Prescription Drug Cost Reduction Act - Amends title XVIII (Medicare) of the Social Security Act to direct the Secretary of Health and Human Services (HHS) to establish a program requiring a manufacturer to provide a rebate to the Secretary for drugs or biologicals furnished under Medicare part B (Supplementary Medical Insurance).
Requires the Secretary to negotiate a contract with a manufacturer to establish the amount of payment under Medicare part B for any drug or biological for which the Medicare part B program is the majority purchaser.
Requires that payment for both a drug or biological functionally equivalent to another drug or biological and that other drug or biological to be the same as for the least costly of them.
Directs the Secretary of HHS to study physician reimbursement for drugs and biologicals furnished under Medicare part B.
Imposes on a pharmacy benefit manager (PBM) specified fiduciary duties to the head of each federal agency with which the PBM contracts.
Requires the Secretary to develop a form for use by physicians and practitioners to certify that any off-label use (not approved by the Food and Drug Administration [FDA]) for which an applicable drug is prescribed under Medicare is for a medically accepted indication.
Amends the Public Health Service Act to: (1) include among "340B" program-covered entities (permitted to buy outpatient drugs at significant discounts) the Program of All-Inclusive Care for the Elderly (PACE); and (2) direct the Secretary to establish a mechanism to ensure that a manufacturer does not pay a duplicate discount with respect to a drug subject to a 340B program agreement if the PACE program receives any rebate (including any negotiated price concessions) for the drug under Medicare part D (Voluntary Prescription Drug Benefit Program).
Makes an organization offering prescription drug coverage eligible to receive from the Secretary 10% of the estimated annual savings to the federal government as a result of the organization's participation in the drug discount program under the Public Health Service Act.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 1699 Introduced in Senate (IS)]
112th CONGRESS
1st Session
S. 1699
To reduce the costs of prescription drugs under the Medicare program,
and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
October 12, 2011
Mr. Kohl introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To reduce the costs of prescription drugs under the Medicare program,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Prescription Drug
Cost Reduction Act''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Medicare part B drug rebate program.
Sec. 3. Negotiation of drug prices under Medicare part B.
Sec. 4. Payment for least costly alternative for Medicare part B drugs.
Sec. 5. Study and report on physician reimbursement for drugs and
biologicals under Medicare part B.
Sec. 6. Requirements of pharmacy benefit managers.
Sec. 7. Certification for off-label prescribing of certain drugs
prescribed in a nursing home setting.
Sec. 8. Expansion of 340B program covered entities to include PACE
programs.
SEC. 2. MEDICARE PART B DRUG REBATE PROGRAM.
Section 1842 of the Social Security Act (42 U.S.C. 1395u) is
amended by adding at the end the following new subsection:
``(v)(1) Not later than 2 years after the date of enactment of this
subsection, the Secretary shall establish a program under which a
manufacturer shall provide a rebate to the Secretary for drugs or
biologicals of the manufacturer that are furnished under this part.
``(2) The program established under paragraph (1)--
``(A) shall be similar to rebate agreements under section
1927 (including the application of an additional rebate for
certain drugs whose costs exceed an annual inflation target as
described in subsection (c)(2) of such section); and
``(B) may use the average manufacturer price (as determined
under section 1927(k)(1)) or the average sales price (as
defined in section 1847A(c)) as the basis for calculating the
amount of the rebate under the program.
``(3) The Secretary shall promulgate regulations to carry out this
subsection.''.
SEC. 3. NEGOTIATION OF DRUG PRICES UNDER MEDICARE PART B.
(a) In General.--Section 1842 of the Social Security Act (42 U.S.C.
