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 116th Congress    }                                  {   Rept. 116-324
                         HOUSE OF REPRESENTATIVES
  1st Session      }                                  {      Part 2
_______________________________________________________________________

                                     

                                                                       


              ELIJAH E. CUMMINGS LOWER DRUG COSTS NOW ACT

                               ----------                              

                              R E P O R T

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                                   ON

                                 H.R. 3

                             together with

                            DISSENTING VIEWS






              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]






                December 6, 2019.--Ordered to be printed

















116th Congress    }                                  {   Rept. 116-324
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                  {      Part 2
_______________________________________________________________________

                                     

                                                                       


              ELIJAH E. CUMMINGS LOWER DRUG COSTS NOW ACT

                               __________

                              R E P O R T

                                 of the

                      COMMITTEE ON WAYS AND MEANS

                        HOUSE OF REPRESENTATIVES

                                   on

                                 H.R. 3

                             together with

                            DISSENTING VIEWS






              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]






                December 6, 2019.--Ordered to be printed 
                               __________

                      U.S. GOVERNMENT PUBLISHING OFFICE
                      
38-525                     WASHINGTON : 2019 
                
                
                
                
                
                
                
                
                
                
                
                            C O N T E N T S

                                                                   Page
  I. SUMMARY AND BACKGROUND..........................................36
          A. Purpose and Summary.................................    36
          B. Background and Need for Legislation.................    36
          C. Legislative History.................................    39
 II. EXPLANATION OF THE BILL.........................................40
          The Lower Drug Costs Now Act of 2019...................    40
III. VOTES OF THE COMMITTEE..........................................55
 IV. BUDGET EFFECTS OF THE BILL......................................66
          A. Committee Estimate of Budgetary Effects.............    66
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures Budget Authority......................    66
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................    66
  V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......66
          A. Committee Oversight Findings and Recommendations....    66
          B. Statement of General Performance Goals and 
              Objectives.........................................    67
          C. Information Relating to Unfunded Mandates...........    67
          D. Congressional Earmarks, Limited Tax Benefits, and 
              Limited Tariff Benefits............................    67
          E. Duplication of Federal Programs.....................    67
          F. Hearings............................................    67
 VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........68
VII.  DISSENTING VIEWS..............................................383






















116th Congress    }                                  {   Rept. 116-324
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                  {      Part 2

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



 
              ELIJAH E. CUMMINGS LOWER DRUG COSTS NOW ACT

                                _______
                                

                December 6, 2019.--Ordered to be printed

                                _______
                                

Mr. Neal, from the Committee on Ways and Means, submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                         [To accompany H.R. 3]

    The Committee on Ways and Means, 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.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Elijah E. Cummings 
Lower Drug Costs Now Act''.
  (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.
Sec. 302. Allowing certain enrollees of prescription drugs plans and 
MA-PD plans under Medicare program to spread out cost-sharing under 
certain circumstances.
Sec. 303. Establishment of pharmacy quality measures under Medicare 
part D.

    TITLE IV--PRESCRIPTION DRUG POLICIES FOR LOW-INCOME INDIVIDUALS

Sec. 401. Adjustments to Medicare part D cost-sharing reductions for 
low-income individuals.
Sec. 402. Dissemination to Medicare part D subsidy eligible individuals 
of information comparing premiums of certain prescription drug plans.
Sec. 403. Providing for intelligent assignment of certain subsidy 
eligible individuals auto-enrolled under Medicare prescription drug 
plans and MA-PD plans.
Sec. 404. Expanding eligibility for low-income subsidies under part D 
of the Medicare program.
Sec. 405. Automatic eligibility of certain low-income territorial 
residents for premium and cost-sharing subsidies under the Medicare 
program; Sunset of enhanced allotment program.
Sec. 406. Automatic qualification of certain Medicaid beneficiaries for 
premium and cost-sharing subsidies under part D of the Medicare 
program.
Sec. 407. Eliminating the resource requirement with respect to subsidy 
eligible individuals under part D of the Medicare program.
Sec. 408. Providing for certain rules regarding the treatment of 
eligible retirement plans in determining the eligibility of individuals 
for premium and cost-sharing subsidies under part D of the Medicare 
program.

                    TITLE V--DRUG PRICE TRANSPARENCY

Sec. 501. Drug price transparency.

      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 included as 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 subparagraph 
        (A) 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 (d), 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;
                          ``(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; and
                          ``(iii) fair price eligible individuals who 
                        are entitled to benefits under part A of title 
                        XVIII or enrolled under part B of such title.
                  ``(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.
  ``(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.

``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.''.
  (b) Application of Maximum Fair Prices and Conforming Amendments.--
          (1) Under medicare.--
                  (A) Application to payments under part b.--Section 
                1847A(b)(1)(B) of the Social Security Act (42 U.S.C. 
                1395w-3a(b)(1)(B)) is amended by inserting ``or in the 
                case of such a drug or biological 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)), 106 percent of the maximum fair price (as 
                defined in section 1191(c)(2) applicable for such drug 
                and a plan year during such period'' after ``paragraph 
                (4)''.
                  (B) Exception to part d 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''.
                  (C) Application as negotiated price under part d.--
                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 prices used for payment (as 
                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.''.
                  (D) 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 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 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) Clerical amendment.--The table of 
                        sections for 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, as 
        applicable--
                  ``(A) if coverage of such selected drug is provided 
                under such plan if the drug is furnished or dispensed 
                at a pharmacy or by a mail order service, to the plan, 
                and to the individuals enrolled under such plan 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 if the drug is furnished or 
                administered by a hospital, physician, or other 
                provider of services or supplier, to the plan, to the 
                individuals enrolled under such plan, 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 shall apply any cost-sharing responsibilities 
        under such plan, 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
          ``(3) the Secretary shall apply the provisions of such part E 
        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) Application to retiree and certain small 
                        group health plans.--Section 9831(a)(2) of the 
                        Internal Revenue Code of 1986 is amended by 
                        inserting ``other than with respect to section 
                        9816,'' before ``any group health plan''.
                          (iii) 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.--For purposes of this section, 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) Selected Drug.--For purposes of this section--
          ``(1) In general.--The term `selected drug' means any 
        selected drug (within the meaning of section 1192 of the Social 
        Security Act) which is manufactured or produced in the United 
        States or entered into the United States for consumption, use, 
        or warehousing.
          ``(2) United states.--The term `United States' has the 
        meaning given such term by section 4612(a)(4).
          ``(3) Coordination with rules for possessions of the united 
        states.--Rules similar to the rules of paragraphs (2) and (4) 
        of section 4132(c) shall apply for purposes of this section.
  ``(e) Other Definitions.--For purposes of this section, the terms 
`selected drug publication date' and `maximum fair price' have the 
meaning given such terms in section 1191 of the Social Security Act.
  ``(f) 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 
                        units of the billing and payment code 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) for the 12 month 
                        period ending with June 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) for the 12 month period ending 
                        with June 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), 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 subparagraphs (B) and (G), 
                        the total number of units of the billing and 
                        payment code 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 units of the billing and 
                payment code for each part B rebatable drug furnished 
                during a calendar quarter shall not include--
                          ``(i) units packaged into the payment for a 
                        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 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.
                  ``(G) Counting units.--
                          ``(i) Cut-off period to count units.--For 
                        purposes of subparagraph (A)(i), subject to 
                        clause (ii), to count the total number of 
                        billing units for a part B rebatable drug for a 
                        quarter, the Secretary may use a cut-off period 
                        in order to exclude from such total number of 
                        billing units for such quarter claims for 
                        services furnished during such quarter that 
                        were not processed at an appropriate time prior 
                        to the end of the cut-off period.
                          ``(ii) Counting units for claims processed 
                        after cut-off period.--If the Secretary uses a 
                        cut-off period pursuant to clause (i), in the 
                        case of units of a part B rebatable drug 
                        furnished during a quarter but pursuant to 
                        application of such cut-off period excluded for 
                        purposes of subparagraph (A)(i) from the total 
                        number of billing units for the drug for such 
                        quarter, the Secretary shall count such units 
                        of such drug so furnished in the total number 
                        of billing units for such drug for a subsequent 
                        quarter, as the Secretary determines 
                        appropriate.
          ``(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 or licensed 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 
                subsequently approved drugs.--In the case of a part B 
                rebatable drug first approved or licensed by the Food 
                and Drug Administration after July 1, 2015, 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 amount under paragraph 
                (1)(B) with respect to a part B rebatable drug that is 
                described as currently in shortage on the shortage list 
                in effect under section 506E 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 a price applicability period (as 
                defined in section 1191(b)(2)) and is determined 
                (pursuant to such section 1192(c)) to no longer be a 
                selected drug, for each applicable year beginning after 
                the price applicability period 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, if the payment amount for a quarter 
        exceeds the inflation adjusted payment for such quarter--
                  ``(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 units of the billing and 
                        payment code of the 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 of the Social 
Security Act (42 U.S.C. 1395l) is amended--
          (1) in subsection (a)--
                  (A) in paragraph (1)--
                          (i) in subparagraph (S), by striking ``with 
                        respect to'' and inserting ``subject to 
                        subparagraph (DD), with respect to'';
                          (ii) by striking ``and (CC)'' and inserting 
                        ``(CC)''; and
                          (iii) 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 
                        the payment amount for a calendar quarter under 
                        paragraph (3)(A)(ii)(I) of such section for 
                        such quarter exceeds the inflation-adjusted 
                        payment under paragraph (3)(A)(ii)(II) of such 
                        section for such quarter, 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'';
                  (B) by adding at the end of the flush left matter 
                following paragraph (9), the following:
``For purposes of applying paragraph (1)(DD), subsections (i)(9) and 
(t)(3)(H), and section 1834(x)(5), the Secretary shall make such 
estimates and use such data as the Secretary determines appropriate, 
and notwithstanding any other provision of law, may do so by program 
instruction or otherwise.'';
          (2) in subsection (i), by adding at the end the following new 
        paragraph:
  ``(9) In the case of a part B rebatable drug (as defined in paragraph 
(2) of section 1834(x)) furnished on or after July 1, 2021, under the 
system under this subsection, in lieu of calculation of coinsurance and 
the amount of payment otherwise applicable under this subsection, the 
provisions of section 1834(x)(5), paragraph (1)(DD) of subsection (a), 
and the flush left matter following paragraph (9) of subsection (a), 
shall, as determined appropriate by the Secretary, apply under this 
subsection in the same manner as such provisions of section 1834(x)(5) 
and subsection (a) apply under such section and subsection.''; and
          (3) in subsection (t)(3), by adding at the end the following 
        new subparagraph:
                  ``(H) Part b rebatable drugs.--In the case of a part 
                B rebatable drug (as defined in paragraph (2) of 
                section 1834(x)) furnished on or after July 1, 2021, 
                under the system under this subsection, in lieu of 
                calculation of coinsurance and the amount of payment 
                otherwise applicable under this subsection, the 
                provisions of section 1834(x)(5), paragraph (1)(DD) of 
                subsection (a), and the flush left matter following 
                paragraph (9) of subsection (a), shall, as determined 
                appropriate by the Secretary, apply under this 
                subsection in the same manner as such provisions of 
                section 1834(x)(5) and subsection (a) apply under such 
                section and subsection.''.
  (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.

