain reductions in cost-
                        sharing.--
                                  (I) In general.--A reduction 
                                in the annual deductible, a 
                                reduction in the coinsurance 
                                percentage[, or an increase in 
                                the initial] or, for a year 
                                preceding 2022, an increase in 
                                the initial coverage limit with 
                                respect to covered part D 
                                drugs, or any combination 
                                thereof, insofar as such a 
                                reduction or increase increases 
                                the actuarial value of benefits 
                                above the actuarial value of 
                                basic prescription drug 
                                coverage.
                                  (II) Construction.--Nothing 
                                in this paragraph shall be 
                                construed as affecting the 
                                application of subsection 
                                (c)(3).
                          (ii) Optional drugs.--Coverage of any 
                        product that would be a covered part D 
                        drug but for the application of 
                        subsection (e)(2)(A).
                  (B) Requirement.--A PDP sponsor may not offer 
                a prescription drug plan that provides 
                supplemental prescription drug coverage 
                pursuant to subparagraph (A) in an area unless 
                the sponsor also offers a prescription drug 
                plan in the area that only provides basic 
                prescription drug coverage.
          (3) Basic prescription drug coverage.--For purposes 
        of this part and part C, the term ``basic prescription 
        drug coverage'' means either of the following:
                  (A) Coverage that meets the requirements of 
                paragraph (1)(A).
                  (B) Coverage that meets the requirements of 
                paragraph (1)(B) but does not have any 
                supplemental prescription drug coverage 
                described in paragraph (2)(A).
          (4) Application of secondary payor provisions.--The 
        provisions of section 1852(a)(4) shall apply under this 
        part in the same manner as they apply under part C.
          (5) Construction.--Nothing in this subsection shall 
        be construed as changing the computation of incurred 
        costs under subsection (b)(4).
  (b) Standard Prescription Drug Coverage.--For purposes of 
this part and part C, the term ``standard prescription drug 
coverage'' means coverage of covered part D drugs that meets 
the following requirements:
          (1) Deductible.--
                  (A) In general.--The coverage has an annual 
                deductible--
                          (i) for 2006, that is equal to $250; 
                        or
                          (ii) for a subsequent year, that is 
                        equal to the amount specified under 
                        this paragraph for the previous year 
                        increased by the percentage specified 
                        in paragraph (6) for the year involved.
                  (B) Rounding.--Any amount determined under 
                subparagraph (A)(ii) that is not a multiple of 
                $5 shall be rounded to the nearest multiple of 
                $5.
          (2) Benefit structure.--
                  (A)  25 percent coinsurance.--Subject to 
                subparagraphs (C) and (D), the coverage has 
                coinsurance (for costs above the annual 
                deductible specified in paragraph (1) and up to 
                the initial coverage limit under paragraph (3) 
                for a year preceding 2022 and for costs above 
                the annual deductible specified in paragraph 
                (1) and up to the annual out-of-pocket 
                threshold specified in paragraph (4)(B) for 
                2022 and each subsequent year) that is--
                          (i) equal to 25 percent; or
                          (ii) actuarially equivalent (using 
                        processes and methods established under 
                        section 1860D-11(c)) to an average 
                        expected payment of 25 percent of such 
                        costs.
                  (B) Use of tiers.--Nothing in this part shall 
                be construed as preventing a PDP sponsor or an 
                MA organization from applying tiered copayments 
                under a plan, so long as such tiered copayments 
                are consistent with subparagraphs (A)(ii), (C), 
                and (D).
                  (C) Coverage for generic drugs in coverage 
                gap.--
                          (i) In general.--Except as provided 
                        in paragraph (4),  for a year preceding 
                        2022, the coverage for an applicable 
                        beneficiary (as defined in section 
                        1860D-14A(g)(1)) has coinsurance (for 
                        costs above the initial coverage limit 
                        under paragraph (3) and below the out-
                        of-pocket threshold) for covered part D 
                        drugs that are not applicable drugs 
                        under section 1860D-14A(g)(2) that is--
                                  (I) equal to the generic-gap 
                                coinsurance percentage 
                                (specified in clause (ii)) for 
                                the year; or
                                  (II) actuarially equivalent 
                                (using processes and methods 
                                established under section 
                                1860D-11(c)) to an average 
                                expected payment of such 
                                percentage of such costs for 
                                covered part D drugs that are 
                                not applicable drugs under 
                                section 1860D-14A(g)(2).
                          (ii) Generic-gap coinsurance 
                        percentage.--The generic-gap 
                        coinsurance percentage specified in 
                        this clause for--
                                  (I) 2011 is 93 percent;
                                  (II) 2012 and each succeeding 
                                year before 2020 is the 
                                generic-gap coinsurance 
                                percentage under this clause 
                                for the previous year decreased 
                                by 7 percentage points; and
                                  (III) 2020 [and each 
                                subsequent year] and 2021 is 25 
                                percent.
                  (D) Coverage for applicable drugs in coverage 
                gap.--
                          (i) In general.--Except as provided 
                        in paragraph (4),  for a year preceding 
                        2022, the coverage for an applicable 
                        beneficiary (as defined in section 
                        1860D-14A(g)(1)) has coinsurance (for 
                        costs above the initial coverage limit 
                        under paragraph (3) and below the out-
                        of-pocket threshold) for the negotiated 
                        price (as defined in section 1860D-
                        14A(g)(6)) of covered part D drugs that 
                        are applicable drugs under section 
                        1860D-14A(g)(2) that is--
                                  (I) equal to the difference 
                                between--
                                          (aa) the applicable 
                                        gap percentage 
                                        (specified in clause 
                                        (ii) for the year); and
                                          (bb) the discount 
                                        percentage specified in 
                                        section 1860D-
                                        14A(g)(4)(A) for such 
                                        applicable drugs (or, 
                                        in the case of [a year 
                                        after 2018] each of 
                                        years 2018 through 
                                        2021, 50 percent); or
                                  (II) actuarially equivalent 
                                (using processes and methods 
                                established under section 
                                1860D-11(c)) to an average 
                                expected payment of such 
                                percentage of such costs, for 
                                covered part D drugs that are 
                                applicable drugs under section 
                                1860D-14A(g)(2).
                          (ii) Applicable gap percentage.--The 
                        applicable gap percentage specified in 
                        this clause for--
                                  (I) 2013 and 2014 is 97.5 
                                percent;
                                  (II) 2015 and 2016 is 95 
                                percent;
                                  (III) 2017 is 90 percent;
                                  (IV) 2018 is 85 percent; and
                                  (V) [2019 and each subsequent 
                                year] each of years 2019 
                                through 2021 is 75 percent.
          (3) Initial coverage limit.--
                  (A) In general.--Except as provided in 
                paragraphs (2)(C), (2)(D), and (4),  for a year 
                preceding 2022, the coverage has an initial 
                coverage limit on the maximum costs that may be 
                recognized for payment purposes (including the 
                annual deductible)--
                          (i) for 2006, that is equal to 
                        $2,250; or
                          (ii) [for a subsequent year] for each 
                        of years 2007 through 2021, that is 
                        equal to the amount specified in this 
                        paragraph for the previous year, 
                        increased by the annual percentage 
                        increase described in paragraph (6) for 
                        the year involved.
                  (B) Rounding.--Any amount determined under 
                subparagraph (A)(ii) that is not a multiple of 
                $10 shall be rounded to the nearest multiple of 
                $10.
          (4) Protection against high out-of-pocket 
        expenditures.--
                  (A) In general.--
                          (i) In general.--The coverage 
                        provides benefits, after the part D 
                        eligible individual has incurred costs 
                        (as described in subparagraph (C)) for 
                        covered part D drugs in a year equal to 
                        the annual out-of-pocket threshold 
                        specified in subparagraph (B), with 
                        cost-sharing that [is equal to the 
                        greater of--] is equal to--
                                  (I) for a year preceding 
                                2022, the greater of-- 
                                          [(I)] (aa) a 
                                        copayment of $2 for a 
                                        generic drug or a 
                                        preferred drug that is 
                                        a multiple source drug 
                                        (as defined in section 
                                        1927(k)(7)(A)(i)) and 
                                        $5 for any other drug; 
                                        or
                                          [(II)] (bb) 
                                        coinsurance that is 
                                        equal to 5 percent[.]; 
                                        and
                                  (II) for 2022 and each 
                                succeeding year, $0.
                          (ii) Adjustment of amount.--For a 
                        year after 2006, the dollar amounts 
                        specified in [clause (i)(I)] clause 
                        (i)(I)(aa) shall be equal to the dollar 
                        amounts specified in this subparagraph 
                        for the previous year, increased by the 
                        annual percentage increase described in 
                        paragraph (6) for the year involved. 
                        Any amount established under this 
                        clause that is not a multiple of a 5 
                        cents shall be rounded to the nearest 
                        multiple of 5 cents. The Secretary 
                        shall continue to calculate the dollar 
                        amounts specified in clause (i)(I)(aa), 
                        including with the adjustment under 
                        this clause, after 2021 for purposes of 
                        section 1860D-14(a)(1)(D)(iii).
                  (B) Annual out-of-pocket threshold.--
                          (i) In general.--For purposes of this 
                        part, the ``annual out-of-pocket 
                        threshold'' specified in this 
                        subparagraph--
                                  (I) for 2006, is equal to 
                                $3,600;
                                  (II) for each of years 2007 
                                through 2013, is equal to the 
                                amount specified in this 
                                subparagraph for the previous 
                                year, increased by the annual 
                                percentage increase described 
                                in paragraph (6) for the year 
                                involved;
                                  (III) for 2014 and 2015, is 
                                equal to the amount specified 
                                in this subparagraph for the 
                                previous year, increased by the 
                                annual percentage increase 
                                described in paragraph (6) for 
                                the year involved, minus 0.25 
                                percentage point;
                                  (IV) for each of years 2016 
                                through 2019, is equal to the 
                                amount specified in this 
                                subparagraph for the previous 
                                year, increased by the lesser 
                                of--
                                          (aa) the annual 
                                        percentage increase 
                                        described in paragraph 
                                        (7) for the year 
                                        involved, plus 2 
                                        percentage points; or
                                          (bb) the annual 
                                        percentage increase 
                                        described in paragraph 
                                        (6) for the year;
                                  (V) for 2020, is equal to the 
                                amount that would have been 
                                applied under this subparagraph 
                                for 2020 if the amendments made 
                                by section 1101(d)(1) of the 
                                Health Care and Education 
                                Reconciliation Act of 2010 had 
                                not been enacted; [or]
                                  (VI) [for a subsequent year] 
                                for 2021, is equal to the 
                                amount specified in this 
                                subparagraph for the previous 
                                year, increased by the annual 
                                percentage increase described 
                                in paragraph (6) for the year 
                                involved[.];
                                  (VII) for 2022, is equal to 
                                $2,000; or
                                  (VIII) for a subsequent year, 
                                is equal to the amount 
                                specified in this subparagraph 
                                for the previous year, 
                                increased by the annual 
                                percentage increase described 
                                in paragraph (6) for the year 
                                involved.
                          (ii) Rounding.--Any amount determined 
                        under [clause (i)(II)] clause (i) that 
                        is not a multiple of $50 shall be 
                        rounded to the nearest multiple of $50.
                  (C) Application.--Except as provided in 
                subparagraph (E), in applying subparagraph 
                (A)--
                          (i) incurred costs shall only include 
                        costs incurred with respect to covered 
                        part D drugs for the annual deductible 
                        described in paragraph (1), for cost-
                        sharing described in paragraph (2), 
                        [and for amounts] and, for a year 
                        preceding 2022, for amounts for which 
                        benefits are not provided because of 
                        the application of the initial coverage 
                        limit described in paragraph (3), but 
                        does not include any costs incurred for 
                        covered part D drugs which are not 
                        included (or treated as being included) 
                        in the plan's formulary;
                          (ii) subject to clause (iii), such 
                        costs shall be treated as incurred only 
                        if they are paid by the part D eligible 
                        individual (or by another person, such 
                        as a family member, on behalf of the 
                        individual) and the part D eligible 
                        individual (or other person) is not 
                        reimbursed through insurance or 
                        otherwise, a group health plan, or 
                        other third-party payment arrangement 
                        (other than under such section or such 
                        a Program) for such costs; and
                          (iii) such costs shall be treated as 
                        incurred and shall not be considered to 
                        be reimbursed under clause (ii) if such 
                        costs are borne or paid--
                                  (I) under section 1860D-14;
                                  (II) under a State 
                                Pharmaceutical Assistance 
                                Program;
                                  (III) by the Indian Health 
                                Service, an Indian tribe or 
                                tribal organization, or an 
                                urban Indian organization (as 
                                defined in section 4 of the 
                                Indian Health Care Improvement 
                                Act); or
                                  (IV) under an AIDS Drug 
                                Assistance Program under part B 
                                of title XXVI of the Public 
                                Health Service Act.
                  (D) Information regarding third-party 
                reimbursement.--
                          (i) Procedures for exchanging 
                        information.--In order to accurately 
                        apply the requirements of subparagraph 
                        (C)(ii), the Secretary is authorized to 
                        establish procedures, in coordination 
                        with the Secretary of the Treasury and 
                        the Secretary of Labor--
                                  (I) for determining whether 
                                costs for part D eligible 
                                individuals are being 
                                reimbursed through insurance or 
                                otherwise, a group health plan, 
                                or other third-party payment 
                                arrangement; and
                                  (II) for alerting the PDP 
                                sponsors and MA organizations 
                                that offer the prescription 
                                drug plans and MA-PD plans in 
                                which such individuals are 
                                enrolled about such 
                                reimbursement arrangements.
                          (ii) Authority to request information 
                        from enrollees.--A PDP sponsor or an MA 
                        organization may periodically ask part 
                        D eligible individuals enrolled in a 
                        prescription drug plan or an MA-PD plan 
                        offered by the sponsor or organization 
                        whether such individuals have or expect 
                        to receive such third-party 
                        reimbursement. A material 
                        misrepresentation of the information 
                        described in the preceding sentence by 
                        an individual (as defined in standards 
                        set by the Secretary and determined 
                        through a process established by the 
                        Secretary) shall constitute grounds for 
                        termination of enrollment in any plan 
                        under section 1851(g)(3)(B) (and as 
                        applied under this part under section 
                        1860D-1(b)(1)(B)(v)) for a period 
                        specified by the Secretary.
                  (E) Inclusion of costs of applicable drugs 
                under medicare coverage gap discount program.--
                [In applying] For each of years 2011 through 
                2021, in applying subparagraph (A), incurred 
                costs shall include the negotiated price (as 
                defined in paragraph (6) of section 1860D-
                14A(g)) of an applicable drug (as defined in 
                paragraph (2) of such section) of a 
                manufacturer that is furnished to an applicable 
                beneficiary (as defined in paragraph (1) of 
                such section) under the Medicare coverage gap 
                discount program under section 1860D-14A, 
                regardless of whether part of such costs were 
                paid by a manufacturer under such program, 
                except that incurred costs shall not include 
                the portion of the negotiated price that 
                represents the reduction in coinsurance 
                resulting from the application of paragraph 
                (2)(D).
          (5) Construction.--Nothing in this part shall be 
        construed as preventing a PDP sponsor or an MA 
        organization offering an MA-PD plan from reducing to 
        zero the cost-sharing otherwise applicable to preferred 
        or generic drugs.
          (6) Annual percentage increase.--The annual 
        percentage increase specified in this paragraph for a 
        year is equal to the annual percentage increase in 
        average per capita aggregate expenditures for covered 
        part D drugs in the United States for part D eligible 
        individuals, as determined by the Secretary for the 12-
        month period ending in July of the previous year using 
        such methods as the Secretary shall specify.
          (7) Additional annual percentage increase.--The 
        annual percentage increase specified in this paragraph 
        for a year is equal to the annual percentage increase 
        in the consumer price index for all urban consumers 
        (United States city average) for the 12-month period 
        ending in July of the previous year.
  (c) Alternative Prescription Drug Coverage Requirements.--A 
prescription drug plan or an MA-PD plan may provide a different 
prescription drug benefit design from standard prescription 
drug coverage so long as the Secretary determines (consistent 
with section 1860D-11(c)) that the following requirements are 
met and the plan applies for, and receives, the approval of the 
Secretary for such benefit design:
          (1) Assuring at least actuarially equivalent 
        coverage.--
                  (A) Assuring equivalent value of total 
                coverage.--The actuarial value of the total 
                coverage is at least equal to the actuarial 
                value of standard prescription drug coverage.
                  (B) Assuring equivalent unsubsidized value of 
                coverage.--The unsubsidized value of the 
                coverage is at least equal to the unsubsidized 
                value of standard prescription drug coverage. 
                For purposes of this subparagraph, the 
                unsubsidized value of coverage is the amount by 
                which the actuarial value of the coverage 
                exceeds the actuarial value of the subsidy 
                payments under section 1860D-15 with respect to 
                such coverage.
                  (C) Assuring standard payment for costs [at 
                initial coverage limit].--The coverage is 
                designed, based upon an actuarially 
                representative pattern of utilization, to 
                provide for the payment, with respect to costs 
                incurred that are equal to the initial coverage 
                limit under subsection (b)(3) for the year for 
                a year preceding 2022 or the annual out-of-
                pocket threshold specified in subsection 
                (b)(4)(B) for the year for 2022 and each 
                subsequent year, of an amount equal to at least 
                the product of--
                          (i) the amount by which the initial 
                        coverage limit described in subsection 
                        (b)(3) for the year for a year 
                        preceding 2022 or the annual out-of-
                        pocket threshold specified in 
                        subsection (b)(4)(B) for the year for 
                        2022 and each subsequent year exceeds 
                        the deductible described in subsection 
                        (b)(1) for the year; and
                          (ii) 100 percent minus the 
                        coinsurance percentage specified in 
                        subsection (b)(2)(A)(i).
          (2) Maximum required deductible.--The deductible 
        under the coverage shall not exceed the deductible 
        amount specified under subsection (b)(1) for the year.
          (3) Same protection against high out-of-pocket 
        expenditures.--The coverage provides the coverage 
        required under subsection (b)(4).
  (d) Access to Negotiated Prices.--
          (1) Access.--
                  (A) In general.--Under qualified prescription 
                drug coverage offered by a PDP sponsor offering 
                a prescription drug plan or an MA organization 
                offering an MA-PD plan, the sponsor or 
                organization shall provide enrollees with 
                access to negotiated prices used for payment 
                for covered part D drugs, regardless of the 
                fact that no benefits may be payable under the 
                coverage with respect to such drugs because of 
                the application of a deductible or other cost-
                sharing [or an initial] or, for a year 
                preceding 2022, an initial coverage limit 
                (described in subsection (b)(3)).
                  (B) Negotiated prices.--For purposes of this 
                part, negotiated prices, subject to 
                subparagraph (D), shall take into account 
                negotiated price concessions, such as 
                discounts, direct or indirect subsidies, 
                rebates, and direct or indirect remunerations, 
                for covered part D drugs, and include any 
                dispensing fees for such drugs.
                  (C) Medicaid-related provisions.--The prices 
                negotiated by a prescription drug plan, by an 
                MA-PD plan with respect to covered part D 
                drugs, or by a qualified retiree prescription 
                drug plan (as defined in section 1860D-
                22(a)(2)) with respect to such drugs on behalf 
                of part D eligible individuals, shall 
                (notwithstanding any other provision of law) 
                not be taken into account for the purposes of 
                establishing the best price under section 
                1927(c)(1)(C).
                  (D) Application of maximum fair price for 
                selected drugs.--In applying this section, in 
                the case of a covered part D drug that is a 
                selected drug (as defined in section 1192(c)), 
                with respect to a price applicability period 
                (as defined in section 1191(b)(2)), the 
                negotiated price described in this subsection 
                shall be the maximum fair price (as defined in 
                section 1191(c)(2)) for such drug and for each 
                plan year during such period.
          (2) Disclosure.--A PDP sponsor offering a 
        prescription drug plan or an MA organization offering 
        an MA-PD plan shall disclose to the Secretary (in a 
        manner specified by the Secretary) the aggregate 
        negotiated price concessions described in paragraph 
        (1)(B) made available to the sponsor or organization by 
        a manufacturer which are passed through in the form of 
        lower subsidies, lower monthly beneficiary prescription 
        drug premiums, and lower prices through pharmacies and 
        other dispensers. The provisions of section 
        1927(b)(3)(D) apply to information disclosed to the 
        Secretary under this paragraph.
          (3) Audits.--To protect against fraud and abuse and 
        to ensure proper disclosures and accounting under this 
        part and in accordance with section 1857(d)(2)(B) (as 
        applied under section 1860D-12(b)(3)(C)), the Secretary 
        may conduct periodic audits, directly or through 
        contracts, of the financial statements and records of 
        PDP sponsors with respect to prescription drug plans 
        and MA organizations with respect to MA-PD plans.
  (e) Covered Part D Drug Defined.--
          (1) In general.--Except as provided in this 
        subsection, for purposes of this part, the term 
        ``covered part D drug'' means--
                  (A) a drug that may be dispensed only upon a 
                prescription and that is described in 
                subparagraph (A)(i), (A)(ii), or (A)(iii) of 
                section 1927(k)(2); or
                  (B) a biological product described in clauses 
                (i) through (iii) of subparagraph (B) of such 
                section or insulin described in subparagraph 
                (C) of such section and medical supplies 
                associated with the injection of insulin (as 
                defined in regulations of the Secretary),
        and such term includes a vaccine licensed under section 
        351 of the Public Health Service Act (and, for vaccines 
        administered on or after January 1, 2008, its 
        administration) and any use of a covered part D drug 
        for a medically accepted indication (as defined in 
        paragraph (4)).
          (2) Exclusions.--
                  (A) In general.--Such term does not include 
                drugs or classes of drugs, or their medical 
                uses, which may be excluded from coverage or 
                otherwise restricted under section 1927(d)(2), 
                other than subparagraph (E) of such section 
                (relating to smoking cessation agents), other 
                than subparagraph (I) of such section (relating 
                to barbiturates) if the barbiturate is used in 
                the treatment of epilepsy, cancer, or a chronic 
                mental health disorder, and other than 
                subparagraph (J) of such section (relating to 
                benzodiazepines), or under section 1927(d)(3), 
                as such sections were in effect on the date of 
                the enactment of this part. Such term also does 
                not include a drug when used for the treatment 
                of sexual or erectile dysfunction, unless such 
                drug were used to treat a condition, other than 
                sexual or erectile dysfunction, for which the 
                drug has been approved by the Food and Drug 
                Administration.
                  (B) Medicare covered drugs.--A drug 
                prescribed for a part D eligible individual 
                that would otherwise be a covered part D drug 
                under this part shall not be so considered if 
                payment for such drug as so prescribed and 
                dispensed or administered with respect to that 
                individual is available (or would be available 
                but for the application of a deductible) under 
                part A or B for that individual.
          (3) Application of general exclusion provisions.--A 
        prescription drug plan or an MA-PD plan may exclude 
        from qualified prescription drug coverage any covered 
        part D drug--
                  (A) for which payment would not be made if 
                section 1862(a) applied to this part; or
                  (B) which is not prescribed in accordance 
                with the plan or this part.
        Such exclusions are determinations subject to 
        reconsideration and appeal pursuant to subsections (g) 
        and (h), respectively, of section 1860D-4.
          (4) Medically accepted indication defined.--
                  (A) In general.--For purposes of paragraph 
                (1), the term ``medically accepted indication'' 
                has the meaning given that term--
                          (i) in the case of a covered part D 
                        drug used in an anticancer 
                        chemotherapeutic regimen, in section 
                        1861(t)(2)(B), except that in applying 
                        such section--
                                  (I) ``prescription drug plan 
                                or MA-PD plan'' shall be 
                                substituted for ``carrier'' 
                                each place it appears; and
                                  (II) subject to subparagraph 
                                (B), the compendia described in 
                                section 1927(g)(1)(B)(i)(III) 
                                shall be included in the list 
                                of compendia described in 
                                clause (ii)(I) section 
                                1861(t)(2)(B); and
                          (ii) in the case of any other covered 
                        part D drug, in section 1927(k)(6).
                  (B) Conflict of interest.--On and after 
                January 1, 2010, subparagraph (A)(i)(II) shall 
                not apply unless the compendia described in 
                section 1927(g)(1)(B)(i)(III) meets the 
                requirement in the third sentence of section 
                1861(t)(2)(B).
                  (C) Update.--For purposes of applying 
                subparagraph (A)(ii), the Secretary shall 
                revise the list of compendia described in 
                section 1927(g)(1)(B)(i) as is appropriate for 
                identifying medically accepted indications for 
                drugs. Any such revision shall be done in a 
                manner consistent with the process for revising 
                compendia under section 1861(t)(2)(B).

