[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.
* * * * * * *
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]