  (a) In General.--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.--
          ``(1) 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 (as defined in subsection (h)(1)) of a 
        manufacturer (as defined in section 1927(k)(5)) dispensed 
        during an applicable year, the manufacturer must have entered 
        into and have in effect an agreement described in subsection 
        (b).
          ``(2)  Authorizing coverage for drugs not covered under 
        agreements.--Paragraph (1) shall not apply to the dispensing of 
        a covered part D drug if--
                  ``(A) the Secretary has made a determination that the 
                availability of the drug is essential to the health of 
                beneficiaries under this part; or
                  ``(B) the Secretary determines that in the period 
                beginning on January 1, 2022, and ending on December 
                31, 2022, there were extenuating circumstances.
          ``(3) Applicable year.--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 shall 
        apply:
                  ``(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 each part D rebatable drug of the 
                manufacturer, shall report to the manufacturer the 
                following for such year:
                          ``(i) Information on the total number of 
                        units (as defined in subsection (h)(2)) 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, shall provide 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 30 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 be 
                        effective, with respect to a plan year--
                                  ``(I) if the termination occurs 
                                before January 30 of the 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 the plan year, 
                                as of the day after the end of the 
                                succeeding plan year.
                  ``(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 that 
                is terminated in a plan year, the Secretary may not 
                enter into another such agreement with the manufacturer 
                (or a successor manufacturer) before the subsequent 
                plan year, unless the Secretary finds good cause for an 
                earlier reinstatement of such an agreement.
  ``(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 (5), the 
        amount equal to the product of--
                  ``(A) the total number of units of 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 annual manufacturer price (as 
                        determined in paragraph (2)) paid for such 
                        dosage form and strength with respect to such 
                        part D rebatable drug for the year; exceeds
                          ``(ii) the inflation-adjusted payment amount 
                        determined under paragraph (3) for such dosage 
                        form and strength with respect to such part D 
                        rebatable drug for the year.
          ``(2) Determination of annual manufacturer price.--The annual 
        manufacturer price determined under this paragraph for a dosage 
        form and strength, with respect to a part D rebatable drug and 
        an applicable year, is the sum of the products of--
                  ``(A) the average manufacturer price (as defined in 
                subsection (h)(6)) of such dosage form and strength, as 
                calculated for a unit of such drug, with respect to 
                each of the calendar quarters of such year; and
                  ``(B) the ratio of--
                          ``(i) the total number of units of such 
                        dosage form and strength dispensed during each 
                        such calendar quarter of such year; to
                          ``(ii) the total number of units of such 
                        dosage form and strength dispensed during such 
                        year.
          ``(3) 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 (5), is--
                  ``(A) the benchmark year manufacturer price 
                determined under paragraph (4) for such dosage form and 
                strength with respect to such drug and an applicable 
                year; increased by
                  ``(B) the percentage by which the applicable year 
                CPI-U (as defined in subsection (h)(5)) for the 
                applicable year exceeds the benchmark period CPI-U (as 
                defined in subsection (h)(4)).
          ``(4) Determination of benchmark year manufacturer price.--
        The benchmark year manufacturer price determined under this 
        paragraph for a dosage form and strength, with respect to a 
        part D rebatable drug and an applicable year, is the sum of the 
        products of--
                  ``(A) the average manufacturer price (as defined in 
                subsection (h)(6)) of such dosage form and strength, as 
                calculated for a unit of such drug, with respect to 
                each calendar quarter of the payment amount benchmark 
                year (as defined in subsection (h)(3)); and
                  ``(B) the ratio of--
                          ``(i) the total number of units of such 
                        dosage form and strength dispensed during such 
                        calendar quarter of the payment amount 
                        benchmark year; to
                          ``(ii) the total number of units of such 
                        dosage form and strength dispensed during the 
                        payment amount benchmark year.
          ``(5) Special treatment of certain drugs and exemption.--
                  ``(A) Subsequently approved drugs.--In the case of a 
                part D rebatable drug first approved or licensed by the 
                Food and Drug Administration after January 1, 2016, 
                subparagraphs (A) and (B) of paragraph (4) shall be 
                applied as if the term `payment amount benchmark year' 
                were defined under subsection (h)(3) as the first 
                calendar year beginning after the day on which the drug 
                was first marketed by any manufacturer and subparagraph 
                (B) of paragraph (3) shall be applied as if the term 
                `benchmark period CPI-U' were defined under subsection 
                (h)(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 that is described as 
                currently in shortage on the shortage list in effect 
                under section 506E of the Federal Food, Drug, and 
                Cosmetic Act or in the case of 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 
                        part D rebatable 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 original part D rebatable 
                        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 a price applicability period (as 
                defined in section 1191(b)(2)) and is determined 
                (pursuant to such section 1192(c)) to no longer be a 
                selected drug, for each applicable year beginning after 
                the price applicability period with respect to such 
                drug, subparagraphs (A) and (B) of paragraph (4) shall 
                be applied as if the term `payment amount benchmark 
                year' were defined under subsection (h)(3) as the last 
                year beginning during such price applicability period 
                with respect to such selected drug and subparagraph (B) 
                of paragraph (3) shall be applied as if the term 
                `benchmark period CPI-U' were defined under subsection 
                (h)(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) Information.--For purposes of carrying out this section, the 
Secretary shall use information submitted by manufacturers under 
section 1927(b)(3).
  ``(f) 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).
  ``(g) 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.
  ``(h) 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 annual total cost under this part for such year 
                per individual who uses such a drug or biological, as 
                determined by the Secretary, is 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) for the 12-month 
                        period beginning with January of 2022; and
                          ``(ii) for a subsequent year, shall be the 
                        dollar amount specified in this subparagraph 
                        for the previous year, increased by the 
                        percentage increase in the consumer price index 
                        for all urban consumers (United States city 
                        average) for the 12-month period beginning with 
                        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 
        under this part.
          ``(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) Applicable year cpi-u.--The term `applicable year 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, 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.''.
  (b) Conforming Amendment to Part B ASP Calculation.--Section 
1847A(c)(3) of the Social Security Act (42 U.S.C. 1395w-3a(c)(3)), as 
amended by section 201(c), is further amended by striking ``section 
1927 or section 1834(x)'' and inserting ``section 1927, section 
1834(x), or section 1860D-14B''.

   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), by striking ``clause 
                        (i)(I)'' and inserting ``clause (i)(I)(aa)'';
                  (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.--Notwithstanding any other provision of 
        law, 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 equal to 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(c) 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 (or any successor regulation), except that, 
        with respect to an applicable drug, 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'' and 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)(i)) 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), 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) Section 1860D-43 of the Social Security Act (42 U.S.C. 
        1395w-153) is amended--
                  (A) in subsection (a)--
                          (i) by striking paragraph (1) and inserting 
                        the following:
          ``(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;'';
                          (ii) by striking paragraph (2) and inserting 
                        the following:
          ``(2) have entered into and have in effect--
                  ``(A) for 2011 through 2021, an agreement described 
                in subsection (b) of section 1860D-14A with the 
                Secretary; and
                  ``(B) for 2022 and each subsequent year, an agreement 
                described in subsection (b) of section 1860D-14C with 
                the Secretary; and''; and
                          (iii) by striking paragraph (3) and inserting 
                        the following:
          ``(3) have entered into and have in effect, under terms and 
        conditions specified by the Secretary--
                  ``(A) for 2011 through 2021, a contract with a third 
                party that the Secretary has entered into a contract 
                with under subsection (d)(3) of section 1860D-14A; and
                  ``(B) for 2022 and each subsequent year, a contract 
                with a third party that the Secretary has entered into 
                a contract with under subsection (d)(3) of section 
                1860D-14C.''; and
                  (B) by striking subsection (b) and inserting the 
                following:
  ``(b) Effective Date.--Paragraphs (1)(A), (2)(A), and (3)(A) of 
subsection (a) shall apply to covered part D drugs dispensed under this 
part on or after January 1, 2011, and before January 1, 2022, and 
paragraphs (1)(B), (2)(B), and (3)(B) of such subsection shall apply to 
covered part D drugs dispensed under this part on or after January 1, 
2022.''.
  (e) Effective Date.--The amendments made by this section shall apply 
with respect to plan year 2022 and subsequent plan years.