           *       *       *       *       *       *       *


    beneficiary protections for qualified prescription drug coverage

  Sec. 1860D-4. (a) Dissemination of Information.--
          (1) General information.--
                  (A) Application of ma information.--A PDP 
                sponsor shall disclose, in a clear, accurate, 
                and standardized form to each enrollee with a 
                prescription drug plan offered by the sponsor 
                under this part at the time of enrollment and 
                at least annually thereafter, the information 
                described in section 1852(c)(1) relating to 
                such plan, insofar as the Secretary determines 
                appropriate with respect to benefits provided 
                under this part, and, subject to subparagraph 
                (C), including the information described in 
                subparagraph (B).
                  (B) Drug specific information.--The 
                information described in this subparagraph is 
                information concerning the following:
                          (i) Access to specific covered part D 
                        drugs, including access through 
                        pharmacy networks.
                          (ii) How any formulary (including any 
                        tiered formulary structure) used by the 
                        sponsor functions, including a 
                        description of how a part D eligible 
                        individual may obtain information on 
                        the formulary consistent with paragraph 
                        (3).
                          (iii) Beneficiary cost-sharing 
                        requirements and how a part D eligible 
                        individual may obtain information on 
                        such requirements, including tiered or 
                        other copayment level applicable to 
                        each drug (or class of drugs), 
                        consistent with paragraph (3).
                          (iv) The medication therapy 
                        management program required under 
                        subsection (c).
                          (v) The drug management program for 
                        at-risk beneficiaries under subsection 
                        (c)(5).
                          (vi) For plan year 2021 and each 
                        subsequent plan year, subject to 
                        subparagraph (C), with respect to the 
                        treatment of pain--
                                  (I) the risks associated with 
                                prolonged opioid use; and
                                  (II) coverage of 
                                nonpharmacological therapies, 
                                devices, and nonopioid 
                                medications--
                                          (aa) in the case of 
                                        an MA-PD plan under 
                                        part C, under such 
                                        plan; and
                                          (bb) in the case of a 
                                        prescription drug plan, 
                                        under such plan and 
                                        under parts A and B.
                  (C) Targeted provision of information.--A PDP 
                sponsor of a prescription drug plan may, in 
                lieu of disclosing the information described in 
                subparagraph (B)(vi) to each enrollee under the 
                plan, disclose such information through mail or 
                electronic communications to a subset of 
                enrollees under the plan, such as enrollees who 
                have been prescribed an opioid in the previous 
                2-year period.
          (2) Disclosure upon request of general coverage, 
        utilization, and grievance information.--Upon request 
        of a part D eligible individual who is eligible to 
        enroll in a prescription drug plan, the PDP sponsor 
        offering such plan shall provide information similar 
        (as determined by the Secretary) to the information 
        described in subparagraphs (A), (B), and (C) of section 
        1852(c)(2) to such individual.
          (3) Provision of specific information.--
                  (A) Response to beneficiary questions.--Each 
                PDP sponsor offering a prescription drug plan 
                shall have a mechanism for providing specific 
                information on a timely basis to enrollees upon 
                request. Such mechanism shall include access to 
                information through the use of a toll-free 
                telephone number and, upon request, the 
                provision of such information in writing.
                  (B) Availability of information on changes in 
                formulary through the internet.--A PDP sponsor 
                offering a prescription drug plan shall make 
                available on a timely basis through an Internet 
                website information on specific changes in the 
                formulary under the plan (including changes to 
                tiered or preferred status of covered part D 
                drugs).
          (4) Claims information.--A PDP sponsor offering a 
        prescription drug plan must furnish to each enrollee in 
        a form easily understandable to such enrollees--
                  (A) an explanation of benefits (in accordance 
                with section 1806(a) or in a comparable 
                manner); and
                  (B) when prescription drug benefits are 
                provided under this part, a notice of the 
                benefits in relation to--
                          (i) [the initial] for a year 
                        preceding 2022, the initial coverage 
                        limit for the current year; and
                          (ii) the annual out-of-pocket 
                        threshold for the current year.
                Notices under subparagraph (B) need not be 
                provided more often than as specified by the 
                Secretary and notices under subparagraph 
                (B)(ii) shall take into account the application 
                of section 1860D-2(b)(4)(C) to the extent 
                practicable, as specified by the Secretary.
  (b) Access to Covered Part D Drugs.--
          (1) Assuring pharmacy access.--
                  (A) Participation of any willing pharmacy.--A 
                prescription drug plan shall permit the 
                participation of any pharmacy that meets the 
                terms and conditions under the plan.
                  (B) Discounts allowed for network 
                pharmacies.--For covered part D drugs dispensed 
                through in-network pharmacies, a prescription 
                drug plan may, notwithstanding subparagraph 
                (A), reduce coinsurance or copayments for part 
                D eligible individuals enrolled in the plan 
                below the level otherwise required. In no case 
                shall such a reduction result in an increase in 
                payments made by the Secretary under section 
                1860D-15 to a plan.
                  (C) Convenient access for network 
                pharmacies.--
                          (i) In general.--The PDP sponsor of 
                        the prescription drug plan shall secure 
                        the participation in its network of a 
                        sufficient number of pharmacies that 
                        dispense (other than by mail order) 
                        drugs directly to patients to ensure 
                        convenient access (consistent with 
                        rules established by the Secretary).
                          (ii) Application of tricare 
                        standards.--The Secretary shall 
                        establish rules for convenient access 
                        to in-network pharmacies under this 
                        subparagraph that are no less favorable 
                        to enrollees than the rules for 
                        convenient access to pharmacies 
                        included in the statement of work of 
                        solicitation (#MDA906-03-R-0002) of the 
                        Department of Defense under the TRICARE 
                        Retail Pharmacy (TRRx) as of March 13, 
                        2003.
                          (iii) Adequate emergency access.--
                        Such rules shall include adequate 
                        emergency access for enrollees.
                          (iv) Convenient access in long-term 
                        care facilities.--Such rules may 
                        include standards with respect to 
                        access for enrollees who are residing 
                        in long-term care facilities and for 
                        pharmacies operated by the Indian 
                        Health Service, Indian tribes and 
                        tribal organizations, and urban Indian 
                        organizations (as defined in section 4 
                        of the Indian Health Care Improvement 
                        Act).
                  (D) Level playing field.--Such a sponsor 
                shall permit enrollees to receive benefits 
                (which may include a 90-day supply of drugs or 
                biologicals) through a pharmacy (other than a 
                mail order pharmacy), with any differential in 
                charge paid by such enrollees.
                  (E) Not required to accept insurance risk.--
                The terms and conditions under subparagraph (A) 
                may not require participating pharmacies to 
                accept insurance risk as a condition of 
                participation.
          (2) Use of standardized technology.--
                  (A) In general.--The PDP sponsor of a 
                prescription drug plan shall issue (and 
                reissue, as appropriate) such a card (or other 
                technology) that may be used by an enrollee to 
                assure access to negotiated prices under 
                section 1860D-2(d).
                  (B) Standards.--
                          (i) In general.--The Secretary shall 
                        provide for the development, adoption, 
                        or recognition of standards relating to 
                        a standardized format for the card or 
                        other technology required under 
                        subparagraph (A). Such standards shall 
                        be compatible with part C of title XI 
                        and may be based on standards developed 
                        by an appropriate standard setting 
                        organization.
                          (ii) Consultation.--In developing the 
                        standards under clause (i), the 
                        Secretary shall consult with the 
                        National Council for Prescription Drug 
                        Programs and other standard setting 
                        organizations determined appropriate by 
                        the Secretary.
                          (iii) Implementation.--The Secretary 
                        shall develop, adopt, or recognize the 
                        standards under clause (i) by such date 
                        as the Secretary determines shall be 
                        sufficient to ensure that PDP sponsors 
                        utilize such standards beginning 
                        January 1, 2006.
          (3) Requirements on development and application of 
        formularies.--If a PDP sponsor of a prescription drug 
        plan uses a formulary (including the use of tiered 
        cost-sharing), the following requirements must be met:
                  (A) Development and revision by a pharmacy 
                and therapeutic (p&t) committee.--
                          (i) In general.--The formulary must 
                        be developed and reviewed by a pharmacy 
                        and therapeutic committee. A majority 
                        of the members of such committee shall 
                        consist of individuals who are 
                        practicing physicians or practicing 
                        pharmacists (or both).
                          (ii) Inclusion of independent 
                        experts.--Such committee shall include 
                        at least one practicing physician and 
                        at least one practicing pharmacist, 
                        each of whom--
                                  (I) is independent and free 
                                of conflict with respect to the 
                                sponsor and plan; and
                                  (II) has expertise in the 
                                care of elderly or disabled 
                                persons.
                  (B) Formulary development.--In developing and 
                reviewing the formulary, the committee shall--
                          (i) base clinical decisions on the 
                        strength of scientific evidence and 
                        standards of practice, including 
                        assessing peer-reviewed medical 
                        literature, such as randomized clinical 
                        trials, pharmacoeconomic studies, 
                        outcomes research data, and on such 
                        other information as the committee 
                        determines to be appropriate; and
                          (ii) take into account whether 
                        including in the formulary (or in a 
                        tier in such formulary) particular 
                        covered part D drugs has therapeutic 
                        advantages in terms of safety and 
                        efficacy.
                  (C) Inclusion of drugs in all therapeutic 
                categories and classes.--
                          (i) In general.--Subject to 
                        subparagraph (G), the formulary must 
                        include drugs within each therapeutic 
                        category and class of covered part D 
                        drugs, although not necessarily all 
                        drugs within such categories and 
                        classes.
                          (ii) Model guidelines.--The Secretary 
                        shall request the United States 
                        Pharmacopeia to develop, in 
                        consultation with pharmaceutical 
                        benefit managers and other interested 
                        parties, a list of categories and 
                        classes that may be used by 
                        prescription drug plans under this 
                        paragraph and to revise such 
                        classification from time to time to 
                        reflect changes in therapeutic uses of 
                        covered part D drugs and the additions 
                        of new covered part D drugs.
                          (iii) Limitation on changes in 
                        therapeutic classification.--The PDP 
                        sponsor of a prescription drug plan may 
                        not change the therapeutic categories 
                        and classes in a formulary other than 
                        at the beginning of each plan year 
                        except as the Secretary may permit to 
                        take into account new therapeutic uses 
                        and newly approved covered part D 
                        drugs.
                  (D) Provider and patient education.--The PDP 
                sponsor shall establish policies and procedures 
                to educate and inform health care providers and 
                enrollees concerning the formulary.
                  (E) Notice before removing drug from 
                formulary or changing preferred or tier status 
                of drug.--Any removal of a covered part D drug 
                from a formulary and any change in the 
                preferred or tiered cost-sharing status of such 
                a drug shall take effect only after appropriate 
                notice is made available (such as under 
                subsection (a)(3)) to the Secretary, affected 
                enrollees, physicians, pharmacies, and 
                pharmacists.
                  (F) Periodic evaluation of protocols.--In 
                connection with the formulary, the sponsor of a 
                prescription drug plan shall provide for the 
                periodic evaluation and analysis of treatment 
                protocols and procedures.
                  (G) Required inclusion of drugs in certain 
                categories and classes.--
                          (i) Formulary requirements.--
                                  (I) In general.--Subject to 
                                subclause (II), a PDP sponsor 
                                offering a prescription drug 
                                plan shall be required to 
                                include all covered part D 
                                drugs in the categories and 
                                classes identified by the 
                                Secretary under clause (ii)(I).
                                  (II) Exceptions.--The 
                                Secretary may establish 
                                exceptions that permit a PDP 
                                sponsor offering a prescription 
                                drug plan to exclude from its 
                                formulary a particular covered 
                                part D drug in a category or 
                                class that is otherwise 
                                required to be included in the 
                                formulary under subclause (I) 
                                (or to otherwise limit access 
                                to such a drug, including 
                                through prior authorization or 
                                utilization management).
                          (ii) Identification of drugs in 
                        certain categories and classes.--
                                  (I) In general.--Subject to 
                                clause (iv), the Secretary 
                                shall identify, as appropriate, 
                                categories and classes of drugs 
                                for which the Secretary 
                                determines are of clinical 
                                concern.
                                  (II) Criteria.--The Secretary 
                                shall use criteria established 
                                by the Secretary in making any 
                                determination under subclause 
                                (I).
                          (iii) Implementation.--The Secretary 
                        shall establish the criteria under 
                        clause (ii)(II) and any exceptions 
                        under clause (i)(II) through the 
                        promulgation of a regulation which 
                        includes a public notice and comment 
                        period.
                          (iv) Requirement for certain 
                        categories and classes until criteria 
                        established.--Until such time as the 
                        Secretary establishes the criteria 
                        under clause (ii)(II) the following 
                        categories and classes of drugs shall 
                        be identified under clause (ii)(I):
                                  (I) Anticonvulsants.
                                  (II) Antidepressants.
                                  (III) Antineoplastics.
                                  (IV) Antipsychotics.
                                  (V) Antiretrovirals.
                                  (VI) Immunosuppressants for 
                                the treatment of transplant 
                                rejection.
                  (H) Use of single, uniform exceptions and 
                appeals process.--Notwithstanding any other 
                provision of this part, each PDP sponsor of a 
                prescription drug plan shall--
                          (i) use a single, uniform exceptions 
                        and appeals process (including, to the 
                        extent the Secretary determines 
                        feasible, a single, uniform model form 
                        for use under such process) with 
                        respect to the determination of 
                        prescription drug coverage for an 
                        enrollee under the plan; and
                          (ii) provide instant access to such 
                        process by enrollees through a toll-
                        free telephone number and an Internet 
                        website.
  (c) Cost and Utilization Management; Quality Assurance; 
Medication Therapy Management Program.--
          (1) In general.--The PDP sponsor shall have in place, 
        directly or through appropriate arrangements, with 
        respect to covered part D drugs, the following:
                  (A) A cost-effective drug utilization 
                management program, including incentives to 
                reduce costs when medically appropriate, such 
                as through the use of multiple source drugs (as 
                defined in section 1927(k)(7)(A)(i)).
                  (B) Quality assurance measures and systems to 
                reduce medication errors and adverse drug 
                interactions and improve medication use.
                  (C) A medication therapy management program 
                described in paragraph (2).
                  (D) A program to control fraud, abuse, and 
                waste.
                  (E) A utilization management tool to prevent 
                drug abuse (as described in paragraph (6)(A)).
                  (F) With respect to plan years beginning on 
                or after January 1, 2022, a drug management 
                program for at-risk beneficiaries described in 
                paragraph (5).
        Nothing in this section shall be construed as impairing 
        a PDP sponsor from utilizing cost management tools 
        (including differential payments) under all methods of 
        operation.
          (2) Medication therapy management program.--
                  (A) Description.--
                          (i) In general.--A medication therapy 
                        management program described in this 
                        paragraph is a program of drug therapy 
                        management that may be furnished by a 
                        pharmacist and that is designed to 
                        assure, with respect to targeted 
                        beneficiaries described in clause (ii), 
                        that covered part D drugs under the 
                        prescription drug plan are 
                        appropriately used to optimize 
                        therapeutic outcomes through improved 
                        medication use, and to reduce the risk 
                        of adverse events, including adverse 
                        drug interactions. Such a program may 
                        distinguish between services in 
                        ambulatory and institutional settings.
                          (ii) Targeted beneficiaries 
                        described.--Targeted beneficiaries 
                        described in this clause are the 
                        following:
                                  (I) Part D eligible 
                                individuals who--
                                          (aa) have multiple 
                                        chronic diseases (such 
                                        as diabetes, asthma, 
                                        hypertension, 
                                        hyperlipidemia, and 
                                        congestive heart 
                                        failure);
                                          (bb) are taking 
                                        multiple covered part D 
                                        drugs; and
                                          (cc) are identified 
                                        as likely to incur 
                                        annual costs for 
                                        covered part D drugs 
                                        that exceed a level 
                                        specified by the 
                                        Secretary.
                                  (II) Beginning January 1, 
                                2021, at-risk beneficiaries for 
                                prescription drug abuse (as 
                                defined in paragraph (5)(C)).
                  (B) Elements.--Such program--
                          (i) may include elements that 
                        promote--
                                  (I) enhanced enrollee 
                                understanding to promote the 
                                appropriate use of medications 
                                by enrollees and to reduce the 
                                risk of potential adverse 
                                events associated with 
                                medications, through 
                                beneficiary education, 
                                counseling, and other 
                                appropriate means;
                                  (II) increased enrollee 
                                adherence with prescription 
                                medication regimens through 
                                medication refill reminders, 
                                special packaging, and other 
                                compliance programs and other 
                                appropriate means; and
                                  (III) detection of adverse 
                                drug events and patterns of 
                                overuse and underuse of 
                                prescription drugs; and
                          (ii) with respect to plan years 
                        beginning on or after January 1, 2021, 
                        shall provide for--
                                  (I) the provision of 
                                information to the enrollee on 
                                the safe disposal of 
                                prescription drugs that are 
                                controlled substances that 
                                meets the criteria established 
                                under section 1852(n)(2), 
                                including information on drug 
                                takeback programs that meet 
                                such requirements determined 
                                appropriate by the Secretary 
                                and information on in-home 
                                disposal; and
                                  (II) cost-effective means by 
                                which an enrollee may so safely 
                                dispose of such drugs.
                  (C) Required interventions.--For plan years 
                beginning on or after the date that is 2 years 
                after the date of the enactment of the Patient 
                Protection and Affordable Care Act, 
                prescription drug plan sponsors shall offer 
                medication therapy management services to 
                targeted beneficiaries described in 
                subparagraph (A)(ii) that include, at a 
                minimum, the following to increase adherence to 
                prescription medications or other goals deemed 
                necessary by the Secretary:
                          (i) An annual comprehensive 
                        medication review furnished person-to-
                        person or using telehealth technologies 
                        (as defined by the Secretary) by a 
                        licensed pharmacist or other qualified 
                        provider. The comprehensive medication 
                        review--
                                  (I) shall include a review of 
                                the individual's medications 
                                and may result in the creation 
                                of a recommended medication 
                                action plan or other actions in 
                                consultation with the 
                                individual and with input from 
                                the prescriber to the extent 
                                necessary and practicable; and
                                  (II) shall include providing 
                                the individual with a written 
                                or printed summary of the 
                                results of the review.
                        The Secretary, in consultation with 
                        relevant stakeholders, shall develop a 
                        standardized format for the action plan 
                        under subclause (I) and the summary 
                        under subclause (II).
                          (ii) Follow-up interventions as 
                        warranted based on the findings of the 
                        annual medication review or the 
                        targeted medication enrollment and 
                        which may be provided person-to-person 
                        or using telehealth technologies (as 
                        defined by the Secretary).
                  (D) Assessment.--The prescription drug plan 
                sponsor shall have in place a process to 
                assess, at least on a quarterly basis, the 
                medication use of individuals who are at risk 
                but not enrolled in the medication therapy 
                management program, including individuals who 
                have experienced a transition in care, if the 
                prescription drug plan sponsor has access to 
                that information.
                  (E) Automatic enrollment with ability to opt-
                out.--The prescription drug plan sponsor shall 
                have in place a process to--
                          (i) subject to clause (ii), 
                        automatically enroll targeted 
                        beneficiaries described in subparagraph 
                        (A)(ii), including beneficiaries 
                        identified under subparagraph (D), in 
                        the medication therapy management 
                        program required under this subsection; 
                        and
                          (ii) permit such beneficiaries to 
                        opt-out of enrollment in such program.
                  (E) Development of program in cooperation 
                with licensed pharmacists.--Such program shall 
                be developed in cooperation with licensed and 
                practicing pharmacists and physicians.
                  (F) Coordination with care management 
                plans.--The Secretary shall establish 
                guidelines for the coordination of any 
                medication therapy management program under 
                this paragraph with respect to a targeted 
                beneficiary with any care management plan 
                established with respect to such beneficiary 
                under a chronic care improvement program under 
                section 1807.
                  (G) Considerations in pharmacy fees.--The PDP 
                sponsor of a prescription drug plan shall take 
                into account, in establishing fees for 
                pharmacists and others providing services under 
                such plan, the resources used, and time 
                required to, implement the medication therapy 
                management program under this paragraph. Each 
                such sponsor shall disclose to the Secretary 
                upon request the amount of any such management 
                or dispensing fees. The provisions of section 
                1927(b)(3)(D) apply to information disclosed 
                under this subparagraph.
          (3) Reducing wasteful dispensing of outpatient 
        prescription drugs in long-term care facilities.--The 
        Secretary shall require PDP sponsors of prescription 
        drug plans to utilize specific, uniform dispensing 
        techniques, as determined by the Secretary, in 
        consultation with relevant stakeholders (including 
        representatives of nursing facilities, residents of 
        nursing facilities, pharmacists, the pharmacy industry 
        (including retail and long-term care pharmacy), 
        prescription drug plans, MA-PD plans, and any other 
        stakeholders the Secretary determines appropriate), 
        such as weekly, daily, or automated dose dispensing, 
        when dispensing covered part D drugs to enrollees who 
        reside in a long-term care facility in order to reduce 
        waste associated with 30-day fills.
          (4) Requiring valid prescriber national provider 
        identifiers on pharmacy claims.--
                  (A) In general.--For plan year 2016 and 
                subsequent plan years, the Secretary shall 
                require a claim for a covered part D drug for a 
                part D eligible individual enrolled in a 
                prescription drug plan under this part or an 
                MA-PD plan under part C to include a prescriber 
                National Provider Identifier that is determined 
                to be valid under the procedures established 
                under subparagraph (B)(i).
                  (B) Procedures.--
                          (i) Validity of prescriber national 
                        provider identifiers.--The Secretary, 
                        in consultation with appropriate 
                        stakeholders, shall establish 
                        procedures for determining the validity 
                        of prescriber National Provider 
                        Identifiers under subparagraph (A).
                          (ii) Informing beneficiaries of 
                        reason for denial.--The Secretary shall 
                        establish procedures to ensure that, in 
                        the case that a claim for a covered 
                        part D drug of an individual described 
                        in subparagraph (A) is denied because 
                        the claim does not meet the 
                        requirements of this paragraph, the 
                        individual is properly informed at the 
                        point of service of the reason for the 
                        denial.
                  (C) Report.--Not later than January 1, 2018, 
                the Inspector General of the Department of 
                Health and Human Services shall submit to 
                Congress a report on the effectiveness of the 
                procedures established under subparagraph 
                (B)(i).
                  (D) Notification and additional requirements 
                with respect to outlier prescribers of 
                opioids.--
                          (i) Notification.--Not later than 
                        January 1, 2021, the Secretary shall, 
                        in the case of a prescriber identified 
                        by the Secretary under clause (ii) to 
                        be an outlier prescriber of opioids, 
                        provide, subject to clause (iv), an 
                        annual notification to such prescriber 
                        that such prescriber has been so 
                        identified and that includes resources 
                        on proper prescribing methods and other 
                        information as specified in accordance 
                        with clause (iii).
                          (ii) Identification of outlier 
                        prescribers of opioids.--
                                  (I) In general.--The 
                                Secretary shall, subject to 
                                subclause (III), using the 
                                valid prescriber National 
                                Provider Identifiers included 
                                pursuant to subparagraph (A) on 
                                claims for covered part D drugs 
                                for part D eligible individuals 
                                enrolled in prescription drug 
                                plans under this part or MA-PD 
                                plans under part C and based on 
                                the thresholds established 
                                under subclause (II), identify 
                                prescribers that are outlier 
                                opioids prescribers for a 
                                period of time specified by the 
                                Secretary.
                                  (II) Establishment of 
                                thresholds.--For purposes of 
                                subclause (I) and subject to 
                                subclause (III), the Secretary 
                                shall, after consultation with 
                                stakeholders, establish 
                                thresholds, based on prescriber 
                                specialty and geographic area, 
                                for identifying whether a 
                                prescriber in a specialty and 
                                geographic area is an outlier 
                                prescriber of opioids as 
                                compared to other prescribers 
                                of opioids within such 
                                specialty and area.
                                  (III) Exclusions.--The 
                                following shall not be included 
                                in the analysis for identifying 
                                outlier prescribers of opioids 
                                under this clause:
                                          (aa) Claims for 
                                        covered part D drugs 
                                        for part D eligible 
                                        individuals who are 
                                        receiving hospice care 
                                        under this title.
                                          (bb) Claims for 
                                        covered part D drugs 
                                        for part D eligible 
                                        individuals who are 
                                        receiving oncology 
                                        services under this 
                                        title.
                                          (cc) Prescribers who 
                                        are the subject of an 
                                        investigation by the 
                                        Centers for Medicare & 
                                        Medicaid Services or 
                                        the Inspector General 
                                        of the Department of 
                                        Health and Human 
                                        Services.
                          (iii) Contents of notification.--The 
                        Secretary shall include the following 
                        information in the notifications 
                        provided under clause (i):
                                  (I) Information on how such 
                                prescriber compares to other 
                                prescribers within the same 
                                specialty and geographic area.
                                  (II) Information on opioid 
                                prescribing guidelines, based 
                                on input from stakeholders, 
                                that may include the Centers 
                                for Disease Control and 
                                Prevention guidelines for 
                                prescribing opioids for chronic 
                                pain and guidelines developed 
                                by physician organizations.
                                  (III) Other information 
                                determined appropriate by the 
                                Secretary.
                          (iv) Modifications and expansions.--
                                  (I) Frequency.--Beginning 5 
                                years after the date of the 
                                enactment of this subparagraph, 
                                the Secretary may change the 
                                frequency of the notifications 
                                described in clause (i) based 
                                on stakeholder input and 
                                changes in opioid prescribing 
                                utilization and trends.
                                  (II) Expansion to other 
                                prescriptions.--The Secretary 
                                may expand notifications under 
                                this subparagraph to include 
                                identifications and 
                                notifications with respect to 
                                concurrent prescriptions of 
                                covered Part D drugs used in 
                                combination with opioids that 
                                are considered to have adverse 
                                side effects when so used in 
                                such combination, as determined 
                                by the Secretary.
                          (v) Additional requirements for 
                        persistent outlier prescribers.--In the 
                        case of a prescriber who the Secretary 
                        determines is persistently identified 
                        under clause (ii) as an outlier 
                        prescriber of opioids, the following 
                        shall apply:
                                  (I) Such prescriber may be 
                                required to enroll in the 
                                program under this title under 
                                section 1866(j) if such 
                                prescriber is not otherwise 
                                required to enroll, but only 
                                after other appropriate 
                                remedies have been provided, 
                                such as the provision of 
                                education funded through 
                                section 6052 of the SUPPORT for 
                                Patients and Communities Act, 
                                for a period determined by the 
                                Secretary as sufficient to 
                                correct the prescribing 
                                patterns that lead to 
                                identification of such 
                                prescriber as a persistent 
                                outlier prescriber of opioids. 
                                The Secretary shall determine 
                                the length of the period for 
                                which such prescriber is 
                                required to maintain such 
                                enrollment, which shall be the 
                                minimum period necessary to 
                                correct such prescribing 
                                patterns.
                                  (II) Not less frequently than 
                                annually (and in a form and 
                                manner determined appropriate 
                                by the Secretary), the 
                                Secretary, consistent with 
                                clause(iv)(I), shall 
                                communicate information on such 
                                prescribers to sponsors of a 
                                prescription drug plan and 
                                Medicare Advantage 
                                organizations offering an MA-PD 
                                plan.
                          (vi) Public availability of 
                        information.--The Secretary shall make 
                        aggregate information under this 
                        subparagraph available on the internet 
                        website of the Centers for Medicare & 
                        Medicaid Services. Such information 
                        shall be in a form and manner 
                        determined appropriate by the Secretary 
                        and shall not identify any specific 
                        prescriber. In carrying out this 
                        clause, the Secretary shall consult 
                        with interested stakeholders.
                          (vii) Opioids defined.--For purposes 
                        of this subparagraph, the term 
                        ``opioids'' has such meaning as 
                        specified by the Secretary.
                          (viii) Other activities.--Nothing in 
                        this subparagraph shall preclude the 
                        Secretary from conducting activities 
                        that provide prescribers with 
                        information as to how they compare to 
                        other prescribers that are in addition 
                        to the activities under this 
                        subparagraph, including activities that 
                        were being conducted as of the date of 
                        the enactment of this subparagraph.
          (5) Drug management program for at-risk 
        beneficiaries.--
                  (A) Authority to establish.--A PDP sponsor 
                may (and for plan years beginning on or after 
                January 1, 2022, a PDP sponsor shall) establish 
                a drug management program for at-risk 
                beneficiaries under which, subject to 
                subparagraph (B), the PDP sponsor may, in the 
                case of an at-risk beneficiary for prescription 
                drug abuse who is an enrollee in a prescription 
                drug plan of such PDP sponsor, limit such 
                beneficiary's access to coverage for frequently 
                abused drugs under such plan to frequently 
                abused drugs that are prescribed for such 
                beneficiary by one or more prescribers selected 
                under subparagraph (D), and dispensed for such 
                beneficiary by one or more pharmacies selected 
                under such subparagraph.
                  (B) Requirement for notices.--
                          (i) In general.--A PDP sponsor may 
                        not limit the access of an at-risk 
                        beneficiary for prescription drug abuse 
                        to coverage for frequently abused drugs 
                        under a prescription drug plan until 
                        such sponsor--
                                  (I) provides to the 
                                beneficiary an initial notice 
                                described in clause (ii) and a 
                                second notice described in 
                                clause (iii); and
                                  (II) verifies with the 
                                providers of the beneficiary 
                                that the beneficiary is an at-
                                risk beneficiary for 
                                prescription drug abuse.
                          (ii) Initial notice.--An initial 
                        notice described in this clause is a 
                        notice that provides to the 
                        beneficiary--
                                  (I) notice that the PDP 
                                sponsor has identified the 
                                beneficiary as potentially 
                                being an at-risk beneficiary 
                                for prescription drug abuse;
                                  (II) information describing 
                                all State and Federal public 
                                health resources that are 
                                designed to address 
                                prescription drug abuse to 
                                which the beneficiary has 
                                access, including mental health 
                                services and other counseling 
                                services;
                                  (III) notice of, and 
                                information about, the right of 
                                the beneficiary to appeal such 
                                identification under subsection 
                                (h), including notice that if 
                                on reconsideration a PDP 
                                sponsor affirms its denial, in 
                                whole or in part, the case 
                                shall be automatically 
                                forwarded to the independent, 
                                outside entity contracted with 
                                the Secretary for review and 
                                resolution;
                                  (IV) a request for the 
                                beneficiary to submit to the 
                                PDP sponsor preferences for 
                                which prescribers and 
                                pharmacies the beneficiary 
                                would prefer the PDP sponsor to 
                                select under subparagraph (D) 
                                in the case that the 
                                beneficiary is identified as an 
                                at-risk beneficiary for 
                                prescription drug abuse as 
                                described in clause (iii)(I);
                                  (V) an explanation of the 
                                meaning and consequences of the 
                                identification of the 
                                beneficiary as potentially 
                                being an at-risk beneficiary 
                                for prescription drug abuse, 
                                including an explanation of the 
                                drug management program 
                                established by the PDP sponsor 
                                pursuant to subparagraph (A);
                                  (VI) clear instructions that 
                                explain how the beneficiary can 
                                contact the PDP sponsor in 
                                order to submit to the PDP 
                                sponsor the preferences 
                                described in subclause (IV) and 
                                any other communications 
                                relating to the drug management 
                                program for at-risk 
                                beneficiaries established by 
                                the PDP sponsor; and
                                  (VII) contact information for 
                                other organizations that can 
                                provide the beneficiary with 
                                assistance regarding such drug 
                                management program (similar to 
                                the information provided by the 
                                Secretary in other standardized 
                                notices provided to part D 
                                eligible individuals enrolled 
                                in prescription drug plans 
                                under this part).
                          (iii) Second notice.--A second notice 
                        described in this clause is a notice 
                        that provides to the beneficiary 
                        notice--
                                  (I) that the PDP sponsor has 
                                identified the beneficiary as 
                                an at-risk beneficiary for 
                                prescription drug abuse;
                                  (II) that such beneficiary is 
                                subject to the requirements of 
                                the drug management program for 
                                at-risk beneficiaries 
                                established by such PDP sponsor 
                                for such plan;
                                  (III) of the prescriber (or 
                                prescribers) and pharmacy (or 
                                pharmacies) selected for such 
                                individual under subparagraph 
                                (D);
                                  (IV) of, and information 
                                about, the beneficiary's right 
                                to appeal such identification 
                                under subsection (h), including 
                                notice that if on 
                                reconsideration a PDP sponsor 
                                affirms its denial, in whole or 
                                in part, the case shall be 
                                automatically forwarded to the 
                                independent, outside entity 
                                contracted with the Secretary 
                                for review and resolution;
                                  (V) that the beneficiary can, 
                                in the case that the 
                                beneficiary has not previously 
                                submitted to the PDP sponsor 
                                preferences for which 
                                prescribers and pharmacies the 
                                beneficiary would prefer the 
                                PDP sponsor select under 
                                subparagraph (D), submit such 
                                preferences to the PDP sponsor; 
                                and
                                  (VI) that includes clear 
                                instructions that explain how 
                                the beneficiary can contact the 
                                PDP sponsor.
                          (iv) Timing of notices.--
                                  (I) In general.--Subject to 
                                subclause (II), a second notice 
                                described in clause (iii) shall 
                                be provided to the beneficiary 
                                on a date that is not less than 
                                30 days after an initial notice 
                                described in clause (ii) is 
                                provided to the beneficiary.
                                  (II) Exception.--In the case 
                                that the PDP sponsor, in 
                                conjunction with the Secretary, 
                                determines that concerns 
                                identified through rulemaking 
                                by the Secretary regarding the 
                                health or safety of the 
                                beneficiary or regarding 
                                significant drug diversion 
                                activities require the PDP 
                                sponsor to provide a second 
                                notice described in clause 
                                (iii) to the beneficiary on a 
                                date that is earlier than the 
                                date described in subclause 
                                (I), the PDP sponsor may 
                                provide such second notice on 
                                such earlier date.
                  (C) At-risk beneficiary for prescription drug 
                abuse.--
                          (i) In general.--Except as provided 
                        in clause (v), for purposes of this 
                        paragraph, the term ``at-risk 
                        beneficiary for prescription drug 
                        abuse'' means a part D eligible 
                        individual who is not an exempted 
                        individual described in clause (ii) 
                        and--
                                  (I) who is identified as such 
                                an at-risk beneficiary through 
                                the use of clinical guidelines 
                                that indicate misuse or abuse 
                                of prescription drugs described 
                                in subparagraph (G) and that 
                                are developed by the Secretary 
                                in consultation with PDP 
                                sponsors and other 
                                stakeholders, including 
                                individuals entitled to 
                                benefits under part A or 
                                enrolled under part B, advocacy 
                                groups representing such 
                                individuals, physicians, 
                                pharmacists, and other 
                                clinicians, retail pharmacies, 
                                plan sponsors, entities 
                                delegated by plan sponsors, and 
                                biopharmaceutical 
                                manufacturers; or
                                  (II) with respect to whom the 
                                PDP sponsor of a prescription 
                                drug plan, upon enrolling such 
                                individual in such plan, 
                                received notice from the 
                                Secretary that such individual 
                                was identified under this 
                                paragraph to be an at-risk 
                                beneficiary for prescription 
                                drug abuse under the 
                                prescription drug plan in which 
                                such individual was most 
                                recently previously enrolled 
                                and such identification has not 
                                been terminated under 
                                subparagraph (F).
                          (ii) Exempted individual described.--
                        An exempted individual described in 
                        this clause is an individual who--
                                  (I) receives hospice care 
                                under this title;
                                  (II) is a resident of a long-
                                term care facility, of a 
                                facility described in section 
                                1905(d), or of another facility 
                                for which frequently abused 
                                drugs are dispensed for 
                                residents through a contract 
                                with a single pharmacy; or
                                  (III) the Secretary elects to 
                                treat as an exempted individual 
                                for purposes of clause (i).
                          (iii) Program size.--The Secretary 
                        shall establish policies, including the 
                        guidelines developed under clause 
                        (i)(I) and the exemptions under clause 
                        (ii)(III), to ensure that the 
                        population of enrollees in a drug 
                        management program for at-risk 
                        beneficiaries operated by a 
                        prescription drug plan can be 
                        effectively managed by such plans.
                          (iv) Clinical contact.--With respect 
                        to each at-risk beneficiary for 
                        prescription drug abuse enrolled in a 
                        prescription drug plan offered by a PDP 
                        sponsor, the PDP sponsor shall contact 
                        the beneficiary's providers who have 
                        prescribed frequently abused drugs 
                        regarding whether prescribed 
                        medications are appropriate for such 
                        beneficiary's medical conditions.
                          (v) Treatment of enrollees with a 
                        history of opioid-related overdose.--
                                  (I) In general.--For plan 
                                years beginning not later than 
                                January 1, 2021, a part D 
                                eligible individual who is not 
                                an exempted individual 
                                described in clause (ii) and 
                                who is identified under this 
                                clause as a part D eligible 
                                individual with a history of 
                                opioid-related overdose (as 
                                defined by the Secretary) shall 
                                be included as a potentially 
                                at-risk beneficiary for 
                                prescription drug abuse under 
                                the drug management program 
                                under this paragraph.
                                  (II) Identification and 
                                notice.--For purposes of this 
                                clause, the Secretary shall--
                                          (aa) identify part D 
                                        eligible individuals 
                                        with a history of 
                                        opioid-related overdose 
                                        (as so defined); and
                                          (bb) notify the PDP 
                                        sponsor of the 
                                        prescription drug plan 
                                        in which such an 
                                        individual is enrolled 
                                        of such identification.
                  (D) Selection of prescribers and 
                pharmacies.--
                          (i) In general.--With respect to each 
                        at-risk beneficiary for prescription 
                        drug abuse enrolled in a prescription 
                        drug plan offered by such sponsor, a 
                        PDP sponsor shall, based on the 
                        preferences submitted to the PDP 
                        sponsor by the beneficiary pursuant to 
                        clauses (ii)(IV) and (iii)(V) of 
                        subparagraph (B) (except as otherwise 
                        provided in this subparagraph) select--
                                  (I) one, or, if the PDP 
                                sponsor reasonably determines 
                                it necessary to provide the 
                                beneficiary with reasonable 
                                access under clause (ii), more 
                                than one, individual who is 
                                authorized to prescribe 
                                frequently abused drugs 
                                (referred to in this paragraph 
                                as a ``prescriber'') who may 
                                write prescriptions for such 
                                drugs for such beneficiary; and
                                  (II) one, or, if the PDP 
                                sponsor reasonably determines 
                                it necessary to provide the 
                                beneficiary with reasonable 
                                access under clause (ii), more 
                                than one, pharmacy that may 
                                dispense such drugs to such 
                                beneficiary.
                        For purposes of subclause (II), in the 
                        case of a pharmacy that has multiple 
                        locations that share real-time 
                        electronic data, all such locations of 
                        the pharmacy shall collectively be 
                        treated as one pharmacy.
                          (ii) Reasonable access.--In making 
                        the selections under this 
                        subparagraph--
                                  (I) a PDP sponsor shall 
                                ensure that the beneficiary 
                                continues to have reasonable 
                                access to frequently abused 
                                drugs (as defined in 
                                subparagraph (G)), taking into 
                                account geographic location, 
                                beneficiary preference, impact 
                                on costsharing, and reasonable 
                                travel time; and
                                  (II) a PDP sponsor shall 
                                ensure such access (including 
                                access to prescribers and 
                                pharmacies with respect to 
                                frequently abused drugs) in the 
                                case of individuals with 
                                multiple residences, in the 
                                case of natural disasters and 
                                similar situations, and in the 
                                case of the provision of 
                                emergency services.
                          (iii) Beneficiary preferences.--If an 
                        at-risk beneficiary for prescription 
                        drug abuse submits preferences for 
                        which in-network prescribers and 
                        pharmacies the beneficiary would prefer 
                        the PDP sponsor select in response to a 
                        notice under subparagraph (B), the PDP 
                        sponsor shall--
                                  (I) review such preferences;
                                  (II) select or change the 
                                selection of prescribers and 
                                pharmacies for the beneficiary 
                                based on such preferences; and
                                  (III) inform the beneficiary 
                                of such selection or change of 
                                selection.
                          (iv) Exception regarding beneficiary 
                        preferences.--In the case that the PDP 
                        sponsor determines that a change to the 
                        selection of prescriber or pharmacy 
                        under clause (iii)(II) by the PDP 
                        sponsor is contributing or would 
                        contribute to prescription drug abuse 
                        or drug diversion by the beneficiary, 
                        the PDP sponsor may change the 
                        selection of prescriber or pharmacy for 
                        the beneficiary without regard to the 
                        preferences of the beneficiary 
                        described in clause (iii). If the PDP 
                        sponsor changes the selection pursuant 
                        to the preceding sentence, the PDP 
                        sponsor shall provide the beneficiary 
                        with--
                                  (I) at least 30 days written 
                                notice of the change of 
                                selection; and
                                  (II) a rationale for the 
                                change.
                          (v) Confirmation.--Before selecting a 
                        prescriber or pharmacy under this 
                        subparagraph, a PDP sponsor must notify 
                        the prescriber and pharmacy that the 
                        beneficiary involved has been 
                        identified for inclusion in the drug 
                        management program for at-risk 
                        beneficiaries and that the prescriber 
                        and pharmacy has been selected as the 
                        beneficiary's designated prescriber and 
                        pharmacy.
                  (E) Terminations and appeals.--The 
                identification of an individual as an at-risk 
                beneficiary for prescription drug abuse under 
                this paragraph, a coverage determination made 
                under a drug management program for at-risk 
                beneficiaries, the selection of prescriber or 
                pharmacy under subparagraph (D), and 
                information to be shared under subparagraph 
                (I), with respect to such individual, shall be 
                subject to reconsideration and appeal under 
                subsection (h) and if on reconsideration a PDP 
                sponsor affirms its denial, in whole or in 
                part, the case shall be automatically forwarded 
                to the independent, outside entity contracted 
                with the Secretary for review and resolution.
                  (F) Termination of identification.--
                          (i) In general.--The Secretary shall 
                        develop standards for the termination 
                        of identification of an individual as 
                        an at-risk beneficiary for prescription 
                        drug abuse under this paragraph. Under 
                        such standards such identification 
                        shall terminate as of the earlier of--
                                  (I) the date the individual 
                                demonstrates that the 
                                individual is no longer likely, 
                                in the absence of the 
                                restrictions under this 
                                paragraph, to be an at-risk 
                                beneficiary for prescription 
                                drug abuse described in 
                                subparagraph (C)(i); and
                                  (II) the end of such maximum 
                                period of identification as the 
                                Secretary may specify.
                          (ii) Rule of construction.--Nothing 
                        in clause (i) shall be construed as 
                        preventing a plan from identifying an 
                        individual as an at-risk beneficiary 
                        for prescription drug abuse under 
                        subparagraph (C)(i) after such 
                        termination on the basis of additional 
                        information on drug use occurring after 
                        the date of notice of such termination.
                  (G) Frequently abused drug.--For purposes of 
                this subsection, the term ``frequently abused 
                drug'' means a drug that is a controlled 
                substance that the Secretary determines to be 
                frequently abused or diverted.
                  (H) Data disclosure.--
                          (i) Data on decision to impose 
                        limitation.--In the case of an at-risk 
                        beneficiary for prescription drug abuse 
                        (or an individual who is a potentially 
                        at-risk beneficiary for prescription 
                        drug abuse) whose access to coverage 
                        for frequently abused drugs under a 
                        prescription drug plan has been limited 
                        by a PDP sponsor under this paragraph, 
                        the Secretary shall establish rules and 
                        procedures to require the PDP sponsor 
                        to disclose data, including any 
                        necessary individually identifiable 
                        health information, in a form and 
                        manner specified by the Secretary, 
                        about the decision to impose such 
                        limitations and the limitations imposed 
                        by the sponsor under this part.
                          (ii) Data to reduce fraud, abuse, and 
                        waste.--The Secretary shall establish 
                        rules and procedures to require PDP 
                        sponsors operating a drug management 
                        program for at-risk beneficiaries under 
                        this paragraph to provide the Secretary 
                        with such data as the Secretary 
                        determines appropriate for purposes of 
                        identifying patterns of prescription 
                        drug utilization for plan enrollees 
                        that are outside normal patterns and 
                        that may indicate fraudulent, medically 
                        unnecessary, or unsafe use.
                  (I) Sharing of information for subsequent 
                plan enrollments.--The Secretary shall 
                establish procedures under which PDP sponsors 
                who offer prescription drug plans shall share 
                information with respect to individuals who are 
                at-risk beneficiaries for prescription drug 
                abuse (or individuals who are potentially at-
                risk beneficiaries for prescription drug abuse) 
                and enrolled in a prescription drug plan and 
                who subsequently disenroll from such plan and 
                enroll in another prescription drug plan 
                offered by another PDP sponsor.
                  (J) Privacy issues.--Prior to the 
                implementation of the rules and procedures 
                under this paragraph, the Secretary shall 
                clarify privacy requirements, including 
                requirements under the regulations promulgated 
                pursuant to section 264(c) of the Health 
                Insurance Portability and Accountability Act of 
                1996 (42 U.S.C. 1320d-2 note), related to the 
                sharing of data under subparagraphs (H) and (I) 
                by PDP sponsors. Such clarification shall 
                provide that the sharing of such data shall be 
                considered to be protected health information 
                in accordance with the requirements of the 
                regulations promulgated pursuant to such 
                section 264(c).
                  (K) Education.--The Secretary shall provide 
                education to enrollees in prescription drug 
                plans of PDP sponsors and providers regarding 
                the drug management program for at-risk 
                beneficiaries described in this paragraph, 
                including education--
                          (i) provided by Medicare 
                        administrative contractors through the 
                        improper payment outreach and education 
                        program described in section 1874A(h); 
                        and
                          (ii) through current education 
                        efforts (such as State health insurance 
                        assistance programs described in 
                        subsection (a)(1)(A) of section 119 of 
                        the Medicare Improvements for Patients 
                        and Providers Act of 2008 (42 U.S.C. 
                        1395b-3 note)) and materials directed 
                        toward such enrollees.
                  (L) Application under ma-pd plans.--Pursuant 
                to section 1860D-21(c)(1), the provisions of 
                this paragraph apply under part D to MA 
                organizations offering MA-PD plans to MA 
                eligible individuals in the same manner as such 
                provisions apply under this part to a PDP 
                sponsor offering a prescription drug plan to a 
                part D eligible individual.
                  (M) CMS compliance review.--The Secretary 
                shall ensure that existing plan sponsor 
                compliance reviews and audit processes include 
                the drug management programs for at-risk 
                beneficiaries under this paragraph, including 
                appeals processes under such programs.
          (6) Utilization management tool to prevent drug 
        abuse.--
                  (A) In general.--A tool described in this 
                paragraph is any of the following:
                          (i) A utilization tool designed to 
                        prevent the abuse of frequently abused 
                        drugs by individuals and to prevent the 
                        diversion of such drugs at pharmacies.
                          (ii) Retrospective utilization review 
                        to identify--
                                  (I) individuals that receive 
                                frequently abused drugs at a 
                                frequency or in amounts that 
                                are not clinically appropriate; 
                                and
                                  (II) providers of services or 
                                suppliers that may facilitate 
                                the abuse or diversion of 
                                frequently abused drugs by 
                                beneficiaries.
                          (iii) Consultation with the 
                        contractor described in subparagraph 
                        (B) to verify if an individual 
                        enrolling in a prescription drug plan 
                        offered by a PDP sponsor has been 
                        previously identified by another PDP 
                        sponsor as an individual described in 
                        clause (ii)(I).
                  (B) Reporting.--A PDP sponsor offering a 
                prescription drug plan (and an MA organization 
                offering an MA-PD plan) in a State shall submit 
                to the Secretary and the Medicare drug 
                integrity contractor with which the Secretary 
                has entered into a contract under section 1893 
                with respect to such State a report, on a 
                monthly basis, containing information on--
                          (i) any provider of services or 
                        supplier described in subparagraph 
                        (A)(ii)(II) that is identified by such 
                        plan sponsor (or organization) during 
                        the 30-day period before such report is 
                        submitted; and
                          (ii) the name and prescription 
                        records of individuals described in 
                        paragraph (5)(C).
                  (C) CMS compliance review.--The Secretary 
                shall ensure that plan sponsor compliance 
                reviews and program audits biennially include a 
                certification that utilization management tools 
                under this paragraph are in compliance with the 
                requirements for such tools.
          (6) Providing prescription drug plans with parts a 
        and b claims data to promote the appropriate use of 
        medications and improve health outcomes.--
                  (A) Process.--Subject to subparagraph (B), 
                the Secretary shall establish a process under 
                which a PDP sponsor of a prescription drug plan 
                may submit a request for the Secretary to 
                provide the sponsor, on a periodic basis and in 
                an electronic format, beginning in plan year 
                2020, data described in subparagraph (D) with 
                respect to enrollees in such plan. Such data 
                shall be provided without regard to whether 
                such enrollees are described in clause (ii) of 
                paragraph (2)(A).
                  (B) Purposes.--A PDP sponsor may use the data 
                provided to the sponsor pursuant to 
                subparagraph (A) for any of the following 
                purposes:
                          (i) To optimize therapeutic outcomes 
                        through improved medication use, as 
                        such phrase is used in clause (i) of 
                        paragraph (2)(A).
                          (ii) To improving care coordination 
                        so as to prevent adverse health 
                        outcomes, such as preventable emergency 
                        department visits and hospital 
                        readmissions.
                          (iii) For any other purpose 
                        determined appropriate by the 
                        Secretary.
                  (C) Limitations on data use.--A PDP sponsor 
                shall not use data provided to the sponsor 
                pursuant to subparagraph (A) for any of the 
                following purposes:
                          (i) To inform coverage determinations 
                        under this part.
                          (ii) To conduct retroactive reviews 
                        of medically accepted indications 
                        determinations.
                          (iii) To facilitate enrollment 
                        changes to a different prescription 
                        drug plan or an MA-PD plan offered by 
                        the same parent organization.
                          (iv) To inform marketing of benefits.
                          (v) For any other purpose that the 
                        Secretary determines is necessary to 
                        include in order to protect the 
                        identity of individuals entitled to, or 
                        enrolled for, benefits under this title 
                        and to protect the security of personal 
                        health information.
                  (D) Data described.--The data described in 
                this clause are standardized extracts (as 
                determined by the Secretary) of claims data 
                under parts A and B for items and services 
                furnished under such parts for time periods 
                specified by the Secretary. Such data shall 
                include data as current as practicable.
  (d) Consumer Satisfaction Surveys.--In order to provide for 
comparative information under section 1860D-1(c)(3)(A)(v), the 
Secretary shall conduct consumer satisfaction surveys with 
respect to PDP sponsors and prescription drug plans in a manner 
similar to the manner such surveys are conducted for MA 
organizations and MA plans under part C.
  (e) Electronic Prescription Program.--
          (1) Application of standards.--As of such date as the 
        Secretary may specify, but not later than 1 year after 
        the date of promulgation of final standards under 
        paragraph (4)(D), prescriptions and other information 
        described in paragraph (2)(A) for covered part D drugs 
        prescribed for part D eligible individuals that are 
        transmitted electronically shall be transmitted only in 
        accordance with such standards under an electronic 
        prescription drug program that meets the requirements 
        of paragraph (2).
          (2) Program requirements.--Consistent with uniform 
        standards established under paragraph (3)--
                  (A) Provision of information to prescribing 
                health care professional and dispensing 
                pharmacies and pharmacists.--An electronic 
                prescription drug program shall provide for the 
                electronic transmittal to the prescribing 
                health care professional and to the dispensing 
                pharmacy and pharmacist of the prescription and 
                information on eligibility and benefits 
                (including the drugs included in the applicable 
                formulary, any tiered formulary structure, and 
                any requirements for prior authorization) and 
                of the following information with respect to 
                the prescribing and dispensing of a covered 
                part D drug:
                          (i) Information on the drug being 
                        prescribed or dispensed and other drugs 
                        listed on the medication history, 
                        including information on drug-drug 
                        interactions, warnings or cautions, 
                        and, when indicated, dosage 
                        adjustments.
                          (ii) Information on the availability 
                        of lower cost, therapeutically 
                        appropriate alternatives (if any) for 
                        the drug prescribed.
                  (B) Application to medical history 
                information.--Effective on and after such date 
                as the Secretary specifies and after the 
                establishment of appropriate standards to carry 
                out this subparagraph, the program shall 
                provide for the electronic transmittal in a 
                manner similar to the manner under subparagraph 
                (A) of information that relates to the medical 
                history concerning the individual and related 
                to a covered part D drug being prescribed or 
                dispensed, upon request of the professional or 
                pharmacist involved.
                  (C) Limitations.--Information shall only be 
                disclosed under subparagraph (A) or (B) if the 
                disclosure of such information is permitted 
                under the Federal regulations (concerning the 
                privacy of individually identifiable health 
                information) promulgated under section 264(c) 
                of the Health Insurance Portability and 
                Accountability Act of 1996.
                  (D) Timing.--To the extent feasible, the 
                information exchanged under this paragraph 
                shall be on an interactive, real-time basis.
                  (E) Electronic prior authorization.--
                          (i) In general.--Not later than 
                        January 1, 2021, the program shall 
                        provide for the secure electronic 
                        transmission of--
                                  (I) a prior authorization 
                                request from the prescribing 
                                health care professional for 
                                coverage of a covered part D 
                                drug for a part D eligible 
                                individual enrolled in a part D 
                                plan (as defined in section 
                                1860D-23(a)(5)) to the PDP 
                                sponsor or Medicare Advantage 
                                organization offering such 
                                plan; and
                                  (II) a response, in 
                                accordance with this 
                                subparagraph, from such PDP 
                                sponsor or Medicare Advantage 
                                organization, respectively, to 
                                such professional.
                          (ii) Electronic transmission.--
                                  (I) Exclusions.--For purposes 
                                of this subparagraph, a 
                                facsimile, a proprietary payer 
                                portal that does not meet 
                                standards specified by the 
                                Secretary, or an electronic 
                                form shall not be treated as an 
                                electronic transmission 
                                described in clause (i).
                                  (II) Standards.--In order to 
                                be treated, for purposes of 
                                this subparagraph, as an 
                                electronic transmission 
                                described in clause (i), such 
                                transmission shall comply with 
                                technical standards adopted by 
                                the Secretary in consultation 
                                with the National Council for 
                                Prescription Drug Programs, 
                                other standard setting 
                                organizations determined 
                                appropriate by the Secretary, 
                                and stakeholders including PDP 
                                sponsors, Medicare Advantage 
                                organizations, health care 
                                professionals, and health 
                                information technology software 
                                vendors.
                                  (III) Application.--
                                Notwithstanding any other 
                                provision of law, for purposes 
                                of this subparagraph, the 
                                Secretary may require the use 
                                of such standards adopted under 
                                subclause (II) in lieu of any 
                                other applicable standards for 
                                an electronic transmission 
                                described in clause (i) for a 
                                covered part D drug for a part 
                                D eligible individual.
          (3) Standards.--
                  (A) In general.--The Secretary shall provide 
                consistent with this subsection for the 
                promulgation of uniform standards relating to 
                the requirements for electronic prescription 
                drug programs under paragraph (2).
                  (B) Objectives.--Such standards shall be 
                consistent with the objectives of improving--
                          (i) patient safety;
                          (ii) the quality of care provided to 
                        patients; and
                          (iii) efficiencies, including cost 
                        savings, in the delivery of care.
                  (C) Design criteria.--Such standards shall--
                          (i) be designed so that, to the 
                        extent practicable, the standards do 
                        not impose an undue administrative 
                        burden on prescribing health care 
                        professionals and dispensing pharmacies 
                        and pharmacists;
                          (ii) be compatible with standards 
                        established under part C of title XI, 
                        standards established under subsection 
                        (b)(2)(B)(i), and with general health 
                        information technology standards; and
                          (iii) be designed so that they permit 
                        electronic exchange of drug labeling 
                        and drug listing information maintained 
                        by the Food and Drug Administration and 
                        the National Library of Medicine.
                  (D) Permitting use of appropriate 
                messaging.--Such standards shall allow for the 
                messaging of information only if it relates to 
                the appropriate prescribing of drugs, including 
                quality assurance measures and systems referred 
                to in subsection (c)(1)(B).
                  (E) Permitting patient designation of 
                dispensing pharmacy.--
                          (i) In general.--Consistent with 
                        clause (ii), such standards shall 
                        permit a part D eligible individual to 
                        designate a particular pharmacy to 
                        dispense a prescribed drug.
                          (ii) No change in benefits.--Clause 
                        (i) shall not be construed as 
                        affecting--
                                  (I) the access required to be 
                                provided to pharmacies by a 
                                prescription drug plan; or
                                  (II) the application of any 
                                differences in benefits or 
                                payments under such a plan 
                                based on the pharmacy 
                                dispensing a covered part D 
                                drug.
          (4) Development, promulgation, and modification of 
        standards.--
                  (A) Initial standards.--Not later than 
                September 1, 2005, the Secretary shall develop, 
                adopt, recognize, or modify initial uniform 
                standards relating to the requirements for 
                electronic prescription drug programs described 
                in paragraph (2) taking into consideration the 
                recommendations (if any) from the National 
                Committee on Vital and Health Statistics (as 
                established under section 306(k) of the Public 
                Health Service Act (42 U.S.C. 242k(k))) under 
                subparagraph (B).
                  (B) Role of ncvhs.--The National Committee on 
                Vital and Health Statistics shall develop 
                recommendations for uniform standards relating 
                to such requirements in consultation with the 
                following:
                          (i) Standard setting organizations 
                        (as defined in section 1171(8))
                          (ii) Practicing physicians.
                          (iii) Hospitals.
                          (iv) Pharmacies.
                          (v) Practicing pharmacists.
                          (vi) Pharmacy benefit managers.
                          (vii) State boards of pharmacy.
                          (viii) State boards of medicine.
                          (ix) Experts on electronic 
                        prescribing.
                          (x) Other appropriate Federal 
                        agencies.
                  (C) Pilot project to test initial 
                standards.--
                          (i) In general.--During the 1-year 
                        period that begins on January 1, 2006, 
                        the Secretary shall conduct a pilot 
                        project to test the initial standards 
                        developed under subparagraph (A) prior 
                        to the promulgation of the final 
                        uniform standards under subparagraph 
                        (D) in order to provide for the 
                        efficient implementation of the 
                        requirements described in paragraph 
                        (2).
                          (ii) Exception.--Pilot testing of 
                        standards is not required under clause 
                        (i) where there already is adequate 
                        industry experience with such 
                        standards, as determined by the 
                        Secretary after consultation with 
                        effected standard setting organizations 
                        and industry users.
                          (iii) Voluntary participation of 
                        physicians and pharmacies.--In order to 
                        conduct the pilot project under clause 
                        (i), the Secretary shall enter into 
                        agreements with physicians, physician 
                        groups, pharmacies, hospitals, PDP 
                        sponsors, MA organizations, and other 
                        appropriate entities under which health 
                        care professionals electronically 
                        transmit prescriptions to dispensing 
                        pharmacies and pharmacists in 
                        accordance with such standards.
                          (iv) Evaluation and report.--
                                  (I) Evaluation.--The 
                                Secretary shall conduct an 
                                evaluation of the pilot project 
                                conducted under clause (i).
                                  (II) Report to congress.--Not 
                                later than April 1, 2007, the 
                                Secretary shall submit to 
                                Congress a report on the 
                                evaluation conducted under 
                                subclause (I).
                  (D) Final standards.--Based upon the 
                evaluation of the pilot project under 
                subparagraph (C)(iv)(I) and not later than 
                April 1, 2008, the Secretary shall promulgate 
                uniform standards relating to the requirements 
                described in paragraph (2).
          (5) Relation to state laws.--The standards 
        promulgated under this subsection shall supersede any 
        State law or regulation that--
                  (A) is contrary to the standards or restricts 
                the ability to carry out this part; and
                  (B) pertains to the electronic transmission 
                of medication history and of information on 
                eligibility, benefits, and prescriptions with 
                respect to covered part D drugs under this 
                part.
          (6) Establishment of safe harbor.--The Secretary, in 
        consultation with the Attorney General, shall 
        promulgate regulations that provide for a safe harbor 
        from sanctions under paragraphs (1) and (2) of section 
        1128B(b) and an exception to the prohibition under 
        subsection (a)(1) of section 1877 with respect to the 
        provision of nonmonetary remuneration (in the form of 
        hardware, software, or information technology and 
        training services) necessary and used solely to receive 
        and transmit electronic prescription information in 
        accordance with the standards promulgated under this 
        subsection--
                  (A) in the case of a hospital, by the 
                hospital to members of its medical staff;
                  (B) in the case of a group practice (as 
                defined in section 1877(h)(4)), by the practice 
                to prescribing health care professionals who 
                are members of such practice; and
                  (C) in the case of a PDP sponsor or MA 
                organization, by the sponsor or organization to 
                pharmacists and pharmacies participating in the 
                network of such sponsor or organization, and to 
                prescribing health care professionals.
          (7) Requirement of e-prescribing for controlled 
        substances.--
                  (A) In general.--Subject to subparagraph (B), 
                a prescription for a covered part D drug under 
                a prescription drug plan (or under an MA-PD 
                plan) for a schedule II, III, IV, or V 
                controlled substance shall be transmitted by a 
                health care practitioner electronically in 
                accordance with an electronic prescription drug 
                program that meets the requirements of 
                paragraph (2).
                  (B) Exception for certain circumstances.--The 
                Secretary shall, through rulemaking, specify 
                circumstances and processes by which the 
                Secretary may waive the requirement under 
                subparagraph (A), with respect to a covered 
                part D drug, including in the case of--
                          (i) a prescription issued when the 
                        practitioner and dispensing pharmacy 
                        are the same entity;
                          (ii) a prescription issued that 
                        cannot be transmitted electronically 
                        under the most recently implemented 
                        version of the National Council for 
                        Prescription Drug Programs SCRIPT 
                        Standard;
                          (iii) a prescription issued by a 
                        practitioner who received a waiver or a 
                        renewal thereof for a period of time as 
                        determined by the Secretary, not to 
                        exceed one year, from the requirement 
                        to use electronic prescribing due to 
                        demonstrated economic hardship, 
                        technological limitations that are not 
                        reasonably within the control of the 
                        practitioner, or other exceptional 
                        circumstance demonstrated by the 
                        practitioner;
                          (iv) a prescription issued by a 
                        practitioner under circumstances in 
                        which, notwithstanding the 
                        practitioner's ability to submit a 
                        prescription electronically as required 
                        by this subsection, such practitioner 
                        reasonably determines that it would be 
                        impractical for the individual involved 
                        to obtain substances prescribed by 
                        electronic prescription in a timely 
                        manner, and such delay would adversely 
                        impact the individual's medical 
                        condition involved;
                          (v) a prescription issued by a 
                        practitioner prescribing a drug under a 
                        research protocol;
                          (vi) a prescription issued by a 
                        practitioner for a drug for which the 
                        Food and Drug Administration requires a 
                        prescription to contain elements that 
                        are not able to be included in 
                        electronic prescribing, such as a drug 
                        with risk evaluation and mitigation 
                        strategies that include elements to 
                        assure safe use;
                          (vii) a prescription issued by a 
                        practitioner--
                                  (I) for an individual who 
                                receives hospice care under 
                                this title; and
                                  (II) that is not covered 
                                under the hospice benefit under 
                                this title; and
                          (viii) a prescription issued by a 
                        practitioner for an individual who is--
                                  (I) a resident of a nursing 
                                facility (as defined in section 
                                1919(a)); and
                                  (II) dually eligible for 
                                benefits under this title and 
                                title XIX.
                  (C) Dispensing.--(i) Nothing in this 
                paragraph shall be construed as requiring a 
                sponsor of a prescription drug plan under this 
                part, MA organization offering an MA-PD plan 
                under part C, or a pharmacist to verify that a 
                practitioner, with respect to a prescription 
                for a covered part D drug, has a waiver (or is 
                otherwise exempt) under subparagraph (B) from 
                the requirement under subparagraph (A).
                  (ii) Nothing in this paragraph shall be 
                construed as affecting the ability of the plan 
                to cover or the pharmacists' ability to 
                continue to dispense covered part D drugs from 
                otherwise valid written, oral, or fax 
                prescriptions that are consistent with laws and 
                regulations.
                  (iii) Nothing in this paragraph shall be 
                construed as affecting the ability of an 
                individual who is being prescribed a covered 
                part D drug to designate a particular pharmacy 
                to dispense the covered part D drug to the 
                extent consistent with the requirements under 
                subsection (b)(1) and under this paragraph.
                  (D) Enforcement.--The Secretary shall, 
                through rulemaking, have authority to enforce 
                and specify appropriate penalties for non-
                compliance with the requirement under 
                subparagraph (A).
  (f) Grievance Mechanism.--Each PDP sponsor shall provide 
meaningful procedures for hearing and resolving grievances 
between the sponsor (including any entity or individual through 
which the sponsor provides covered benefits) and enrollees with 
prescription drug plans of the sponsor under this part in 
accordance with section 1852(f).
  (g) Coverage Determinations and Reconsiderations.--
          (1) Application of coverage determination and 
        reconsideration provisions.--A PDP sponsor shall meet 
        the requirements of paragraphs (1) through (3) of 
        section 1852(g) with respect to covered benefits under 
        the prescription drug plan it offers under this part in 
        the same manner as such requirements apply to an MA 
        organization with respect to benefits it offers under 
        an MA plan under part C.
          (2) Request for a determination for the treatment of 
        tiered formulary drug.--In the case of a prescription 
        drug plan offered by a PDP sponsor that provides for 
        tiered cost-sharing for drugs included within a 
        formulary and provides lower cost-sharing for preferred 
        drugs included within the formulary, a part D eligible 
        individual who is enrolled in the plan may request an 
        exception to the tiered cost-sharing structure. Under 
        such an exception, a nonpreferred drug could be covered 
        under the terms applicable for preferred drugs if the 
        prescribing physician determines that the preferred 
        drug for treatment of the same condition either would 
        not be as effective for the individual or would have 
        adverse effects for the individual or both. A PDP 
        sponsor shall have an exceptions process under this 
        paragraph consistent with guidelines established by the 
        Secretary for making a determination with respect to 
        such a request. Denial of such an exception shall be 
        treated as a coverage denial for purposes of applying 
        subsection (h).
  (h) Appeals.--
          (1) In general.--Subject to paragraph (2), a PDP 
        sponsor shall meet the requirements of paragraphs (4) 
        and (5) of section 1852(g) with respect to benefits 
        (including a determination related to the application 
        of tiered cost-sharing described in subsection (g)(2)) 
        in a manner similar (as determined by the Secretary) to 
        the manner such requirements apply to an MA 
        organization with respect to benefits under the 
        original medicare fee-for-service program option it 
        offers under an MA plan under part C. In applying this 
        paragraph only the part D eligible individual shall be 
        entitled to bring such an appeal.
          (2) Limitation in cases on nonformulary 
        determinations.--A part D eligible individual who is 
        enrolled in a prescription drug plan offered by a PDP 
        sponsor may appeal under paragraph (1) a determination 
        not to provide for coverage of a covered part D drug 
        that is not on the formulary under the plan only if the 
        prescribing physician determines that all covered part 
        D drugs on any tier of the formulary for treatment of 
        the same condition would not be as effective for the 
        individual as the nonformulary drug, would have adverse 
        effects for the individual, or both.
          (3) Treatment of nonformulary determinations.--If a 
        PDP sponsor determines that a plan provides coverage 
        for a covered part D drug that is not on the formulary 
        of the plan, the drug shall be treated as being 
        included on the formulary for purposes of section 
        1860D-2(b)(4)(C)(i).
  (i) Privacy, Confidentiality, and Accuracy of Enrollee 
Records.--The provisions of section 1852(h) shall apply to a 
PDP sponsor and prescription drug plan in the same manner as it 
applies to an MA organization and an MA plan.
  (j) Treatment of Accreditation.--Subparagraph (A) of section 
1852(e)(4) (relating to treatment of accreditation) shall apply 
to a PDP sponsor under this part with respect to the following 
requirements, in the same manner as it applies to an MA 
organization with respect to the requirements in subparagraph 
(B) (other than clause (vii) thereof) of such section:
          (1) Subsection (b) of this section (relating to 
        access to covered part D drugs).
          (2) Subsection (c) of this section (including quality 
        assurance and medication therapy management).
          (3) Subsection (i) of this section (relating to 
        confidentiality and accuracy of enrollee records).
  (k) Public Disclosure of Pharmaceutical Prices for Equivalent 
Drugs.--
          (1) In general.--A PDP sponsor offering a 
        prescription drug plan shall provide that each pharmacy 
        that dispenses a covered part D drug shall inform an 
        enrollee of any differential between the price of the 
        drug to the enrollee and the price of the lowest priced 
        generic covered part D drug under the plan that is 
        therapeutically equivalent and bioequivalent and 
        available at such pharmacy.
          (2) Timing of notice.--
                  (A) In general.--Subject to subparagraph (B), 
                the information under paragraph (1) shall be 
                provided at the time of purchase of the drug 
                involved, or, in the case of dispensing by mail 
                order, at the time of delivery of such drug.
                  (B) Waiver.--The Secretary may waive 
                subparagraph (A) in such circumstances as the 
                Secretary may specify.
  (l) Requirements with Respect to Sales and Marketing 
Activities.--The following provisions shall apply to a PDP 
sponsor (and the agents, brokers, and other third parties 
representing such sponsor) in the same manner as such 
provisions apply to a Medicare Advantage organization (and the 
agents, brokers, and other third parties representing such 
organization):
          (1) The prohibition under section 1851(h)(4)(C) on 
        conducting activities described in section 1851(j)(1).
          (2) The requirement under section 1851(h)(4)(D) to 
        conduct activities described in section 1851(j)(2) in 
        accordance with the limitations established under such 
        subsection.
          (3) The inclusion of the plan type in the plan name 
        under section 1851(h)(6).
          (4) The requirements regarding the appointment of 
        agents and brokers and compliance with State 
        information requests under subparagraphs (A) and (B), 
        respectively, of section 1851(h)(7).
  (m) Prohibition on Limiting Certain Information on Drug 
Prices.--A PDP sponsor and a Medicare Advantage organization 
shall ensure that each prescription drug plan or MA-PD plan 
offered by the sponsor or organization does not restrict a 
pharmacy that dispenses a prescription drug or biological from 
informing, nor penalize such pharmacy for informing, an 
enrollee in such plan of any differential between the 
negotiated price of, or copayment or coinsurance for, the drug 
or biological to the enrollee under the plan and a lower price 
the individual would pay for the drug or biological if the 
enrollee obtained the drug without using any health insurance 
coverage.
  (m) Program Integrity Transparency Measures.--For program 
integrity transparency measures applied with respect to 
prescription drug plan and MA plans, see section 1859(i).