1395u), as amended by section 2, is amended by adding at the end the
following new subsection:
``(w) Negotiation of Prices for Drugs and Biologicals.--
``(1) In general.--Notwithstanding any other provision of
law, the Secretary shall negotiate a contract with a
manufacturer to establish the amount of payment under this part
for any drug or biological for which the program under this
part is the majority purchaser (as determined under paragraph
(2)). The Secretary shall negotiate such contracts with the
goal of ensuring appropriate and adequate access to necessary
drugs and biologicals for individuals enrolled under this part,
while minimizing costs to such individuals and to the program
under this part to the greatest extent possible.
``(2) Majority purchaser.--For purposes of paragraph (1),
the Secretary shall, by regulation, establish a method to
identify, based upon drug utilization rates, any drug or
biological for which greater than 50 percent of the units sold
by the manufacturer of such drug or biological in the preceding
calendar year were provided to individuals enrolled under this
part.
``(3) Definitions.--In this subsection:
``(A) Drugs and biologicals.--The term `drug' and
the term `biological' have the same meaning as provided
under section 1861(t).
``(B) Manufacturer.--The term `manufacturer' has
the same meaning as provided under section
1847A(c)(6)(A).''.
(b) Effective Date.--The amendments made by this section shall
apply to drugs and biologicals that are furnished on or after July 1,
2012.
SEC. 4. PAYMENT FOR LEAST COSTLY ALTERNATIVE FOR MEDICARE PART B DRUGS.
Section 1847A(b) of the Social Security Act (42 U.S.C. 1395w-3a(b))
is amended--
(1) in paragraph (1), in the matter preceding subparagraph
(A), by striking ``paragraph (7)'' and inserting ``paragraphs
(7) and (9)''; and
(2) by adding at the end the following new paragraph:
``(9) Treatment of functionally equivalent drugs and
biologicals.--In the case of a drug or biological furnished on
or after the date that is 180 days after the date of enactment
of this paragraph, for which payment is determined under this
section, if the drug or biological is functionally equivalent
(as defined by the Secretary) to another drug or biological for
which payment is determined under this section, the amount of
payment for both such drugs or biologicals shall be equal to
the payment amount otherwise determined under this section
(without regard to the application of this paragraph) for the
least costly of such drugs or biologicals.''.
SEC. 5. STUDY AND REPORT ON PHYSICIAN REIMBURSEMENT FOR DRUGS AND
BIOLOGICALS UNDER MEDICARE PART B.
(a) Study.--The Secretary of Health and Human Services (in this
section referred to as the ``Secretary'') shall conduct a study on
physician reimbursement for drugs and biologicals furnished under part
B of title XVIII of the Social Security Act (42 U.S.C. 1395j et seq.).
Such study shall include an evaluation and assessment of the following:
(1) The ability of physicians to afford and profit from
drugs and biologicals purchased at the current reimbursement
rate of average sales price plus 6 percent under section 1847A
of the Social Security Act (42 U.S.C. 1395w-3a), including any
profit margins with respect to such drugs and biologicals.
(2) The rate at which physicians furnish the higher priced
drug or biological under such part when there is a cheaper
alternative drug or biological.
(3) The feasibility and merits of other reimbursement
structures that are not based on the price of the drug or
biological, such as a flat, universal fee issued for every drug
or biological furnished under such part, or any other relevant
reimbursement structures.
(b) Consultation.--In conducting the study under subsection (a),
the Secretary shall consult with the Administrator of the Centers for
Medicare & Medicaid Services and the Inspector General of the
Department of Health and Human Services.
(c) Report.--
(1) In general.--Not later than 1 year after the date of
enactment of this Act, the Secretary shall submit to Congress a
report containing the results of the study conducted under
subsection (a), together with recommendations for changing
physician reimbursement for drugs and biologicals under
Medicare part B.
(2) Consideration of recommendations to remove incentives
to prescribe higher priced drugs.--In making recommendations
under paragraph (1), the Secretary shall consider including
recommendations that would--
(A) move reimbursement for drugs and biologicals
under Medicare part B away from being based on the
price of the drug or biological; and
(B) reduce or eliminate incentives to furnish
higher priced drugs and biologicals under such part.