SEC. 302. ALLOWING CERTAIN ENROLLEES OF PRESCRIPTION DRUGS PLANS AND 
                    MA-PD PLANS UNDER MEDICARE PROGRAM TO SPREAD OUT 
                    COST-SHARING UNDER CERTAIN CIRCUMSTANCES.

  Section 1860D-2(b)(2) of the Social Security Act (42 U.S.C. 1395w-
102(b)(2)), as amended by section 301, is further amended--
          (1) in subparagraph (A), by striking ``Subject to 
        subparagraphs (C) and (D)'' and inserting ``Subject to 
        subparagraphs (C), (D), and (E)''; and
          (2) by adding at the end the following new subparagraph:
                  ``(E) Enrollee option regarding spreading cost-
                sharing.--The Secretary shall establish by regulation a 
                process under which, with respect to plan year 2022 and 
                subsequent plan years, a prescription drug plan or an 
                MA-PD plan shall, in the case of a part D eligible 
                individual enrolled with such plan for such plan year 
                who is not a subsidy eligible individual (as defined in 
                section 1860D-14(a)(3)) and with respect to whom the 
                plan projects that the dispensing of the first fill of 
                a covered part D drug to such individual will result in 
                the individual incurring costs that are equal to or 
                above the annual out-of-pocket threshold specified in 
                paragraph (4)(B) for such plan year, provide such 
                individual with the option to make the coinsurance 
                payment required under subparagraph (A) (for the 
                portion of such costs that are not above such annual 
                out-of-pocket threshold) in the form of periodic 
                installments over the remainder of such plan year.''.

SEC. 303. ESTABLISHMENT OF PHARMACY QUALITY MEASURES UNDER MEDICARE 
                    PART D.

  Section 1860D-4(c) of the Social Security Act (42 U.S.C. 1395w-
104(c)) is amended--
          (1) by redesignating the paragraph (6), as added by section 
        50354 of division E of the Bipartisan Budget Act of 2018 
        (Public Law 115-123), as paragraph (7); and
          (2) by adding at the end the following new paragraph:
          ``(8) Application of pharmacy quality measures.--
                  ``(A) In general.--A PDP sponsor that implements 
                incentive payments to a pharmacy or price concessions 
                paid by a pharmacy based on quality measures shall use 
                measures established or approved by the Secretary under 
                subparagraph (B) with respect to payment for covered 
                part D drugs dispensed by such pharmacy.
                  ``(B) Standard pharmacy quality measures.--The 
                Secretary shall establish or approve standard quality 
                measures from a consensus and evidence-based 
                organization for payments described in subparagraph 
                (A). Such measures shall focus on patient health 
                outcomes and be based on proven criteria measuring 
                pharmacy performance.
                  ``(C) Effective date.--The requirement under 
                subparagraph (A) shall take effect for plan years 
                beginning on or after January 1, 2021, or such earlier 
                date specified by the Secretary if the Secretary 
                determines there are sufficient measures established or 
                approved under subparagraph (B) to meet the requirement 
                under subparagraph (A).''.

    TITLE IV--PRESCRIPTION DRUG POLICIES FOR LOW-INCOME INDIVIDUALS

SEC. 401. ADJUSTMENTS TO MEDICARE PART D COST-SHARING REDUCTIONS FOR 
                    LOW-INCOME INDIVIDUALS.

  Section 1860D-14(a) of the Social Security Act (42 U.S.C. 1395w-
114(a)), as amended by section 301(d), is further amended--
          (1) in paragraph (1)--
                  (A) in subparagraph (D)--
                          (i) in clause (ii)--
                                  (I) by striking ``that does not 
                                exceed $1 for'' and all that follows 
                                through the period at the end and 
                                inserting ``that does not exceed--
                                  ``(I) for plan years before plan year 
                                2021--
                                          ``(aa) for a generic drug or 
                                        a preferred drug that is a 
                                        multiple source drug (as 
                                        defined in section 
                                        1927(k)(7)(A)(i)), $1 or, if 
                                        less, the copayment amount 
                                        applicable to an individual 
                                        under clause (iii); and
                                          ``(bb) for any other drug, $3 
                                        or, if less, the copayment 
                                        amount applicable to an 
                                        individual under clause (iii); 
                                        and''; and
                                  (II) by adding at the end the 
                                following new subclauses:
                                  ``(II) for plan year 2021--
                                          ``(aa) for a generic drug, 
                                        $0; and
                                          ``(bb) for any other drug, 
                                        the dollar amount applied under 
                                        this clause (after application 
                                        of paragraph (4)(A)) for plan 
                                        year 2020 for a drug described 
                                        in subclause (I)(bb); and
                                  ``(III) for a subsequent year, the 
                                dollar amount applied under this clause 
                                for the previous year for the drug, 
                                increased by the annual percentage 
                                increase in the consumer price index 
                                (all items; U.S. city average) as of 
                                September of such previous year.''; and
                          (ii) in clause (iii)--
                                  (I) by striking ``does not exceed the 
                                copayment amount specified under'' and 
                                inserting ``does not exceed--
                                  ``(I) for plan years beginning before 
                                plan year 2021, the copayment amount 
                                specified under'';
                                  (II) by striking the period at the 
                                end and inserting ``; and''; and
                                  (III) by adding at the end the 
                                following new subclause:
                                  ``(II) for plan year 2021 and each 
                                subsequent plan year, the copayment 
                                amount applied under clause (ii) for 
                                the drug and year involved.''; and
                  (B) by adding at the end the following new 
                subparagraph:
                  ``(F) Rounding.--Any amount established under clause 
                (ii) of subparagraph (D), including as applied under 
                clause (iii) of such subparagraph or paragraph (2)(D), 
                that is based on an increase of $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.'';
          (2) in paragraph (2)--
                  (A) in subparagraph (D)--
                          (i) by striking ``of coinsurance of'' and 
                        inserting ``of--
                          ``(i) for plan years before plan year 2021, 
                        coinsurance of'';
                          (ii) by striking the period at the end and 
                        inserting ``; and''; and
                          (iii) by adding at the end the following new 
                        clause:
                          ``(ii) for plan year 2021 and each subsequent 
                        plan year, a copayment amount that does not 
                        exceed the copayment amount applied under 
                        paragraph (1)(D)(ii) for the drug and year 
                        involved.''; and
                  (B) in subparagraph (E)--
                          (i) by striking ``subsection (c), the 
                        substitution for'' and inserting ``subsection 
                        (c)--
                          ``(i) for plan years before plan year 2021, 
                        the substitution for'';
                          (ii) by striking the period at the end and 
                        inserting ``; and''; and
                          (iii) by adding at the end the following new 
                        clause:
                          ``(ii) for plan year 2021, the elimination of 
                        any cost-sharing imposed under section 1860D-
                        2(b)(4)(A).''; and
          (3) in paragraph (4)(A)(ii), by inserting ``(before 2021)'' 
        after ``subsequent year''.

SEC. 402. DISSEMINATION TO MEDICARE PART D SUBSIDY ELIGIBLE INDIVIDUALS 
                    OF INFORMATION COMPARING PREMIUMS OF CERTAIN 
                    PRESCRIPTION DRUG PLANS.

  Section 1860D-1(c)(3) of the Social Security Act (42 U.S.C. 1395w-
101(c)(3)) is amended by adding at the end the following new 
subparagraph:
                  ``(C) Information on premiums for subsidy eligible 
                individuals.--
                          ``(i) In general.--For plan year 2022 and 
                        each subsequent plan year, the Secretary shall 
                        disseminate to each subsidy eligible individual 
                        (as defined in section 1860D-14(a)(3)) 
                        information under this paragraph comparing 
                        premiums that would apply to such individual 
                        for prescription drug coverage under LIS 
                        benchmark plans, including, in the case of an 
                        individual enrolled in a prescription drug plan 
                        under this part, information that compares the 
                        premium that would apply if such individual 
                        were to remain enrolled in such plan to 
                        premiums that would apply if the individual 
                        were to enroll in other LIS benchmark plans.
                          ``(ii) LIS benchmark plan.--For purposes of 
                        clause (i), the term `LIS benchmark plan' 
                        means, with respect to an individual, a 
                        prescription drug plan under this part that is 
                        offered in the region in which the individual 
                        resides and--
                                  ``(I) that provides for a premium 
                                that is not more than the low-income 
                                benchmark premium amount (as defined in 
                                section 1860D-14(b)(2)) for such 
                                region; or
                                  ``(II) with respect to which the 
                                premium would be waived as de minimis 
                                pursuant to section 1860D-14(a)(5) for 
                                such individual.''.

SEC. 403. PROVIDING FOR INTELLIGENT ASSIGNMENT OF CERTAIN SUBSIDY 
                    ELIGIBLE INDIVIDUALS AUTO-ENROLLED UNDER MEDICARE 
                    PRESCRIPTION DRUG PLANS AND MA-PD PLANS.