      Subpart 2--Prescription Drug Plans; PDP Sponsors; Financing

             pdp regions; submission of bids; plan approval

  Sec. 1860D-11. (a) Establishment of PDP Regions; Service 
Areas.--
          (1) Coverage of entire pdp region.--The service area 
        for a prescription drug plan shall consist of an entire 
        PDP region established under paragraph (2).
          (2) Establishment of pdp regions.--
                  (A) In general.--The Secretary shall 
                establish, and may revise, PDP regions in a 
                manner that is consistent with the requirements 
                for the establishment and revision of MA 
                regions under subparagraphs (B) and (C) of 
                section 1858(a)(2).
                  (B) Relation to ma regions.--To the extent 
                practicable, PDP regions shall be the same as 
                MA regions under section 1858(a)(2). The 
                Secretary may establish PDP regions which are 
                not the same as MA regions if the Secretary 
                determines that the establishment of different 
                regions under this part would improve access to 
                benefits under this part.
                  (C) Authority for territories.--The Secretary 
                shall establish, and may revise, PDP regions 
                for areas in States that are not within the 50 
                States or the District of Columbia.
          (3) National plan.--Nothing in this subsection shall 
        be construed as preventing a prescription drug plan 
        from being offered in more than one PDP region 
        (including all PDP regions).
  (b) Submission of Bids, Premiums, and Related Information.--
          (1) In general.--A PDP sponsor shall submit to the 
        Secretary information described in paragraph (2) with 
        respect to each prescription drug plan it offers. Such 
        information shall be submitted at the same time and in 
        a similar manner to the manner in which information 
        described in paragraph (6) of section 1854(a) is 
        submitted by an MA organization under paragraph (1) of 
        such section.
          (2) Information described.--The information described 
        in this paragraph is information on the following:
                  (A) Coverage provided.--The prescription drug 
                coverage provided under the plan, including the 
                deductible and other cost-sharing.
                  (B) Actuarial value.--The actuarial value of 
                the qualified prescription drug coverage in the 
                region for a part D eligible individual with a 
                national average risk profile for the factors 
                described in section 1860D-15(c)(1)(A) (as 
                specified by the Secretary).
                  (C) Bid.--Information on the bid, including 
                an actuarial certification of--
                          (i) the basis for the actuarial value 
                        described in subparagraph (B) assumed 
                        in such bid;
                          (ii) the portion of such bid 
                        attributable to basic prescription drug 
                        coverage and, if applicable, the 
                        portion of such bid attributable to 
                        supplemental benefits;
                          (iii) [assumptions regarding the 
                        reinsurance] assumptions regarding--
                                  (I) the reinsurance  subsidy 
                                payments provided under section 
                                1860D-15(b) subtracted from the 
                                actuarial value to produce such 
                                bid; and
                                  (II) for 2022 and each 
                                subsequent year, the 
                                manufacturer discounts provided 
                                under section 1860D-14C 
                                subtracted from the actuarial 
                                value to produce such bid; and
                          (iv) administrative expenses assumed 
                        in the bid.
                  (D) Service area.--The service area for the 
                plan.
                  (E) Level of risk assumed.--
                          (i) In general.--Whether the PDP 
                        sponsor requires a modification of risk 
                        level under clause (ii) and, if so, the 
                        extent of such modification. Any such 
                        modification shall apply with respect 
                        to all prescription drug plans offered 
                        by a PDP sponsor in a PDP region. This 
                        subparagraph shall not apply to an MA-
                        PD plan.
                          (ii) Risk levels described.--A 
                        modification of risk level under this 
                        clause may consist of one or more of 
                        the following:
                                  (I) Increase in federal 
                                percentage assumed in initial 
                                risk corridor.--An equal 
                                percentage point increase in 
                                the percents applied under 
                                subparagraphs (B)(i), 
                                (B)(ii)(I), (C)(i), and 
                                (C)(ii)(I) of section 1860D-
                                15(e)(2). In no case shall the 
                                application of previous 
                                sentence prevent the 
                                application of a higher 
                                percentage under section 1869D-
                                15(e)(2)(B)(iii).
                                  (II) Increase in federal 
                                percentage assumed in second 
                                risk corridor.--An equal 
                                percentage point increase in 
                                the percents applied under 
                                subparagraphs (B)(ii)(II) and 
                                (C)(ii)(II) of section 1860D-
                                15(e)(2).
                                  (III) Decrease in size of 
                                risk corridors.--A decrease in 
                                the threshold risk percentages 
                                specified in section 1860D-
                                15(e)(3)(C).
                  (F) Additional information.--Such other 
                information as the Secretary may require to 
                carry out this part.
          (3) Paperwork reduction for offering of prescription 
        drug plans nationally or in multi-region areas.--The 
        Secretary shall establish requirements for information 
        submission under this subsection in a manner that 
        promotes the offering of such plans in more than one 
        PDP region (including all regions) through the filing 
        of consolidated information.
  (c) Actuarial Valuation.--
          (1) Processes.--For purposes of this part, the 
        Secretary shall establish processes and methods for 
        determining the actuarial valuation of prescription 
        drug coverage, including--
                  (A) an actuarial valuation of standard 
                prescription drug coverage under section 1860D-
                2(b);
                  (B) actuarial valuations relating to 
                alternative prescription drug coverage under 
                section 1860D-2(c)(1);
                  (C) [an actuarial valuation of the 
                reinsurance] an actuarial valuation of--
                          (i) the reinsurance  subsidy payments 
                        under section 1860D-15(b); and
                          (ii) for 2022 and each subsequent 
                        year, the manufacturer discounts 
                        provided under section 1860D-14C;
                  (D) the use of generally accepted actuarial 
                principles and methodologies; and
                  (E) applying the same methodology for 
                determinations of actuarial valuations under 
                subparagraphs (A) and (B).
          (2) Accounting for drug utilization.--Such processes 
        and methods for determining actuarial valuation shall 
        take into account the effect that providing alternative 
        prescription drug coverage (rather than standard 
        prescription drug coverage) has on drug utilization.
          (3) Responsibilities.--
                  (A) Plan responsibilities.--PDP sponsors and 
                MA organizations are responsible for the 
                preparation and submission of actuarial 
                valuations required under this part for 
                prescription drug plans and MA-PD plans they 
                offer.
                  (B) Use of outside actuaries.--Under the 
                processes and methods established under 
                paragraph (1), PDP sponsors offering 
                prescription drug plans and MA organizations 
                offering MA-PD plans may use actuarial opinions 
                certified by independent, qualified actuaries 
                to establish actuarial values.
  (d) Review of Information and Negotiation.--
          (1) Review of information.--The Secretary shall 
        review the information filed under subsection (b) for 
        the purpose of conducting negotiations under paragraph 
        (2).
          (2) Negotiation regarding terms and conditions.--
        Subject to subsection (i), in exercising the authority 
        under paragraph (1), the Secretary--
                  (A) has the authority to negotiate the terms 
                and conditions of the proposed bid submitted 
                and other terms and conditions of a proposed 
                plan; and
                  (B) has authority similar to the authority of 
                the Director of the Office of Personnel 
                Management with respect to health benefits 
                plans under chapter 89 of title 5, United 
                States Code.
          (3) Rejection of bids.--Paragraph (5)(C) of section 
        1854(a) shall apply with respect to bids submitted by a 
        PDP sponsor under subsection (b) in the same manner as 
        such paragraph applies to bids submitted by an MA 
        organization under such section 1854(a).
  (e) Approval of Proposed Plans.--
          (1) In general.--After review and negotiation under 
        subsection (d), the Secretary shall approve or 
        disapprove the prescription drug plan.
          (2) Requirements for approval.--The Secretary may 
        approve a prescription drug plan only if the following 
        requirements are met:
                  (A) Compliance with requirements.--The plan 
                and the PDP sponsor offering the plan comply 
                with the requirements under this part, 
                including the provision of qualified 
                prescription drug coverage.
                  (B) Actuarial determinations.--The Secretary 
                determines that the plan and PDP sponsor meet 
                the requirements under this part relating to 
                actuarial determinations, including such 
                requirements under section 1860D-2(c).
                  (C) Application of fehbp standard.--
                          (i) In general.--The Secretary 
                        determines that the portion of the bid 
                        submitted under subsection (b) that is 
                        attributable to basic prescription drug 
                        coverage is supported by the actuarial 
                        bases provided under such subsection 
                        and reasonably and equitably reflects 
                        the revenue requirements (as used for 
                        purposes of section 1302(8)(C) of the 
                        Public Health Service Act) for benefits 
                        provided under that plan, less the sum 
                        (determined on a monthly per capita 
                        basis) of the actuarial value of the 
                        reinsurance payments under section 
                        1860D-15(b).
                          (ii) Supplemental coverage.--The 
                        Secretary determines that the portion 
                        of the bid submitted under subsection 
                        (b) that is attributable to 
                        supplemental prescription drug coverage 
                        pursuant to section 1860D-2(a)(2) is 
                        supported by the actuarial bases 
                        provided under such subsection and 
                        reasonably and equitably reflects the 
                        revenue requirements (as used for 
                        purposes of section 1302(8)(C) of the 
                        Public Health Service Act) for such 
                        coverage under the plan.
                  (D) Plan design.--
                          (i) In general.--The Secretary does 
                        not find that the design of the plan 
                        and its benefits (including any 
                        formulary and tiered formulary 
                        structure) are likely to substantially 
                        discourage enrollment by certain part D 
                        eligible individuals under the plan.
                          (ii) Use of categories and classes in 
                        formularies.--The Secretary may not 
                        find that the design of categories and 
                        classes within a formulary violates 
                        clause (i) if such categories and 
                        classes are consistent with guidelines 
                        (if any) for such categories and 
                        classes established by the United 
                        States Pharmacopeia.
  (f) Application of Limited Risk Plans.--
          (1) Conditions for approval of limited risk plans.--
        The Secretary may only approve a limited risk plan (as 
        defined in paragraph (4)(A)) for a PDP region if the 
        access requirements under section 1860D-3(a) would not 
        be met for the region but for the approval of such a 
        plan (or a fallback prescription drug plan under 
        subsection (g)).
          (2) Rules.--The following rules shall apply with 
        respect to the approval of a limited risk plan in a PDP 
        region:
                  (A) Limited exercise of authority.--Only the 
                minimum number of such plans may be approved in 
                order to meet the access requirements under 
                section 1860D-3(a).
                  (B) Maximizing assumption of risk.--The 
                Secretary shall provide priority in approval 
                for those plans bearing the highest level of 
                risk (as computed by the Secretary), but the 
                Secretary may take into account the level of 
                the bids submitted by such plans.
                  (C) No full underwriting for limited risk 
                plans.--In no case may the Secretary approve a 
                limited risk plan under which the modification 
                of risk level provides for no (or a de minimis) 
                level of financial risk.
          (3) Acceptance of all full risk contracts.--There 
        shall be no limit on the number of full risk plans that 
        are approved under subsection (e).
          (4) Risk-plans defined.--For purposes of this 
        subsection:
                  (A) Limited risk plan.--The term ``limited 
                risk plan'' means a prescription drug plan that 
                provides basic prescription drug coverage and 
                for which the PDP sponsor includes a 
                modification of risk level described in 
                subparagraph (E) of subsection (b)(2) in its 
                bid submitted for the plan under such 
                subsection. Such term does not include a 
                fallback prescription drug plan.
                  (B) Full risk plan.--The term ``full risk 
                plan'' means a prescription drug plan that is 
                not a limited risk plan or a fallback 
                prescription drug plan.
  (g) Guaranteeing Access to Coverage.--
          (1) Solicitation of bids.--
                  (A) In general.--Separate from the bidding 
                process under subsection (b), the Secretary 
                shall provide for a process for the 
                solicitation of bids from eligible fallback 
                entities (as defined in paragraph (2)) for the 
                offering in all fallback service areas (as 
                defined in paragraph (3)) in one or more PDP 
                regions of a fallback prescription drug plan 
                (as defined in paragraph (4)) during the 
                contract period specified in paragraph (5).
                  (B) Acceptance of bids.--
                          (i) In general.--Except as provided 
                        in this subparagraph, the provisions of 
                        subsection (e) shall apply with respect 
                        to the approval or disapproval of 
                        fallback prescription drug plans. The 
                        Secretary shall enter into contracts 
                        under this subsection with eligible 
                        fallback entities for the offering of 
                        fallback prescription drug plans so 
                        approved in fallback service areas.
                          (ii) Limitation of 1 plan for all 
                        fallback service areas in a pdp 
                        region.--With respect to all fallback 
                        service areas in any PDP region for a 
                        contract period, the Secretary shall 
                        approve the offering of only 1 fallback 
                        prescription drug plan.
                          (iii) 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 a 
                        contract under this subsection. The 
                        provisions of subsection (d) of section 
                        1874A shall apply to a contract under 
                        this section in the same manner as they 
                        apply to a contract under such section.
                          (iv) Timing.--The Secretary shall 
                        approve a fallback prescription drug 
                        plan for a PDP region in a manner so 
                        that, if there are any fallback service 
                        areas in the region for a year, the 
                        fallback prescription drug plan is 
                        offered at the same time as 
                        prescription drug plans would otherwise 
                        be offered.
                          (V) No national fallback plan.--The 
                        Secretary shall not enter into a 
                        contract with a single fallback entity 
                        for the offering of fallback plans 
                        throughout the United States.
          (2) Eligible fallback entity.--For purposes of this 
        section, the term ``eligible fallback entity'' means, 
        with respect to all fallback service areas in a PDP 
        region for a contract period, an entity that--
                  (A) meets the requirements to be a PDP 
                sponsor (or would meet such requirements but 
                for the fact that the entity is not a risk-
                bearing entity); and
                  (B) does not submit a bid under section 
                1860D-11(b) for any prescription drug plan for 
                any PDP region for the first year of such 
                contract period.
        For purposes of subparagraph (B), an entity shall be 
        treated as submitting a bid with respect to a 
        prescription drug plan if the entity is acting as a 
        subcontractor of a PDP sponsor that is offering such a 
        plan. The previous sentence shall not apply to entities 
        that are subcontractors of an MA organization except 
        insofar as such organization is acting as a PDP sponsor 
        with respect to a prescription drug plan.
          (3) Fallback service area.--For purposes of this 
        subsection, the term ``fallback service area'' means, 
        for a PDP region with respect to a year, any area 
        within such region for which the Secretary determines 
        before the beginning of the year that the access 
        requirements of the first sentence of section 1860D-
        3(a) will not be met for part D eligible individuals 
        residing in the area for the year.
          (4) Fallback prescription drug plan.--For purposes of 
        this part, the term ``fallback prescription drug plan'' 
        means a prescription drug plan that--
                  (A) only offers the standard prescription 
                drug coverage and access to negotiated prices 
                described in section 1860D-2(a)(1)(A) and does 
                not include any supplemental prescription drug 
                coverage; and
                  (B) meets such other requirements as the 
                Secretary may specify.
          (5) Payments under the contract.--
                  (A) In general.--A contract entered into 
                under this subsection shall provide for--
                          (i) payment for the actual costs 
                        (taking into account negotiated price 
                        concessions described in section 1860D-
                        2(d)(1)(B)) of covered part D drugs 
                        provided to part D eligible individuals 
                        enrolled in a fallback prescription 
                        drug plan offered by the entity; and
                          (ii) payment of management fees that 
                        are tied to performance measures 
                        established by the Secretary for the 
                        management, administration, and 
                        delivery of the benefits under the 
                        contract.
                  (B) Performance measures.--The performance 
                measures established by the Secretary pursuant 
                to subparagraph (A)(ii) shall include at least 
                measures for each of the following:
                          (i) Costs.--The entity contains costs 
                        to the Medicare Prescription Drug 
                        Account and to part D eligible 
                        individuals enrolled in a fallback 
                        prescription drug plan offered by the 
                        entity through mechanisms such as 
                        generic substitution and price 
                        discounts.
                          (ii) Quality programs.--The entity 
                        provides such enrollees with quality 
                        programs that avoid adverse drug 
                        reactions and overutilization and 
                        reduce medical errors.
                          (iii) Customer service.--The entity 
                        provides timely and accurate delivery 
                        of services and pharmacy and 
                        beneficiary support services.
                          (iv) Benefit administration and 
                        claims adjudication.--The entity 
                        provides efficient and effective 
                        benefit administration and claims 
                        adjudication.
          (6) Monthly beneficiary premium.--Except as provided 
        in section 1860D-13(b) (relating to late enrollment 
        penalty) and subject to section 1860D-14 (relating to 
        low-income assistance), the monthly beneficiary premium 
        to be charged under a fallback prescription drug plan 
        offered in all fallback service areas in a PDP region 
        shall be uniform and shall be equal to 25.5 percent of 
        an amount equal to the Secretary's estimate of the 
        average monthly per capita actuarial cost, including 
        administrative expenses, under the fallback 
        prescription drug plan of providing coverage in the 
        region, as calculated by the Chief Actuary of the 
        Centers for Medicare & Medicaid Services. In 
        calculating such administrative expenses, the Chief 
        Actuary shall use a factor that is based on similar 
        expenses of prescription drug plans that are not 
        fallback prescription drug plans.
          (7) General contract terms and conditions.--
                  (A) In general.--Except as may be appropriate 
                to carry out this section, the terms and 
                conditions of contracts with eligible fallback 
                entities offering fallback prescription drug 
                plans under this subsection shall be the same 
                as the terms and conditions of contracts under 
                this part for prescription drug plans.
                  (B) Period of contract.--
                          (i) In general.--Subject to clause 
                        (ii), a contract approved for a 
                        fallback prescription drug plan for 
                        fallback service areas for a PDP region 
                        under this section shall be for a 
                        period of 3 years (except as may be 
                        renewed after a subsequent bidding 
                        process).
                          (ii) Limitation.--A fallback 
                        prescription drug plan may be offered 
                        under a contract in an area for a year 
                        only if that area is a fallback service 
                        area for that year.
                  (C) Entity not permitted to market or brand 
                fallback prescription drug plans.--An eligible 
                fallback entity with a contract under this 
                subsection may not engage in any marketing or 
                branding of a fallback prescription drug plan.
  (h) Annual Report on Use of Limited Risk Plans and Fallback 
Plans.--The Secretary shall submit to Congress an annual report 
that describes instances in which limited risk plans and 
fallback prescription drug plans were offered under subsections 
(f) and (g). The Secretary shall include in such report such 
recommendations as may be appropriate to limit the need for the 
provision of such plans and to maximize the assumption of 
financial risk under section subsection (f).
  (i) Noninterference.--In order to promote competition under 
this part and in carrying out this part, the Secretary, except 
as provided under part E of title XI,--
          (1) may not interfere with the negotiations between 
        drug manufacturers and pharmacies and PDP sponsors; and
          (2) may not require a particular formulary or 
        institute a price structure for the reimbursement of 
        covered part D drugs.
  (j) Coordination of Benefits.--A PDP sponsor offering a 
prescription drug plan shall permit State Pharmaceutical 
Assistance Programs and Rx plans under sections 1860D-23 and 
1860D-24 to coordinate benefits with the plan and, in 
connection with such coordination with such a Program, not to 
impose fees that are unrelated to the cost of coordination.