SEC. 6. REQUIREMENTS OF PHARMACY BENEFIT MANAGERS.
(a) In General.--A pharmacy benefit manager (referred to in this
section as a ``PBM'') shall owe a fiduciary duty, in accordance with
this section, to each covered entity.
(b) Covered Entity Defined.--In this section, the term ``covered
entity'' means the head of each Federal agency with which the PBM
contracts, including--
(1) the Secretary of Health and Human Services with respect
to the programs under part C of title XVIII of the Social
Security Act (42 U.S.C. 1395w-21 et seq.) and part D of such
title;
(2) the Secretary of Veterans Affairs with respect to
health coverage offered through the Department of Veterans
Affairs;
(3) the Secretary of Defense with respect to the TRICARE
program under chapter 55 of title 10, United States Code; and
(4) the Director of the Office of Personnel Management with
respect to the Federal employee health benefits program under
chapter 89 of title 5, United States Code.
(c) Requirements.--
(1) In general.--The fiduciary duty described in subsection
(a) shall include the duty to--
(A) notify each covered entity, on a quarterly
basis, if the PBM substitutes a drug that costs more
than the drug prescribed to an individual by a
practitioner, and disclose the aggregate costs of the
drug prescribed and the drug provided by the PBM and
any benefit or payment directly or indirectly received
by the PBM as a result of the substitution for all
individuals receiving such substitute drug during the
applicable quarter;
(B) pass through any benefit, rebate, or payment
the PBM receives for promoting a drug that is more
expensive than a drug prescribed;
(C) in the case that a PBM receives a payment or
benefit for increasing volume of sales for a particular
drug, class of drug, or brand of drug, disclose the
payment or benefit with the covered entity; and
(D) disclose to covered entities all financial
terms and arrangements between the PBM and a
pharmaceutical drug company, including formulary
management and drug-switch agreements, educational
support, claims processing and pharmacy network fees
that are charged from retail pharmacies, data sales
fees, and other direct or indirect remunerations,
including discounts, charge backs or rebates, cash
discounts, free goods contingent on a purchase
agreement, up-front payments, coupons, goods in-kind,
free or reduced-price services, grants, or other price
concessions or similar benefits offered to some or all
purchasers from any source, including manufacturers,
pharmacies, enrollees, or any other person that would
serve to decrease the costs incurred under the plan.
(2) Reporting of drug substitutions.--The Secretary of
Health and Human Services shall establish categories that
describe reasons, such as a concern about drug interactions or
discretion of the PBM, for a PBM to substitute a drug that
costs more than the drug prescribed to an individual by a
practitioner, as described in paragraph (1)(A). In reporting
drug substitutions under such paragraph, a PBM shall state the
category under which each type of substitution falls.
(3) Direct or indirect remuneration.--For purposes of
paragraph (1)(D), the term ``direct or indirect remuneration''
includes discounts, chargebacks or rebates, cash discounts,
free goods contingent on a purchase agreement, up-front
payments, coupons, goods in-kind, free or reduced-price
services, grants, or other price concessions or similar
benefits from manufacturers, pharmacies or similar entities
obtained by an intermediary contracting organization with which
the plan sponsor has contracted, regardless of whether the
intermediary contracting organization retains all or a portion
of the direct and indirect remuneration or passes the entire
direct and indirect remuneration to the plan sponsor and
regardless of the terms of the contract between the plan
sponsor and the intermediary contracting organization.
(d) Confidentiality.--
(1) In general.--A PBM may require covered entities to keep
the information described in subsection (c)(4) confidential.
(2) Restrictions on the use of information.--
(A) In general.--Officers, employees, and
contractors of the Department of Health and Human
Services may use the information disclosed or obtained
in accordance with the provisions of this Act only for
the purposes of, and to the extent necessary in,
carrying out this Act, including determination of
payments, payment-related oversight, and program
integrity activities.