  (a) In General.--Section 1860D-1(b)(1) of the Social Security Act (42 
U.S.C. 1395w-101(b)(1)) is amended--
          (1) in subparagraph (C)--
                  (A) by inserting after ``PDP region'' the following: 
                ``or through use of an intelligent assignment process 
                that is designed to maximize the access of such 
                individual to necessary prescription drugs while 
                minimizing costs to such individual and to the program 
                under this part to the greatest extent possible. In the 
                case the Secretary enrolls such individuals through use 
                of an intelligent assignment process, such process 
                shall take into account the extent to which 
                prescription drugs necessary for the individual are 
                covered in the case of a PDP sponsor of a prescription 
                drug plan that uses a formulary, the use of prior 
                authorization or other restrictions on access to 
                coverage of such prescription drugs by such a sponsor, 
                and the overall quality of a prescription drug plan as 
                measured by quality ratings established by the 
                Secretary''; and
                  (B) by striking ``Nothing in the previous sentence'' 
                and inserting ``Nothing in this subparagraph''; and
          (2) in subparagraph (D)--
                  (A) by inserting after ``PDP region'' the following: 
                ``or through use of an intelligent assignment process 
                that is designed to maximize the access of such 
                individual to necessary prescription drugs while 
                minimizing costs to such individual and to the program 
                under this part to the greatest extent possible. In the 
                case the Secretary enrolls such individuals through use 
                of an intelligent assignment process, such process 
                shall take into account the extent to which 
                prescription drugs necessary for the individual are 
                covered in the case of a PDP sponsor of a prescription 
                drug plan that uses a formulary, the use of prior 
                authorization or other restrictions on access to 
                coverage of such prescription drugs by such a sponsor, 
                and the overall quality of a prescription drug plan as 
                measured by quality ratings established by the 
                Secretary''; and
                  (B) by striking ``Nothing in the previous sentence'' 
                and inserting ``Nothing in this subparagraph''.
  (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to plan years beginning with plan year 2022.

SEC. 404. EXPANDING ELIGIBILITY FOR LOW-INCOME SUBSIDIES UNDER PART D 
                    OF THE MEDICARE PROGRAM.

  Section 1860D-14(a) of the Social Security Act (42 U.S.C. 1395w-
114(a)), as amended by sections 301(d) and 401, is further amended--
          (1) in the subsection heading, by striking ``Individuals'' 
        and all that follows through ``Line'' and inserting ``Certain 
        Individuals'';
          (2) in paragraph (1)--
                  (A) by striking the paragraph heading and inserting 
                ``Individuals with certain low incomes''; and
                  (B) in the matter preceding subparagraph (A), by 
                inserting ``(or, with respect to a plan year beginning 
                on or after January 1, 2022, 150 percent)'' after ``135 
                percent'';
          (3) in paragraph (2)--
                  (A) by striking the paragraph heading and inserting 
                ``Other low-income individuals''; and
                  (B) in subparagraph (A)--
                          (i) by inserting ``(or, with respect to a 
                        plan year beginning on or after January 1, 
                        2022, 150 percent)'' after ``135 percent''; and
                          (ii) by inserting ``(or, with respect to a 
                        plan year beginning on or after January 1, 
                        2022, 200 percent)'' after ``150 percent''; and
          (4) in paragraph (3)(A)(ii), by inserting ``(or, with respect 
        to a plan year beginning on or after January 1, 2022, 200 
        percent)'' after ``150 percent''.

SEC. 405. AUTOMATIC ELIGIBILITY OF CERTAIN LOW-INCOME TERRITORIAL 
                    RESIDENTS FOR PREMIUM AND COST-SHARING SUBSIDIES 
                    UNDER THE MEDICARE PROGRAM; SUNSET OF ENHANCED 
                    ALLOTMENT PROGRAM.

  (a) Automatic Eligibility of Certain Low-Income Territorial Residents 
for Premium and Cost-Sharing Subsidies Under the Medicare Program.--
          (1) In general.--Section 1860D-14(a)(3) of the Social 
        Security Act (42 U.S.C. 1395w-114(a)(3)) is amended--
                  (A) in subparagraph (B)(v)--
                          (i) in subclause (I), by striking ``and'' at 
                        the end;
                          (ii) in subclause (II), by striking the 
                        period and inserting ``; and''; and
                          (iii) by inserting after subclause (II) the 
                        following new subclause:
                                  ``(III) with respect to plan years 
                                beginning on or after January 1, 2021, 
                                shall provide that any part D eligible 
                                individual who is enrolled for medical 
                                assistance under the State Medicaid 
                                plan of a territory (as defined in 
                                section 1935(f)) under title XIX (or a 
                                waiver of such a plan) shall be treated 
                                as a subsidy eligible individual 
                                described in paragraph (1).''; and
                  (B) in subparagraph (F), by adding at the end the 
                following new sentence: ``The previous sentence shall 
                not apply with respect to eligibility determinations 
                for premium and cost-sharing subsidies under this 
                section made on or after January 1, 2021.''.
          (2) Conforming amendment.--Section 1860D-31(j)(2)(D) of the 
        Social Security Act (42 U.S.C. 1395w-141(j)(2)(D)) is amended 
        by adding at the end the following new sentence: ``The previous 
        sentence shall not apply with respect to amounts made available 
        to a State under this paragraph on or after January 1, 2021.''.
  (b) Sunset of Enhanced Allotment Program.--
          (1) In general.--Section 1935(e) of the Social Security Act 
        (42 U.S.C. 1396u-5(e)) is amended--
                  (A) in paragraph (1)(A), by inserting after ``such 
                State'' the following: ``before January 1, 2021''; and
                  (B) in paragraph (3)--
                          (i) in subparagraph (A), in the matter 
                        preceding clause (i), by inserting after ``a 
                        year'' the following: ``(before 2021)''; and
                          (ii) in subparagraph (B)(iii), by striking 
                        ``a subsequent year'' and inserting ``each of 
                        fiscal years 2008 through 2020''.
          (2) Territory defined.--Section 1935 of the Social Security 
        Act (42 U.S.C. 1396u-5) is amended by adding at the end the 
        following new subsection:
  ``(f) Territory Defined.--In this section, the term `territory' means 
Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, 
and American Samoa.''.

SEC. 406. AUTOMATIC QUALIFICATION OF CERTAIN MEDICAID BENEFICIARIES FOR 
                    PREMIUM AND COST-SHARING SUBSIDIES UNDER PART D OF 
                    THE MEDICARE PROGRAM.

  Clause (v) of section 1860D-14(a)(3)(B) of the Social Security Act 
(42 U.S.C. 1395w-114(a)(3)(B)), as amended by section 405, is further 
amended--
          (1) in subclause (II), by striking ``and'' at the end;
          (2) in subclause (III), by striking the period and inserting 
        ``; and''; and
          (3) by inserting after subclause (III) the following new 
        subclause:
                                  ``(IV) with respect to plan years 
                                beginning on or after January 1, 2022, 
                                shall, notwithstanding the preceding 
                                clauses of this subparagraph, provide 
                                that any part D eligible individual not 
                                described in subclause (I), (II), or 
                                (III) who is enrolled, as of the day 
                                before the date on which such 
                                individual attains the age of 65, for 
                                medical assistance under a State plan 
                                under title XIX (or a waiver of such 
                                plan) pursuant to clause (i)(VIII) or 
                                (ii)(XX) of section 1902(a)(10)(A), and 
                                who has income below 200 percent of the 
                                poverty line applicable to a family of 
                                the size involved, shall be treated as 
                                a subsidy eligible individual described 
                                in paragraph (1) for a limited period 
                                of time, as specified by the 
                                Secretary.''.

SEC. 407. ELIMINATING THE RESOURCE REQUIREMENT WITH RESPECT TO SUBSIDY 
                    ELIGIBLE INDIVIDUALS UNDER PART D OF THE MEDICARE 
                    PROGRAM.

  Section 1860D-14(a)(3)(A)(iii) of the Social Security Act (42 U.S.C. 
1395w-114(a)(3)(A)(iii)) is amended by inserting ``in the case of a 
plan year beginning before January 1, 2022,'' before ``meets''.

SEC. 408. PROVIDING FOR CERTAIN RULES REGARDING THE TREATMENT OF 
                    ELIGIBLE RETIREMENT PLANS IN DETERMINING THE 
                    ELIGIBILITY OF INDIVIDUALS FOR PREMIUM AND COST-
                    SHARING SUBSIDIES UNDER PART D OF THE MEDICARE 
                    PROGRAM.

  Section 1860D-14(a)(3)(C)(i) of the Social Security Act (42 U.S.C. 
1395w-114(a)(3)(C)(i)) is amended, by striking ``except that support 
and maintenance furnished in kind shall not be counted as income; and'' 
and inserting ``except that--
                                  ``(I) support and maintenance 
                                furnished in kind shall not be counted 
                                as income; and
                                  ``(II) for plan years beginning on or 
                                after January 1, 2022, any distribution 
                                or withdrawal from an eligible 
                                retirement plan (as defined in 
                                subparagraph (B) of section 402(c)(8) 
                                of the Internal Revenue Code of 1986, 
                                but excluding any defined benefit plan 
                                described in clause (iv) or (v) of such 
                                subparagraph and any qualified trust 
                                (as defined in subparagraph (A) of such 
                                section) which is part of such a 
                                defined benefit plan) shall be counted 
                                as income; and''.

                    TITLE V--DRUG PRICE TRANSPARENCY

SEC. 501. DRUG PRICE TRANSPARENCY.

  Part A of title XI of the Social Security Act is amended by adding at 
the end the following new sections:

``SEC. 1150C. REPORTING ON DRUG PRICES.