   requirements for and contracts with prescription drug plan (pdp) 
                                sponsors

  Sec. 1860D-12. (a) General Requirements.--Each PDP sponsor of 
a prescription drug plan shall meet the following requirements:
          (1) Licensure.--Subject to subsection (c), the 
        sponsor is organized and licensed under State law as a 
        risk-bearing entity eligible to offer health insurance 
        or health benefits coverage in each State in which it 
        offers a prescription drug plan.
          (2) Assumption of financial risk for unsubsidized 
        coverage.--
                  (A) In general.--Subject to subparagraph (B), 
                to the extent that the entity is at risk the 
                entity assumes financial risk on a prospective 
                basis for benefits that it offers under a 
                prescription drug plan and that is not covered 
                under section 1860D-15(b).
                  (B) Reinsurance permitted.--The plan sponsor 
                may obtain insurance or make other arrangements 
                for the cost of coverage provided to any 
                enrollee to the extent that the sponsor is at 
                risk for providing such coverage.
          (3) Solvency for unlicensed sponsors.--In the case of 
        a PDP sponsor that is not described in paragraph (1) 
        and for which a waiver has been approved under 
        subsection (c), such sponsor shall meet solvency 
        standards established by the Secretary under subsection 
        (d).
  (b) Contract Requirements.--
          (1) In general.--The Secretary shall not permit the 
        enrollment under section 1860D-1 in a prescription drug 
        plan offered by a PDP sponsor under this part, and the 
        sponsor shall not be eligible for payments under 
        section 1860D-14 or 1860D-15, unless the Secretary has 
        entered into a contract under this subsection with the 
        sponsor with respect to the offering of such plan. Such 
        a contract with a sponsor may cover more than one 
        prescription drug plan. Such contract shall provide 
        that the sponsor agrees to comply with the applicable 
        requirements and standards of this part and the terms 
        and conditions of payment as provided for in this part.
          (2) Limitation on entities offering fallback 
        prescription drug plans.--The Secretary shall not enter 
        into a contract with a PDP sponsor for the offering of 
        a prescription drug plan (other than a fallback 
        prescription drug plan) in a PDP region for a year if 
        the sponsor--
                  (A) submitted a bid under section 1860D-11(g) 
                for such year (as the first year of a contract 
                period under such section) to offer a fallback 
                prescription drug plan in any PDP region;
                  (B) offers a fallback prescription drug plan 
                in any PDP region during the year; or
                  (C) offered a fallback prescription drug plan 
                in that PDP region during the previous year.
        For purposes of this paragraph, an entity shall be 
        treated as submitting a bid with respect to a 
        prescription drug plan or offering a fallback 
        prescription drug plan if the entity is acting as a 
        subcontractor of a PDP sponsor that is offering such a 
        plan. The previous sentence shall not apply to entities 
        that are subcontractors of an MA organization except 
        insofar as such organization is acting as a PDP sponsor 
        with respect to a prescription drug plan.
          (3) Incorporation of certain medicare advantage 
        contract requirements.--Except as otherwise provided, 
        the following provisions of section 1857 shall apply to 
        contracts under this section in the same manner as they 
        apply to contracts under section 1857(a):
                  (A) Minimum enrollment.--Paragraphs (1) and 
                (3) of section 1857(b), except that--
                          (i) the Secretary may increase the 
                        minimum number of enrollees required 
                        under such paragraph (1) as the 
                        Secretary determines appropriate; and
                          (ii) the requirement of such 
                        paragraph (1) shall be waived during 
                        the first contract year with respect to 
                        an organization in a region.
                  (B) Contract period and effectiveness.--
                Section 1857(c), except that in applying 
                paragraph (4)(B) of such section any reference 
                to payment amounts under section 1853 shall be 
                deemed payment amounts under section 1860D-15.
                  (C) Protections against fraud and beneficiary 
                protections.--Section 1857(d).
                  (D) Additional contract terms.--Section 
                1857(e); except that section 1857(e)(2) shall 
                apply as specified to PDP sponsors and payments 
                under this part to an MA-PD plan shall be 
                treated as expenditures made under part D. 
                Notwithstanding any other provision of law, 
                information provided to the Secretary under the 
                application of section 1857(e)(1) to contracts 
                under this section under the preceding 
                sentence--
                          (i) may be used for the purposes of 
                        carrying out this part, improving 
                        public health through research on the 
                        utilization, safety, effectiveness, 
                        quality, and efficiency of health care 
                        services (as the Secretary determines 
                        appropriate); and
                          (ii) shall be made available to 
                        Congressional support agencies (in 
                        accordance with their obligations to 
                        support Congress as set out in their 
                        authorizing statutes) for the purposes 
                        of conducting Congressional oversight, 
                        monitoring, making recommendations, and 
                        analysis of the program under this 
                        title.
                  (E) Intermediate sanctions.--Section 1857(g) 
                (other than paragraph (1)(F) of such section), 
                except that in applying such section the 
                reference in section 1857(g)(1)(B) to section 
                1854 is deemed a reference to this part.
                  (F) Procedures for termination.--Section 
                1857(h).
          (4) Prompt payment of clean claims.--
                  (A) Prompt payment.--
                          (i) In general.--Each contract 
                        entered into with a PDP sponsor under 
                        this part with respect to a 
                        prescription drug plan offered by such 
                        sponsor shall provide that payment 
                        shall be issued, mailed, or otherwise 
                        transmitted with respect to all clean 
                        claims submitted by pharmacies (other 
                        than pharmacies that dispense drugs by 
                        mail order only or are located in, or 
                        contract with, a long-term care 
                        facility) under this part within the 
                        applicable number of calendar days 
                        after the date on which the claim is 
                        received.
                          (ii) Clean claim defined.--In this 
                        paragraph, the term ``clean claim'' 
                        means a claim that has no defect or 
                        impropriety (including any lack of any 
                        required substantiating documentation) 
                        or particular circumstance requiring 
                        special treatment that prevents timely 
                        payment from being made on the claim 
                        under this part.
                          (iii) Date of receipt of claim.--In 
                        this paragraph, a claim is considered 
                        to have been received--
                                  (I) with respect to claims 
                                submitted electronically, on 
                                the date on which the claim is 
                                transferred; and
                                  (II) with respect to claims 
                                submitted otherwise, on the 5th 
                                day after the postmark date of 
                                the claim or the date specified 
                                in the time stamp of the 
                                transmission.
                  (B) Applicable number of calendar days 
                defined.--In this paragraph, the term 
                ``applicable number of calendar days'' means--
                          (i) with respect to claims submitted 
                        electronically, 14 days; and
                          (ii) with respect to claims submitted 
                        otherwise, 30 days.
                  (C) Interest payment.--
                          (i) In general.--Subject to clause 
                        (ii), if payment is not issued, mailed, 
                        or otherwise transmitted within the 
                        applicable number of calendar days (as 
                        defined in subparagraph (B)) after a 
                        clean claim is received, the PDP 
                        sponsor shall pay interest to the 
                        pharmacy that submitted the claim at a 
                        rate equal to the weighted average of 
                        interest on 3-month marketable Treasury 
                        securities determined for such period, 
                        increased by 0.1 percentage point for 
                        the period beginning on the day after 
                        the required payment date and ending on 
                        the date on which payment is made (as 
                        determined under subparagraph (D)(iv)). 
                        Interest amounts paid under this 
                        subparagraph shall not be counted 
                        against the administrative costs of a 
                        prescription drug plan or treated as 
                        allowable risk corridor costs under 
                        section 1860D-15(e).
                          (ii) Authority not to charge 
                        interest.--The Secretary may provide 
                        that a PDP sponsor is not charged 
                        interest under clause (i) in the case 
                        where there are exigent circumstances, 
                        including natural disasters and other 
                        unique and unexpected events, that 
                        prevent the timely processing of 
                        claims.
                  (D) Procedures involving claims.--
                          (i) Claim deemed to be clean.--A 
                        claim is deemed to be a clean claim if 
                        the PDP sponsor involved does not 
                        provide notice to the claimant of any 
                        deficiency in the claim--
                                  (I) with respect to claims 
                                submitted electronically, 
                                within 10 days after the date 
                                on which the claim is received; 
                                and
                                  (II) with respect to claims 
                                submitted otherwise, within 15 
                                days after the date on which 
                                the claim is received.
                          (ii) Claim determined to not be a 
                        clean claim.--
                                  (I) In general.--If a PDP 
                                sponsor determines that a 
                                submitted claim is not a clean 
                                claim, the PDP sponsor shall, 
                                not later than the end of the 
                                period described in clause (i), 
                                notify the claimant of such 
                                determination. Such 
                                notification shall specify all 
                                defects or improprieties in the 
                                claim and shall list all 
                                additional information or 
                                documents necessary for the 
                                proper processing and payment 
                                of the claim.
                                  (II) Determination after 
                                submission of additional 
                                information.--A claim is deemed 
                                to be a clean claim under this 
                                paragraph if the PDP sponsor 
                                involved does not provide 
                                notice to the claimant of any 
                                defect or impropriety in the 
                                claim within 10 days of the 
                                date on which additional 
                                information is received under 
                                subclause (I).
                          (iii) Obligation to pay.--A claim 
                        submitted to a PDP sponsor that is not 
                        paid or contested by the sponsor within 
                        the applicable number of days (as 
                        defined in subparagraph (B)) after the 
                        date on which the claim is received 
                        shall be deemed to be a clean claim and 
                        shall be paid by the PDP sponsor in 
                        accordance with subparagraph (A).
                          (iv) Date of payment of claim.--
                        Payment of a clean claim under such 
                        subparagraph is considered to have been 
                        made on the date on which--
                                  (I) with respect to claims 
                                paid electronically, the 
                                payment is transferred; and
                                  (II) with respect to claims 
                                paid otherwise, the payment is 
                                submitted to the United States 
                                Postal Service or common 
                                carrier for delivery.
                  (E) Electronic transfer of funds.--A PDP 
                sponsor shall pay all clean claims submitted 
                electronically by electronic transfer of funds 
                if the pharmacy so requests or has so requested 
                previously. In the case where such payment is 
                made electronically, remittance may be made by 
                the PDP sponsor electronically as well.
                  (F) Protecting the rights of claimants.--
                          (i) In general.--Nothing in this 
                        paragraph shall be construed to 
                        prohibit or limit a claim or action not 
                        covered by the subject matter of this 
                        section that any individual or 
                        organization has against a provider or 
                        a PDP sponsor.
                          (ii) Anti-retaliation.--Consistent 
                        with applicable Federal or State law, a 
                        PDP sponsor shall not retaliate against 
                        an individual or provider for 
                        exercising a right of action under this 
                        subparagraph.
                  (G) Rule of construction.--A determination 
                under this paragraph that a claim submitted by 
                a pharmacy is a clean claim shall not be 
                construed as a positive determination regarding 
                eligibility for payment under this title, nor 
                is it an indication of government approval of, 
                or acquiescence regarding, the claim submitted. 
                The determination shall not relieve any party 
                of civil or criminal liability with respect to 
                the claim, nor does it offer a defense to any 
                administrative, civil, or criminal action with 
                respect to the claim.
          (5) Submission of claims by pharmacies located in or 
        contracting with long-term care facilities.--Each 
        contract entered into with a PDP sponsor under this 
        part with respect to a prescription drug plan offered 
        by such sponsor shall provide that a pharmacy located 
        in, or having a contract with, a long-term care 
        facility shall have not less than 30 days (but not more 
        than 90 days) to submit claims to the sponsor for 
        reimbursement under the plan.
          (6) Regular update of prescription drug pricing 
        standard.--If the PDP sponsor of a prescription drug 
        plan uses a standard for reimbursement of pharmacies 
        based on the cost of a drug, each contract entered into 
        with such sponsor under this part with respect to the 
        plan shall provide that the sponsor shall update such 
        standard not less frequently than once every 7 days, 
        beginning with an initial update on January 1 of each 
        year, to accurately reflect the market price of 
        acquiring the drug.
          (7) Suspension of payments pending investigation of 
        credible allegations of fraud by pharmacies.--
                  (A) In general.--Section 1862(o)(1) shall 
                apply with respect to a PDP sponsor with a 
                contract under this part, a pharmacy, and 
                payments to such pharmacy under this part in 
                the same manner as such section applies with 
                respect to the Secretary, a provider of 
                services or supplier, and payments to such 
                provider of services or supplier under this 
                title. A PDP sponsor shall notify the Secretary 
                regarding the imposition of any payment 
                suspension pursuant to the previous sentence, 
                such as through the secure internet website 
                portal (or other successor technology) 
                established under section 1859(i).
                  (B) Rule of construction.--Nothing in this 
                paragraph shall be construed as limiting the 
                authority of a PDP sponsor to conduct 
                postpayment review.
          (8) Provision of information related to maximum fair 
        prices.--Each contract entered into with a PDP sponsor 
        under this part with respect to a prescription drug 
        plan offered by such sponsor shall require the sponsor 
        to provide information to the Secretary as requested by 
        the Secretary in accordance with section 1196(b).
  (c) Waiver of Certain Requirements To Expand Choice.--
          (1) Authorizing waiver.--
                  (A) In general.--In the case of an entity 
                that seeks to offer a prescription drug plan in 
                a State, the Secretary shall waive the 
                requirement of subsection (a)(1) that the 
                entity be licensed in that State if the 
                Secretary determines, based on the application 
                and other evidence presented to the Secretary, 
                that any of the grounds for approval of the 
                application described in paragraph (2) have 
                been met.
                  (B) Application of regional plan waiver 
                rule.--In addition to the waiver available 
                under subparagraph (A), the provisions of 
                section 1858(d) shall apply to PDP sponsors 
                under this part in a manner similar to the 
                manner in which such provisions apply to MA 
                organizations under part C, except that no 
                application shall be required under paragraph 
                (1)(B) of such section in the case of a State 
                that does not provide a licensing process for 
                such a sponsor.
          (2) Grounds for approval.--
                  (A) In general.--The grounds for approval 
                under this paragraph are--
                          (i) subject to subparagraph (B), the 
                        grounds for approval described in 
                        subparagraphs (B), (C), and (D) of 
                        section 1855(a)(2); and
                          (ii) the application by a State of 
                        any grounds other than those required 
                        under Federal law.
                  (B) Special rules.--In applying subparagraph 
                (A)(i)--
                          (i) the ground of approval described 
                        in section 1855(a)(2)(B) is deemed to 
                        have been met if the State does not 
                        have a licensing process in effect with 
                        respect to the PDP sponsor; and
                          (ii) for plan years beginning before 
                        January 1, 2008, if the State does have 
                        such a licensing process in effect, 
                        such ground for approval described in 
                        such section is deemed to have been met 
                        upon submission of an application 
                        described in such section.
          (3) Application of waiver procedures.--With respect 
        to an application for a waiver (or a waiver granted) 
        under paragraph (1)(A) of this subsection, the 
        provisions of subparagraphs (E), (F), and (G) of 
        section 1855(a)(2) shall apply, except that clauses (i) 
        and (ii) of such subparagraph (E) shall not apply in 
        the case of a State that does not have a licensing 
        process described in paragraph (2)(B)(i) in effect.
          (4) References to certain provisions.--In applying 
        provisions of section 1855(a)(2) under paragraphs (2) 
        and (3) of this subsection to prescription drug plans 
        and PDP sponsors--
                  (A) any reference to a waiver application 
                under section 1855 shall be treated as a 
                reference to a waiver application under 
                paragraph (1)(A) of this subsection; and
                  (B) any reference to solvency standards shall 
                be treated as a reference to solvency standards 
                established under subsection (d) of this 
                section.
  (d) Solvency Standards for Non-Licensed Entities.--
          (1) Establishment and publication.--The Secretary, in 
        consultation with the National Association of Insurance 
        Commissioners, shall establish and publish, by not 
        later than January 1, 2005, financial solvency and 
        capital adequacy standards for entities described in 
        paragraph (2).
          (2) Compliance with standards.--A PDP sponsor that is 
        not licensed by a State under subsection (a)(1) and for 
        which a waiver application has been approved under 
        subsection (c) shall meet solvency and capital adequacy 
        standards established under paragraph (1). The 
        Secretary shall establish certification procedures for 
        such sponsors with respect to such solvency standards 
        in the manner described in section 1855(c)(2).
  (e) Licensure Does Not Substitute for or Constitute 
Certification.--The fact that a PDP sponsor is licensed in 
accordance with subsection (a)(1) or has a waiver application 
approved under subsection (c) does not deem the sponsor to meet 
other requirements imposed under this part for a sponsor.
  (f) Periodic Review and Revision of Standards.--
          (1) In general.--Subject to paragraph (2), the 
        Secretary may periodically review the standards 
        established under this section and, based on such 
        review, may revise such standards if the Secretary 
        determines such revision to be appropriate.
          (2) Prohibition of midyear implementation of 
        significant new regulatory requirements.--The Secretary 
        may not implement, other than at the beginning of a 
        calendar year, regulations under this section that 
        impose new, significant regulatory requirements on a 
        PDP sponsor or a prescription drug plan.
  (g) Prohibition of State Imposition of Premium Taxes; 
Relation to State Laws.--The provisions of sections 1854(g) and 
1856(b)(3) shall apply with respect to PDP sponsors and 
prescription drug plans under this part in the same manner as 
such sections apply to MA organizations and MA plans under part 
C.

           *       *       *       *       *       *       *


     premium and cost-sharing subsidies for low-income individuals

  Sec. 1860D-14. (a) Income-Related Subsidies for Individuals 
With Income Up to 150 Percent of Poverty Line.--
          (1) Individuals with income below 135 percent of 
        poverty line.--In the case of a subsidy eligible 
        individual (as defined in paragraph (3)) who is 
        determined to have income that is below 135 percent of 
        the poverty line applicable to a family of the size 
        involved and who meets the resources requirement 
        described in paragraph (3)(D) or who is covered under 
        this paragraph under paragraph (3)(B)(i), the 
        individual is entitled under this section to the 
        following:
                  (A) Full premium subsidy.--An income-related 
                premium subsidy equal to 100 percent of the 
                amount described in subsection (b)(1), but not 
                to exceed the premium amount specified in 
                subsection (b)(2)(B).
                  (B) Elimination of deductible.--A reduction 
                in the annual deductible applicable under 
                section 1860D-2(b)(1) to $0.
                  (C) Continuation of coverage above the 
                initial coverage limit.--[The continuation] For 
                a year preceding 2022, the continuation of 
                coverage from the initial coverage limit (under 
                paragraph (3) of section 1860D-2(b)) for 
                expenditures incurred through the total amount 
                of expenditures at which benefits are available 
                under paragraph (4) of such section, subject to 
                the reduced cost-sharing described in 
                subparagraph (D).
                  (D) Reduction in cost-sharing below out-of-
                pocket threshold.--
                          (i) Institutionalized individuals.--
                        In the case of an individual who is a 
                        full-benefit dual eligible individual 
                        and who is an institutionalized 
                        individual or couple (as defined in 
                        section 1902(q)(1)(B)) or, effective on 
                        a date specified by the Secretary (but 
                        in no case earlier than January 1, 
                        2012), who would be such an 
                        institutionalized individual or couple, 
                        if the full-benefit dual eligible 
                        individual were not receiving services 
                        under a home and community-based waiver 
                        authorized for a State under section 
                        1115 or subsection (c) or (d) of 
                        section 1915 or under a State plan 
                        amendment under subsection (i) of such 
                        section or services provided through 
                        enrollment in a medicaid managed care 
                        organization with a contract under 
                        section 1903(m) or under section 1932, 
                        the elimination of any beneficiary 
                        coinsurance described in section 1860D-
                        2(b)(2) (for all amounts through the 
                        total amount of expenditures at which 
                        benefits are available under section 
                        1860D-2(b)(4)).
                          (ii) Lowest income dual eligible 
                        individuals.--In the case of an 
                        individual not described in clause (i) 
                        who is a full-benefit dual eligible 
                        individual and whose income does not 
                        exceed 100 percent of the poverty line 
                        applicable to a family of the size 
                        involved, the substitution for the 
                        beneficiary coinsurance described in 
                        section 1860D-2(b)(2) (for all amounts 
                        through the total amount of 
                        expenditures at which benefits are 
                        available under section 1860D-2(b)(4)) 
                        of a copayment amount that does not 
                        exceed $1 for a generic drug or a 
                        preferred drug that is a multiple 
                        source drug (as defined in section 
                        1927(k)(7)(A)(i)) and $3 for any other 
                        drug, or, if less, the copayment amount 
                        applicable to an individual under 
                        clause (iii).
                          (iii) Other individuals.--In the case 
                        of an individual not described in 
                        clause (i) or (ii), the substitution 
                        for the beneficiary coinsurance 
                        described in section 1860D-2(b)(2) (for 
                        all amounts through the total amount of 
                        expenditures at which benefits are 
                        available under section 1860D-2(b)(4)) 
                        of a copayment amount that does not 
                        exceed the copayment amount specified 
                        under section [1860D-2(b)(4)(A)(i)(I)] 
                        1860D-2(b)(4)(A)(i)(I)(aa) for the drug 
                        and year involved.
                  (E) Elimination of cost-sharing above annual 
                out-of-pocket threshold.--[The elimination] For 
                a year preceding 2022, the elimination of any 
                cost-sharing imposed under section 1860D-
                2(b)(4)(A).
          (2) Other individuals with income below 150 percent 
        of poverty line.--In the case of a subsidy eligible 
        individual who is not described in paragraph (1), the 
        individual is entitled under this section to the 
        following:
                  (A) Sliding scale premium subsidy.--An 
                income-related premium subsidy determined on a 
                linear sliding scale ranging from 100 percent 
                of the amount described in paragraph (1)(A) for 
                individuals with incomes at or below 135 
                percent of such level to 0 percent of such 
                amount for individuals with incomes at 150 
                percent of such level.
                  (B) Reduction of deductible.--A reduction in 
                the annual deductible applicable under section 
                1860D-2(b)(1) to $50.
                  (C) Continuation of coverage above the 
                initial coverage limit.--[The continuation] For 
                a year preceding 2022, the continuation of 
                coverage from the initial coverage limit (under 
                paragraph (3) of section 1860D-2(b)) for 
                expenditures incurred through the total amount 
                of expenditures at which benefits are available 
                under paragraph (4) of such section, subject to 
                the reduced coinsurance described in 
                subparagraph (D).
                  (D) Reduction in cost-sharing below out-of-
                pocket threshold.--The substitution for the 
                beneficiary coinsurance described in section 
                1860D-2(b)(2) (for all amounts above the 
                deductible under subparagraph (B) through the 
                total amount of expenditures at which benefits 
                are available under section 1860D-2(b)(4)) of 
                coinsurance of ``15 percent'' instead of 
                coinsurance of ``25 percent'' in section 1860D-
                2(b)(2).
                  (E) Reduction of cost-sharing above annual 
                out-of-pocket threshold.--Subject to subsection 
                (c) for a year preceding 2022,, the 
                substitution for the cost-sharing imposed under 
                section 1860D-2(b)(4)(A) of a copayment or 
                coinsurance not to exceed the copayment or 
                coinsurance amount specified under section 
                [1860D-2(b)(4)(A)(i)(I)] 1860D-
                2(b)(4)(A)(i)(I)(aa) for the drug and year 
                involved.
          (3) Determination of eligibility.--
                  (A) Subsidy eligible individual defined.--For 
                purposes of this part, subject to subparagraph 
                (F), the term ``subsidy eligible individual'' 
                means a part D eligible individual who--
                          (i) is enrolled in a prescription 
                        drug plan or MA-PD plan;
                          (ii) has income below 150 percent of 
                        the poverty line applicable to a family 
                        of the size involved; and
                          (iii) meets the resources requirement 
                        described in subparagraph (D) or (E).
                  (B) Determinations.--
                          (i) In general.--The determination of 
                        whether a part D eligible individual 
                        residing in a State is a subsidy 
                        eligible individual and whether the 
                        individual is described in paragraph 
                        (1) shall be determined under the State 
                        plan under title XIX for the State 
                        under section 1935(a) or by the 
                        Commissioner of Social Security. There 
                        are authorized to be appropriated to 
                        the Social Security Administration such 
                        sums as may be necessary for the 
                        determination of eligibility under this 
                        subparagraph.
                          (ii) Effective period.--
                        Determinations under this subparagraph 
                        shall be effective beginning with the 
                        month in which the individual applies 
                        for a determination that the individual 
                        is a subsidy eligible individual and 
                        shall remain in effect for a period 
                        specified by the Secretary, but not to 
                        exceed 1 year.
                          (iii) Redeterminations and appeals 
                        through medicaid.--Redeterminations and 
                        appeals, with respect to eligibility 
                        determinations under clause (i) made 
                        under a State plan under title XIX, 
                        shall be made in accordance with the 
                        frequency of, and manner in which, 
                        redeterminations and appeals of 
                        eligibility are made under such plan 
                        for purposes of medical assistance 
                        under such title.
                          (iv) Redeterminations and appeals 
                        through commissioner.--With respect to 
                        eligibility determinations under clause 
                        (i) made by the Commissioner of Social 
                        Security--
                                  (I) redeterminations shall be 
                                made at such time or times as 
                                may be provided by the 
                                Commissioner;
                                  (II) the Commissioner shall 
                                establish procedures for 
                                appeals of such determinations 
                                that are similar to the 
                                procedures described in the 
                                third sentence of section 
                                1631(c)(1)(A); and
                                  (III) judicial review of the 
                                final decision of the 
                                Commissioner made after a 
                                hearing shall be available to 
                                the same extent, and with the 
                                same limitations, as provided 
                                in subsections (g) and (h) of 
                                section 205.
                          (v) Treatment of medicaid 
                        beneficiaries.--Subject to subparagraph 
                        (F), the Secretary--
                                  (I) shall provide that part D 
                                eligible individuals who are 
                                full-benefit dual eligible 
                                individuals (as defined in 
                                section 1935(c)(6)) or who are 
                                recipients of supplemental 
                                security income benefits under 
                                title XVI shall be treated as 
                                subsidy eligible individuals 
                                described in paragraph (1); and
                                  (II) may provide that part D 
                                eligible individuals not 
                                described in subclause (I) who 
                                are determined for purposes of 
                                the State plan under title XIX 
                                to be eligible for medical 
                                assistance under clause (i), 
                                (iii), or (iv) of section 
                                1902(a)(10)(E) are treated as 
                                being determined to be subsidy 
                                eligible individuals described 
                                in paragraph (1).
                        Insofar as the Secretary determines 
                        that the eligibility requirements under 
                        the State plan for medical assistance 
                        referred to in subclause (II) are 
                        substantially the same as the 
                        requirements for being treated as a 
                        subsidy eligible individual described 
                        in paragraph (1), the Secretary shall 
                        provide for the treatment described in 
                        such subclause.
                          (vi) Special rule for widows and 
                        widowers.--Notwithstanding the 
                        preceding provisions of this 
                        subparagraph, in the case of an 
                        individual whose spouse dies during the 
                        effective period for a determination or 
                        redetermination that has been made 
                        under this subparagraph, such effective 
                        period shall be extended through the 
                        date that is 1 year after the date on 
                        which the determination or 
                        redetermination would (but for the 
                        application of this clause) otherwise 
                        cease to be effective.
                  (C) Income determinations.--For purposes of 
                applying this section--
                          (i) in the case of a part D eligible 
                        individual who is not treated as a 
                        subsidy eligible individual under 
                        subparagraph (B)(v), income shall be 
                        determined in the manner described in 
                        section 1905(p)(1)(B), without regard 
                        to the application of section 
                        1902(r)(2) and except that support and 
                        maintenance furnished in kind shall not 
                        be counted as income; and
                          (ii) the term ``poverty line'' has 
                        the meaning given such term in section 
                        673(2) of the Community Services Block 
                        Grant Act (42 U.S.C. 9902(2)), 
                        including any revision required by such 
                        section.
                Nothing in clause (i) shall be construed to 
                affect the application of section 1902(r)(2) 
                for the determination of eligibility for 
                medical assistance under title XIX.
                  (D) Resource standard applied to full low-
                income subsidy to be based on three times ssi 
                resource standard.--The resources requirement 
                of this subparagraph is that an individual's 
                resources (as determined under section 1613 for 
                purposes of the supplemental security income 
                program subject to the life insurance policy 
                exclusion provided under subparagraph (G)) do 
                not exceed--
                          (i) for 2006 three times the maximum 
                        amount of resources that an individual 
                        may have and obtain benefits under that 
                        program; and
                          (ii) for a subsequent year the 
                        resource limitation established under 
                        this clause for the previous year 
                        increased by the annual percentage 
                        increase in the consumer price index 
                        (all items; U.S. city average) as of 
                        September of such previous year.
                Any resource limitation established under 
                clause (ii) that is not a multiple of $10 shall 
                be rounded to the nearest multiple of $10.
                  (E) Alternative resource standard.--
                          (i) In general.--The resources 
                        requirement of this subparagraph is 
                        that an individual's resources (as 
                        determined under section 1613 for 
                        purposes of the supplemental security 
                        income program subject to the life 
                        insurance policy exclusion provided 
                        under subparagraph (G)) do not exceed--
                                  (I) for 2006, $10,000 (or 
                                $20,000 in the case of the 
                                combined value of the 
                                individual's assets or 
                                resources and the assets or 
                                resources of the individual's 
                                spouse); and
                                  (II) for a subsequent year 
                                the dollar amounts specified in 
                                this subclause (or subclause 
                                (I)) for the previous year 
                                increased by the annual 
                                percentage increase in the 
                                consumer price index (all 
                                items; U.S. city average) as of 
                                September of such previous 
                                year.
                        Any dollar amount established under 
                        subclause (II) that is not a multiple 
                        of $10 shall be rounded to the nearest 
                        multiple of $10.
                          (ii) Use of simplified application 
                        form and process.--The Secretary, 
                        jointly with the Commissioner of Social 
                        Security, shall--
                                  (I) develop a model, 
                                simplified application form and 
                                process consistent with clause 
                                (iii) for the determination and 
                                verification of a part D 
                                eligible individual's assets or 
                                resources under this 
                                subparagraph; and
                                  (II) provide such form to 
                                States.
                          (iii) Documentation and safeguards.--
                        Under such process--
                                  (I) the application form 
                                shall consist of an attestation 
                                under penalty of perjury 
                                regarding the level of assets 
                                or resources (or combined 
                                assets and resources in the 
                                case of a married part D 
                                eligible individual) and 
                                valuations of general classes 
                                of assets or resources;
                                  (II) such form shall be 
                                accompanied by copies of recent 
                                statements (if any) from 
                                financial institutions in 
                                support of the application; and
                                  (III) matters attested to in 
                                the application shall be 
                                subject to appropriate methods 
                                of verification.
                          (iv) Methodology flexibility.--The 
                        Secretary may permit a State in making 
                        eligibility determinations for premium 
                        and cost-sharing subsidies under this 
                        section to use the same asset or 
                        resource methodologies that are used 
                        with respect to eligibility for medical 
                        assistance for medicare cost-sharing 
                        described in section 1905(p) so long as 
                        the Secretary determines that the use 
                        of such methodologies will not result 
                        in any significant differences in the 
                        number of individuals determined to be 
                        subsidy eligible individuals.
                  (F) Treatment of territorial residents.--In 
                the case of a part D eligible individual who is 
                not a resident of the 50 States or the District 
                of Columbia, the individual is not eligible to 
                be a subsidy eligible individual under this 
                section but may be eligible for financial 
                assistance with prescription drug expenses 
                under section 1935(e).
                  (G) Life insurance policy exclusion.--In 
                determining the resources of an individual (and 
                the eligible spouse of the individual, if any) 
                under section 1613 for purposes of 
                subparagraphs (D) and (E) no part of the value 
                of any life insurance policy shall be taken 
                into account.
          (4) Indexing dollar amounts.--
                  (A) Copayment for lowest income dual eligible 
                individuals.--The dollar amounts applied under 
                paragraph (1)(D)(ii)--
                          (i) for 2007 shall be the dollar 
                        amounts specified in such paragraph 
                        increased by the annual percentage 
                        increase in the consumer price index 
                        (all items; U.S. city average) as of 
                        September of such previous year; or
                          (ii) for a subsequent year shall be 
                        the dollar amounts specified in this 
                        clause (or clause (i)) for the previous 
                        year increased by the annual percentage 
                        increase in the consumer price index 
                        (all items; U.S. city average) as of 
                        September of such previous year.
                Any amount established under clause (i) or 
                (ii), that is based on an increase of $1 or $3, 
                that is not a multiple of 5 cents or 10 cents, 
                respectively, shall be rounded to the nearest 
                multiple of 5 cents or 10 cents, respectively.
                  (B) Reduced deductible.--The dollar amount 
                applied under paragraph (2)(B)--
                          (i) for 2007 shall be the dollar 
                        amount specified in such paragraph 
                        increased by the annual percentage 
                        increase described in section 1860D-
                        2(b)(6) for 2007; or
                          (ii) for a subsequent year shall be 
                        the dollar amount specified in this 
                        clause (or clause (i)) for the previous 
                        year increased by the annual percentage 
                        increase described in section 1860D-
                        2(b)(6) for the year involved.
                Any amount established under clause (i) or (ii) 
                that is not a multiple of $1 shall be rounded 
                to the nearest multiple of $1.
          (5) Waiver of de minimis premiums.--The Secretary 
        shall, under procedures established by the Secretary, 
        permit a prescription drug plan or an MA-PD plan to 
        waive the monthly beneficiary premium for a subsidy 
        eligible individual if the amount of such premium is de 
        minimis. If such premium is waived under the plan, the 
        Secretary shall not reassign subsidy eligible 
        individuals enrolled in the plan to other plans based 
        on the fact that the monthly beneficiary premium under 
        the plan was greater than the low-income benchmark 
        premium amount.
  (b) Premium Subsidy Amount.--
          (1) In general.--The premium subsidy amount described 
        in this subsection for a subsidy eligible individual 
        residing in a PDP region and enrolled in a prescription 
        drug plan or MA-PD plan is the low-income benchmark 
        premium amount (as defined in paragraph (2)) for the 
        PDP region in which the individual resides or, if 
        greater, the amount specified in paragraph (3).
          (2) Low-income benchmark premium amount defined.--
                  (A) In general.--For purposes of this 
                subsection, the term ``low-income benchmark 
                premium amount'' means, with respect to a PDP 
                region in which--
                          (i) all prescription drug plans are 
                        offered by the same PDP sponsor, the 
                        weighted average of the amounts 
                        described in subparagraph (B)(i) for 
                        such plans; or
                          (ii) there are prescription drug 
                        plans offered by more than one PDP 
                        sponsor, the weighted average of 
                        amounts described in subparagraph (B) 
                        for prescription drug plans and MA-PD 
                        plans described in section 
                        1851(a)(2)(A)(i) offered in such 
                        region.
                  (B) Premium amounts described.--The premium 
                amounts described in this subparagraph are, in 
                the case of--
                          (i) a prescription drug plan that is 
                        a basic prescription drug plan, the 
                        monthly beneficiary premium for such 
                        plan;
                          (ii) a prescription drug plan that 
                        provides alternative prescription drug 
                        coverage the actuarial value of which 
                        is greater than that of standard 
                        prescription drug coverage, the portion 
                        of the monthly beneficiary premium that 
                        is attributable to basic prescription 
                        drug coverage; and
                          (iii) an MA-PD plan, the portion of 
                        the MA monthly prescription drug 
                        beneficiary premium that is 
                        attributable to basic prescription drug 
                        benefits (described in section 
                        1852(a)(6)(B)(ii)) and determined 
                        before the application of the monthly 
                        rebate computed under section 
                        1854(b)(1)(C)(i) for that plan and year 
                        involved and, in the case of a 
                        qualifying plan, before the application 
                        of the increase under section 1853(o) 
                        for that plan and year involved.
                The premium amounts described in this 
                subparagraph do not include any amounts 
                attributable to late enrollment penalties under 
                section 1860D-13(b).
          (3) Access to 0 premium plan.--In no case shall the 
        premium subsidy amount under this subsection for a PDP 
        region be less than the lowest monthly beneficiary 
        premium for a prescription drug plan that offers basic 
        prescription drug coverage in the region.
  (c) Administration of Subsidy Program.--
          (1) In general.--The Secretary shall provide a 
        process whereby, in the case of a part D eligible 
        individual who is determined to be a subsidy eligible 
        individual and who is enrolled in a prescription drug 
        plan or is enrolled in an MA-PD plan--
                  (A) the Secretary provides for a notification 
                of the PDP sponsor or the MA organization 
                offering the plan involved that the individual 
                is eligible for a subsidy and the amount of the 
                subsidy under subsection (a);
                  (B) the sponsor or organization involved 
                reduces the premiums or cost-sharing otherwise 
                imposed by the amount of the applicable subsidy 
                and submits to the Secretary information on the 
                amount of such reduction;
                  (C) the Secretary periodically and on a 
                timely basis reimburses the sponsor or 
                organization for the amount of such reductions; 
                and
                  (D) the Secretary ensures the confidentiality 
                of individually identifiable information.
        In applying subparagraph (C), the Secretary shall 
        compute reductions based upon imposition under 
        subsections (a)(1)(D) and (a)(2)(E) of unreduced 
        copayment amounts applied under such subsections.
          (2) Use of capitated form of payment.--The 
        reimbursement under this section with respect to cost-
        sharing subsidies may be computed on a capitated basis, 
        taking into account the actuarial value of the 
        subsidies and with appropriate adjustments to reflect 
        differences in the risks actually involved.
  (d) Facilitation of Reassignments.--Beginning not later than 
January 1, 2011, the Secretary shall, in the case of a subsidy 
eligible individual who is enrolled in one prescription drug 
plan and is subsequently reassigned by the Secretary to a new 
prescription drug plan, provide the individual, within 30 days 
of such reassignment, with--
          (1) information on formulary differences between the 
        individual's former plan and the plan to which the 
        individual is reassigned with respect to the 
        individual's drug regimens; and
          (2) a description of the individual's right to 
        request a coverage determination, exception, or 
        reconsideration under section 1860D-4(g), bring an 
        appeal under section 1860D-4(h), or resolve a grievance 
        under section 1860D-4(f).
  (e) Relation to Medicaid Program.--For special provisions 
under the medicaid program relating to medicare prescription 
drug benefits, see section 1935.