(B) Limitations.--
(i) Authority of the oig.--The restriction
described in subparagraph (A) does not limit
the authority of the Inspector General of the
United States to fulfill the responsibilities
of the Inspector General in accordance with
applicable Federal law.
(ii) Authority of cms.--The restriction
described in subparagraph (A) does not limit
the authority of the Centers for Medicare &
Medicaid Services to use data regarding drug
claims in accordance with section 1848(m) of
the Social Security Act (42 U.S.C. 1395w-4(m)).
(e) Audits.--To ensure compliance with the requirements of this
section, each covered entity shall conduct audits of the PBMs with
which the covered entity contracts.
SEC. 7. CERTIFICATION FOR OFF-LABEL PRESCRIBING OF CERTAIN DRUGS
PRESCRIBED IN A NURSING HOME SETTING.
Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) is
amended by adding at the end the following new section:
``certification for off-label prescribing of certain drugs prescribed
in a nursing home setting
``Sec. 1899B. (a) In General.--The Secretary shall develop a form
for use by physicians and practitioners (as defined in section
1842(b)(18)(C)) to certify that, in the case of an applicable drug
prescribed for an off-label use under this title, such use is for a
medically accepted indication.
``(b) Definitions.--In this section:
``(1) Applicable drug.--The term `applicable drug' means an
atypical antipsychotic prescribed for use in a nursing home
setting (as defined by the Secretary).
``(2) Off-label use.--The term `off-label use' means a use
which has not been approved by the Food and Drug
Administration.
``(3) Medically accepted indication.--The term `medically
accepted indication' means the applicable drug is included in
the compendia described in section 1861(t)(1) or is approved by
a committee described in such section (or, in the case of an
applicable drug that is a covered part D drug (as defined in
section 1860D-2(e)), has the meaning given such term in
paragraph (4) of such section 1860D-2(e)).
``(c) Regulations.--The Secretary shall establish by regulation
requirements that, effective not later than 1 year after the date of
enactment of this section, physicians and practitioners use the form
developed under subsection (a) to make the certification under such
subsection with respect to an applicable drug prescribed by the
physician or practitioner for an off-label use under this title. In
order to carry out these requirements in a timely manner, the Secretary
shall promulgate regulations that take effect on an interim basis,
after notice and pending opportunity for public comment.''.
SEC. 8. EXPANSION OF 340B PROGRAM COVERED ENTITIES TO INCLUDE PACE
PROGRAMS.
(a) Expansion.--Section 340B(a) of the Public Health Service Act
(42 U.S.C. 256b(a)) is amended--
(1) in paragraph (4), by adding at the end the following:
``(P) An entity that is a PACE provider offering a
PACE program under section 1894 and section 1934 of the
Social Security Act.''; and
(2) in paragraph (5)(A), by adding at the end the
following:
``(iii) Additional mechanism.--The
Secretary shall establish a mechanism to ensure
that a manufacturer does not pay a duplicate
discount with respect to a drug that is subject
to an agreement under this section if the PACE
program receives any rebate (including any
negotiated price concessions) for the drug
under part D of title XVIII of the Social
Security Act. Such mechanism shall be similar
to the mechanism established under clause
(ii).''.
(b) Requirements.--
(1) Medicare.--Section 1894(e) of the Social Security Act
(42 U.S.C. 1395eee(e)) is amended by adding at the end the
following new paragraph:
``(9) Participation in 340B program.--
``(A) In general.--In the case of a PACE program
that serves part D eligible individuals who are
enrolled under such program, the PACE program agreement
for such program shall require the PACE provider
offering the program to participate in the drug
discount program under section 340B of the Public
Health Service Act for purposes of purchasing covered
part D drugs with respect to qualified prescription
drug coverage provided to such individuals.
``(B) Attestation.--The Secretary may accept an
attestation by a PACE provider, at the time of
submitting a bid pursuant to section 1860D-21(f), as
sufficient evidence of participation in the drug
discount program under section 340B of the Public
Health Service Act for purposes of subparagraph (A).