  ``(a) Definitions.--In this section:
          ``(1) Manufacturer.--The term `manufacturer' means the 
        person--
                  ``(A) that holds the application for a drug approved 
                under section 505 of the Federal Food, Drug, and 
                Cosmetic Act or licensed under section 351 of the 
                Public Health Service Act; or
                  ``(B) who is responsible for setting the wholesale 
                acquisition cost for the drug.
          ``(2) Qualifying drug.--The term `qualifying drug' means any 
        drug 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--
                  ``(A) that has a wholesale acquisition cost of $100 
                or more, adjusted for inflation occurring after the 
                date of enactment of this section, for a month's supply 
                or a typical course of treatment that lasts less than a 
                month, and is--
                          ``(i) subject to section 503(b)(1) of the 
                        Federal Food, Drug, and Cosmetic Act; and
                          ``(ii) not a preventative vaccine; and
                  ``(B) for which, during the previous calendar year, 
                at least 1 dollar of the total amount of sales were for 
                individuals enrolled under the Medicare program under 
                title XVIII or under a State Medicaid plan under title 
                XIX or under a waiver of such plan.
          ``(3) Wholesale acquisition cost.--The term `wholesale 
        acquisition cost' has the meaning given that term in section 
        1847A(c)(6)(B).
  ``(b) Report.--
          ``(1) Report required.--The manufacturer of a qualifying drug 
        shall submit a report to the Secretary if, with respect to the 
        qualifying drug--
                  ``(A) there is an increase in the price of the 
                qualifying drug that results in an increase in the 
                wholesale acquisition cost of that drug that is equal 
                to--
                          ``(i) 10 percent or more within a 12-month 
                        period beginning on or after January 1, 2019; 
                        or
                          ``(ii) 25 percent or more within a 36-month 
                        period beginning on or after January 1, 2019;
                  ``(B) the estimated price of the qualifying drug or 
                spending per individual or per user of such drug (as 
                estimated by the Secretary) for the applicable year (or 
                per course of treatment in such applicable year as 
                determined by the Secretary) is at least $26,000 
                beginning on or after January 1, 2021; or
                  ``(C) there was an increase in the price of the 
                qualifying drug that resulted in an increase in the 
                wholesale acquisition cost of that drug that is equal 
                to--
                          ``(i) 10 percent or more within a 12-month 
                        period that begins and ends during the 5-year 
                        period preceding January 1, 2021; or
                          ``(ii) 25 percent or more within a 36-month 
                        period that begins and ends during the 5-year 
                        period preceding January 1, 2021.
          ``(2) Report deadline.--Each report described in paragraph 
        (1) shall be submitted to the Secretary--
                  ``(A) in the case of a report with respect to an 
                increase in the price of a qualifying drug that occurs 
                during the period beginning on January 1, 2019, and 
                ending on the day that is 60 days after the date of the 
                enactment of this section, not later than 90 days after 
                such date of enactment;
                  ``(B) in the case of a report with respect to an 
                increase in the price of a qualifying drug that occurs 
                after the period described in subparagraph (A), not 
                later than 30 days prior to the planned effective date 
                of such price increase for such qualifying drug;
                  ``(C) in the case of a report with respect to a 
                qualifying drug that meets the criteria under paragraph 
                (1)(B), not later than 30 days after such drug meets 
                such criteria; and
                  ``(D) in the case of a report with respect to an 
                increase in the price of a qualifying drug that occurs 
                during a 12-month or 36-month period described in 
                paragraph (1)(C), not later than April 1, 2021.
  ``(c) Contents.--A report under subsection (b), consistent with the 
standard for disclosures described in section 213.3(d) of title 12, 
Code of Federal Regulations (as in effect on the date of enactment of 
this section), shall, at a minimum, include--
          ``(1) with respect to the qualifying drug--
                  ``(A) the percentage by which the manufacturer will 
                raise the wholesale acquisition cost of the drug within 
                the 12-month period or 36-month period as described in 
                subsection (b)(1)(A)(i), (b)(1)(A)(ii), (b)(1)(C)(i), 
                or (b)(1)(C)(ii), as applicable, and the effective date 
                of such price increase or the cost associated with a 
                qualifying drug if such drug meets the criteria under 
                subsection (b)(1)(B) and the effective date at which 
                such drug meets such criteria;
                  ``(B) an explanation for, and description of, each 
                price increase for such drug that will occur during the 
                12-month period or the 36-month period described in 
                subsection (b)(1)(A)(i), (b)(1)(A)(ii), (b)(1)(C)(i), 
                or (b)(1)(C)(ii), as applicable;
                  ``(C) an explanation for, and description of, the 
                cost associated with a qualifying drug if such drug 
                meets the criteria under subsection (b)(1)(B), as 
                applicable;
                  ``(D) if known and different from the manufacturer of 
                the qualifying drug, the identity of--
                          ``(i) the sponsor or sponsors of any 
                        investigational new drug applications under 
                        section 505(i) of the Federal Food, Drug, and 
                        Cosmetic Act for clinical investigations with 
                        respect to such drug, for which the full 
                        reports are submitted as part of the 
                        application--
                                  ``(I) for approval of the drug under 
                                section 505 of such Act; or
                                  ``(II) for licensure of the drug 
                                under section 351 of the Pubic Health 
                                Service Act; and
                          ``(ii) the sponsor of an application for the 
                        drug approved under such section 505 of the 
                        Federal Food, Drug, and Cosmetic Act or 
                        licensed under section 351 of the Public Health 
                        Service Act;
                  ``(E) a description of the history of the 
                manufacturer's price increases for the drug since the 
                approval of the application for the drug under section 
                505 of the Federal Food, Drug, and Cosmetic Act or the 
                issuance of the license for the drug under section 351 
                of the Public Health Service Act, or since the 
                manufacturer acquired such approved application or 
                license, if applicable;
                  ``(F) the current wholesale acquisition cost of the 
                drug;
                  ``(G) the total expenditures of the manufacturer on--
                          ``(i) materials and manufacturing for such 
                        drug;
                          ``(ii) acquiring patents and licensing for 
                        such drug; and
                          ``(iii) purchasing or acquiring such drug 
                        from another manufacturer, if applicable;
                  ``(H) the percentage of total expenditures of the 
                manufacturer on research and development for such drug 
                that was derived from Federal funds;
                  ``(I) the total expenditures of the manufacturer on 
                research and development for such drug that is 
                necessary to demonstrate that it meets applicable 
                statutory standards for approval under section 505 of 
                the Federal Food, Drug, and Cosmetic Act or licensure 
                under section 351 of the Public Health Service Act, as 
                applicable;
                  ``(J) the total expenditures of the manufacturer on 
                pursuing new or expanded indications or dosage changes 
                for such drug under section 505 of the Federal Food, 
                Drug, and Cosmetic Act or section 351 of the Public 
                Health Service Act;
                  ``(K) the total expenditures of the manufacturer on 
                carrying out postmarket requirements related to such 
                drug, including under section 505(o)(3) of the Federal 
                Food, Drug, and Cosmetic Act;
                  ``(L) the total revenue and the net profit generated 
                from the qualifying drug for each calendar year since 
                the approval of the application for the drug under 
                section 505 of the Federal Food, Drug, and Cosmetic Act 
                or the issuance of the license for the drug under 
                section 351 of the Public Health Service Act, or since 
                the manufacturer acquired such approved application or 
                license; and
                  ``(M) the total costs associated with marketing and 
                advertising for the qualifying drug;
          ``(2) with respect to the manufacturer--
                  ``(A) the total revenue and the net profit of the 
                manufacturer for each of the 12-month period described 
                in subsection (b)(1)(A)(i) or (b)(1)(C)(i) or the 36-
                month period described in subsection (b)(1)(A)(ii) or 
                (b)(1)(C)(ii), as applicable;
                  ``(B) all stock-based performance metrics used by the 
                manufacturer to determine executive compensation for 
                each of the 12-month periods described in subsection 
                (b)(1)(A)(i) or (b)(1)(C)(i) or the 36-month periods 
                described in subsection (b)(1)(A)(ii) or (b)(1)(C)(ii), 
                as applicable; and
                  ``(C) any additional information the manufacturer 
                chooses to provide related to drug pricing decisions, 
                such as total expenditures on--
                          ``(i) drug research and development; or
                          ``(ii) clinical trials, including on drugs 
                        that failed to receive approval by the Food and 
                        Drug Administration; and
          ``(3) such other related information as the Secretary 
        considers appropriate and as specified by the Secretary.
  ``(d) Information Provided.--The manufacturer of a qualifying drug 
that is required to submit a report under subsection (b), shall ensure 
that such report and any explanation for, and description of, each 
price increase described in subsection (c)(1) shall be truthful, not 
misleading, and accurate.
  ``(e) Civil Monetary Penalty.--Any manufacturer of a qualifying drug 
that fails to submit a report for the drug as required by this section, 
following notification by the Secretary to the manufacturer that the 
manufacturer is not in compliance with this section, shall be subject 
to a civil monetary penalty of $75,000 for each day on which the 
violation continues.
  ``(f) False Information.--Any manufacturer that submits a report for 
a drug as required by this section that knowingly provides false 
information in such report is subject to a civil monetary penalty in an 
amount not to exceed $100,000 for each item of false information.
  ``(g) Public Posting.--
          ``(1) In general.--Subject to paragraph (4), the Secretary 
        shall post each report submitted under subsection (b) on the 
        public website of the Department of Health and Human Services 
        the day the price increase of a qualifying drug is scheduled to 
        go into effect.
          ``(2) Format.--In developing the format in which reports will 
        be publicly posted under paragraph (1), the Secretary shall 
        consult with stakeholders, including beneficiary groups, and 
        shall seek feedback from consumer advocates and readability 
        experts on the format and presentation of the content of such 
        reports to ensure that such reports are--
                  ``(A) user-friendly to the public; and
                  ``(B) written in plain language that consumers can 
                readily understand.
          ``(3) List.--In addition to the reports submitted under 
        subsection (b), the Secretary shall also post a list of each 
        qualifying drug with respect to which the manufacturer was 
        required to submit such a report in the preceding year and 
        whether such manufacturer was required to submit such report 
        based on a qualifying price increase or whether such drug meets 
        the criteria under subsection (b)(1)(B).
          ``(4) Protected information.--In carrying out this section, 
        the Secretary shall enforce applicable law concerning the 
        protection of confidential commercial information and trade 
        secrets.