                 medicare coverage gap discount program

  Sec. 1860D-14A. (a) Establishment.--[The Secretary] Subject 
to subsection (h), the Secretary shall establish a Medicare 
coverage gap discount program (in this section referred to as 
the ``program'') by not later than January 1, 2011. Under the 
program, the Secretary shall enter into agreements described in 
subsection (b) with manufacturers and provide for the 
performance of the duties described in subsection (c)(1). The 
Secretary shall establish a model agreement for use under the 
program by not later than 180 days after the date of the 
enactment of this section, in consultation with manufacturers, 
and allow for comment on such model agreement.
  (b) Terms of Agreement.--
          (1) In general.--
                  (A) Agreement.--An agreement under this 
                section shall require the manufacturer to 
                provide applicable beneficiaries access to 
                discounted prices for applicable drugs of the 
                manufacturer.
                  (B) Provision of discounted prices at the 
                point-of-sale.--Except as provided in 
                subsection (c)(1)(A)(iii), such discounted 
                prices shall be provided to the applicable 
                beneficiary at the pharmacy or by the mail 
                order service at the point-of-sale of an 
                applicable drug.
                  (C) Timing of agreement.--
                          (i) Special rule for 2011.--In order 
                        for an agreement with a manufacturer to 
                        be in effect under this section with 
                        respect to the period beginning on 
                        January 1, 2011, and ending on December 
                        31, 2011, the manufacturer shall enter 
                        into such agreement not later than not 
                        later than 30 days after the date of 
                        the establishment of a model agreement 
                        under subsection (a).
                          (ii) 2012 and subsequent years.--In 
                        order for an agreement with a 
                        manufacturer to be in effect under this 
                        section with respect to plan year 2012 
                        or a subsequent plan year, the 
                        manufacturer shall enter into such 
                        agreement (or such agreement shall be 
                        renewed under paragraph (4)(A)) not 
                        later than January 30 of the preceding 
                        year.
          (2) Provision of appropriate data.--Each manufacturer 
        with an agreement in effect under this section shall 
        collect and have available appropriate data, as 
        determined by the Secretary, to ensure that it can 
        demonstrate to the Secretary compliance with the 
        requirements under the program.
          (3) Compliance with requirements for administration 
        of program.--Each manufacturer with an agreement in 
        effect under this section shall comply with 
        requirements imposed by the Secretary or a third party 
        with a contract under subsection (d)(3), as applicable, 
        for purposes of administering the program, including 
        any determination under clause (i) of subsection 
        (c)(1)(A) or procedures established under such 
        subsection (c)(1)(A).
          (4) Length of agreement.--
                  (A) In general.--An agreement under this 
                section shall be effective for an initial 
                period of not less than 18 months and shall be 
                automatically renewed for a period of not less 
                than 1 year unless terminated under 
                subparagraph (B).
                  (B) Termination.--
                          (i) By the secretary.--The Secretary 
                        may provide for termination of an 
                        agreement under this section for a 
                        knowing and willful violation of the 
                        requirements of the agreement or other 
                        good cause shown. Such termination 
                        shall not be effective earlier than 30 
                        days after the date of notice to the 
                        manufacturer of such termination. The 
                        Secretary shall provide, upon request, 
                        a manufacturer with a hearing 
                        concerning such a termination, and such 
                        hearing shall take place prior to the 
                        effective date of the termination with 
                        sufficient time for such effective date 
                        to be repealed if the Secretary 
                        determines appropriate.
                          (ii) By a manufacturer.--A 
                        manufacturer may terminate an agreement 
                        under this section for any reason. Any 
                        such termination shall be effective, 
                        with respect to a plan year--
                                  (I) if the termination occurs 
                                before January 30 of a plan 
                                year, as of the day after the 
                                end of the plan year; and
                                  (II) if the termination 
                                occurs on or after January 30 
                                of a plan year, as of the day 
                                after the end of the succeeding 
                                plan year.
                          (iii) Effectiveness of termination.--
                        Any termination under this subparagraph 
                        shall not affect discounts for 
                        applicable drugs of the manufacturer 
                        that are due under the agreement before 
                        the effective date of its termination.
                          (iv) Notice to third party.--The 
                        Secretary shall provide notice of such 
                        termination to a third party with a 
                        contract under subsection (d)(3) within 
                        not less than 30 days before the 
                        effective date of such termination.
  (c) Duties Described and Special Rule for Supplemental 
Benefits.--
          (1) Duties described.--The duties described in this 
        subsection are the following:
                  (A) Administration of program.--Administering 
                the program, including--
                          (i) the determination of the amount 
                        of the discounted price of an 
                        applicable drug of a manufacturer;
                          (ii) except as provided in clause 
                        (iii), the establishment of procedures 
                        under which discounted prices are 
                        provided to applicable beneficiaries at 
                        pharmacies or by mail order service at 
                        the point-of-sale of an applicable 
                        drug;
                          (iii) in the case where, during the 
                        period beginning on January 1, 2011, 
                        and ending on December 31, 2011, it is 
                        not practicable to provide such 
                        discounted prices at the point-of-sale 
                        (as described in clause (ii)), the 
                        establishment of procedures to provide 
                        such discounted prices as soon as 
                        practicable after the point-of-sale;
                          (iv) the establishment of procedures 
                        to ensure that, not later than the 
                        applicable number of calendar days 
                        after the dispensing of an applicable 
                        drug by a pharmacy or mail order 
                        service, the pharmacy or mail order 
                        service is reimbursed for an amount 
                        equal to the difference between--
                                  (I) the negotiated price of 
                                the applicable drug; and
                                  (II) the discounted price of 
                                the applicable drug;
                          (v) the establishment of procedures 
                        to ensure that the discounted price for 
                        an applicable drug under this section 
                        is applied before any coverage or 
                        financial assistance under other health 
                        benefit plans or programs that provide 
                        coverage or financial assistance for 
                        the purchase or provision of 
                        prescription drug coverage on behalf of 
                        applicable beneficiaries as the 
                        Secretary may specify;
                          (vi) the establishment of procedures 
                        to implement the special rule for 
                        supplemental benefits under paragraph 
                        (2); and
                          (vii) providing a reasonable dispute 
                        resolution mechanism to resolve 
                        disagreements between manufacturers, 
                        applicable beneficiaries, and the third 
                        party with a contract under subsection 
                        (d)(3).
                  (B) Monitoring compliance.--
                          (i) In general.--The Secretary shall 
                        monitor compliance by a manufacturer 
                        with the terms of an agreement under 
                        this section.
                          (ii) Notification.--If a third party 
                        with a contract under subsection (d)(3) 
                        determines that the manufacturer is not 
                        in compliance with such agreement, the 
                        third party shall notify the Secretary 
                        of such noncompliance for appropriate 
                        enforcement under subsection (e).
                  (C) Collection of data from prescription drug 
                plans and ma-pd plans.--The Secretary may 
                collect appropriate data from prescription drug 
                plans and MA-PD plans in a timeframe that 
                allows for discounted prices to be provided for 
                applicable drugs under this section.
          (2) Special rule for supplemental benefits.--For plan 
        year 2011 and each subsequent plan year, in the case 
        where an applicable beneficiary has supplemental 
        benefits with respect to applicable drugs under the 
        prescription drug plan or MA-PD plan that the 
        applicable beneficiary is enrolled in, the applicable 
        beneficiary shall not be provided a discounted price 
        for an applicable drug under this section until after 
        such supplemental benefits have been applied with 
        respect to the applicable drug.
  (d) Administration.--
          (1) In general.--Subject to paragraph (2), the 
        Secretary shall provide for the implementation of this 
        section, including the performance of the duties 
        described in subsection (c)(1).
          (2) Limitation.--
                  (A) In general.--Subject to subparagraph (B), 
                in providing for such implementation, the 
                Secretary shall not receive or distribute any 
                funds of a manufacturer under the program.
                  (B) Exception.--The limitation under 
                subparagraph (A) shall not apply to the 
                Secretary with respect to drugs dispensed 
                during the period beginning on January 1, 2011, 
                and ending on December 31, 2011, but only if 
                the Secretary determines that the exception to 
                such limitation under this subparagraph is 
                necessary in order for the Secretary to begin 
                implementation of this section and provide 
                applicable beneficiaries timely access to 
                discounted prices during such period.
          (3) Contract with third parties.--The Secretary shall 
        enter into a contract with 1 or more third parties to 
        administer the requirements established by the 
        Secretary in order to carry out this section. At a 
        minimum, the contract with a third party under the 
        preceding sentence shall require that the third party--
                  (A) receive and transmit information between 
                the Secretary, manufacturers, and other 
                individuals or entities the Secretary 
                determines appropriate;
                  (B) receive, distribute, or facilitate the 
                distribution of funds of manufacturers to 
                appropriate individuals or entities in order to 
                meet the obligations of manufacturers under 
                agreements under this section;
                  (C) provide adequate and timely information 
                to manufacturers, consistent with the agreement 
                with the manufacturer under this section, as 
                necessary for the manufacturer to fulfill its 
                obligations under this section; and
                  (D) permit manufacturers to conduct periodic 
                audits, directly or through contracts, of the 
                data and information used by the third party to 
                determine discounts for applicable drugs of the 
                manufacturer under the program.
          (4) Performance requirements.--The Secretary shall 
        establish performance requirements for a third party 
        with a contract under paragraph (3) and safeguards to 
        protect the independence and integrity of the 
        activities carried out by the third party under the 
        program under this section.
          (5) Implementation.--The Secretary may implement the 
        program under this section by program instruction or 
        otherwise.
          (6) Administration.--Chapter 35 of title 44, United 
        States Code, shall not apply to the program under this 
        section.
  (e) Enforcement.--
          (1) Audits.--Each manufacturer with an agreement in 
        effect under this section shall be subject to periodic 
        audit by the Secretary.
          (2) Civil money penalty.--
                  (A) In general.--The Secretary shall impose a 
                civil money penalty on a manufacturer that 
                fails to provide applicable beneficiaries 
                discounts for applicable drugs of the 
                manufacturer in accordance with such agreement 
                for each such failure in an amount the 
                Secretary determines is commensurate with the 
                sum of--
                          (i) the amount that the manufacturer 
                        would have paid with respect to such 
                        discounts under the agreement, which 
                        will then be used to pay the discounts 
                        which the manufacturer had failed to 
                        provide; and
                          (ii) 25 percent of such amount.
                  (B) Application.--The provisions of section 
                1128A (other than subsections (a) and (b)) 
                shall apply to a civil money penalty under this 
                paragraph in the same manner as such provisions 
                apply to a penalty or proceeding under section 
                1128A(a).
  (f) Clarification Regarding Availability of Other Covered 
Part D Drugs.--Nothing in this section shall prevent an 
applicable beneficiary from purchasing a covered part D drug 
that is not an applicable drug (including a generic drug or a 
drug that is not on the formulary of the prescription drug plan 
or MA-PD plan that the applicable beneficiary is enrolled in).
  (g) Definitions.--In this section:
          (1) Applicable beneficiary.--The term ``applicable 
        beneficiary'' means an individual who, on the date of 
        dispensing a covered part D drug--
                  (A) is enrolled in a prescription drug plan 
                or an MA-PD plan;
                  (B) is not enrolled in a qualified retiree 
                prescription drug plan;
                  (C) is not entitled to an income-related 
                subsidy under section 1860D-14(a); and
                  (D) who--
                          (i) has reached or exceeded the 
                        initial coverage limit under section 
                        1860D-2(b)(3) during the year; and
                          (ii) has not incurred costs for 
                        covered part D drugs in the year equal 
                        to the annual out-of-pocket threshold 
                        specified in section 1860D-2(b)(4)(B).
          (2) Applicable drug.--The term ``applicable drug'' 
        means, with respect to an applicable beneficiary, a 
        covered part D drug--
                  (A) approved under a new drug application 
                under section 505(b) of the Federal Food, Drug, 
                and Cosmetic Act or, in the case of a biologic 
                product, licensed under section 351 of the 
                Public Health Service Act (other than, with 
                respect to a plan year before 2019, a product 
                licensed under subsection (k) of such section 
                351); and
                  (B)(i) if the PDP sponsor of the prescription 
                drug plan or the MA organization offering the 
                MA-PD plan uses a formulary, which is on the 
                formulary of the prescription drug plan or MA-
                PD plan that the applicable beneficiary is 
                enrolled in;
                  (ii) if the PDP sponsor of the prescription 
                drug plan or the MA organization offering the 
                MA-PD plan does not use a formulary, for which 
                benefits are available under the prescription 
                drug plan or MA-PD plan that the applicable 
                beneficiary is enrolled in; or
                  (iii) is provided through an exception or 
                appeal.
          (3) Applicable number of calendar days.--The term 
        ``applicable number of calendar days'' means--
                  (A) with respect to claims for reimbursement 
                submitted electronically, 14 days; and
                  (B) with respect to claims for reimbursement 
                submitted otherwise, 30 days.
          (4) Discounted price.--
                  (A) In general.--The term ``discounted 
                price'' means 50 percent (or, with respect to a 
                plan year after plan year 2018, 30 percent) of 
                the negotiated price of the applicable drug of 
                a manufacturer.
                  (B) Clarification.--Nothing in this section 
                shall be construed as affecting the 
                responsibility of an applicable beneficiary for 
                payment of a dispensing fee for an applicable 
                drug.
                  (C) Special case for certain claims.--In the 
                case where the entire amount of the negotiated 
                price of an individual claim for an applicable 
                drug with respect to an applicable beneficiary 
                does not fall at or above the initial coverage 
                limit under section 1860D-2(b)(3) and below the 
                annual out-of-pocket threshold specified in 
                section 1860D-2(b)(4)(B) for the year, the 
                manufacturer of the applicable drug shall 
                provide the discounted price under this section 
                on only the portion of the negotiated price of 
                the applicable drug that falls at or above such 
                initial coverage limit and below such annual 
                out-of-pocket threshold.
          (5) Manufacturer.--The term ``manufacturer'' means 
        any entity which is engaged in the production, 
        preparation, propagation, compounding, conversion, or 
        processing of prescription drug products, either 
        directly or indirectly by extraction from substances of 
        natural origin, or independently by means of chemical 
        synthesis, or by a combination of extraction and 
        chemical synthesis. Such term does not include a 
        wholesale distributor of drugs or a retail pharmacy 
        licensed under State law.
          (6) Negotiated price.--The term ``negotiated price'' 
        has the meaning given such term in section 423.100 of 
        title 42, Code of Federal Regulations (as in effect on 
        the date of enactment of this section), except that 
        such negotiated price shall not include any dispensing 
        fee for the applicable drug.
          (7) Qualified retiree prescription drug plan.--The 
        term ``qualified retiree prescription drug plan'' has 
        the meaning given such term in section 1860D-22(a)(2).
  (h) Sunset of Program.--
          (1) In general.--The program shall not apply with 
        respect to applicable drugs dispensed on or after 
        January 1, 2022, and, subject to paragraph (2), 
        agreements under this section shall be terminated as of 
        such date.
          (2) Continued application for applicable drugs 
        dispensed prior to sunset.--The provisions of this 
        section (including all responsibilities and duties) 
        shall continue to apply after January 1, 2022, with 
        respect to applicable drugs dispensed prior to such 
        date.

SEC. 1860D-14B. MANUFACTURER REBATE FOR CERTAIN DRUGS WITH PRICES 
                    INCREASING FASTER THAN INFLATION.

  (a) In General.--Subject to the provisions of this section, 
in order for coverage to be available under this part for a 
part D rebatable drug of a manufacturer dispensed during an 
applicable year, the manufacturer must have entered into and 
have in effect an agreement described in subsection (b). For 
purposes of this section the term ``applicable year'' means a 
year beginning with 2022.
  (b) Agreements.--
          (1) Terms of agreement.--An agreement described in 
        this subsection, with respect to a manufacturer of a 
        part D rebatable drug, is an agreement under which the 
        following applies:
                  (A) Secretarial provision of information.--
                Not later than 9 months after the end of each 
                applicable year with respect to which the 
                agreement is in effect, the Secretary, for the 
                part D rebatable drug of the manufacturer, 
                reports to the manufacturer the following for 
                such year:
                          (i) Information on the total units 
                        (as defined in subsection (g)(2)) 
                        dispensed for each dosage form and 
                        strength with respect to such part D 
                        rebatable drug and year.
                          (ii) Information on the amount (if 
                        any) of the excess average manufacturer 
                        price increase described in subsection 
                        (c)(1)(B) for each dosage form and 
                        strength with respect to such drug and 
                        year.
                          (iii) The rebate amount specified 
                        under subsection (c) for each dosage 
                        form and strength with respect to such 
                        drug and year.
                  (B) Manufacturer requirements.--For each 
                applicable year with respect to which the 
                agreement is in effect, the manufacturer of the 
                part D rebatable drug, for each dosage form and 
                strength with respect to such drug, not later 
                than 30 days after the date of receipt from the 
                Secretary of the information described in 
                subparagraph (A) for such year, provides to the 
                Secretary a rebate that is equal to the amount 
                specified in subsection (c) for such dosage 
                form and strength with respect to such drug for 
                such year.
          (2) Length of agreement.--
                  (A) In general.--An agreement under this 
                section, with respect to a part D rebatable 
                drug, shall be effective for an initial period 
                of not less than one year and shall be 
                automatically renewed for a period of not less 
                than one year unless terminated under 
                subparagraph (B).
                  (B) Termination.--
                          (i) By Secretary.--The Secretary may 
                        provide for termination of an agreement 
                        under this section for violation of the 
                        requirements of the agreement or other 
                        good cause shown. Such termination 
                        shall not be effective earlier than 60 
                        days after the date of notice of such 
                        termination. The Secretary shall 
                        provide, upon request, a manufacturer 
                        with a hearing concerning such a 
                        termination, but such hearing shall not 
                        delay the effective date of the 
                        termination.
                          (ii) By a manufacturer.--A 
                        manufacturer may terminate an agreement 
                        under this section for any reason. Any 
                        such termination shall not be effective 
                        until the year beginning at least 60 
                        days after the date the manufacturer 
                        provides notice to the Secretary.
                  (C) Effectiveness of termination.--Any 
                termination under this paragraph shall not 
                affect rebates due under the agreement under 
                this section before the effective date of its 
                termination.
                  (D) Delay before reentry.--In the case of any 
                agreement under this section with a 
                manufacturer which is terminated in a plan 
                year, another such agreement with the 
                manufacturer (or a successor manufacturer) may 
                not be entered into before the subsequent plan 
                year, unless the Secretary finds good cause for 
                an earlier reinstatement of such an agreement.
          (3) Information.--For purposes of carrying out this 
        section, the Secretary shall use information submitted 
        by manufacturers under section 1927(b)(3).
  (c) Rebate Amount.--
          (1) In general.--For purposes of this section, the 
        amount specified in this subsection for a dosage form 
        and strength with respect to a part D rebatable drug 
        and applicable year is, subject to subparagraphs (B) 
        and (C) of paragraph (3), the amount equal to the 
        product of--
                  (A) the total average number of units 
                weighted by, and dispensed for, such dosage 
                form and strength with respect to such part D 
                rebatable drug and year; and
                  (B) the amount (if any) by which--
                          (i) the average manufacturer price 
                        (as defined in subsection (g)) paid for 
                        such dosage form and strength with 
                        respect to such part D rebatable drug 
                        during the year; exceeds
                          (ii) the inflation-adjusted payment 
                        amount determined under paragraph (2) 
                        for such dosage form and strength with 
                        respect to such part D rebatable drug 
                        during the year.
          (2) Determination of inflation-adjusted payment 
        amount.--The inflation-adjusted payment amount 
        determined under this paragraph for a dosage form and 
        strength with respect to a part D rebatable drug for an 
        applicable year, subject to subparagraphs (A) and (D) 
        of paragraph (3), is--
                  (A) the average manufacturer price paid for 
                such dosage form and strength with respect to 
                such drug in the payment amount benchmark year 
                (as defined in subsection (g)(3)); increased by
                  (B) the percentage by which the rebate period 
                CPI-U (as defined in subsection (g)(5)) for the 
                applicable year exceeds the benchmark period 
                CPI-U (as defined in subsection (g)(4)).
          (3) Special treatment of certain drugs and 
        exemption.--
                  (A) Subsequently approved drugs.--In the case 
                of a part D rebatable drug first approved by 
                the Food and Drug Administration after January 
                1, 2016, subparagraph (A) of paragraph (2) 
                shall be applied as if the term ``payment 
                amount benchmark year'' were defined under 
                subsection (g)(3) as the first year beginning 
                after the day on which the drug was first 
                marketed and subparagraph (B) of paragraph (2) 
                shall be applied as if the term ``benchmark 
                period CPI-U'' were defined under subsection 
                (g)(4) as if the reference to ``January 2016'' 
                under such subsection were a reference to 
                ``January of the first year beginning after the 
                date on which the drug was first marketed by 
                any manufacturer''.
                  (B) Exemption for shortages.--The Secretary 
                may reduce or waive the rebate under paragraph 
                (1) with respect to a part D rebatable drug in 
                the case of a shortage of such drug or other 
                exigent circumstances, as determined by the 
                Secretary.
                  (C) Treatment of new formulations.--
                          (i) In general.--In the case of a 
                        part D rebatable drug that is a line 
                        extension of a single source drug or an 
                        innovator multiple source drug that is 
                        an oral solid dosage form, the 
                        Secretary shall establish a formula for 
                        determining the amount specified in 
                        this subsection with respect to such 
                        part D rebatable drug and an applicable 
                        year with consideration of the single 
                        source drug or an innovator multiple 
                        source drug.
                          (ii) Line extension defined.--In this 
                        subparagraph, the term ``line 
                        extension'' means, with respect to a 
                        part D rebatable drug, a new 
                        formulation of the drug (as determined 
                        by the Secretary), such as an extended 
                        release formulation, but does not 
                        include an abuse-deterrent formulation 
                        of the drug (as determined by the 
                        Secretary), regardless of whether such 
                        abuse-deterrent formulation is an 
                        extended release formulation.
                  (D) Selected drugs.--In the case of a part D 
                rebatable drug that is a selected drug (as 
                defined in section 1192(c)), for each 
                applicable year beginning after the price 
                applicability period (as defined in section 
                1191(b)(2) with respect to such drug, 
                subparagraph (A) of paragraph (2) shall be 
                applied as if the term ``payment amount 
                benchmark year'' were defined under subsection 
                (g)(3) as the last year beginning during such 
                price applicability period with respect to such 
                selected drug and subparagraph (B) of paragraph 
                (2) shall be applied as if the term ``benchmark 
                period CPI-U'' were defined under subsection 
                (g)(4) as if the reference to ``January 2016'' 
                under such subsection were a reference to 
                January of the last year beginning during such 
                price applicability period with respect to such 
                drug.
  (d) Rebate Deposits.--Amounts paid as rebates under 
subsection (c) shall be deposited into the Medicare 
Prescription Drug Account in the Federal Supplementary Medical 
Insurance Trust Fund established under section 1841.
  (e) Civil money penalty.--In the case of a manufacturer of a 
part D rebatable drug with an agreement in effect under this 
section who has failed to comply with the terms of the 
agreement under subsection (b)(1)(B) with respect to such drug 
for an applicable year, the Secretary may impose a civil money 
penalty on such manufacturer in an amount equal to 125 percent 
of the amount specified in subsection (c) for such drug for 
such year. The provisions of section 1128A (other than 
subsections (a) (with respect to amounts of penalties or 
additional assessments) and (b)) shall apply to a civil money 
penalty under this subsection in the same manner as such 
provisions apply to a penalty or proceeding under section 
1128A(a).
  (f) Judicial Review.--There shall be no judicial review of 
the following:
          (1) The determination of units under this section.
          (2) The determination of whether a drug is a part D 
        rebatable drug under this section.
          (3) The calculation of the rebate amount under this 
        section.
  (g) Definitions.--In this section:
          (1) Part d rebatable drug defined.--
                  (A) In general.--The term ``part D rebatable 
                drug'' means a drug or biological that would 
                (without application of this section) be a 
                covered part D drug, except such term shall, 
                with respect to an applicable year, not include 
                such a drug or biological if the average total 
                cost under a prescription drug plan under this 
                part or MA-PD plan under part C for such year 
                per individual who uses such a drug or 
                biological, as determined by the Secretary, are 
                less than, subject to subparagraph (B), $100, 
                as determined by the Secretary using the most 
                recent data available or, if data is not 
                available, as estimated by the Secretary.
                  (B) Increase.--The dollar amount applied 
                under subparagraph (A)--
                          (i) for 2023, shall be the dollar 
                        amount specified under such 
                        subparagraph for 2022, increased by the 
                        percentage increase in the consumer 
                        price index for all urban consumers 
                        (United States city average) as of 
                        January of 2022; and
                          (ii) for a subsequent year, shall be 
                        the dollar amount specified in this 
                        subparagraph (or subparagraph (A)) for 
                        the previous year, increased by the 
                        percentage increase in the consumer 
                        price index for all urban consumers 
                        (United States city average) as of 
                        January of the previous year.
                Any dollar amount specified under this 
                subparagraph that is not a multiple of $10 
                shall be rounded to the nearest multiple of 
                $10.
          (2) Unit defined.--The term ``unit'' means, with 
        respect to a part D rebatable drug, the lowest 
        identifiable quantity (such as a capsule or tablet, 
        milligram of molecules, or grams) of the part D 
        rebatable drug that is dispensed to individuals 
        enrolled under a prescription drug plan under this part 
        or an MA-PD plan under part C.
          (3) Payment amount benchmark year.--The term 
        ``payment amount benchmark year'' means the year 
        beginning January 1, 2016.
          (4) Benchmark period cpi-u.--The term ``benchmark 
        period CPI-U'' means the consumer price index for all 
        urban consumers (United States city average) for 
        January 2016.
          (5) Rebate period CPI-U The term ``rebate period CPI-
        U'' means, with respect to an applicable year, the 
        consumer price index for all urban consumers (United 
        States city average) for January of such year.
          (6) Average manufacturer price.--The term ``average 
        manufacturer price'' has the meaning, with respect to a 
        part D rebatable drug of a manufacturer for an 
        applicable year, given such term in section 1927(k)(1), 
        with respect to a covered outpatient drug of a 
        manufacturer for a rebate period under section 1927. 
        For purposes of applying the previous sentence, with 
        respect to a part D rebatable drug of a manufacturer 
        and an applicable year, the Secretary shall use the 
        information with respect to the average manufacturer 
        price for such drug reported by the manufacturer under 
        section 1927(b)(3) with respect to each of the quarters 
        in the applicable year and calculate an annual average 
        manufacturer price for such applicable year as the 
        average of such average manufacturer prices for each 
        such quarter, weighted by units of such drug sold or 
        dispensed with respect to such applicable year.

SEC. 1860D-14C. MANUFACTURER DISCOUNT PROGRAM.