``(C) Ensuring timely access to covered outpatient
drugs.--Nothing in this paragraph shall prevent a PACE
program from providing enrollees access to covered
outpatient drugs (including covered part D drugs)
through a retail community pharmacy (as defined in
section 1927(k)(10)) that is not a contract pharmacy
under the drug discount program under section 340B of
the Public Health Service Act in the case where such
access is necessary to ensure that such drugs are
dispensed to enrollees on a timely basis.
``(D) Definitions.--In this paragraph:
``(i) Covered outpatient drug.--The term
`covered outpatient drug' has the meaning given
such term for purposes of section 340B of the
Public Health Service Act.
``(ii) Covered part d drug.--The term
`covered part D drug' has the meaning given
such term in section 1860D-2(e).
``(iii) Part d eligible individual.--The
term `part D eligible individual' has the
meaning given such term in section 1860D-
1(a)(3)(A).
``(iv) Qualified prescription drug
coverage.--The term `qualified prescription
drug coverage' has the meaning given such term
in section 1860D-2(a).''.
(2) Medicaid.--Section 1934(e) of the Social Security Act
(42 U.S.C. 1396u-4(e)) is amended by adding at the end the
following new paragraph:
``(9) Participation in 340B program.--
``(A) In general.--In the case of a PACE program
that serves part D eligible individuals who are
enrolled under such program, the PACE program agreement
for such program shall require the PACE provider
offering the program to participate in the drug
discount program under section 340B of the Public
Health Service Act for purposes of purchasing covered
part D drugs with respect to qualified prescription
drug coverage provided to such individuals.
``(B) Attestation.--The Secretary may accept an
attestation by a PACE provider, at the time of
submitting a bid pursuant to section 1860D-21(f), as
sufficient evidence of participation in the drug
discount program under section 340B of the Public
Health Service Act for purposes of subparagraph (A).
``(C) Ensuring timely access to covered outpatient
drugs.--Nothing in this paragraph shall prevent a PACE
program from providing enrollees access to covered
outpatient drugs (including covered part D drugs)
through a retail community pharmacy (as defined in
section 1927(k)(10)) that is not a contract pharmacy
under the drug discount program under section 340B of
the Public Health Service Act in the case where such
access is necessary to ensure that such drugs are
dispensed to enrollees on a timely basis.
``(D) Definitions.--In this paragraph:
``(i) Covered outpatient drug.--The term
`covered outpatient drug' has the meaning given
such term for purposes of section 340B of the
Public Health Service Act.
``(ii) Covered part d drug.--The term
`covered part D drug' has the meaning given
such term in section 1860D-2(e).
``(iii) Part d eligible individual.--The
term `part D eligible individual' has the
meaning given such term in section 1860D-
1(a)(3)(A).
``(iv) Qualified prescription drug
coverage.--The term `qualified prescription
drug coverage' has the meaning given such term
in section 1860D-2(a).''.
(3) Effective date.--The amendments made by this subsection
shall apply to PACE program agreements entered into on or after
the date that is 2 years after the date of enactment of this
section.
(c) Inclusion of Savings in Bids Submitted by PACE Programs
Providing Qualified Prescription Drug Coverage.--
(1) In general.--Section 1860D-21(f) of the Social Security
Act (42 U.S.C. 1395w-131(f)) is amended by adding at the end
the following new paragraph:
``(4) Participation in 340B program.--
``(A) Inclusion of savings in bids submitted.--
``(i) Determination of savings.--An
organization offering prescription drug
coverage under this subsection shall determine
the estimated annual savings to the
organization as a result of participation in
the drug discount program under section 340B of
the Public Health Service Act (as described in
sections 1894(e)(2)(C) and 1934(e)(2)(C)).