``SEC. 1150D. ANNUAL REPORT TO CONGRESS.

  ``(a) In General.--Subject to subsection (b), the Secretary shall 
submit to the Committees on Energy and Commerce and Ways and Means of 
the House of Representatives and the Committees on Health, Education, 
Labor, and Pensions and Finance of the Senate, and post on the public 
website of the Department of Health and Human Services in a way that is 
user-friendly to the public and written in plain language that 
consumers can readily understand, an annual report--
          ``(1) summarizing the information reported pursuant to 
        section 1150C;
          ``(2) including copies of the reports and supporting detailed 
        economic analyses submitted pursuant to such section;
          ``(3) detailing the costs and expenditures incurred by the 
        Department of Health and Human Services in carrying out section 
        1150C; and
          ``(4) explaining how the Department of Health and Human 
        Services is improving consumer and provider information about 
        drug value and drug price transparency.
  ``(b) Protected Information.--In carrying out this section, the 
Secretary shall enforce applicable law concerning the protection of 
confidential commercial information and trade secrets.''.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 3, the Lower Drug Costs Now Act of 2019, as 
amended and ordered reported by the Committee on Ways and Means 
on October 22, 2019, amends Part D of title XVIII of the Social 
Security Act. H.R. 3 also amends the following: chapters 32 and 
100, and sections 4221(a) and 9831(a)(2) of the Internal 
Revenue Code of 1986; title XI of the Social Security Act; 
title XXVII of the Public Health Service Act; and title I of 
the Employee Retirement Income Security Act of 1974.

                 B. Background and Need for Legislation

    With six in ten Americans reporting they currently take at 
least one prescription medication (and one in four reporting 
they take four or more), high drug prices have far-reaching 
effects.\1\ According to a 2018 Kaiser Family Foundation poll, 
79 percent of Americans believe the costs of prescription drugs 
are unreasonable, and 26 percent are worried they may not be 
able to afford the prescription drugs they need.\2\
---------------------------------------------------------------------------
    \1\Public Opinion on Prescription Drugs and Their Prices. Henry J. 
Kaiser Family Foundation, (2019). Available at: https://www.kff.org/
slideshow/public-opinion-on-prescription-drugs-and-their-prices/
    \2\Id.
---------------------------------------------------------------------------
    The U.S., on average, spends nearly four times more than 
other similar countries on drugs. A recent report released by 
the Ways and Means Committee found that on average, U.S. drug 
prices are nearly four times higher than prices for the same 
drugs in other countries. In some cases, Americans pay 67 times 
more than consumers in other countries pay for the same 
drug.\3\
---------------------------------------------------------------------------
    \3\A Painful Pill to Swallow: U.S. vs. International Prescription 
Drug Prices. U.S. House of Representatives: The Committee on Ways and 
Means, (2019). Available at: https://waysandmeans.house.gov/sites/
democrats.waysandmeans.house.gov/files/documents/U.S.%20vs.%20Inter 
national%20Prescription%20Drug_2Prices_2.pdf
---------------------------------------------------------------------------
    In 2016, the U.S. spent $457 billion on combined retail 
(dispensed at the pharmacy) and non-retail (dispensed in 
physician offices) drugs.\4\\5\ During the same year, Medicare 
spent nearly $130 billion on prescription drugs, of which $99.5 
billion was spent on Part D pharmacy drugs and another $29.1 
billion was spent on Part B physician-administered drugs.\6\ In 
total, 30 percent of Medicare spending went to prescription 
drug costs.\7\
---------------------------------------------------------------------------
    \4\Observation on Trends in Prescription Drug Spending. Department 
of Health and Human Services, (2019). Available at: https://
aspe.hhs.gov/system/files/pdf/187586/Drugspending.pdf
    \5\``Retail Prescription Drugs Filled at Pharmacies per Capita,'' 
Henry J. Kaiser Family Foundation, (2018). Available at: https://
www.kff.org/health-costs/state-indicator/retail-rx-drugs-per-capita/
?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%

22asc%22%7D
    \6\``10 Essential Facts About Medicare and Prescription Drug 
Spending,'' Henry J. Kaiser Family Foundation, (2019). Available at: 
https://www.kff.org/infographic/10-essential-facts-about-medicare-and-
prescription-drug- spending/
    \7\Id.
---------------------------------------------------------------------------
    The rise in spending for specialty drugs has in large part 
driven the increase in overall drug costs under Part D and 
Medicaid. In 2015, the average total cost of treating a patient 
with specialty medications was more than $52,000, with patients 
responsible for a bill in excess of $10,000.\8\ A 2019 
Congressional Budget Office (CBO) report found that specialty 
drugs accounted for 13 percent of Part D spending in 2010 and 
rose to 31 percent by 2015.\9\ In Medicaid, 25 percent of 
spending in 2010 was on specialty drugs rising to 35 percent by 
2015.\10\
---------------------------------------------------------------------------
    \8\Trends in Retail Prices of Specialty Prescription Drugs Widely 
Used by Older Americans, 2006 to 2015. AARP Public Policy Institute, 
(2017). Available at: https://www.aarp.org/content/dam/aarp/ppi/2017/
11/full-report-trendsin-retail-prices-of-specialty-prescription-drugs-
widely-used-by-older-americans.pdf
    \9\Prices for and Spending on Specialty Drugs in Medicare Part D 
and Medicaid. Congressional Budget Office, (2019). Available at: 
https://www.cbo.gov/system/files/2019-03/54964-Specialty_Drugs.pdf
    \10\Id.
---------------------------------------------------------------------------
    While overall drug spending has grown significantly, a 
relatively small number of drugs are responsible for a 
disproportionately large share of Medicare costs. According to 
the Centers for Medicare & Medicare Services (CMS) Medicare 
Part D data, the 250 top-spending drugs (8.7 percent of Part D 
drugs) account for 77.9 percent of total Part D spending.\11\
---------------------------------------------------------------------------
    \11\``10 Essential Facts About Medicare and Prescription Drug 
Spending,'' Henry J. Kaiser Family Foundation, (2019). Available at: 
https://www.kff.org/infographic/10-essential-facts-about-medicare-and-
prescription-drug-spending/
---------------------------------------------------------------------------
    Additionally, the Congressional Budget Office notes that 
brand-name specialty drugs accounted for about 30 percent of 
net spending on prescription drugs under Medicare Part D and 
Medicaid, but they accounted for only about 1 percent of all 
prescriptions dispensed in each program. Yet, the net prices 
paid for these drugs are very high, due to the fact that 
rebates in Medicare Part D are significantly lower than in 
Medicaid. In fact, net of rebates and discounts, the average 
price per standardized prescription was nearly twice as high in 
Medicare Part D as in Medicaid for specialty drugs and three 
times as high for top-selling non-specialty drugs. Because many 
of these drugs have little or no competition, there are no 
market forces to apply downward pressure to provide lowered 
prices to the millions who have coverage for such medicines 
under Medicare.\12\
---------------------------------------------------------------------------
    \12\Prices for and Spending on Specialty Drugs in Medicare Part D 
and Medicaid. Congressional Budget Office, (2019). Available at: 
https://www.cbo.gov/system/files/2019-03/54964-Specialty_Drugs.pdf
---------------------------------------------------------------------------
    In response to the rising cost of drugs, many have called 
for Medicare to negotiate prices of prescription drugs on 
behalf of beneficiaries. Current law requires 
``noninterference,'' which explicitly prohibits the Secretary 
from negotiating with drug manufacturers.\13\ Instead, Part D 
plans negotiate directly with drug companies to obtain 
discounts (rebates) for their enrollees, retaining the most 
leverage when multiple drugs or therapies exist on the market 
for the same condition. Negotiation is a tool that will 
mitigate the potential for even higher launch prices because 
manufacturers will attempt to avoid participating in such a 
process. And as their leverage in such negotiations, Medicare 
Part D plans can offer manufacturers preferred formulary 
placement (e.g., a tier that has better patient cost-sharing or 
fewer utilization management tools) to incentivize higher 
utilization of the drug.
---------------------------------------------------------------------------
    \13\Section 1860D-11(i) of the Social Security Act.
---------------------------------------------------------------------------
    External Reference Pricing (ERP) is the practice of using 
the price of a pharmaceutical product (generally an ex-factory 
or list price) in one or several countries to create a 
benchmark or reference price for the purposes of setting or 
negotiating prices in a given country.\14\\15\ With the 
exceptions of Denmark, Sweden, and the U.K., almost every 
European country--and most other developed nations--has 
established some form of an ERP, creating a ``basket'' of rates 
in comparable countries and using the average of all prices in 
the basket as a benchmark.\16\
---------------------------------------------------------------------------
    \14\Dimitra Panteli et al. Pharmaceutical Regulation in 15 European 
Countries. Health Systems in Transition, (2016). Available at: http://
www.euro.who.int/data/assets/pdf_file/0019/322444/HiT-pharmaceutical-
regulation-15-European-countries.pdf?ua=1
    \15\WHO Guideline on Country Pharmaceutical Pricing Policies. World 
Health Organization, (2013). Available at: https://
www.ncbi.nlm.nih.gov/books/NBK258618/
    \16\A Painful Pill to Swallow: U.S. vs. International Prescription 
Drug Prices. U.S. House of Representatives: The Committee on Ways and 
Means, (2019). Available at: https://waysandmeans.house.gov/sites/
democrats.waysandmeans.house.gov/files/documents/U.S.%20vs.%20Inter 
national%20Prescription%20Drug%20Prices_0.pdf
---------------------------------------------------------------------------
    Empirical evidence shows ERPs are effective in moderating 
drug prices within a market, resulting in price reductions of 
about 15 percent over 10 years. Further as outlined in the Ways 
and Means Committee report, purchasing the same drugs using an 
index of average drug prices across the comparator countries 
could reduce Part D spending by $48.8 billion annually.\17\\18\
---------------------------------------------------------------------------
    \17\Dimitra Panteli et al. Pharmaceutical Regulation in 15 European 
Countries. Health Systems in Transition, (2016). Available at: http://
www.euro.who.int/data/assets/pdf_file/0019/322444/HiT-pharmaceutical-
regulation-15-European-countries.pdf?ua=1
    \18\A Painful Pill to Swallow: U.S. vs. International Prescription 
Drug Prices. U.S. House of Representatives: The Committee on Ways and 
Means, (2019). Available at: https://waysandmeans.house.gov/sites/
democrats.waysandmeans.house.gov/files/documents/U.S.%20vs.%20Inter 
national%20Prescription%20Drug%20Prices_0.pdf
---------------------------------------------------------------------------
    Drug manufacturers admit that they continue to make profits 
in countries where drug prices are significantly lower.\19\ 
Yet, when presented proposals to relax the noninterference 
clause, critics argue such a policy would limit patient access 
to drugs and inhibit innovation among manufacturers. Many drug 
manufacturers cite research and development costs as the reason 
for high prices. Yet as reported by the Washington Post, nine 
out of 10 large pharmaceutical companies spend more on sales, 
marketing, and other overhead than on innovation or research 
and development.\20\ And according to PhRMA's most recent 
numbers, the industry spent nearly $30 billion on marketing and 
promotion in 2016 and the industry will spend over $300 billion 
over the next 10 years.\21\ While research is crucial to the 
continued development of new, life-saving drugs and therapies, 
innovation is of no use if Americans cannot afford its 
benefits.
---------------------------------------------------------------------------
    \19\https://www.npr.org/sections/health-shots/2019/02/26/698136259/
pharmaceutical-company-ceos-face-grilling-in-senate-over-high-drug-
prices
    \20\https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-
pharmaceutical-companies-are-spending-far-more-on-marketing-than-
research/
    \21\https://phrma.org/-/media/Project/PhRMA/PhRMA-Org/PhRMA-Org/
PDF/PhRMA_Marketing_IssueBrief.pdf?utm_source=STAT+Newsletters&utm_campa
ign=cb1b1d3d39-RO_COPY_03&utm_medium=email&utm_term=0_8cab1d7961-
cb1b1d3d39-150975749
---------------------------------------------------------------------------
    While Medicare provides important financial and health 
security for more than 60 million Americans, the program still 
has gaps in coverage that pose significant financial hardship 
for more than half of all Medicare beneficiaries who have 
incomes of less than $2,200 a month.\22\ In addition, many 
working-age adults who become disabled and can no longer work 
are on Social Security Disability, which pays on average less 
than $1400 a month.\23\ Addressing coverage gaps and working to 
address out-of-pocket costs would go a long way toward 
improving overall health by helping beneficiaries to avoid 
depression and social isolation, and prevent health care costs 
due to accidents, falls, cognitive impairments, an increase in 
chronic conditions, and oral cancer.
---------------------------------------------------------------------------
    \22\Gretchen Jacobson et al., Income and Assets of Medicare 
Beneficiaries, 2016-2035. Henry J. Kaiser Family Foundation, (2017). 
Available at: https://www.kff.org/medicare/issue-brief/income-and-
assets-of-medicare- beneficiaries-2016-2035/
    \23\Id.
---------------------------------------------------------------------------
    The Medicare Savings Programs (MSPs) and Low-Income Subsidy 
(LIS) program, often collectively referred to as Extra Help 
programs, help Medicare beneficiaries with out-of-pocket costs 
such as premiums, deductibles, and cost sharing. These 
programs, however, do not reach many beneficiaries with very 
modest incomes, leaving them exposed to significant financial 
risk. In addition, many eligible beneficiaries are not enrolled 
in these programs, with as many as 85 percent of eligible 
individuals in certain categories not receiving assistance with 
their Medicare premiums.\24\ Eliminating barriers to enrollment 
and improving availability of these programs will lower out-of-
pocket costs and improve access to care.
---------------------------------------------------------------------------
    \24\``Medicare Savings Programs: New Estimates Continue to Show 
Many Eligible Individuals Not Enrolled,'' Medicaid and CHIP Payment 
Advisory Commission (MACPAC), (2017). Available at: https://
www.macpac.gov/wp-content/uploads/2017/08/Medicare-Savings-Programs-
New-Estimates-Continue-to-Show-Many-Eligible-Individuals-Not-
Enrolled.pdf
---------------------------------------------------------------------------