  (a) Establishment.--The Secretary shall establish a 
manufacturer discount program (in this section referred to as 
the ``program''). Under the program, the Secretary shall enter 
into agreements described in subsection (b) with manufacturers 
and provide for the performance of the duties described in 
subsection (c). The Secretary shall establish a model agreement 
for use under the program by not later than January 1, 2021, in 
consultation with manufacturers, and allow for comment on such 
model agreement.
  (b) Terms of Agreement.--
          (1) In general.--
                  (A) Agreement.--An agreement under this 
                section shall require the manufacturer to 
                provide applicable beneficiaries access to 
                discounted prices for applicable drugs of the 
                manufacturer that are dispensed on or after 
                January 1, 2022.
                  (B) Provision of discounted prices at the 
                point-of-sale.--The discounted prices described 
                in subparagraph (A) shall be provided to the 
                applicable beneficiary at the pharmacy or by 
                the mail order service at the point-of-sale of 
                an applicable drug.
                  (C) Timing of agreement.--
                          (i) Special rule for 2022.--In order 
                        for an agreement with a manufacturer to 
                        be in effect under this section with 
                        respect to the period beginning on 
                        January 1, 2022, and ending on December 
                        31, 2022, the manufacturer shall enter 
                        into such agreement not later than 30 
                        days after the date of the 
                        establishment of a model agreement 
                        under subsection (a).
                          (ii) 2023 and subsequent years.--In 
                        order for an agreement with a 
                        manufacturer to be in effect under this 
                        section with respect to plan year 2023 
                        or a subsequent plan year, the 
                        manufacturer shall enter into such 
                        agreement (or such agreement shall be 
                        renewed under paragraph (4)(A)) not 
                        later than January 30 of the preceding 
                        year.
          (2) Provision of appropriate data.--Each manufacturer 
        with an agreement in effect under this section shall 
        collect and have available appropriate data, as 
        determined by the Secretary, to ensure that it can 
        demonstrate to the Secretary compliance with the 
        requirements under the program.
          (3) Compliance with requirements for administration 
        of program.--Each manufacturer with an agreement in 
        effect under this section shall comply with 
        requirements imposed by the Secretary or a third party 
        with a contract under subsection (d)(3), as applicable, 
        for purposes of administering the program, including 
        any determination under subparagraph (A) of subsection 
        (c)(1) or procedures established under such subsection 
        (c)(1).
          (4) Length of agreement.--
                  (A) In general.--An agreement under this 
                section shall be effective for an initial 
                period of not less than 12 months and shall be 
                automatically renewed for a period of not less 
                than 1 year unless terminated under 
                subparagraph (B).
                  (B) Termination.--
                          (i) By the secretary.--The Secretary 
                        may provide for termination of an 
                        agreement under this section for a 
                        knowing and willful violation of the 
                        requirements of the agreement or other 
                        good cause shown. Such termination 
                        shall not be effective earlier than 30 
                        days after the date of notice to the 
                        manufacturer of such termination. The 
                        Secretary shall provide, upon request, 
                        a manufacturer with a hearing 
                        concerning such a termination, and such 
                        hearing shall take place prior to the 
                        effective date of the termination with 
                        sufficient time for such effective date 
                        to be repealed if the Secretary 
                        determines appropriate.
                          (ii) By a manufacturer.--A 
                        manufacturer may terminate an agreement 
                        under this section for any reason. Any 
                        such termination shall be effective, 
                        with respect to a plan year--
                                  (I) if the termination occurs 
                                before January 30 of a plan 
                                year, as of the day after the 
                                end of the plan year; and
                                  (II) if the termination 
                                occurs on or after January 30 
                                of a plan year, as of the day 
                                after the end of the succeeding 
                                plan year.
                          (iii) Effectiveness of termination.--
                        Any termination under this subparagraph 
                        shall not affect discounts for 
                        applicable drugs of the manufacturer 
                        that are due under the agreement before 
                        the effective date of its termination.
                          (iv) Notice to third party.--The 
                        Secretary shall provide notice of such 
                        termination to a third party with a 
                        contract under subsection (d)(3) within 
                        not less than 30 days before the 
                        effective date of such termination.
  (c) Duties Described.--The duties described in this 
subsection are the following:
          (1) Administration of program.--Administering the 
        program, including--
                  (A) the determination of the amount of the 
                discounted price of an applicable drug of a 
                manufacturer;
                  (B) the establishment of procedures under 
                which discounted prices are provided to 
                applicable beneficiaries at pharmacies or by 
                mail order service at the point-of-sale of an 
                applicable drug;
                  (C) the establishment of procedures to ensure 
                that, not later than the applicable number of 
                calendar days after the dispensing of an 
                applicable drug by a pharmacy or mail order 
                service, the pharmacy or mail order service is 
                reimbursed for an amount equal to the 
                difference between--
                          (i) the negotiated price of the 
                        applicable drug; and
                          (ii) the discounted price of the 
                        applicable drug;
                  (D) the establishment of procedures to ensure 
                that the discounted price for an applicable 
                drug under this section is applied before any 
                coverage or financial assistance under other 
                health benefit plans or programs that provide 
                coverage or financial assistance for the 
                purchase or provision of prescription drug 
                coverage on behalf of applicable beneficiaries 
                as the Secretary may specify; and
                  (E) providing a reasonable dispute resolution 
                mechanism to resolve disagreements between 
                manufacturers, applicable beneficiaries, and 
                the third party with a contract under 
                subsection (d)(3).
          (2) Monitoring compliance.--
                  (A) In general.--The Secretary shall monitor 
                compliance by a manufacturer with the terms of 
                an agreement under this section.
                  (B) Notification.--If a third party with a 
                contract under subsection (d)(3) determines 
                that the manufacturer is not in compliance with 
                such agreement, the third party shall notify 
                the Secretary of such noncompliance for 
                appropriate enforcement under subsection (e).
          (3) Collection of data from prescription drug plans 
        and ma-pd plans.--The Secretary may collect appropriate 
        data from prescription drug plans and MA-PD plans in a 
        timeframe that allows for discounted prices to be 
        provided for applicable drugs under this section.
  (d) Administration.--
          (1) In general.--Subject to paragraph (2), the 
        Secretary shall provide for the implementation of this 
        section, including the performance of the duties 
        described in subsection (c).
          (2) Limitation.--In providing for the implementation 
        of this section, the Secretary shall not receive or 
        distribute any funds of a manufacturer under the 
        program.
          (3) Contract with third parties.--The Secretary shall 
        enter into a contract with 1 or more third parties to 
        administer the requirements established by the 
        Secretary in order to carry out this section. At a 
        minimum, the contract with a third party under the 
        preceding sentence shall require that the third party--
                  (A) receive and transmit information between 
                the Secretary, manufacturers, and other 
                individuals or entities the Secretary 
                determines appropriate;
                  (B) receive, distribute, or facilitate the 
                distribution of funds of manufacturers to 
                appropriate individuals or entities in order to 
                meet the obligations of manufacturers under 
                agreements under this section;
                  (C) provide adequate and timely information 
                to manufacturers, consistent with the agreement 
                with the manufacturer under this section, as 
                necessary for the manufacturer to fulfill its 
                obligations under this section; and
                  (D) permit manufacturers to conduct periodic 
                audits, directly or through contracts, of the 
                data and information used by the third party to 
                determine discounts for applicable drugs of the 
                manufacturer under the program.
          (4) Performance requirements.--The Secretary shall 
        establish performance requirements for a third party 
        with a contract under paragraph (3) and safeguards to 
        protect the independence and integrity of the 
        activities carried out by the third party under the 
        program under this section.
          (5) Implementation.--The Secretary may implement the 
        program under this section by program instruction or 
        otherwise.
          (6) Administration.--Chapter 35 of title 44, United 
        States Code, shall not apply to the program under this 
        section.
  (e) Enforcement.--
          (1) Audits.--Each manufacturer with an agreement in 
        effect under this section shall be subject to periodic 
        audit by the Secretary.
          (2) Civil money penalty.--
                  (A) In general.--The Secretary may impose a 
                civil money penalty on a manufacturer that 
                fails to provide applicable beneficiaries 
                discounts for applicable drugs of the 
                manufacturer in accordance with such agreement 
                for each such failure in an amount the 
                Secretary determines is commensurate with the 
                sum of--
                          (i) the amount that the manufacturer 
                        would have paid with respect to such 
                        discounts under the agreement, which 
                        will then be used to pay the discounts 
                        which the manufacturer had failed to 
                        provide; and
                          (ii) 25 percent of such amount.
                  (B) Application.--The provisions of section 
                1128A (other than subsections (a) and (b)) 
                shall apply to a civil money penalty under this 
                paragraph in the same manner as such provisions 
                apply to a penalty or proceeding under section 
                1128A(a).
  (f) Clarification Regarding Availability of Other Covered 
Part D Drugs.--Nothing in this section shall prevent an 
applicable beneficiary from purchasing a covered part D drug 
that is not an applicable drug (including a generic drug or a 
drug that is not on the formulary of the prescription drug plan 
or MA-PD plan that the applicable beneficiary is enrolled in).
  (g) Definitions.--In this section:
          (1) Applicable beneficiary.--The term ``applicable 
        beneficiary'' means an individual who, on the date of 
        dispensing a covered part D drug--
                  (A) is enrolled in a prescription drug plan 
                or an MA-PD plan;
                  (B) is not enrolled in a qualified retiree 
                prescription drug plan; and
                  (C) has incurred costs for covered part D 
                drugs in the year that are equal to or exceed 
                the annual deductible specified in section 
                1860D-2(b)(1) for such year.
          (2) Applicable drug.--The term ``applicable drug'', 
        with respect to an applicable beneficiary--
                  (A) means a covered part D drug--
                          (i) approved under a new drug 
                        application under section 505(b) of the 
                        Federal Food, Drug, and Cosmetic Act 
                        or, in the case of a biologic product, 
                        licensed under section 351 of the 
                        Public Health Service Act; and
                          (ii)(I) if the PDP sponsor of the 
                        prescription drug plan or the MA 
                        organization offering the MA-PD plan 
                        uses a formulary, which is on the 
                        formulary of the prescription drug plan 
                        or MA-PD plan that the applicable 
                        beneficiary is enrolled in;
                          (II) if the PDP sponsor of the 
                        prescription drug plan or the MA 
                        organization offering the MA-PD plan 
                        does not use a formulary, for which 
                        benefits are available under the 
                        prescription drug plan or MA-PD plan 
                        that the applicable beneficiary is 
                        enrolled in; or
                          (III) is provided through an 
                        exception or appeal; and
                  (B) does not include a selected drug (as 
                defined in section 1192(c)) during a price 
                applicability period (as defined in section 
                1191(b)(2)) with respect to such drug.
          (3) Applicable number of calendar days.--The term 
        ``applicable number of calendar days'' means--
                  (A) with respect to claims for reimbursement 
                submitted electronically, 14 days; and
                  (B) with respect to claims for reimbursement 
                submitted otherwise, 30 days.
          (4) Discounted price.--
                  (A) In general.--The term ``discounted 
                price'' means, with respect to an applicable 
                drug of a manufacturer furnished during a year 
                to an applicable beneficiary--
                          (i) who has not incurred costs for 
                        covered part D drugs in the year that 
                        are equal to or exceed the annual out-
                        of-pocket threshold specified in 
                        section 1860D-2(b)(4)(B)(i) for the 
                        year, 90 percent of the negotiated 
                        price of such drug; and
                          (ii) who has incurred such costs in 
                        the year that are equal to or exceed 
                        such threshold for the year, 70 percent 
                        of the negotiated price of such drug.
                  (B) Clarification.--Nothing in this section 
                shall be construed as affecting the 
                responsibility of an applicable beneficiary for 
                payment of a dispensing fee for an applicable 
                drug.
                  (C) Special case for certain claims.--
                          (i) Claims spanning deductible.--In 
                        the case where the entire amount of the 
                        negotiated price of an individual claim 
                        for an applicable drug with respect to 
                        an applicable beneficiary does not fall 
                        at or above the annual deductible 
                        specified in section 1860D-2(b)(1) for 
                        the year, the manufacturer of the 
                        applicable drug shall provide the 
                        discounted price under this section on 
                        only the portion of the negotiated 
                        price of the applicable drug that falls 
                        at or above such annual deductible.
                          (ii) Claims spanning out-of-pocket 
                        threshold.--In the case where the 
                        entire amount of the negotiated price 
                        of an individual claim for an 
                        applicable drug with respect to an 
                        applicable beneficiary does not fall 
                        entirely below or entirely above the 
                        annual out-of-pocket threshold 
                        specified in section 1860D-
                        2(b)(4)(B)(i) for the year, the 
                        manufacturer of the applicable drug 
                        shall provide the discounted price--
                                  (I) in accordance with 
                                subparagraph (A)(i) on the 
                                portion of the negotiated price 
                                of the applicable drug that 
                                falls below such threshold; and
                                  (II) in accordance with 
                                subparagraph (A)(ii) on the 
                                portion of such price of such 
                                drug that falls at or above 
                                such threshold.
          (5) Manufacturer.--The term ``manufacturer'' means 
        any entity which is engaged in the production, 
        preparation, propagation, compounding, conversion, or 
        processing of prescription drug products, either 
        directly or indirectly by extraction from substances of 
        natural origin, or independently by means of chemical 
        synthesis, or by a combination of extraction and 
        chemical synthesis. Such term does not include a 
        wholesale distributor of drugs or a retail pharmacy 
        licensed under State law.
          (6) Negotiated price.--The term ``negotiated price'' 
        has the meaning given such term in section 423.100 of 
        title 42, Code of Federal Regulations (as in effect on 
        the date of enactment of section 1860D-14A), except 
        that such negotiated price shall not include any 
        dispensing fee for the applicable drug.
          (7) Qualified retiree prescription drug plan.--The 
        term ``qualified retiree prescription drug plan'' has 
        the meaning given such term in section 1860D-22(a)(2).

 subsidies for part d eligible individuals for qualified prescription 
                             drug coverage

  Sec. 1860D-15. (a) Subsidy Payment.--In order to reduce 
premium levels applicable to qualified prescription drug 
coverage for part D eligible individuals consistent with an 
overall subsidy level of 74.5 percent for basic prescription 
drug coverage, to reduce adverse selection among prescription 
drug plans and MA-PD plans, and to promote the participation of 
PDP sponsors under this part and MA organizations under part C, 
the Secretary shall provide for payment to a PDP sponsor that 
offers a prescription drug plan and an MA organization that 
offers an MA-PD plan of the following subsidies in accordance 
with this section:
          (1) Direct subsidy.--A direct subsidy for each part D 
        eligible individual enrolled in a prescription drug 
        plan or MA-PD plan for a month equal to--
                  (A) the amount of the plan's standardized bid 
                amount (as defined in section 1860D-13(a)(5)), 
                adjusted under subsection (c)(1), reduced by
                  (B) the base beneficiary premium (as computed 
                under paragraph (2) of section 1860D-13(a) and 
                as adjusted under paragraph (1)(B) of such 
                section).
          (2) Subsidy through reinsurance.--The reinsurance 
        payment amount (as defined in subsection (b)).
This section constitutes budget authority in advance of 
appropriations Acts and represents the obligation of the 
Secretary to provide for the payment of amounts provided under 
this section.
  (b) Reinsurance Payment Amount.--
          (1) In general.--The reinsurance payment amount under 
        this subsection for a part D eligible individual 
        enrolled in a prescription drug plan or MA-PD plan for 
        a coverage year is an amount equal to 80 percent (or, 
        with respect to a coverage year after 2021, 20 percent) 
        of the allowable reinsurance costs (as specified in 
        paragraph (2)) attributable to that portion of gross 
        covered prescription drug costs as specified in 
        paragraph (3) incurred in the coverage year after such 
        individual has incurred costs that exceed the annual 
        out-of-pocket threshold specified in section 1860D-
        2(b)(4)(B).
          (2) Allowable reinsurance costs.--For purposes of 
        this section, the term ``allowable reinsurance costs'' 
        means, with respect to gross covered prescription drug 
        costs under a prescription drug plan offered by a PDP 
        sponsor or an MA-PD plan offered by an MA organization, 
        the part of such costs that are actually paid (net of 
        discounts, chargebacks, and average percentage rebates) 
        by the sponsor or organization or by (or on behalf of) 
        an enrollee under the plan, but in no case more than 
        the part of such costs that would have been paid under 
        the plan if the prescription drug coverage under the 
        plan were basic prescription drug coverage, or, in the 
        case of a plan providing supplemental prescription drug 
        coverage, if such coverage were standard prescription 
        drug coverage.
          (3) Gross covered prescription drug costs.--For 
        purposes of this section, the term ``gross covered 
        prescription drug costs'' means, with respect to a part 
        D eligible individual enrolled in a prescription drug 
        plan or MA-PD plan during a coverage year, the costs 
        incurred under the plan, not including administrative 
        costs, but including costs directly related to the 
        dispensing of covered part D drugs during the year and 
        costs relating to the deductible. Such costs shall be 
        determined whether they are paid by the individual or 
        under the plan, regardless of whether the coverage 
        under the plan exceeds basic prescription drug 
        coverage.
          (4) Coverage year defined.--For purposes of this 
        section, the term ``coverage year'' means a calendar 
        year in which covered part D drugs are dispensed if the 
        claim for such drugs (and payment on such claim) is 
        made not later than such period after the end of such 
        year as the Secretary specifies.
  (c) Adjustments Relating to Bids.--
          (1) Health status risk adjustment.--
                  (A) Establishment of risk adjustors.--The 
                Secretary shall establish an appropriate 
                methodology for adjusting the standardized bid 
                amount under subsection (a)(1)(A) to take into 
                account variation in costs for basic 
                prescription drug coverage among prescription 
                drug plans and MA-PD plans based on the 
                differences in actuarial risk of different 
                enrollees being served. Any such risk 
                adjustment shall be designed in a manner so as 
                not to result in a change in the aggregate 
                amounts payable to such plans under subsection 
                (a)(1) and through that portion of the monthly 
                beneficiary prescription drug premiums 
                described in subsection (a)(1)(B) and MA 
                monthly prescription drug beneficiary premiums.
                  (B) Considerations.--In establishing the 
                methodology under subparagraph (A), the 
                Secretary may take into account the similar 
                methodologies used under section 1853(a)(3) to 
                adjust payments to MA organizations for 
                benefits under the original medicare fee-for-
                service program option.
                  (C) Data collection.--In order to carry out 
                this paragraph, the Secretary shall require--
                          (i) PDP sponsors to submit data 
                        regarding drug claims that can be 
                        linked at the individual level to part 
                        A and part B data and such other 
                        information as the Secretary determines 
                        necessary; and
                          (ii) MA organizations that offer MA-
                        PD plans to submit data regarding drug 
                        claims that can be linked at the 
                        individual level to other data that 
                        such organizations are required to 
                        submit to the Secretary and such other 
                        information as the Secretary determines 
                        necessary.
                  (D) Publication.--At the time of publication 
                of risk adjustment factors under section 
                1853(b)(1)(B)(i)(II), the Secretary shall 
                publish the risk adjusters established under 
                this paragraph for the succeeding year.
          (2) Geographic adjustment.--
                  (A) In general.--Subject to subparagraph (B), 
                for purposes of section 1860D-13(a)(1)(B)(iii), 
                the Secretary shall establish an appropriate 
                methodology for adjusting the national average 
                monthly bid amount (computed under section 
                1860D-13(a)(4)) to take into account 
                differences in prices for covered part D drugs 
                among PDP regions.
                  (B) De minimis rule.--If the Secretary 
                determines that the price variations described 
                in subparagraph (A) among PDP regions are de 
                minimis, the Secretary shall not provide for 
                adjustment under this paragraph.
                  (C) Budget neutral adjustment.--Any 
                adjustment under this paragraph shall be 
                applied in a manner so as to not result in a 
                change in the aggregate payments made under 
                this part that would have been made if the 
                Secretary had not applied such adjustment.
  (d) Payment Methods.--
          (1) In general.--Payments under this section shall be 
        based on such a method as the Secretary determines. The 
        Secretary may establish a payment method by which 
        interim payments of amounts under this section are made 
        during a year based on the Secretary's best estimate of 
        amounts that will be payable after obtaining all of the 
        information.
          (2) Requirement for provision of information.--
                  (A) Requirement.--Payments under this section 
                to a PDP sponsor or MA organization are 
                conditioned upon the furnishing to the 
                Secretary, in a form and manner specified by 
                the Secretary, of such information as may be 
                required to carry out this section.
                  (B) Restriction on use of information.--
                Information disclosed or obtained pursuant to 
                subparagraph (A) may be used by officers, 
                employees, and contractors of the Department of 
                Health and Human Services only for the purposes 
                of, and to the extent necessary in, carrying 
                out this section.
          (3) Source of payments.--Payments under this section 
        shall be made from the Medicare Prescription Drug 
        Account.
          (4) Application of enrollee adjustment.--The 
        provisions of section 1853(a)(2) shall apply to 
        payments to PDP sponsors under this section in the same 
        manner as they apply to payments to MA organizations 
        under section 1853(a).
  (e) Portion of Total Payments to a Sponsor or Organization 
Subject to Risk (Application of Risk Corridors).--
          (1) Computation of adjusted allowable risk corridor 
        costs.--
                  (A) In general.--For purposes of this 
                subsection, the term ``adjusted allowable risk 
                corridor costs'' means, for a plan for a 
                coverage year (as defined in subsection 
                (b)(4))--
                          (i) the allowable risk corridor costs 
                        (as defined in subparagraph (B)) for 
                        the plan for the year, reduced by
                          (ii) the sum of (I) the total 
                        reinsurance payments made under 
                        subsection (b) to the sponsor of the 
                        plan for the year, and (II) the total 
                        subsidy payments made under section 
                        1860D-14 to the sponsor of the plan for 
                        the year.
                  (B) Allowable risk corridor costs.--For 
                purposes of this subsection, the term 
                ``allowable risk corridor costs'' means, with 
                respect to a prescription drug plan offered by 
                a PDP sponsor or an MA-PD plan offered by an MA 
                organization, the part of costs (not including 
                administrative costs, but including costs 
                directly related to the dispensing of covered 
                part D drugs during the year) incurred by the 
                sponsor or organization under the plan that are 
                actually paid (net of discounts, chargebacks, 
                and average percentage rebates) by the sponsor 
                or organization under the plan, but in no case 
                more than the part of such costs that would 
                have been paid under the plan if the 
                prescription drug coverage under the plan were 
                basic prescription drug coverage, or, in the 
                case of a plan providing supplemental 
                prescription drug coverage, if such coverage 
                were basic prescription drug coverage taking 
                into account the adjustment under section 
                1860D-11(c)(2). In computing allowable costs 
                under this paragraph, the Secretary shall 
                compute such costs based upon imposition under 
                paragraphs (1)(D) and (2)(E) of section 1860D-
                14(a) of the maximum amount of copayments 
                permitted under such paragraphs.
          (2) Adjustment of payment.--
                  (A) No adjustment if adjusted allowable risk 
                corridor costs within risk corridor.--If the 
                adjusted allowable risk corridor costs (as 
                defined in paragraph (1)) for the plan for the 
                year are at least equal to the first threshold 
                lower limit of the risk corridor (specified in 
                paragraph (3)(A)(i)), but not greater than the 
                first threshold upper limit of the risk 
                corridor (specified in paragraph (3)(A)(iii)) 
                for the plan for the year, then no payment 
                adjustment shall be made under this subsection.
                  (B) Increase in payment if adjusted allowable 
                risk corridor costs above upper limit of risk 
                corridor.--
                          (i) Costs between first and second 
                        threshold upper limits.--If the 
                        adjusted allowable risk corridor costs 
                        for the plan for the year are greater 
                        than the first threshold upper limit, 
                        but not greater than the second 
                        threshold upper limit, of the risk 
                        corridor for the plan for the year, the 
                        Secretary shall increase the total of 
                        the payments made to the sponsor or 
                        organization offering the plan for the 
                        year under this section by an amount 
                        equal to 50 percent (or, for 2006 and 
                        2007, 75 percent or 90 percent if the 
                        conditions described in clause (iii) 
                        are met for the year) of the difference 
                        between such adjusted allowable risk 
                        corridor costs and the first threshold 
                        upper limit of the risk corridor.
                          (ii) Costs above second threshold 
                        upper limits.--If the adjusted 
                        allowable risk corridor costs for the 
                        plan for the year are greater than the 
                        second threshold upper limit of the 
                        risk corridor for the plan for the 
                        year, the Secretary shall increase the 
                        total of the payments made to the 
                        sponsor or organization offering the 
                        plan for the year under this section by 
                        an amount equal to the sum of--
                                  (I) 50 percent (or, for 2006 
                                and 2007, 75 percent or 90 
                                percent if the conditions 
                                described in clause (iii) are 
                                met for the year) of the 
                                difference between the second 
                                threshold upper limit and the 
                                first threshold upper limit; 
                                and
                                  (II) 80 percent of the 
                                difference between such 
                                adjusted allowable risk 
                                corridor costs and the second 
                                threshold upper limit of the 
                                risk corridor.
                          (iii) Conditions for application of 
                        higher percentage for 2006 and 2007.--
                        The conditions described in this clause 
                        are met for 2006 or 2007 if the 
                        Secretary determines with respect to 
                        such year that--
                                  (I) at least 60 percent of 
                                prescription drug plans and MA-
                                PD plans to which this 
                                subsection applies have 
                                adjusted allowable risk 
                                corridor costs for the plan for 
                                the year that are more than the 
                                first threshold upper limit of 
                                the risk corridor for the plan 
                                for the year; and
                                  (II) such plans represent at 
                                least 60 percent of part D 
                                eligible individuals enrolled 
                                in any prescription drug plan 
                                or MA-PD plan.
                  (C) Reduction in payment if adjusted 
                allowable risk corridor costs below lower limit 
                of risk corridor.--
                          (i) Costs between first and second 
                        threshold lower limits.--If the 
                        adjusted allowable risk corridor costs 
                        for the plan for the year are less than 
                        the first threshold lower limit, but 
                        not less than the second threshold 
                        lower limit, of the risk corridor for 
                        the plan for the year, the Secretary 
                        shall reduce the total of the payments 
                        made to the sponsor or organization 
                        offering the plan for the year under 
                        this section by an amount (or otherwise 
                        recover from the sponsor or 
                        organization an amount) equal to 50 
                        percent (or, for 2006 and 2007, 75 
                        percent) of the difference between the 
                        first threshold lower limit of the risk 
                        corridor and such adjusted allowable 
                        risk corridor costs.
                          (ii) Costs below second threshold 
                        lower limit.--If the adjusted allowable 
                        risk corridor costs for the plan for 
                        the year are less the second threshold 
                        lower limit of the risk corridor for 
                        the plan for the year, the Secretary 
                        shall reduce the total of the payments 
                        made to the sponsor or organization 
                        offering the plan for the year under 
                        this section by an amount (or otherwise 
                        recover from the sponsor or 
                        organization an amount) equal to the 
                        sum of--
                                  (I) 50 percent (or, for 2006 
                                and 2007, 75 percent) of the 
                                difference between the first 
                                threshold lower limit and the 
                                second threshold lower limit; 
                                and
                                  (II) 80 percent of the 
                                difference between the second 
                                threshold upper limit of the 
                                risk corridor and such adjusted 
                                allowable risk corridor costs.
          (3) Establishment of risk corridors.--
                  (A) In general.--For each plan year the 
                Secretary shall establish a risk corridor for 
                each prescription drug plan and each MA-PD 
                plan. The risk corridor for a plan for a year 
                shall be equal to a range as follows:
                          (i) First threshold lower limit.--The 
                        first threshold lower limit of such 
                        corridor shall be equal to--
                                  (I) the target amount 
                                described in subparagraph (B) 
                                for the plan; minus
                                  (II) an amount equal to the 
                                first threshold risk percentage 
                                for the plan (as determined 
                                under subparagraph (C)(i)) of 
                                such target amount.
                          (ii) Second threshold lower limit.--
                        The second threshold lower limit of 
                        such corridor shall be equal to--
                                  (I) the target amount 
                                described in subparagraph (B) 
                                for the plan; minus
                                  (II) an amount equal to the 
                                second threshold risk 
                                percentage for the plan (as 
                                determined under subparagraph 
                                (C)(ii)) of such target amount.
                          (iii) First threshold upper limit.--
                        The first threshold upper limit of such 
                        corridor shall be equal to the sum of--
                                  (I) such target amount; and
                                  (II) the amount described in 
                                clause (i)(II).
                          (iv) Second threshold upper limit.--
                        The second threshold upper limit of 
                        such corridor shall be equal to the sum 
                        of--
                                  (I) such target amount; and
                                  (II) the amount described in 
                                clause (ii)(II).
                  (B) Target amount described.--The target 
                amount described in this paragraph is, with 
                respect to a prescription drug plan or an MA-PD 
                plan in a year, the total amount of payments 
                paid to the PDP sponsor or MA-PD organization 
                for the plan for the year, taking into account 
                amounts paid by the Secretary and enrollees, 
                based upon the standardized bid amount (as 
                defined in section 1860D-13(a)(5) and as risk 
                adjusted under subsection (c)(1)), reduced by 
                the total amount of administrative expenses for 
                the year assumed in such standardized bid.
                  (C) First and second threshold risk 
                percentage defined.--
                          (i) First threshold risk 
                        percentage.--Subject to clause (iii), 
                        for purposes of this section, the first 
                        threshold risk percentage is--
                                  (I) for 2006 and 2007, and 
                                2.5 percent;
                                  (II) for 2008 through 2011, 5 
                                percent; and
                                  (III) for 2012 and subsequent 
                                years, a percentage established 
                                by the Secretary, but in no 
                                case less than 5 percent.
                          (ii) Second threshold risk 
                        percentage.--Subject to clause (iii), 
                        for purposes of this section, the 
                        second threshold risk percentage is--
                                  (I) for 2006 and 2007, 5 
                                percent;
                                  (II) for 2008 through 2011, 
                                10 percent; and
                                  (III) for 2012 and subsequent 
                                years, a percentage established 
                                by the Secretary that is 
                                greater than the percent 
                                established for the year under 
                                clause (i)(III), but in no case 
                                less than 10 percent.
                          (iii) Reduction of risk percentage to 
                        ensure 2 plans in an area.--Pursuant to 
                        section 1860D-11(b)(2)(E)(ii), a PDP 
                        sponsor may submit a bid that requests 
                        a decrease in the applicable first or 
                        second threshold risk percentages or an 
                        increase in the percents applied under 
                        paragraph (2).
          (4) Plans at risk for entire amount of supplemental 
        prescription drug coverage.--A PDP sponsor and MA 
        organization that offers a plan that provides 
        supplemental prescription drug benefits shall be at 
        full financial risk for the provision of such 
        supplemental benefits.
          (5) No effect on monthly premium.--No adjustment in 
        payments made by reason of this subsection shall affect 
        the monthly beneficiary premium or the MA monthly 
        prescription drug beneficiary premium.
  (f) Disclosure of Information.--
          (1) In general.--Each contract under this part and 
        under part C shall provide that--
                  (A) the PDP sponsor offering a prescription 
                drug plan or an MA organization offering an MA-
                PD plan shall provide the Secretary with such 
                information as the Secretary determines is 
                necessary to carry out this section; and
                  (B) the Secretary shall have the right in 
                accordance with section 1857(d)(2)(B) (as 
                applied under section 1860D-12(b)(3)(C)) to 
                inspect and audit any books and records of a 
                PDP sponsor or MA organization that pertain to 
                the information regarding costs provided to the 
                Secretary under subparagraph (A).
          (2) Restriction on use of information.--Information 
        disclosed or obtained pursuant to the provisions of 
        this section may be used--
                  (A) by officers, employees, and contractors 
                of the Department of Health and Human Services 
                for the purposes of, and to the extent 
                necessary in--
                          (i) carrying out this section; and
                          (ii) conducting oversight, 
                        evaluation, and enforcement under this 
                        title; and
                  (B) by the Attorney General and the 
                Comptroller General of the United States for 
                the purposes of, and to the extent necessary 
                in, carrying out health oversight activities.
  (g) Payment for Fallback Prescription Drug Plans.--In lieu of 
the amounts otherwise payable under this section to a PDP 
sponsor offering a fallback prescription drug plan (as defined 
in section 1860D-3(c)(4)), the amount payable shall be the 
amounts determined under the contract for such plan pursuant to 
section 1860D-11(g)(5).

           *       *       *       *       *       *       *


 Subpart 3--Application to Medicare Advantage Program and Treatment of 
     Employer-Sponsored Programs and Other Prescription Drug Plans

  application to medicare advantage program and related managed care 
                                programs

  Sec. 1860D-21. (a) Special Rules Relating to Offering of 
Qualified Prescription Drug Coverage.--
          (1) In general.--An MA organization on and after 
        January 1, 2006--
                  (A) may not offer an MA plan described in 
                section 1851(a)(2)(A) in an area unless either 
                that plan (or another MA plan offered by the 
                organization in that same service area) 
                includes required prescription drug coverage 
                (as defined in paragraph (2)); and
                  (B) may not offer prescription drug coverage 
                (other than that required under parts A and B) 
                to an enrollee--
                          (i) under an MSA plan; or
                          (ii) under another MA plan unless 
                        such drug coverage under such other 
                        plan provides qualified prescription 
                        drug coverage and unless the 
                        requirements of this section with 
                        respect to such coverage are met.
          (2) Qualifying coverage.--For purposes of paragraph 
        (1)(A), the term ``required coverage'' means with 
        respect to an MA-PD plan--
                  (A) basic prescription drug coverage; or
                  (B) qualified prescription drug coverage that 
                provides supplemental prescription drug 
                coverage, so long as there is no MA monthly 
                supplemental beneficiary premium applied under 
                the plan (due to the application of a credit 
                against such premium of a rebate under section 
                1854(b)(1)(C)).
  (b) Application of Default Enrollment Rules.--
          (1) Seamless continuation.--In applying section 
        1851(c)(3)(A)(ii), an individual who is enrolled in a 
        health benefits plan shall not be considered to have 
        been deemed to make an election into an MA-PD plan 
        unless such health benefits plan provides any 
        prescription drug coverage.
          (2) MA continuation.--In applying section 
        1851(c)(3)(B), an individual who is enrolled in an MA 
        plan shall not be considered to have been deemed to 
        make an election into an MA-PD plan unless--
                  (A) for purposes of the election as of 
                January 1, 2006, the MA plan provided as of 
                December 31, 2005, any prescription drug 
                coverage; or
                  (B) for periods after January 1, 2006, such 
                MA plan is an MA-PD plan.
          (3) Discontinuance of ma-pd election during first 
        year of eligibility.--In applying the second sentence 
        of section 1851(e)(4) in the case of an individual who 
        is electing to discontinue enrollment in an MA-PD plan, 
        the individual shall be permitted to enroll in a 
        prescription drug plan under part D at the time of the 
        election of coverage under the original medicare fee-
        for-service program.
          (4) Rules regarding enrollees in ma plans not 
        providing qualified prescription drug coverage.--In the 
        case of an individual who is enrolled in an MA plan 
        (other than an MSA plan) that does not provide 
        qualified prescription drug coverage, if the 
        organization offering such coverage discontinues the 
        offering with respect to the individual of all MA plans 
        that do not provide such coverage--
                  
                          (i) the individual is deemed to have 
                        elected the original medicare fee-for-
                        service program option, unless the 
                        individual affirmatively elects to 
                        enroll in an MA-PD plan; and
                          (ii) in the case of such a deemed 
                        election, the disenrollment shall be 
                        treated as an involuntary termination 
                        of the MA plan described in 
                        subparagraph (B)(ii) of section 
                        1882(s)(3) for purposes of applying 
                        such section.
        The information disclosed under section 1852(c)(1) for 
        individuals who are enrolled in such an MA plan shall 
        include information regarding such rules.
  (c) Application of Part D Rules for Prescription Drug 
Coverage.--With respect to the offering of qualified 
prescription drug coverage by an MA organization under this 
part on and after January 1, 2006--
          (1) In general.--Except as otherwise provided, the 
        provisions of this part shall apply under part C with 
        respect to prescription drug coverage provided under 
        MA-PD plans in lieu of the other provisions of part C 
        that would apply to such coverage under such plans.
          (2) Waiver.--The Secretary shall waive the provisions 
        referred to in paragraph (1) to the extent the 
        Secretary determines that such provisions duplicate, or 
        are in conflict with, provisions otherwise applicable 
        to the organization or plan under part C or as may be 
        necessary in order to improve coordination of this part 
        with the benefits under this part.
          (3) Treatment of ma owned and operated pharmacies.--
        The Secretary may waive the requirement of section 
        1860D-4(b)(1)(C) in the case of an MA-PD plan that 
        provides access (other than mail order) to qualified 
        prescription drug coverage through pharmacies owned and 
        operated by the MA organization, if the Secretary 
        determines that the organization's pharmacy network is 
        sufficient to provide comparable access for enrollees 
        under the plan.
  (d) Special Rules for Private Fee-for-Service Plans That 
Offer Prescription Drug Coverage.--With respect to an MA plan 
described in section 1851(a)(2)(C) that offers qualified 
prescription drug coverage, on and after January 1, 2006, the 
following rules apply:
          (1) Requirements regarding negotiated prices.--
        Subsections (a)(1) and (d)(1) of section 1860D-2 and 
        section 1860D-4(b)(2)(A) shall not be construed to 
        require the plan to provide negotiated prices 
        (described in subsection (d)(1)(B) of such section), 
        but shall apply to the extent the plan does so.
          (2) Modification of pharmacy access standard and 
        disclosure requirement.--If the plan provides coverage 
        for drugs purchased from all pharmacies, without 
        charging additional cost-sharing, and without regard to 
        whether they are participating pharmacies in a network 
        or have entered into contracts or agreements with 
        pharmacies to provide drugs to enrollees covered by the 
        plan, subsections (b)(1)(C) and (k) of section 1860D-4 
        shall not apply to the plan.
          (3) Drug utilization management program and 
        medication therapy management program not required.--
        The requirements of subparagraphs (A) and (C) of 
        section 1860D-4(c)(1) shall not apply to the plan.
          (4) Application of reinsurance.--The Secretary shall 
        determine the amount of reinsurance payments under 
        section 1860D-15(b) using a methodology that--
                  (A) bases such amount on the Secretary's 
                estimate of the amount of such payments that 
                would be payable if the plan were an MA-PD plan 
                described in section 1851(a)(2)(A)(i) and the 
                previous provisions of this subsection did not 
                apply; and
                  (B) takes into account the average 
                reinsurance payments made under section 1860D-
                15(b) for populations of similar risk under MA-
                PD plans described in such section.
          (5) Exemption from risk corridor provisions.--The 
        provisions of section 1860D-15(e) shall not apply.
          (6) Exemption from negotiations.--Subsections (d) and 
        (e)(2)(C) of section 1860D-11 shall not apply and the 
        provisions of section 1854(a)(5)(B) prohibiting the 
        review, approval, or disapproval of amounts described 
        in such section shall apply to the proposed bid and 
        terms and conditions described in section 1860D-11(d).
          (7) Treatment of incurred costs without regard to 
        formulary.--The exclusion of costs incurred for covered 
        part D drugs which are not included (or treated as 
        being included) in a plan's formulary under [section 
        1860D-2(b)(4)(B)(i)] section 1860D-2(b)(4)(C)(i) shall 
        not apply insofar as the plan does not utilize a 
        formulary.
  (e) Application to Reasonable Cost Reimbursement 
Contractors.--
          (1) In general.--Subject to paragraphs (2) and (3) 
        and rules established by the Secretary, in the case of 
        an organization that is providing benefits under a 
        reasonable cost reimbursement contract under section 
        1876(h) and that elects to provide qualified 
        prescription drug coverage to a part D eligible 
        individual who is enrolled under such a contract, the 
        provisions of this part (and related provisions of part 
        C) shall apply to the provision of such coverage to 
        such enrollee in the same manner as such provisions 
        apply to the provision of such coverage under an MA-PD 
        local plan described in section 1851(a)(2)(A)(i) and 
        coverage under such a contract that so provides 
        qualified prescription drug coverage shall be deemed to 
        be an MA-PD local plan.
          (2) Limitation on enrollment.--In applying paragraph 
        (1), the organization may not enroll part D eligible 
        individuals who are not enrolled under the reasonable 
        cost reimbursement contract involved.
          (3) Bids not included in determining national average 
        monthly bid amount.--The bid of an organization 
        offering prescription drug coverage under this 
        subsection shall not be taken into account in computing 
        the national average monthly bid amount and low-income 
        benchmark premium amount under this part.
  (f) Application to PACE.--
          (1) In general.--Subject to paragraphs (2) and (3) 
        and rules established by the Secretary, in the case of 
        a PACE program under section 1894 that elects to 
        provide qualified prescription drug coverage to a part 
        D eligible individual who is enrolled under such 
        program, the provisions of this part (and related 
        provisions of part C) shall apply to the provision of 
        such coverage to such enrollee in a manner that is 
        similar to the manner in which such provisions apply to 
        the provision of such coverage under an MA-PD local 
        plan described in section 1851(a)(2)(A)(ii) and a PACE 
        program that so provides such coverage may be deemed to 
        be an MA-PD local plan.
          (2) Limitation on enrollment.--In applying paragraph 
        (1), the organization may not enroll part D eligible 
        individuals who are not enrolled under the PACE program 
        involved.
          (3) Bids not included in determining standardized bid 
        amount.--The bid of an organization offering 
        prescription drug coverage under this subsection is not 
        be taken into account in computing any average 
        benchmark bid amount and low-income benchmark premium 
        amount under this part.