``(ii) Inclusion in bids submitted.--The
bid of an organization offering prescription
drug coverage under this subsection shall
reflect the estimated savings determined by the
organization under clause (i) for the plan year
involved, and shall take into account any
additional costs to the organization as a
result of the implementation and administration
of such drug discount program during the plan
year involved. Such bid shall include an
attestation by the organization that such
savings are reflected in the bid amount.
``(iii) Consideration of applicable ceiling
prices.--In making the determination under
clause (i), the organization shall consider the
applicable ceiling prices for covered
outpatient drugs (using the access provided
under section 340B(d)(1)(B)(iii) of the Public
Health Service Act).
``(B) Receipt of percentage of savings.--
``(i) In general.--Subject to clause (ii),
an organization offering prescription drug
coverage under this subsection shall be
eligible to receive from the Secretary an
amount equal to 10 percent of the estimated
annual savings to the Federal government (as
determined by the Secretary under regulations
promulgated under subparagraph (C)) to the
organization as a result of participation in
the drug discount program under section 340B of
the Public Health Service Act (as described in
sections 1894(e)(2)(C) and 1934(e)(2)(C)). In
making the determination under the preceding
sentence, the Secretary shall consider the
determination of the organization under
subparagraph (A)(i).
``(ii) Requirements.--An organization shall
only be eligible to receive the amount under
clause (i) for the plan year involved if the
organization--
``(I) submits to the Secretary an
application in such form and manner,
and containing such information, as the
Secretary may specify; and
``(II) has in effect a plan
approved by the Secretary for the use
of any amounts received under such
clause to--
``(aa) provide to enrollees
enhanced formulary coverage,
medication management, or
disease management;
``(bb) invest in the
development of the organization
(including through the use of a
significant proportion of the
savings to invest in the
development and use of
qualified electronic health
records (as defined in section
3000(13) of the Public Health
Service Act) or other health
information technology); or
``(cc) carry out other
initiatives approved by the
Secretary.
``(C) Regulations.--The Secretary shall promulgate
regulations to carry out this paragraph and sections
1894(e)(9) and 1934(e)(9).''.
(2) Effective date.--The amendment made by this subsection
shall apply to plan years beginning on or after the date that
is 2 years after the date of enactment of this Act.
(d) Not Treated as Change in Law for Purposes of Determining
Manufacturer Compliance.--Section 1927(a)(5) of the Social Security Act
(42 U.S.C. 1396r-8(a)(5)) is amended--
(1) in subparagraph (D)--
(A) by striking ``amendments.--In determining'' and
inserting ``amendments.--
``(i) In general.--Subject to clause (ii),
in determining''; and
(B) by adding at the end the following new clause:
``(ii) Exception.--The Secretary shall take
into account the amendments made by section 9
of the Prescription Drug Cost Reduction Act for
purposes of determining whether an agreement
under subparagraph (A) meets the requirements
of section 340B of the Public Health Service
Act and an agreement under such subparagraph
shall not be determined to meet such
requirements if it does not meet the
requirements under such section with respect to
covered outpatient drugs purchased by a covered
entity described in subsection (a)(4)(P) of
such section on or after the date that is 1
year after the date of enactment of such
Act.''; and
(2) in subparagraph (E)--
(A) by striking ``compliance.--A manufacturer'' and
inserting ``compliance.--
``(i) In general.--Subject to clause (ii),
a manufacturer''; and
(B) by adding at the end the following new clause:
``(ii) Exception.--The amendments made by
section 9 of the Prescription Drug Cost
Reduction Act shall not be treated as a
legislative change for purposes of applying
clause (i) and a manufacturer shall not be
deemed to be in compliance with the
requirements of this paragraph if the
manufacturer has not entered into an agreement
with the Secretary that meets the requirements
under section 340B of the Public Health Service
Act with respect to covered outpatient drugs
purchased by a covered entity described in
subsection (a)(4)(P) of such section on or
after the date that is 1 year after the date of
enactment of such Act.''.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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