                         C. Legislative History


Background

    H.R. 3 was introduced on September 19, 2019, and was 
referred to the Committee on Energy and Commerce, and in 
addition, the Committee on Ways and Means and the Committee on 
Education and Labor.

Committee action

    The Committee on Ways and Means met on October 22, 2019 to 
consider H.R.3, and ordered the bill, as amended, favorably 
reported by a vote of vote, 24-17, with one member voting 
present.

Committee hearings

    On October 17, 2019, the Committee on Ways and Means held a 
full committee hearing entitled, ``Investing in the U.S. Health 
system by lowering drug prices, reducing out-of-pocket costs, 
and improving Medicare benefits,'' to discuss how H.R. 3, the 
Lower Drug Costs Now Act, will lower prescription drug prices 
in Medicare and the commercial market, improve affordability of 
medicine, and reduce costs for patients and taxpayers.
    On February 12, 2019, the Committee on Ways and Means held 
a full committee hearing entitled, ``The Cost of Rising 
Prescription Drug Prices,'' to discuss the drug pricing crisis.
    Members heard testimony from expert witnesses about 
relevant issues, including: rapidly escalating prices of older 
medications; high launch prices; misalignment of incentives for 
responsibly pricing products; and high out-of-pocket costs for 
patients. Democrats invited four witnesses, including: 1) 
Odunola Ojaumi (patient); 2) Mark Miller, PhD; 3) Rachel Sachs, 
JD, MPH; and 4) Alan Reuther, JD. The minority invited Joe 
Antos, PhD.
    On March 7, 2019, the Committee on Ways and Means held a 
health subcommittee hearing entitled ``Promoting Competition to 
Lower Medicare Drug Prices,'' to discuss the complicated drug 
pricing landscape, including how to lower prescription drug 
prices through competition, pay for value, and lower out-of-
pocket costs for patients. Democrats invited four witnesses, 
including: 1) Robin Feldman, JD; 2) Ameet Sarpatwari, JD, PhD; 
3) Amy Kapczynski, MA, M.Phil, JD; and 4) Frederick Isasi, MPH. 
The minority invited Douglas Holtz-Eakin, PhD.
    On June 4, 2019, the Committee on Ways and Means held a 
full committee Member Day hearing to hear member testimony on a 
range of issues and proposals regarding prescription drug 
pricing, dental, vision, and hearing coverage, and Medicare 
Savings Program, the Low Income Subsidy (LIS) Program, and 
Medigap improvements. Off-committee Member, Representatives 
Sharice Davids (D-KS-3), Ben McAdams (D-UT-4), Xochitl Torres 
Small (D-NM-2), and Elissa Slotkin (D-MI-8) discussed more 
transparency and the need to ensure better affordability and 
lower out-of-pocket costs for prescription drugs. On Committee 
Republican Representatives Devin Nunes (R-CA-2) and David 
Schweikert (R-AZ-6) discussed the importance of drug 
affordability, and the former also opposed policies that would 
establish federal price setting policies.

                      II. EXPLANATION OF THE BILL


                  The Lower Drug Costs Now Act of 2019


      Title I: Lowering Prices Through Fair Drug Price Negotiation


                              PRESENT LAW

    Medicare Part A (Hospital Insurance, or HI) covers 
inpatient hospital services, skilled nursing care, hospice 
care, and some home health services.\25\ Part A pays providers 
for drugs as part of a predetermined, per episode payment. 
Hospitals can also receive add-on payments for certain new 
innovator drugs under Part A.
---------------------------------------------------------------------------
    \25\Section 1812 of the Social Security Act (42 U.S.C. Sec. 1395d).
---------------------------------------------------------------------------
    Medicare Part B (Supplementary Medical Insurance, or SMI) 
covers physician services, outpatient services, and some home 
health and preventive services.\26\ Providers who administer 
prescription drugs under Part B are paid based on a list price 
defined in statute (Average Sales Price or ASP). Beneficiaries 
generally pay 20% coinsurance under Part B, including for 
drugs.
---------------------------------------------------------------------------
    \26\Section 1832 of the Social Security Act (42 U.S.C. Sec. 1395k).
---------------------------------------------------------------------------
    The voluntary Medicare Part D outpatient prescription drug 
benefit provides coverage to Medicare beneficiaries who enroll 
in stand-alone private plans (PDP) or Medicare Part C managed 
care plans (i.e., Medicare Advantage) with a Part D component 
(MA-PD) (collectively referred to as ``Part D plans'').\27\ The 
Part D noninterference provision bars the Department of Health 
and Human Services (HHS) Secretary (Secretary) from negotiating 
Part D drug prices and from requiring a set formulary or 
pricing structure.\28\
---------------------------------------------------------------------------
    \27\Section 1860D-2 of the Social Security Act (42 U.S.C. 
Sec. 1395w-102).
    \28\Section 1860D-11(i) of the Social Security Act (42 U.S.C. 
Sec. 1395w-111(i)).
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    Part D plan sponsors (insurers), working with pharmacy 
benefit managers (PBMs), negotiate prescription drug price 
discounts and rebates with manufacturers and dispensing 
pharmacies. Sponsors must offer enrollees their negotiated 
price for covered drugs. Under the HHS definition of negotiated 
prices, sponsors have latitude to decide whether to pass on 
rebates and certain other price concessions to enrollees at the 
pharmacy at the point of sale; however, the vast majority do 
not. Instead sponsors generally use rebates to buy down or 
reduce premiums for all plan enrollees.
    In the commercial market, which includes group health plans 
and health insurance offered in the individual and group 
markets, health plans, in conjunction with PBMs, negotiate 
discounts and rebates with manufacturers. Currently, there are 
no federal statutes or regulations related to the prices that 
health plans pay for prescription drugs.