             special rules for employer-sponsored programs

  Sec. 1860D-22. (a) Subsidy Payment.--
          (1) In general.--The Secretary shall provide in 
        accordance with this subsection for payment to the 
        sponsor of a qualified retiree prescription drug plan 
        (as defined in paragraph (2)) of a special subsidy 
        payment equal to the amount specified in paragraph (3) 
        for each qualified covered retiree under the plan (as 
        defined in paragraph (4)). This subsection constitutes 
        budget authority in advance of appropriations Acts and 
        represents the obligation of the Secretary to provide 
        for the payment of amounts provided under this section.
          (2) Qualified retiree prescription drug plan 
        defined.--For purposes of this subsection, the term 
        ``qualified retiree prescription drug plan'' means 
        employment-based retiree health coverage (as defined in 
        subsection (c)(1)) if, with respect to a part D 
        eligible individual who is a participant or beneficiary 
        under such coverage, the following requirements are 
        met:
                  (A) Attestation of actuarial equivalence to 
                standard coverage.--The sponsor of the plan 
                provides the Secretary, annually or at such 
                other time as the Secretary may require, with 
                an attestation that the actuarial value of 
                prescription drug coverage under the plan (as 
                determined using the processes and methods 
                described in section 1860D-11(c)) is at least 
                equal to the actuarial value of standard 
                prescription drug coverage, not taking into 
                account [the value of any discount] the value 
                of--
                          (i) for years prior to 2022, any 
                        discount  or coverage provided during 
                        the gap in prescription drug coverage 
                        that occurs between the initial 
                        coverage limit under section 1860D-
                        2(b)(3) during the year and the out-of-
                        pocket threshold specified in section 
                        1860D-2(b)(4)(B)[.]; and
                          (ii) for 2022 and each subsequent 
                        year, any discount provided pursuant to 
                        section 1860D-14C.
                  (B) Audits.--The sponsor of the plan, or an 
                administrator of the plan designated by the 
                sponsor, shall maintain (and 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 and the accuracy of payments made 
                under this section. The provisions of section 
                1860D-2(d)(3) shall apply to such information 
                under this section (including such actuarial 
                value and attestation) in a manner similar to 
                the manner in which they apply to financial 
                records of PDP sponsors and MA organizations.
                  (C) Provision of disclosure regarding 
                prescription drug coverage.--The sponsor of the 
                plan shall provide for disclosure of 
                information regarding prescription drug 
                coverage in accordance with section 1860D-
                13(b)(6)(B).
          (3) Employer and union special subsidy amounts.--
                  (A) In general.--For purposes of this 
                subsection, the special subsidy payment amount 
                under this paragraph for a qualifying covered 
                retiree for a coverage year enrolled with the 
                sponsor of a qualified retiree prescription 
                drug plan is, for the portion of the retiree's 
                gross covered retiree plan-related prescription 
                drug costs (as defined in subparagraph (C)(ii)) 
                for such year that exceeds the cost threshold 
                amount specified in subparagraph (B) and does 
                not exceed the cost limit under such 
                subparagraph, an amount equal to 28 percent of 
                the allowable retiree costs (as defined in 
                subparagraph (C)(i)) attributable to such gross 
                covered prescription drug costs.
                  (B) Cost threshold and cost limit 
                applicable.--
                          (i) In general.--Subject to clause 
                        (ii)--
                                  (I) the cost threshold under 
                                this subparagraph is equal to 
                                $250 for plan years that end in 
                                2006; and
                                  (II) the cost limit under 
                                this subparagraph is equal to 
                                $5,000 for plan years that end 
                                in 2006.
                          (ii) Indexing.--The cost threshold 
                        and cost limit amounts specified in 
                        subclauses (I) and (II) of clause (i) 
                        for a plan year that ends after 2006 
                        shall be adjusted in the same manner as 
                        the annual deductible and the annual 
                        out-of-pocket threshold, respectively, 
                        are annually adjusted under paragraphs 
                        (1) and (4)(B) of section 1860D-2(b).
                  (C) Definitions.--For purposes of this 
                paragraph:
                          (i) Allowable retiree costs.--The 
                        term ``allowable retiree costs'' means, 
                        with respect to gross covered 
                        prescription drug costs under a 
                        qualified retiree prescription drug 
                        plan by a plan sponsor, the part of 
                        such costs that are actually paid (net 
                        of discounts, chargebacks, and average 
                        percentage rebates) by the sponsor or 
                        by or on behalf of a qualifying covered 
                        retiree under the plan.
                          (ii) Gross covered retiree plan-
                        related prescription drug costs.--For 
                        purposes of this section, the term 
                        ``gross covered retiree plan-related 
                        prescription drug costs'' means, with 
                        respect to a qualifying covered retiree 
                        enrolled in a qualified retiree 
                        prescription drug plan during a 
                        coverage year, the costs incurred under 
                        the plan, not including administrative 
                        costs, but including costs directly 
                        related to the dispensing of covered 
                        part D drugs during the year. Such 
                        costs shall be determined whether they 
                        are paid by the retiree or under the 
                        plan.
                  (iii) Coverage year.--The term ``coverage 
                year'' has the meaning given such term in 
                section 1860D-15(b)(4).
          (4) Qualifying covered retiree defined.--For purposes 
        of this subsection, the term ``qualifying covered 
        retiree'' means a part D eligible individual who is not 
        enrolled in a prescription drug plan or an MA-PD plan 
        but is covered under a qualified retiree prescription 
        drug plan.
          (5) Payment methods, including provision of necessary 
        information.--The provisions of section 1860D-15(d) 
        (including paragraph (2), relating to requirement for 
        provision of information) shall apply to payments under 
        this subsection in a manner similar to the manner in 
        which they apply to payment under section 1860D-15(b).
          (6) Construction.--Nothing in this subsection shall 
        be construed as--
                  (A) precluding a part D eligible individual 
                who is covered under employment-based retiree 
                health coverage from enrolling in a 
                prescription drug plan or in an MA-PD plan;
                  (B) precluding such employment-based retiree 
                health coverage or an employer or other person 
                from paying all or any portion of any premium 
                required for coverage under a prescription drug 
                plan or MA-PD plan on behalf of such an 
                individual;
                  (C) preventing such employment-based retiree 
                health coverage from providing coverage--
                          (i) that is better than standard 
                        prescription drug coverage to retirees 
                        who are covered under a qualified 
                        retiree prescription drug plan; or
                          (ii) that is supplemental to the 
                        benefits provided under a prescription 
                        drug plan or an MA-PD plan, including 
                        benefits to retirees who are not 
                        covered under a qualified retiree 
                        prescription drug plan but who are 
                        enrolled in such a prescription drug 
                        plan or MA-PD plan; or
                  (D) preventing employers to provide for 
                flexibility in benefit design and pharmacy 
                access provisions, without regard to the 
                requirements for basic prescription drug 
                coverage, so long as the actuarial equivalence 
                requirement of paragraph (2)(A) is met.
  (b) Application of MA Waiver Authority.--The provisions of 
section 1857(i) shall apply with respect to prescription drug 
plans in relation to employment-based retiree health coverage 
in a manner similar to the manner in which they apply to an MA 
plan in relation to employers, including authorizing the 
establishment of separate premium amounts for enrollees in a 
prescription drug plan by reason of such coverage and 
limitations on enrollment to part D eligible individuals 
enrolled under such coverage.
  (c) Definitions.--For purposes of this section:
          (1) Employment-based retiree health coverage.--The 
        term ``employment-based retiree health coverage'' means 
        health insurance or other coverage of health care costs 
        (whether provided by voluntary insurance coverage or 
        pursuant to statutory or contractual obligation) for 
        part D eligible individuals (or for such individuals 
        and their spouses and dependents) under a group health 
        plan based on their status as retired participants in 
        such plan.
          (2) Sponsor.--The term ``sponsor'' means a plan 
        sponsor, as defined in section 3(16)(B) of the Employee 
        Retirement Income Security Act of 1974, in relation to 
        a group health plan, except that, in the case of a plan 
        maintained jointly by one employer and an employee 
        organization and with respect to which the employer is 
        the primary source of financing, such term means such 
        employer.
          (3) Group health plan.--The term ``group health 
        plan'' includes such a plan as defined in section 
        607(1) of the Employee Retirement Income Security Act 
        of 1974 and also includes the following:
                  (A) Federal and state governmental plans.--
                Such a plan established or maintained for its 
                employees by the Government of the United 
                States, by the government of any State or 
                political subdivision thereof, or by any agency 
                or instrumentality of any of the foregoing, 
                including a health benefits plan offered under 
                chapter 89 of title 5, United States Code.
                  (B) Collectively bargained plans.--Such a 
                plan established or maintained under or 
                pursuant to one or more collective bargaining 
                agreements.
                  (C) Church plans.--Such a plan established 
                and maintained for its employees (or their 
                beneficiaries) by a church or by a convention 
                or association of churches which is exempt from 
                tax under section 501 of the Internal Revenue 
                Code of 1986.

           *       *       *       *       *       *       *


          Subpart 5--Definitions and Miscellaneous Provisions

      definitions; treatment of references to provisions in part c

  Sec. 1860D-41. (a) Definitions.--For purposes of this part:
          (1) Basic prescription drug coverage.--The term 
        ``basic prescription drug coverage'' is defined in 
        section 1860D-2(a)(3).
          (2) Covered part d drug.--The term ``covered part D 
        drug'' is defined in section 1860D-2(e).
          (3) Creditable prescription drug coverage.--The term 
        ``creditable prescription drug coverage'' has the 
        meaning given such term in section 1860D-13(b)(4).
          (4) Part d eligible individual.--The term ``part D 
        eligible individual'' has the meaning given such term 
        in section 1860D-1(a)(4)(A).
          (5) Fallback prescription drug plan.--The term 
        ``fallback prescription drug plan'' has the meaning 
        given such term in section 1860D-11(g)(4).
          (6) Initial coverage limit.--The term ``initial 
        coverage limit'' means such limit as established under 
        section 1860D-2(b)(3) for a year before 2022, or, in 
        the case of coverage that is not standard prescription 
        drug coverage, the comparable limit (if any) 
        established under the coverage for such year.
          (7) Insurance risk.--The term ``insurance risk'' 
        means, with respect to a participating pharmacy, risk 
        of the type commonly assumed only by insurers licensed 
        by a State and does not include payment variations 
        designed to reflect performance-based measures of 
        activities within the control of the pharmacy, such as 
        formulary compliance and generic drug substitution.
          (8) MA plan.--The term ``MA plan'' has the meaning 
        given such term in section 1860D-1(a)(4)(B).
          (9) MA-PD plan.--The term ``MA-PD plan'' has the 
        meaning given such term in section 1860D-1(a)(4)(C).
          (10) Medicare prescription drug account.--The term 
        ``Medicare Prescription Drug Account'' means the 
        Account created under section 1860D-16(a).
          (11) PDP approved bid.--The term ``PDP approved bid'' 
        has the meaning given such term in section 1860D-
        13(a)(6).
          (12) PDP region.--The term ``PDP region'' means such 
        a region as provided under section 1860D-11(a)(2).
          (13) PDP sponsor.--The term ``PDP sponsor'' means a 
        nongovernmental entity that is certified under this 
        part as meeting the requirements and standards of this 
        part for such a sponsor.
          (14) Prescription drug plan.--The term ``prescription 
        drug plan'' means prescription drug coverage that is 
        offered--
                  (A) under a policy, contract, or plan that 
                has been approved under section 1860D-11(e); 
                and
                  (B) by a PDP sponsor pursuant to, and in 
                accordance with, a contract between the 
                Secretary and the sponsor under section 1860D-
                12(b).
          (15) Qualified prescription drug coverage.--The term 
        ``qualified prescription drug coverage'' is defined in 
        section 1860D-2(a)(1).
          (16) Standard prescription drug coverage.--The term 
        ``standard prescription drug coverage'' is defined in 
        section 1860D-2(b).
          (17) State pharmaceutical assistance program.--The 
        term ``State Pharmaceutical Assistance Program'' has 
        the meaning given such term in section 1860D-23(b).
          (18) Subsidy eligible individual.--The term ``subsidy 
        eligible individual'' has the meaning given such term 
        in section 1860D-14(a)(3)(A).
  (b) Application of Part C Provisions Under This Part.--For 
purposes of applying provisions of part C under this part with 
respect to a prescription drug plan and a PDP sponsor, unless 
otherwise provided in this part such provisions shall be 
applied as if--
          (1) any reference to an MA plan included a reference 
        to a prescription drug plan;
          (2) any reference to an MA organization or a 
        provider-sponsored organization included a reference to 
        a PDP sponsor;
          (3) any reference to a contract under section 1857 
        included a reference to a contract under section 1860D-
        12(b);
          (4) any reference to part C included a reference to 
        this part; and
          (5) any reference to an election period under section 
        1851 were a reference to an enrollment period under 
        section 1860D-1.

           *       *       *       *       *       *       *


            condition for coverage of drugs under this part

  Sec. 1860D-43. (a) In General.--In order for coverage to be 
available under this part for covered part D drugs (as defined 
in section 1860D-2(e)) of a manufacturer, the manufacturer 
must--
          [(1) participate in the Medicare coverage gap 
        discount program under section 1860D-14A;]
          (1) participate in--
                  (A) for 2011 through 2021, the Medicare 
                coverage gap discount program under section 
                1860D-14A; and
                  (B) for 2022 and each subsequent year, the 
                manufacturer discount program under section 
                1860D-14C;
          (2) have entered into and have in effect an agreement 
        described in subsection (b) of such section with the 
        Secretary; and
          (3) have entered into and have in effect, under terms 
        and conditions specified by the Secretary, a contract 
        with a third party that the Secretary has entered into 
        a contract with under subsection (d)(3) of such 
        section.
  (b) Effective Date.--Subsection (a) shall apply to covered 
part D drugs dispensed under this part on or after January 1, 
2011.
  (c) Authorizing Coverage for Drugs Not Covered Under 
Agreements.--Subsection (a) shall not apply to the dispensing 
of a covered part D drug if--
          (1) the Secretary has made a determination that the 
        availability of the drug is essential to the health of 
        beneficiaries under this part; or
          (2) the Secretary determines that in the period 
        beginning on January 1, 2011, and December 31, 2011, 
        there were extenuating circumstances.
  (d) Definition of Manufacturer.--In this section, the term 
``manufacturer'' has the meaning given such term in section 
1860D-14A(g)(5).

           *       *       *       *       *       *       *

                              ----------                              


                       PUBLIC HEALTH SERVICE ACT



           *       *       *       *       *       *       *
    TITLE XXVII--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

PART A--INDIVIDUAL AND GROUP MARKET REFORMS

           *       *       *       *       *       *       *


Subpart II--Improving Coverage

           *       *       *       *       *       *       *


SEC. 2729A. FAIR PRICE DRUG NEGOTIATION PROGRAM AND APPLICATION OF 
                    MAXIMUM FAIR PRICES.

  (a) In General.--In the case of a group health plan or health 
insurance issuer offering health insurance coverage that is 
treated under section 1197 of the Social Security Act as having 
in effect an agreement with the Secretary under the Fair Price 
Drug Negotiation Program under part E of title XI of such Act, 
with respect to a price applicability period (as defined in 
section 1191(b) of such Act) and a selected drug (as defined in 
section 1192(c) of such Act) with respect to such period with 
respect to which coverage is provided under such plan or 
coverage--
          (1) the provisions of such part shall apply to the 
        plans or coverage offered by such plan or issuer, and 
        to the individuals enrolled under such plans or 
        coverage, during such period, with respect to such 
        selected drug, in the same manner as such provisions 
        apply to prescription drug plans and MA-PD plans, and 
        to individuals enrolled under such prescription drug 
        plans and MA-PD plans;
          (2) the plan or issuer shall apply any cost-sharing 
        responsibilities under such plan or coverage, with 
        respect to such selected drug, by substituting the 
        maximum fair price negotiated under such part for such 
        drug in lieu of the contracted rate under such plan or 
        coverage for such selected drug; and
          (3) the Secretary shall apply the provisions of such 
        part to such plan, issuer, and coverage, and such 
        individuals so enrolled in such plans.
  (b) Notification Regarding Nonparticipation in Fair Drug 
Price Negotiation Program.--A group health plan or a health 
insurance issuer offering group or individual health insurance 
coverage shall publicly disclose in a manner and in accordance 
with a process specified by the Secretary any election made 
under section 1197 of the Social Security Act by the plan or 
issuer to not participate in the Fair Drug Price Negotiation 
Program under part E of title XI of such Act with respect to a 
selected drug (as defined in section 1192(c) of such Act) for 
which coverage is provided under such plan or coverage before 
the beginning of the plan year for which such election was 
made.

           *       *       *       *       *       *       *

                              ----------                              


            EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974


                            TABLE OF CONTENTS

Sec. 1. Short title and table of contents.

             TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS

     * * * * * * *

                    Subtitle B--Regulatory Provisions

     * * * * * * *

                 Part 7--Group Health Plan Requirements

     * * * * * * *

                      Subpart B--Other Requirements

Sec. 711. Standards relating to benefits for mothers and newborns.
     * * * * * * *
Sec. 714. Coverage of dependent students on medically necessary leave of 
          absence.
Sec. 716. Fair Price Drug Negotiation Program and application of maximum 
          fair prices.

           *       *       *       *       *       *       *


TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS

           *       *       *       *       *       *       *


Subtitle B--Regulatory Provisions

           *       *       *       *       *       *       *


Part 7--Group Health Plan Requirements

           *       *       *       *       *       *       *


Subpart B--Other Requirements

           *       *       *       *       *       *       *


SEC. 716. FAIR PRICE DRUG NEGOTIATION PROGRAM AND APPLICATION OF 
                    MAXIMUM FAIR PRICES.

  (a) In General.--In the case of a group health plan or health 
insurance issuer offering group health insurance coverage that 
is treated under section 1197 of the Social Security Act as 
having in effect an agreement with the Secretary under the Fair 
Price Drug Negotiation Program under part E of title XI of such 
Act, with respect to a price applicability period (as defined 
in section 1191(b) of such Act) and a selected drug (as defined 
in section 1192(c) of such Act) with respect to such period 
with respect to which coverage is provided under such plan or 
coverage--
          (1) the provisions of such part shall apply, as 
        applicable--
                  (A) if coverage of such selected drug is 
                provided under such plan or coverage if the 
                drug is furnished or dispensed at a pharmacy or 
                by a mail order service, to the plans or 
                coverage offered by such plan or issuer, and to 
                the individuals enrolled under such plans or 
                coverage, during such period, with respect to 
                such selected drug, in the same manner as such 
                provisions apply to prescription drug plans and 
                MA-PD plans, and to individuals enrolled under 
                such prescription drug plans and MA-PD plans 
                during such period; and
                  (B) if coverage of such selected drug is 
                provided under such plan or coverage if the 
                drug is furnished or administered by a 
                hospital, physician, or other provider of 
                services or supplier, to the plans or coverage 
                offered by such plan or issuers, to the 
                individuals enrolled under such plans or 
                coverage, and to hospitals, physicians, and 
                other providers of services and suppliers 
                during such period, with respect to such drug 
                in the same manner as such provisions apply to 
                the Secretary, to individuals entitled to 
                benefits under part A of title XVIII or 
                enrolled under part B of such title, and to 
                hospitals, physicians, and other providers and 
                suppliers participating under title XVIII 
                during such period;
          (2) the plan or issuer shall apply any cost-sharing 
        responsibilities under such plan or coverage, with 
        respect to such selected drug, by substituting an 
        amount not more than the maximum fair price negotiated 
        under such part E of title XI for such drug in lieu of 
        the drug price upon which the cost-sharing would have 
        otherwise applied, and such cost-sharing 
        responsibilities with respect to such selected drug may 
        not exceed such amount; and
          (3) the Secretary shall apply the provisions of such 
        part E to such plan, issuer, and coverage, and such 
        individuals so enrolled in such plans.
  (b) Notification Regarding Nonparticipation in Fair Drug 
Price Negotiation Program.--A group health plan or a health 
insurance issuer offering group health insurance coverage shall 
publicly disclose in a manner and in accordance with a process 
specified by the Secretary any election made under section 1197 
of the Social Security Act by the plan or issuer to not 
participate in the Fair Drug Price Negotiation Program under 
part E of title XI of such Act with respect to a selected drug 
(as defined in section 1192(c) of such Act) for which coverage 
is provided under such plan or coverage before the beginning of 
the plan year for which such election was made.

Subpart C--General Provisions

           *       *       *       *       *       *       *


SEC. 732. SPECIAL RULES RELATING TO GROUP HEALTH PLANS.

  (a) General Exception for Certain Small Group Health Plans.--
The requirements of this part (other than [section 711] 
sections 711 and 716) shall not apply to any group health plan 
(and group health insurance coverage offered in connection with 
a group health plan) for any plan year if, on the first day of 
such plan year, such plan has less than 2 participants who are 
current employees.
  (b) Exception for Certain Benefits.--The requirements of this 
part shall not apply to any group health plan (and group health 
insurance coverage) in relation to its provision of excepted 
benefits described in section 733(c)(1).
  (c) Exception for Certain Benefits if Certain Conditions 
Met.--
          (1) Limited, excepted benefits.--The requirements of 
        this part shall not apply to any group health plan (and 
        group health insurance coverage offered in connection 
        with a group health plan) in relation to its provision 
        of excepted benefits described in section 733(c)(2) if 
        the benefits--
                  (A) are provided under a separate policy, 
                certificate, or contract of insurance; or
                  (B) are otherwise not an integral part of the 
                plan.
          (2) Noncoordinated, excepted benefits.--The 
        requirements of this part shall not apply to any group 
        health plan (and group health insurance coverage 
        offered in connection with a group health plan) in 
        relation to its provision of excepted benefits 
        described in section 733(c)(3) if all of the following 
        conditions are met:
                  (A) The benefits are provided under a 
                separate policy, certificate, or contract of 
                insurance.
                  (B) There is no coordination between the 
                provision of such benefits and any exclusion of 
                benefits under any group health plan maintained 
                by the same plan sponsor.
                  (C) Such benefits are paid with respect to an 
                event without regard to whether benefits are 
                provided with respect to such an event under 
                any group health plan maintained by the same 
                plan sponsor.
          (3) Supplemental excepted benefits.--The requirements 
        of this part shall not apply to any group health plan 
        (and group health insurance coverage) in relation to 
        its provision of excepted benefits described in section 
        733(c)(4) if the benefits are provided under a separate 
        policy, certificate, or contract of insurance.
  (d) Treatment of Partnerships.--For purposes of this part--
          (1) Treatment as a group health plan.--Any plan, 
        fund, or program which would not be (but for this 
        subsection) an employee welfare benefit plan and which 
        is established or maintained by a partnership, to the 
        extent that such plan, fund, or program provides 
        medical care (including items and services paid for as 
        medical care) to present or former partners in the 
        partnership or to their dependents (as defined under 
        the terms of the plan, fund, or program), directly or 
        through insurance, reimbursement, or otherwise, shall 
        be treated (subject to paragraph (2)) as an employee 
        welfare benefit plan which is a group health plan.
          (2) Employer.--In the case of a group health plan, 
        the term ``employer'' also includes the partnership in 
        relation to any partner.
          (3) Participants of group health plans.--In the case 
        of a group health plan, the term ``participant'' also 
        includes--
                  (A) in connection with a group health plan 
                maintained by a partnership, an individual who 
                is a partner in relation to the partnership, or
                  (B) in connection with a group health plan 
                maintained by a self-employed individual (under 
                which one or more employees are participants), 
                the self-employed individual,
        if such individual is, or may become, eligible to 
        receive a benefit under the plan or such individual's 
        beneficiaries may be eligible to receive any such 
        benefit.

           *       *       *       *       *       *       *

                              ----------                              


                     INTERNAL REVENUE CODE OF 1986

Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


Subchapter B--COMPUTATION OF TAXABLE INCOME

           *       *       *       *       *       *       *


PART IX--ITEMS NOT DEDUCTIBLE

           *       *       *       *       *       *       *


SEC. 275. CERTAIN TAXES.

  (a) General rule.--No deduction shall be allowed for the 
following taxes:
          (1) Federal income taxes, including--
                  (A) the tax imposed by section 3101 (relating 
                to the tax on employees under the Federal 
                Insurance Contributions Act);
                  (B) the taxes imposed by sections 3201 and 
                3211 (relating to the taxes on railroad 
                employees and railroad employee 
                representatives); and
                  (C) the tax withheld at source on wages under 
                section 3402.
          (2) Federal war profits and excess profits taxes.
          (3) Estate, inheritance, legacy, succession, and gift 
        taxes.
          (4) Income, war profits, and excess profits taxes 
        imposed by the authority of any foreign country or 
        possession of the United States if the taxpayer chooses 
        to take to any extent the benefits of section 901.
          (5) Taxes on real property, to the extent that 
        section 164(d) requires such taxes to be treated as 
        imposed on another taxpayer.
          (6) Taxes imposed by chapters 41, 42, 43, 44, 45, 46, 
        and 54 or by section 4192.
Paragraph (1) shall not apply to any taxes to the extent such 
taxes are allowable as a deduction under section 164(f).
  (b) Cross reference.--For disallowance of certain other 
taxes, see section 164(c).

           *       *       *       *       *       *       *


Subtitle D--Miscellaneous Excise Taxes

           *       *       *       *       *       *       *


                 CHAPTER 32--MANUFACTURERS EXCISE TAXES

               SUBCHAPTER A. AUTOMOTIVE AND RELATED ITEMS

     * * * * * * *
[SUBCHAPTER E. MEDICAL DEVICES]
SUBCHAPTER E. OTHER MEDICAL PRODUCTS

           *       *       *       *       *       *       *


        Subchapter E-- [MEDICAL DEVICES] OTHER MEDICAL PRODUCTS

Sec. 4191. Medical devices.
Sec. 4192. Selected drugs during noncompliance periods.

           *       *       *       *       *       *       *


SEC. 4192. SELECTED DRUGS DURING NONCOMPLIANCE PERIODS.

  (a) In General.--There is hereby imposed on the sale by the 
manufacturer, producer, or importer of any selected drug during 
a day described in subsection (b) a tax in an amount such that 
the applicable percentage is equal to the ratio of--
          (1) such tax, divided by
          (2) the sum of such tax and the price for which so 
        sold.
  (b) Noncompliance Periods.--A day is described in this 
subsection with respect to a selected drug if it is a day 
during one of the following periods:
          (1) The period beginning on the June 16th immediately 
        following the selected drug publication date and ending 
        on the first date during which the manufacturer of the 
        drug has in place an agreement described in subsection 
        (a) of section 1193 of the Social Security Act with 
        respect to such drug.
          (2) The period beginning on the April 1st immediately 
        following the June 16th described in paragraph (1) and 
        ending on the first date during which the manufacturer 
        of the drug has agreed to a maximum fair price under 
        such agreement.
          (3) In the case of a selected drug with respect to 
        which the Secretary of Health and Human Services has 
        specified a renegotiation period under such agreement, 
        the period beginning on the first date after the last 
        date of such renegotiation period and ending on the 
        first date during which the manufacturer of the drug 
        has agreed to a renegotiated maximum fair price under 
        such agreement.
          (4) With respect to information that is required to 
        be submitted to the Secretary of Health and Human 
        Services under such agreement, the period beginning on 
        the date on which such Secretary certifies that such 
        information is overdue and ending on the date that such 
        information is so submitted.
          (5) In the case of a selected drug with respect to 
        which a payment is due under subsection (c) of such 
        section 1193, the period beginning on the date on which 
        the Secretary of Health and Human Services certifies 
        that such payment is overdue and ending on the date 
        that such payment is made in full.
  (c) Applicable Percentage.--The term ``applicable 
percentage'' means--
          (1) in the case of sales of a selected drug during 
        the first 90 days described in subsection (b) with 
        respect to such drug, 65 percent,
          (2) in the case of sales of such drug during the 91st 
        day through the 180th day described in subsection (b) 
        with respect to such drug, 75 percent,
          (3) in the case of sales of such drug during the 
        181st day through the 270th day described in subsection 
        (b) with respect to such drug, 85 percent, and
          (4) in the case of sales of such drug during any 
        subsequent day, 95 percent.
  (d) Definitions.--The terms ``selected drug publication 
date'' and ``maximum fair price'' have the meaning given such 
terms in section 1191 of the Social Security Act and the term 
``selected drug'' has the meaning given such term in section 
1192 of such Act.
  (e) Anti-abuse Rule.--In the case of a sale which was timed 
for the purpose of avoiding the tax imposed by this section, 
the Secretary may treat such sale as occurring during a day 
described in subsection (b).

           *       *       *       *       *       *       *


Subchapter G--EXEMPTIONS, REGISTRATION, ETC.

           *       *       *       *       *       *       *


SEC. 4221. CERTAIN TAX-FREE SALES.

  (a) General rule.--Under regulations prescribed by the 
Secretary, no tax shall be imposed under this chapter (other 
than under section 4121 or 4081) on the sale by the 
manufacturer (or under subchapter C of chapter 31 on the first 
retail sale) of an article--
          (1) for use by the purchaser for further manufacture, 
        or for resale by the purchaser to a second purchaser 
        for use by such second purchaser in further 
        manufacture,
          (2) for export, or for resale by the purchaser to a 
        second purchaser for export,
          (3) for use by the purchaser as supplies for vessels 
        or aircraft,
          (4) to a State or local government for the exclusive 
        use of a State or local government,
          (5) to a nonprofit educational organization for its 
        exclusive use, or
          (6) to a qualified blood collector organization (as 
        defined in section 7701(a)(49)) for such organization's 
        exclusive use in the collection, storage, or 
        transportation of blood,
but only if such exportation or use is to occur before any 
other use. Paragraphs (4), (5), and (6) shall not apply to the 
tax imposed by section 4064. In the case of taxes imposed by 
section 4051 or 4071, paragraphs (4) and (5) shall not apply on 
and after October 1, 2022. In the case of the tax imposed by 
section 4131, paragraphs (3), (4), and (5) shall not apply and 
paragraph (2) shall apply only if the use of the exported 
vaccine meets such requirements as the Secretary may by 
regulations prescribe. In the case of taxes imposed by 
subchapter C or D, paragraph (6) shall not apply. In the case 
of the tax imposed by section 4191 or 4192, paragraphs (3), 
(4), (5), and (6) shall not apply.
  (b) Proof of resale for further manufacture; proof of 
export.--Where an article has been sold free of tax under 
subsection (a)--
          (1) for resale by the purchaser to a second purchaser 
        for use by such second purchaser in further 
        manufacture, or
          (2) for export, or for resale by the purchaser to a 
        second purchaser for export,
subsection (a) shall cease to apply in respect of such sale of 
such article unless, within the 6-month period which begins on 
the date of the sale by the manufacturer (or, if earlier, on 
the date of shipment by the manufacturer), the manufacturer 
receives proof that the article has been exported or resold for 
use in further manufacture.
  (c) Manufacturer relieved from liability in certain cases.--
In the case of any article sold free of tax under this section 
(other than a sale to which subsection (b) applies), and in the 
case of any article sold free of tax under section 4053(6), if 
the manufacturer in good faith accepts a certification by the 
purchaser that the article will be used in accordance with the 
applicable provisions of law, no tax shall thereafter be 
imposed under this chapter in respect of such sale by such 
manufacturer.
  (d) Definitions.--For purposes of this section--
          (1) Manufacturer.--The term ``manufacturer'' includes 
        a producer or importer of an article, and, in the case 
        of taxes imposed by subchapter C of chapter 31, 
        includes the retailer with respect to the first retail 
        sale.
          (2) Export.--The term ``export'' includes shipment to 
        a possession of the United States; and the term 
        ``exported'' includes shipped to a possession of the 
        United States.
          (3) Supplies for vessels or aircraft.--The term 
        ``supplies for vessels or aircraft'' means fuel 
        supplies, ships' stores, sea stores, or legitimate 
        equipment on vessels of war of the United States or of 
        any foreign nation, vessels employed in the fisheries 
        or in the whaling business, or vessels actually engaged 
        in foreign trade or trade between the Atlantic and 
        Pacific ports of the United States or between the 
        United States and any of its possessions. For purposes 
        of the preceding sentence, the term ``vessels'' 
        includes civil aircraft employed in foreign trade or 
        trade between the United States and any of its 
        possessions, and the term ``vessels of war of the 
        United States or of any foreign nation'' includes 
        aircraft owned by the United States or by any foreign 
        nation and constituting a part of the armed forces 
        thereof.
          (4) State or local government.--The term ``State or 
        local government'' means any State, any political 
        subdivision thereof, or the District of Columbia.
          (5) Nonprofit educational organization.--The term 
        ``nonprofit educational organization'' means an 
        educational organization described in section 
        170(b)(1)(A)(ii) which is exempt from income tax under 
        section 501(a). The term also includes a school 
        operated as an activity of an organization described in 
        section 501(c)(3) which is exempt from income tax under 
        section 501(a), if such school normally maintains a 
        regular faculty and curriculum and normally has a 
        regularly enrolled body of pupils or students in 
        attendance at the place where its educational 
        activities are regularly carried on.
          (6) Use in further manufacture.--An article shall be 
        treated as sold for use in further manufacture if--
                  (A) such article is sold for use by the 
                purchaser as material in the manufacture or 
                production of, or as a component part of, 
                another article taxable under this chapter to 
                be manufactured or produced by him; or
                  (B) in the case of gasoline taxable under 
                section 4081, such gasoline is sold for use by 
                the purchaser, for nonfuel purposes, as a 
                material in the manufacture or production of 
                another article to be manufactured or produced 
                by him.
          (7) Qualified bus.--
                  (A) In general.--The term ``qualified bus'' 
                means--
                          (i) an intercity or local bus, and
                          (ii) a school bus.
                  (B) Intercity or local bus.--The term 
                ``intercity or local bus'' means any automobile 
                bus which is used predominantly in furnishing 
                (for compensation) passenger land 
                transportation available to the general public 
                if--
                          (i) such transportation is scheduled 
                        and along regular routes, or
                          (ii) the seating capacity of such bus 
                        is at least 20 adults (not including 
                        the driver).
                  (C) School bus.--The term ``school bus'' 
                means any automobile bus substantially all the 
                use of which is in transporting students and 
                employees of schools. For purposes of the 
                preceding sentence, the term ``school'' means 
                an educational organization which normally 
                maintains a regular faculty and curriculum and 
                normally has a regularly enrolled body of 
                pupils or students in attendance at the place 
                where its educational activities are carried 
                on.
  (e) Special rules.--
          (1) Reciprocity required in case of civil aircraft.--
        In the case of articles sold for use as supplies for 
        aircraft, the privileges granted under subsection 
        (a)(3) in respect of civil aircraft employed in foreign 
        trade or trade between the United States and any of its 
        possessions, in respect of aircraft registered in a 
        foreign country, shall be allowed only if the Secretary 
        of the Treasury has been advised by the Secretary of 
        Commerce that he has found that such foreign country 
        allows, or will allow, substantially reciprocal 
        privileges in respect of aircraft registered in the 
        United States. If the Secretary of the Treasury is 
        advised by the Secretary of Commerce that he has found 
        that a foreign country has discontinued or will 
        discontinue the allowance of such privileges, the 
        privileges granted under subsection (a)(3) shall not 
        apply thereafter in respect of civil aircraft 
        registered in that foreign country and employed in 
        foreign trade or trade between the United States and 
        any of its possessions.
          (2) Tires.--
                  (A) Tax-free sales.--Under regulations 
                prescribed by the Secretary, no tax shall be 
                imposed under section 4071 on the sale by the 
                manufacturer of a tire if--
                          (i) such tire is sold for use by the 
                        purchaser for sale on or in connection 
                        with the sale of another article 
                        manufactured or produced by such 
                        purchaser; and
                          (ii) such other article is to be sold 
                        by such purchaser in a sale which 
                        either will satisfy the requirements of 
                        paragraph (2), (3), (4), or (5) of 
                        subsection (a) for a tax-free sale, or 
                        would satisfy such requirements but for 
                        the fact that such other article is not 
                        subject to tax under this chapter.
                  (B) Proof.--Where a tire has been sold free 
                of tax under this paragraph, this paragraph 
                shall cease to apply unless, within the 6-month 
                period which begins on the date of the sale by 
                him (or, if earlier, on the date of the 
                shipment by him), the manufacturer of such tire 
                receives proof that the other article referred 
                to in clause (ii) of subparagraph (A) has been 
                sold in a manner which satisfies the 
                requirements of such clause (ii) (including in 
                the case of a sale for export, proof of export 
                of such other article).
                  (C) Subsection (a)(1) does not apply.--
                Paragraph (1) of subsection (a) shall not apply 
                with respect to the tax imposed under section 
                4071 on the sale of a tire.
          (3) Tires used on intercity, local, and school 
        buses.--Under regulations prescribed by the Secretary, 
        the tax imposed by section 4071 shall not apply in the 
        case of tires sold for use by the purchaser on or in 
        connection with a qualified bus.

           *       *       *       *       *       *       *


Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *


CHAPTER 65--ABATEMENTS, CREDITS, AND REFUNDS

           *       *       *       *       *       *       *


Subchapter B--RULES OF SPECIAL APPLICATION

           *       *       *       *       *       *       *


SEC. 6416. CERTAIN TAXES ON SALES AND SERVICES.

  (a) Condition to allowance.--
          (1) General rule.--No credit or refund of any 
        overpayment of tax imposed by chapter 31 (relating to 
        retail excise taxes), or chapter 32 (manufacturers 
        taxes), shall be allowed or made unless the person who 
        paid the tax establishes, under regulations prescribed 
        by the Secretary, that he--
                  (A) has not included the tax in the price of 
                the article with respect to which it was 
                imposed and has not collected the amount of the 
                tax from the person who purchased such article;
                  (B) has repaid the amount of the tax to the 
                ultimate purchaser of the article;
                  (C) in the case of an overpayment under 
                subsection (b)(2) of this section--
                          (i) has repaid or agreed to repay the 
                        amount of the tax to the ultimate 
                        vendor of the article, or
                          (ii) has obtained the written consent 
                        of such ultimate vendor to the 
                        allowance of the credit or the making 
                        of the refund; or
                  (D) has filed with the Secretary the written 
                consent of the person referred to in 
                subparagraph (B) to the allowance of the credit 
                or the making of the refund.
          (2) Exceptions.--This subsection shall not apply to--
                  (A) the tax imposed by section 4041 (relating 
                to tax on special fuels) on the use of any 
                liquid, and
                  (B) an overpayment of tax under paragraph 
                (1), (3)(A), (4), (5), or (6) of subsection (b) 
                of this section.
          (3) Special rule.--For purposes of this subsection, 
        in any case in which the Secretary determines that an 
        article is not taxable, the term ``ultimate purchaser'' 
        (when used in paragraph (1)(B) of this subsection) 
        includes a wholesaler, jobber, distributor, or retailer 
        who, on the 15th day after the date of such 
        determination, holds such article for sale; but only if 
        claim for credit or refund by reason of this paragraph 
        is filed on or before the date for filing the return 
        with respect to the taxes imposed under chapter 32 for 
        the first period which begins more than 60 days after 
        the date on such determination.
          (4) Registered ultimate vendor or credit card issuer 
        to administer credits and refunds of gasoline tax.--
                  (A) In general.--For purposes of this 
                subsection, except as provided in subparagraph 
                (B), if an ultimate vendor purchases any 
                gasoline on which tax imposed by section 4081 
                has been paid and sells such gasoline to an 
                ultimate purchaser described in subparagraph 
                (C) or (D) of subsection (b)(2) (and such 
                gasoline is for a use described in such 
                subparagraph), such ultimate vendor shall be 
                treated as the person (and the only person) who 
                paid such tax, but only if such ultimate vendor 
                is registered under section 4101.
                  (B) Credit card issuer.--For purposes of this 
                subsection, if the purchase of gasoline 
                described in subparagraph (A) (determined 
                without regard to the registration status of 
                the ultimate vendor) is made by means of a 
                credit card issued to the ultimate purchaser, 
                paragraph (1) shall not apply and the person 
                extending the credit to the ultimate purchaser 
                shall be treated as the person (and the only 
                person) who paid the tax, but only if such 
                person--
                          (i) is registered under section 4101,
                          (ii) has established, under 
                        regulations prescribed by the 
                        Secretary, that such person--
                                  (I) has not collected the 
                                amount of the tax from the 
                                person who purchased such 
                                article, or
                                  (II) has obtained the written 
                                consent from the ultimate 
                                purchaser to the allowance of 
                                the credit or refund, and
                          (iii) has so established that such 
                        person--
                                  (I) has repaid or agreed to 
                                repay the amount of the tax to 
                                the ultimate vendor,
                                  (II) has obtained the written 
                                consent of the ultimate vendor 
                                to the allowance of the credit 
                                or refund, or
                                  (III) has otherwise made 
                                arrangements which directly or 
                                indirectly provides the 
                                ultimate vendor with 
                                reimbursement of such tax.
                If clause (i), (ii), or (iii) is not met by 
                such person extending the credit to the 
                ultimate purchaser, then such person shall 
                collect an amount equal to the tax from the 
                ultimate purchaser and only such ultimate 
                purchaser may claim such credit or payment.
                  (C) Timing of claims.--The procedure and 
                timing of any claim under subparagraph (A) or 
                (B) shall be the same as for claims under 
                section 6427(i)(4), except that the rules of 
                section 6427(i)(3)(B) regarding electronic 
                claims shall not apply unless the ultimate 
                vendor or credit card issuer has certified to 
                the Secretary for the most recent quarter of 
                the taxable year that all ultimate purchasers 
                of the vendor or credit card issuer are 
                certified and entitled to a refund under 
                subparagraph (C) or (D) of subsection (b)(2).
  (b) Special cases in which tax payments considered 
overpayments.--Under regulations prescribed by the Secretary, 
credit or refund (without interest) shall be allowed or made in 
respect of the overpayments determined under the following 
paragraphs:
          (1) Price readjustments.--
                  (A) In general.--Except as provided in 
                subparagraph (B) or (C), if the price of any 
                article in respect of which a tax, based on 
                such price, is imposed by chapter 31 or 32, is 
                readjusted by reason of the return or 
                repossession of the article or a covering or 
                container, or by a bona fide discount, rebate, 
                or allowance, including a readjustment for 
                local advertising (but only to the extent 
                provided in section 4216(e)(2) and (3)), the 
                part of the tax proportionate to the part of 
                the price repaid or credited to the purchaser 
                shall be deemed to be an overpayment.
                  (B) Further manufacture.--Subparagraph (A) 
                shall not apply in the case of an article in 
                respect of which tax was computed under section 
                4223(b)(2); but if the price for which such 
                article was sold is readjusted by reason of the 
                return or repossession of the article, the part 
                of the tax proportionate to the part of such 
                price repaid or credited to the purchaser shall 
                be deemed to be an overpayment.
                  (C) Adjustment of tire price.--No credit or 
                refund of any tax imposed by subsection (a) or 
                (b) of section 4071 shall be allowed or made by 
                reason of an adjustment of a tire pursuant to a 
                warranty or guarantee.
          (2) Specified uses and resales.--The tax paid under 
        chapter 32 (or under subsection (a) or (d) of section 
        4041 in respect of sales or under section 4051) in 
        respect of any article shall be deemed to be an 
        overpayment if such article was, by any person--
                  (A) exported;
                  (B) used or sold for use as supplies for 
                vessels or aircraft;
                  (C) sold to a State or local government for 
                the exclusive use of a State or local 
                government;
                  (D) sold to a nonprofit educational 
                organization for its exclusive use;
                  (E) sold to a qualified blood collector 
                organization (as defined in section 
                7701(a)(49)) for such organization's exclusive 
                use in the collection, storage, or 
                transportation of blood;
                  (F) in the case of any tire taxable under 
                section 4071(a), sold to any person for use as 
                described in section 4221(e)(3); or
                  (G) in the case of gasoline, used or sold for 
                use in the production of special fuels referred 
                to in section 4041.
        Subparagraphs (C), (D), and (E) shall not apply in the 
        case of any tax paid under section 4064. In the case of 
        the tax imposed by section 4131, subparagraphs (B), 
        (C), (D), and (E) shall not apply and subparagraph (A) 
        shall apply only if the use of the exported vaccine 
        meets such requirements as the Secretary may by 
        regulations prescribe. This paragraph shall not apply 
        in the case of any tax imposed under section 4041(a)(1) 
        or 4081 on diesel fuel or kerosene and any tax paid 
        under section 4121. Subparagraphs (C) and (D) shall not 
        apply in the case of any tax imposed on gasoline under 
        section 4081 if the requirements of subsection (a)(4) 
        are not met. In the case of taxes imposed by subchapter 
        C or D of chapter 32, subparagraph (E) shall not apply. 
        In the case of the tax imposed by section 4191 or 4192, 
        subparagraphs (B), (C), (D), and (E) shall not apply.
          (3) Tax-paid articles used for further manufacture, 
        etc..--If the tax imposed by chapter 32 has been paid 
        with respect to the sale of any article (other than 
        coal taxable under section 4121) by the manufacturer, 
        producer, or importer thereof and such article is sold 
        to a subsequent manufacturer or producer before being 
        used, such tax shall be deemed to be an overpayment by 
        such subsequent manufacturer or producer if--
                  (A) in the case of any article other than any 
                fuel taxable under section 4081, such article 
                is used by the subsequent manufacturer or 
                producer as material in the manufacture or 
                production of, or as a component part of--
                          (i) another article taxable under 
                        chapter 32, or
                          (ii) an automobile bus chassis or an 
                        automobile bus body,
                manufactured or produced by him; or
                  (B) in the case of any fuel taxable under 
                section 4081, such fuel is used by the 
                subsequent manufacturer or producer, for 
                nonfuel purposes, as a material in the 
                manufacture or production of any other article 
                manufactured or produced by him.
          (4) Tires.--If--
                  (A) the tax imposed by section 4071 has been 
                paid with respect to the sale of any tire by 
                the manufacturer, producer, or importer 
                thereof, and
                  (B) such tire is sold by any person on or in 
                connection with, or with the sale of, any other 
                article, such tax shall be deemed to be an 
                overpayment by such person if such other 
                article is--
                          (i) an automobile bus chassis or an 
                        automobile bus body,
                          (ii) by such person exported, sold to 
                        a State or local government for the 
                        exclusive use of a State or local 
                        government, sold to a nonprofit 
                        educational organization for its 
                        exclusive use, or used or sold for use 
                        as supplies for vessels or aircraft, or
                          (iii) sold to a qualified blood 
                        collector organization for its 
                        exclusive use in connection with a 
                        vehicle the organization certifies will 
                        be primarily used in the collection, 
                        storage, or transportation of blood.
          (5) Return of certain installment accounts.--If--
                  (A) tax was paid under section 4216(d)(1) in 
                respect of any installment account,
                  (B) such account is, under the agreement 
                under which the account was sold, returned to 
                the person who sold such account, and
                  (C) the consideration is readjusted as 
                provided in such agreement,
        the part of the tax paid under section 4216(d)(1) 
        allocable to the part of the consideration repaid or 
        credited to the purchaser of such account shall be 
        deemed to be an overpayment.
          (6) Truck chassis, bodies, and semitrailers used for 
        further manufacture.--If--
                  (A) the tax imposed by section 4051 has been 
                paid with respect to the sale of any article, 
                and
                  (B) before any other use, such article is by 
                any person used as a component part of another 
                article taxable under section 4051 manufactured 
                or produced by him,
        such tax shall be deemed to be an overpayment by such 
        person. For purposes of the preceding sentence, an 
        article shall be treated as having been used as a 
        component part of another article if, had it not been 
        broken or rendered useless in the manufacture or 
        production of such other article, it would have been so 
        used.
This subsection shall apply in respect of an article only if 
the exportation or use referred to in the applicable provision 
of this subsection occurs before any other use, or, in the case 
of a sale or resale, the use referred to in the applicable 
provision of this subsection is to occur before any other use.
  (c) Refund to exporter or shipper.--Under regulations 
prescribed by the Secretary the amount of any tax imposed by 
chapter 31, or chapter 32 erroneously or illegally collected in 
respect of any article exported to a foreign country or shipped 
to a possession of the United States may be refunded to the 
exporter or shipper thereof, if the person who paid such tax 
waives his claim to such amount.
  (d) Credit on returns.--Any person entitled to a refund of 
tax imposed by chapter 31 or 32, paid to the Secretary may, 
instead of filing a claim for refund, take credit therefor 
against taxes imposed by such chapter due on any subsequent 
return. The preceding sentence shall not apply to the tax 
imposed by section 4081 in the case of refunds described in 
section 4081(e).
  (e) Accounting procedures for like articles.--Under 
regulations prescribed by the Secretary, if any person uses or 
resells like articles, then for purposes of this section the 
manufacturer, producer, or importer of any such article may be 
identified, and the amount of tax paid under chapter 32 in 
respect of such article may be determined--
          (1) on a first-in-first-out basis,
          (2) on a last-in-first-out basis, or
          (3) in accordance with any other consistent method 
        approved by the Secretary.
  (f) Meaning of terms.--For purposes of this section, any term 
used in this section has the same meaning as when used in 
chapter 31, 32, or 33, as the case may be.

           *       *       *       *       *       *       *


Subtitle K--Group Health Plan Requirements

           *       *       *       *       *       *       *


CHAPTER 100--GROUP HEALTH PLAN REQUIREMENTS

           *       *       *       *       *       *       *


                    Subchapter B--OTHER REQUIREMENTS

Sec.
9811. Standards relating to benefits for mothers and newborns.
     * * * * * * *
9815. Additional market reforms.
9816. Fair Price Drug Negotiation Program and application of maximum 
          fair prices.

           *       *       *       *       *       *       *


SEC. 9816. FAIR PRICE DRUG NEGOTIATION PROGRAM AND APPLICATION OF 
                    MAXIMUM FAIR PRICES.

  (a) In General.--In the case of a group health plan that is 
treated under section 1197 of the Social Security Act as having 
in effect an agreement with the Secretary under the Fair Price 
Drug Negotiation Program under part E of title XI of such Act, 
with respect to a price applicability period (as defined in 
section 1191(b) of such Act) and a selected drug (as defined in 
section 1192(c) of such Act) with respect to such period with 
respect to which coverage is provided under such plan--
          (1) the provisions of such part shall apply to the 
        plans offered by such plan, and to the individuals 
        enrolled under such plans, during such period, with 
        respect to such selected drug, in the same manner as 
        such provisions apply to prescription drug plans and 
        MA-PD plans, and to individuals enrolled under such 
        prescription drug plans and MA-PD plans;
          (2) the plan shall apply any cost-sharing 
        responsibilities under such plan, with respect to such 
        selected drug, by substituting the maximum fair price 
        negotiated under such part for such drug in lieu of the 
        contracted rate under such plan for such selected drug; 
        and
          (3) the Secretary shall apply the provisions of such 
        part to such plan and such individuals so enrolled in 
        such plan.
  (b) Notification Regarding Nonparticipation in Fair Drug 
Price Negotiation Program.--A group health plan shall publicly 
disclose in a manner and in accordance with a process specified 
by the Secretary any election made under section 1197 of the 
Social Security Act by the plan to not participate in the Fair 
Drug Price Negotiation Program under part E of title XI of such 
Act with respect to a selected drug (as defined in section 
1192(c) of such Act) for which coverage is provided under such 
plan before the beginning of the plan year for which such 
election was made.

                             MINORITY VIEWS

                              Introduction

    The costs of prescription drugs are a major concern for all 
Americans. According to a recent poll, one in four people worry 
about affording their medication.\1\ While nearly all employer-
sponsored plans cover prescription drug benefits, the majority 
of plan participants are subject to cost-sharing payments, such 
as copays or co-insurance, for coverage. While overall consumer 
and health-plan drug spending has fallen, the out-of-pocket 
costs are expected to continue to increase in the coming years. 
These increasing costs demand that Congress pass a bipartisan 
solution for American workers and families.
---------------------------------------------------------------------------
    \1\Rabah Kamal et al., Kaiser Family Found., What are the Recent 
and Forecasted Trends in Prescription Drug Spending? (Feb. 20, 2019), 
https://www.healthsystemtracker.org/chart-collection/recent-forecasted-
trends-prescription-drug-spending/#item-start.
---------------------------------------------------------------------------

    Bipartisan Activities To Lower Drug Costs in the 116TH Congress

    Addressing rising prescription drug costs have been a key 
area of bipartisan consensus for both the House of 
Representatives and the Senate under Republican leadership. 
This work has continued during the 116th Congress. The Senate 
Committee on Health, Education, Labor, and Pensions included 
drug pricing and transparency reforms in S. 1895, the Lower 
Health Care Costs Act, which passed the Committee on June 26, 
2019, by a vote of 20-3. This bill includes provisions to 
provide more transparency for patents and licenses, increase 
access to generics, clarify regulatory definitions, and 
modernize labeling. On July 25, 2019, the Senate Committee on 
Finance approved the chairman's mark of the Prescription Drug 
Pricing Act of 2019, by a vote of 19-9. This bill includes 
provisions to redesign the Medicare Part D program, increase 
transparency for manufacturers and pharmacy benefit managers, 
and change Medicaid payment structures. The House Committees on 
Energy and Commerce and Ways and Means have also worked on 
bipartisan bills during the 116th Congress to address high 
prescription drug prices, including proposals to reduce costs 
in Medicaid and Medicare Part D, increase consumer 
transparency, create faster approval processes for generic 
drugs, and improve manufacturer reporting. Two of these bills 
have become law, while others have passed the House and are 
awaiting votes in the Senate or have been favorably reported 
out of committee and are still awaiting a House floor vote.

                         Fatal Flaws in H.R. 3

H.R. 3's Political Process Threatens Bipartisan Drug Pricing Work
    Clearly, as the work described previously demonstrates, 
efforts to lower drug costs for American families are a 
bipartisan priority. However, instead of working together to 
pass bipartisan legislation that can be considered in the 
Senate and signed by the President, Speaker Pelosi continues to 
prioritize partisan politics over progress. At the Committee's 
markup of H.R. 3, Republican Leader Virginia Foxx (R-NC) raised 
these concerns in her opening statement:

          It is no surprise that 70 percent of Americans 
        consider this a top priority' and want Congress to 
        tackle prescription drug costs. That is why 
        Congressional efforts to bring down drug costs for the 
        American people have been, and should continue to be, a 
        collaborative and bipartisan effort.\2\
---------------------------------------------------------------------------
    \2\H.R. 3, Lower Drug Costs Now Act: Markup Before the H. Comm. on 
Educ. & Lab., 116th Cong. (2019) (statement of Virginia Foxx, 
Republican Leader, Comm. on Educ. & Lab.).

    Earlier this year, Speaker Pelosi chose to shamelessly 
politicize a number of bipartisan drug-pricing bills by pairing 
them with partisan bills to bail out Obamacare in H.R. 987, the 
Strengthening Health Care and Lowering Prescription Drug Costs 
Act, which passed the House on May 21, 2019, by a vote of 234-
183. Now, Speaker Pelosi is ramming through H.R. 3, a bill 
drafted in secret without Member input or the collaborative 
Committee process. Republican Leader Foxx also noted that H.R. 
3 does not have a complete Congressional Budget Office (CBO) 
analysis, making an accurate discussion of the impact of H.R. 
---------------------------------------------------------------------------
3's policies virtually impossible:

          House Democrats are so committed to this extreme plan 
        that they rushed a CBO score that provides less than a 
        full picture of the costs of this ill-advised 
        legislation and are intent on ramming this legislation 
        through the House before the full implications are 
        known or carefully considered.\3\
---------------------------------------------------------------------------
    \3\Id.

    Republican Leader of the Subcommittee on Health, 
Employment, Labor, and Pensions (HELP) Tim Walberg (R-MI) added 
his concerns about the process and priorities of House 
---------------------------------------------------------------------------
Democrats during his opening statement at the Committee markup:

          Instead of holding a hearing on this socialist agenda 
        drug-pricing scheme that will hurt the development of 
        money-saving treatments and more importantly people's 
        lives, the Committee's time would be better spent 
        finding bipartisan solutions to our nation's 
        problems.\4\
---------------------------------------------------------------------------
    \4\Id. (statement of Tim Walberg, Republican Leader, Subcomm. on 
Health, Emp., Lab., & Pensions, Comm. on Educ. & Lab.).
---------------------------------------------------------------------------
H.R. 3 Harms Private Markets with Unprecedented Government Interference
    H.R. 3's requirement for the Secretary of Health and Human 
Services (HHS) to make HHS-negotiated prices accessible to the 
commercial market requires unprecedented government 
interference in private market prices. The federal government 
holds all the bargaining power and leverage in this negotiation 
process, including patent exclusivity and drug coverage in 
public programs. Paired with the additional threat of excise 
taxes for noncompliance, this radical scheme only allows the 
government to dictate prices instead of truly negotiating.
    In testimony to the HELP Subcommittee on September 26, 
2019, Christopher Holt of the American Action Forum discussed 
the perils of this ``negotiation'' process:

          First, the rhetoric of a voluntary-bilateral process 
        seems facetious when any manufacturer who declines to 
        participate in the voluntary process is subject to the 
        . . . 95 percent tax on gross receipts. Additionally, 
        the process of reaching an agreement on [a Maximum Fair 
        Price] cannot truly be said to be a negotiation when 
        the manufacturer is required to reach an agreement with 
        the Secretary or else be deemed not to have negotiated 
        in good faith--and once again face the tax penalty.\5\
---------------------------------------------------------------------------
    \5\ Making Health Care More Affordable: Lowering Drug Prices and 
Increasing Transparency: Hearing Before the Subcomm. on Health, Emp., 
Lab., & Pensions of the H. Comm. on Educ. & Lab., 116th Cong. (2019) 
(statement of Christopher Holt, Director of Health Care Pol'y, Am. 
Action F.) [hereinafter Holt Statement].

    The impact of this policy is also negligible unless the 
Secretary is willing to limit access to high-cost therapies. 
CBO concluded that direct negotiation of drugs in Medicare by 
the federal government would have ``a negligible effect on 
federal spending'' without establishing a single, government-
controlled formulary--where innovative, breakthrough drugs for 
seniors could be excluded due to cost reasons and where 
patients have no right to choose another option.\6\
---------------------------------------------------------------------------
    \6\ Letter from CBO to Sen. Chuck Grassley (May 17, 2019), https://
www.cbo.gov/system/files/2019-05/55270-DrugPricesMedicare.pdf.
---------------------------------------------------------------------------
    Mr. Holt also detailed the impact direct negotiation would 
have on access in the Medicare program:

          For the federal government to undertake this kind of 
        negotiation, there would need to be a single federal 
        formulary. In other words, the Secretary would have to 
        be willing to say no to many treatments on behalf of 
        all beneficiaries in order to drive discounts system-
        wide. Beneficiaries' choices would drop from 27 plans 
        to 1. Further, beneficiaries would no longer be able to 
        shop for the plan that is best for them; rather they 
        would have to simply hope the government was able to 
        negotiate a good deal for the drug(s) they need.\7\
---------------------------------------------------------------------------
    \7\Holt Statement, supra note 6.
---------------------------------------------------------------------------

H.R. 3 Jeopardizes Access to Lifesaving Medicines

    One of the main impacts of H.R. 3 is significantly reduced 
access to pharmaceutical innovations. Countries that have 
adopted drug-pricing systems similar to those included in H.R. 
3 face decreased access, increased wait times, and even supply 
shortages. A recent analysis conducted by HHS on international 
drug access found that of the 27 drugs examined, only 11 were 
available in all 16 countries included in the analysis.\8\ In 
contrast, all the same drugs were covered in the United States 
under Medicare without restriction. Similarly, analysis 
conducted by PhRMA found that nearly 90 percent of new 
medicines launched from 2011 to 2017 are available in the 
United States, compared to 64 percent in Germany, 59 percent in 
the United Kingdom, 51 percent in Japan, 50 percent in France, 
and 46 percent in Canada.\9\ Even when new drugs are available, 
there are often significant wait times until treatment can 
commence. The same analysis found that cancer drugs are 
available on average 17 months sooner in the United States than 
the other countries evaluated.\10\
---------------------------------------------------------------------------
    \8\HHS, Off. of the Assistant Sec'y. for Plan. & Evaluation, 
Comparison of U.S. and International Prices for Top Medicare Part B 
Drugs by Total Expenditures (Oct. 25, 2018).
    \9\PhRMA, Analysis of IQVIA Analytics Link and FDA, EMA and PMDA 
Data on New Active Substances First Launched Globally Between 2011 and 
2018 (May 2019).
    \10\ Id.
---------------------------------------------------------------------------
    In his testimony, Mr. Holt argued that limiting access to 
new drugs is not worth the potential costs:

          Other countries that seek to limit drug spending 
        through restrictive government price controls have made 
        the determination that lower spending is more important 
        than access to the range of innovative new drugs. 
        Having the government decide that Americans should not 
        have access to new, innovative treatments in a timely 
        manner because the value of those treatments is not 
        worth the cost to taxpayers, or in this case private 
        payers as well, has long been a bridge too far for both 
        American patients and policymakers. Changing that 
        calculus would be a sea change. Markets provide an 
        effective means for determining value to consumers, one 
        that policymakers should be reticent to eliminate.\11\
---------------------------------------------------------------------------
    \11\ Holt Statement, supra note 6.
---------------------------------------------------------------------------

H.R. 3 Suffocates Research and Development for Breakthrough Cures

    Another significant impact of H.R. 3 is severely reduced 
investment in research and development of future treatments. A 
Department of Commerce report estimated that current price 
controls in foreign countries suppress worldwide private 
investment by up to 16 percent each year.\12\ Additional 
estimates found that the proposals included in H.R. 3 could 
lead to over $200 billion in cuts over the next 10 years.\13\
---------------------------------------------------------------------------
    \12\U.S. Dep't of Com., Pharmaceutical Price Controls in OECD 
Countries: Implications for U.S. Consumers, Pricing, Research and 
Development, and Innovation (Dec. 2004).
    \13\NDP Analytics, IP-Intensive Manufacturing Industries: Driving 
U.S. Economic Growth (Sept. 2017), http://www.ndpanalytics.com/s/IP-
Report-2017.pdf.
---------------------------------------------------------------------------
    In testimony to the HELP Subcommittee on September 26, 
2019, Dr. Craig Garthwaite outlined the relationship between 
research and development, prices and access to breakthrough 
cures:

          Through either patents or other forms of market 
        exclusivity, governments arm firms with time limited 
        periods of enhanced market power that allow them to 
        capture the value by creating innovative products. 
        During this time period, the high prices curtail some 
        access to valuable medicines. However, this reduced 
        access today is deliberately traded off for the 
        development of new products in the future. These new 
        products provide access to patients for whom there 
        would otherwise be no treatment.\14\

    \14\ Making Health Care More Affordable: Lowering Drug Prices and 
Increasing Transparency: Hearing Before the Subcomm. on Health, Emp., 
Lab., & Pensions of the H. Comm. on Educ. & Lab., 116th Cong. (2019) 
(statement of Craig Garthwaite, Associate Professor of Strategy, 
Northwestern U.) [hereinafter Garthwaite Statement].

    Dr. Garthwaite further explained the unintended 
consequences that need to be seriously considered when 
---------------------------------------------------------------------------
implementing proposals like H.R. 3:

          While the existing parameters may not reflect a 
        perfectly thought out calculus, they do determine the 
        existing level of investments in innovation in market. 
        Therefore, changing these parameters will decrease 
        investment in innovation and therefore should reflect a 
        willingness to decrease the flow of new products to 
        market in exchange for lower prices. Policies which do 
        not seriously consider the potential negative impacts 
        on innovation from changing these innovation policy 
        parameters are likely to have unintended 
        consequences.\15\
---------------------------------------------------------------------------
    \15\Id.

    European investments in new drugs have undergone a 
significant and negative shift after adopting international-
reference pricing and other government mandates. Before these 
proposals were enacted, research and development investment in 
Europe was 24 percent higher than in the United States. But 
today, Europe's investment is over 40 percent lower than the 
United States.\16\
---------------------------------------------------------------------------
    \16\Joseph Golec & John Vernon, European Pharmaceutical Price 
Regulation, Firm Profitability, and R&D Spending, NBER Working Paper 
No. 12676, Nat'l Bureau of Econ. Res. (Nov. 2006), http://www.nber.org/
papers/w12676; European Comm'n, the 2016 EU Industrial R&D Investment 
Scoreboard (2016), http://publications.jrc.ec.europa.eu/repository/
bitstream/JRC103716/jrc103716_sb_report_online_final_18-1-2017.pdf.
---------------------------------------------------------------------------
    Another negative effect of H.R. 3 on research and 
development is the increased reliance on the National 
Institutes of Health (NIH) rather than private-sector 
investments. While the NIH plays an important role in the 
development of new medicines, its focus is limited to basic 
scientific research, not the complete pipeline of 
pharmaceutical trials and production. Dr. Garthwaite discussed 
the role of the NIH in detail in his testimony to the HELP 
Subcommittee:

          Proponents of the Lower Drug Costs Now Act point to 
        the fact that the savings from the greater price 
        regulation dictated by the bill can be redirected 
        towards the NIH to offset the expected decline in 
        innovation. However, this belief ignores the current 
        role of the NIH--which is to evaluate and fund basic 
        science and not drug development and commercialization. 
        While there are a small number of examples of the NIH 
        taking part in more advanced stages of drug 
        development, these are certainly the exception rather 
        than the rule--as would be expected given the purpose 
        of the NIH is to solve the public goods problem for 
        basic science research. To move into a primary drug 
        development role, the NIH would need to transform into 
        something that more closely resembles the private 
        market. It is not simply a question of providing more 
        funding for the NIH's current system, but transforming 
        in many ways the purpose and activities of the current 
        NIH.\17\
---------------------------------------------------------------------------
    \17\ Garthwaite Statement, supra note 15.

    Eliminating private-investment incentives and abilities and 
relying on the NIH to make up the difference will jeopardize 
future cures for diseases like Alzheimer's, cancer, sickle cell 
disease, and others.

                         Republican Amendments

    H.R. 3 is yet another radical House Democrat political ploy 
that previews a one-size-fits-all socialist takeover of our 
health care system. In an attempt to highlight the shortcomings 
of H.R. 3 and improve a fatally-flawed bill, Republican 
Committee Members offered the following amendments:
    Representatives Tim Walberg (R-MI) and Elise Stefanik (R-
NY) raised concerns about H.R. 3's dramatically harmful impact 
on the development of medical breakthroughs for Alzheimer's 
disease and offered an amendment to remove potential new drugs 
for Alzheimer's treatment and cures from the list of eligible 
negotiated drugs. Alzheimer's disease is a degenerative type of 
dementia that affects memory and cognitive abilities. The 
symptoms gradually worsen over time, and include 
disorientation, mood swings, deep confusion, unfounded 
suspicions, memory loss, and difficulty speaking, swallowing, 
or walking. Many individuals can lose their ability to live 
independently, converse, recognize loved ones, or respond to 
their environment. There is currently no cure for the 5.6 
million Americans impacted by Alzheimer's disease, and that 
number is anticipated to rise to nearly 14 million by the year 
2050.\18\ At least $70 billion has already been invested in 
finding a cure to date. Committee Democrats opposed protecting 
and enhancing research to end this terrible disease and 
defeated the amendment on a party-line vote of 19-26.
---------------------------------------------------------------------------
    \18\Alzheimer's Association, 2019 Alzheimer's Disease Facts and 
Figures (2019), https://www.alz.org/media/Documents/Alzheimers-facts-
and-figures-2019-r.pdf.
---------------------------------------------------------------------------
    Since H.R. 3 gives an edge to China in developing 
pharmaceutical manufacturing and innovation capabilities at the 
expense of U.S. companies, patients, jobs, and families, 
Representative Rick Allen (R-GA) offered an amendment to 
require the Secretary of Labor to certify that H.R. 3 would not 
result in biotechnology investment or manufacturing jobs moving 
to China and if the Secretary could not make this 
certification, provisions of H.R. 3 would not go into effect. 
Disregarding China's growing threat to our economy, national 
security, and patient health, all Committee Democrats opposed 
the amendment which was defeated on a party-line vote of 20-26.
    Fiduciary duty under the Employee Retirement Income 
Security Act of 1974 (ERISA) is a high standard that requires 
plan sponsors to act in the sole interest of their workers. 
Representative Dusty Johnson (R-SD) offered an amendment to 
clarify that employers who act in the best interest of their 
plan and choose not to accept the government-set price for 
drugs do not violate their fiduciary duty under the plan. 
Employers are skilled health care consumers that make complex 
plan decisions and are required to uphold a high standard of 
loyalty, care, skill, prudence, and diligence under ERISA. 
Committee Democrats disagreed that employers can negotiate 
better deals on drug prices, make responsible decisions on 
behalf of their employees, and uphold the importance of 
employers' fiduciary duty on a party-line vote of 20-26.
    H.R. 3 requires employers to report to the federal 
government if they choose not to use the HHS price controls, 
and the federal government must publish a list of those 
employers to the public. Republican Leader Virginia Foxx (R-NC) 
offered an amendment that would modify H.R. 3's reporting 
requirements to ensure that employers are not required to 
inform the government about their choice not to use the 
government price controls if they can negotiate a lower price 
for drugs on their own. Employers should not be publicly shamed 
for making responsible decisions for their employees and face 
the wrath of special-interest groups and activists. Using the 
heavy hand of the federal government to subject employers to a 
public shame list, Committee Democrats protected these coercive 
tactics by defeating the amendment on a party-line vote of 21-
26.
    The pharmaceutical industry directly employs over 800,000 
workers and indirectly supports an estimated 4 million jobs 
across the country and because H.R. 3 would reduce economic 
investment in drugs to cure deadly diseases while promoting 
outsourcing of related jobs, Republican Leader Foxx also 
offered an amendment to require the Government Accountability 
Office (GAO) to conduct a study on how many jobs would be lost 
under H.R. 3 and if GAO found that more than 50,000 
manufacturing, construction, research and development, and 
scientist jobs would be lost, the legislation would not go into 
effect. Apparently, Committee Democrats want to be left in the 
dark about, or keep hidden, the potential impact of H.R. 3 on 
high-wage manufacturing, construction, research and 
development, and scientist jobs as many experts predict, voting 
in lockstep to defeat the amendment on a party-line vote of 21-
26.
    The United States is the leader of medical innovation 
worldwide, and some preliminary analysis suggests that H.R. 3 
could reduce investments in research and development by as much 
as $1 trillion over 10 years.\19\ Representative Mark Walker 
(R-NC) offered an amendment to require GAO to conduct a study 
on how much research and development would be affected by H.R. 
3. If GAO found that research and development investment would 
decrease by $10 billion or more per year, H.R. 3 would not go 
into effect. Committee Democrats disagreed that research and 
development investments are crucial to developing new 
breakthrough cures, defeating the amendment on a party-line 
vote of 21-27.
---------------------------------------------------------------------------
    \19\PhRMA, Get the Facts on H.R. 3 Innovation (2019).
---------------------------------------------------------------------------
    As discussed previously, other countries that have 
implemented similar proposals as those included in H.R. 3 face 
decreased access to new drugs, shortages, and wait times, which 
is why Representative Phil Roe (R-TN) offered an amendment to 
require the Secretary of Labor to certify that H.R. 3 would not 
result in decreased access to prescription drugs in employer-
sponsored plans and if the Secretary cannot make this 
certification, provisions of H.R. 3 would not go into effect. 
Committee Democrats disagreed that preserving access to 
prescription drugs in employer plans was an important 
consideration and defeated the amendment on a party-line vote 
of 21-27.

                               Conclusion

    H.R. 3 is a politically motivated socialist scheme which 
damages private markets with unprecedented government 
interference, effectively allowing the federal government to 
set drug prices and impose a 95 percent excise tax. H.R. 3 also 
jeopardizes access to life-saving medications for Americans in 
desperate need of treatment and cures. Finally, H.R. 3 
suffocates essential research and development investments 
needed to develop breakthrough cures for difficult and rare 
diseases. Ever-increasing drug prices must be addressed by 
Congress in a bipartisan manner. But unfortunately, Speaker 
Pelosi and her Democrat colleagues have chosen the most 
partisan approach possible. However, Committee Republicans 
stand ready to work with Democrats to push for serious and 
necessary legislation that promotes competition, lowers out-of-
pocket costs for consumers, and establishes transparency and 
accountability in drug costs. For these reasons and those 
outlined above, Committee Republicans strongly oppose enactment 
of H.R. 3 as reported by the Committee on Education and Labor.

                                   Virginia Foxx,
                                           Ranking Member.
                                   David P. Roe.
                                   Glenn ``GT'' Thompson.
                                   Tim Walberg.
                                   Brett Guthrie.
                                   Bradley Byrne.
                                   Glenn Grothman.
                                   Elise M. Stefanik.
                                   Rick W. Allen.
                                   Lloyd Smucker.
                                   Jim Banks.
                                   Mark Walker.
                                   James Comer.
                                   Ben Cline.
                                   Russ Fulcher.
                                   Van Taylor.
                                   Steve C. Watkins, Jr.
                                   Ron Wright.
                                   Daniel Meuser.
                                   Dusty Johnson.
                                   Fred Keller.
                                   Gregory F. Murphy.

                                  [all]