                          REASONS FOR CHANGES

    To establish a new program at Title XI of the Social 
Security Act (SSA) that would require the Secretary of Health 
and Human Services (HHS Secretary) to annually negotiate a 
maximum price for a group of select, single source prescription 
drugs dispensed to certain enrollees in Medicare and in 
commercial health plans (prices will first be available to 
certain eligible Medicare beneficiaries and enrollees in 
participating commercial plans in 2023).

                       EXPLANATION OF PROVISIONS

    Section 1 establishes the short title as the Elijah E. 
Cummings Lower Drug Costs Now Act of 2019.
    Section 101, ``Providing for Lower Prices for Certain High-
Priced Single Source Drugs'', directs the Secretary to 
establish a Fair Price Negotiation Program by amending Title XI 
of the Social Security Act to add a new Part E. The Secretary 
shall publish a list of selected drugs; enter into agreements 
with manufacturers of selected drugs; negotiate and renegotiate 
maximum fair price (MFP) for each selected drug; and carry out 
other administrative duties. Prices negotiated under section 
101 shall apply beginning in plan year 2023.
    Selected Drugs. Every year, the Secretary will identify the 
250 brand-name drugs that lack price competition and have the 
greatest net spending in the U.S. The legislation targets the 
area of the market failure in which competition between 
products does not exist and is not successful in lowering 
prices. By focusing on the most expensive drugs, the Secretary 
will most effectively utilize the federal government's 
resources to lower costs. The 25 most expensive drugs in the 
Medicare Part D program represent 23 percent of total Part D 
spending.
    The Secretary will use data provided by Medicare, Medicaid, 
and commercial insurance to make the determination about 
aggregate cost, which is a measure of price and volume of 
sales. The Secretary is required to select 125 drugs from 
Medicare and 125 from the commercial market, and in addition to 
the 250 drugs, identify any new drugs that are eligible for 
negotiation that would otherwise make the list of high cost 
drugs, beginning no later than April 15, 2021. The Secretary 
should adhere to any public notice requirements that are 
relevant to the annual selection of negotiation eligible drugs, 
including adhering to standards that require solicitation of 
public comment.
    An eligible drug that lacks price competition is to be 
defined as a brand-name drug that does not have a generic or 
biosimilar competitor on the market. Insulin is also included 
for negotiation. Drugs placed on a selected drug list for a 
price applicability year would be considered selected drugs for 
that year and each subsequent plan year until the first plan 
year beginning after the date the Secretary were to determine 
that the drug is no longer a qualifying single source drug.
    In prioritizing drugs for negotiation each year, the 
Secretary would take into account the drugs for which the 
greatest savings to taxpayers, patients, and all payers may be 
achieved. Recognizing the practical capacity and administrative 
constraints on HHS, the Secretary will negotiate as many drugs 
as possible each year, beginning with at least 25 drugs (from 
calendar year (CY) 2023--CY 2027), and, progressively 
increasing to 30 drugs (from CY 2028--CY 2032) and 35 drugs by 
2032. A drug selected for negotiation would continue to be 
included in the program until two generic or biosimilar 
competitors enter the market. CBO believes the first group of 
selected drugs will yield the greatest savings, even as the 
overall number increases in 2028 and again in 2032. 
Additionally, the 25 to 30 to 35 drug thresholds are the bare 
minimum number of drugs for which prices should be negotiated, 
and the Secretary has discretion to be more aggressive in 
pursuing savings for American consumers.
    Following the publication of the list of selected drugs by 
April 15, 2021, the Secretary would need to enter into 
agreements with manufacturers of selected drugs no later than 
June 15, 2021. The agreements would specify the process and 
requirements for negotiating, renegotiating, and administering 
the MFP for a selected drug during the coming applicability 
year or period.
    Negotiation. The Secretary is required under the 
legislation to directly negotiate with drug manufacturers to 
establish a maximum fair price. The legislation does not 
broadly repeal the non-interference clause, as simply ending 
the ban on negotiation would not result in a CBO score that 
reflects savings for patients or the federal government. In 
contrast, in a preliminary estimate, this bill saves Medicare 
alone $345 billion through lower prices, lower premiums, and 
lower out-of-pocket costs by empowering the Secretary to 
negotiate while ensuring a structure is in place to achieve 
savings for patients and the government.\29\
---------------------------------------------------------------------------
    \29\Letter to Hon. Frank Pallone, Jr., ``Effects of Drug Price 
Negotiation Stemming from Title I of H.R. 3, the Lower Drugs Costs Now 
Act of 2019, on Spending and Revenues Related to Part D of Medicare, 
Congressional Budget Office (October 11, 2019). Available at: https://
www.cbo.gov/system/files/2019-10/hr3ltr.pdf
---------------------------------------------------------------------------
    While negotiating the price, the Secretary will consider: 
research and development costs of the drug as well as cost of 
production; information on alternative treatments and the value 
of the drug; and domestic and international sales information. 
The legislation also establishes an upper limit for the price 
reached in any negotiation as no more than 1.2 times (or 120 
percent) of the volume-weighted average of the price of six 
countries (Australia, Canada, France, Germany, Japan, and the 
United Kingdom), known as the Average International Market 
(AIM) price.
    A selected drug's ``target price'' would depend on whether 
an available AIM price exists for a negotiation or 
renegotiation period. The legislation defines ``target price'' 
as follows:
          Available AIM Price: The average price (net average 
        volume weighted price, if practicable) for any dosage 
        form and strength of a drug unit for sale in an AIM 
        price-applicable country that had the lowest average 
        price compared to the drug's average prices in other 
        AIM price- applicable countries.
          No Available AIM Price: If no AIM price were to be 
        available for the negotiation or renegotiation period, 
        the target price would be 80 percent of the drug's AMP 
        for such year.
    In price negotiations or renegotiations, to the extent 
practicable, the Secretary would consider information that is 
manufacturer specific, related to alternative products, foreign 
sales, and additional information. As part of the negotiation 
or renegotiation process, H.R. 3 compels the Secretary to 
accept a manufacturer's offer to sell a selected drug at or 
below a specified ``target price.'' Specifically, if a 
manufacturer, in negotiation or renegotiation of an MFP for a 
selected drug, were to offer a price that was not more than a 
specified target price, the Secretary would then agree to such 
price as the MFP.
    Maximum Fair Price. The goal is for the Secretary and the 
manufacturer to negotiate a mutually agreed maximum fair price 
that is below the AIM price through a voluntary, bi-lateral 
negotiation process. The maximum fair price would be applied to 
Medicare, with flexibility for Medicare Advantage and Medicare 
Part D plans to use additional tools to negotiate even lower 
prices. A manufacturer would also be required to offer the 
negotiated price to the commercial market, to group and 
individual health insurance plans. It is at the discretion of 
these payers whether to accept the negotiated price. No later 
than May 1st of a Part D plan year before the initial price 
applicability year (May 1, 2022, for 2023), the Secretary would 
publish in the Federal Register the MFP for a selected drug 
that it negotiated with the manufacturer. If the MFP for a 
selected drug for an initial price applicability year were to 
be agreed upon after the MFP publication deadline, the 
Secretary would need to publish the MFP in the Federal Register 
no later than 30 days after the MFP had been determined.
    Once the MFP is established, that drug's maximum fair price 
will remain in place until there are two or more generic or 
biosimilar products available. If a manufacturer has agreed to 
a maximum fair price, and then overcharges Medicare or 
commercial payers, the manufacturer will be subject to a civil 
monetary penalty equal to 10 times the difference between the 
price charged and the maximum fair price for the drug. The 
Secretary or the manufacturer may request a re-negotiation if 
new information becomes available after the maximum fair price 
is agreed to.
    Judicial Review. Section 101 excludes the selection of 
drugs (including qualifying insulin products) for publication 
as selected drugs and determinations of whether a drug is a 
negotiation-eligible drug, the MFP, and units of a drug for 
calculating the AIM price under the MDP Program from being 
subject to judicial review. This provision is similar to other 
provision in Medicare statutes where Secretarial determinations 
are not subject to such review, including sections 1899(g) and 
1848(q)(13)(B) of the Social Security Act, and a number of 
instances in the Medicare Access and CHIP Reauthorization Act 
(MACRA) (H.R. 2, P.L. 114-10).
    Section 102, ``Selected Drug Manufacturer Excise Tax 
Imposed During Noncompliance Periods,'' establishes an excise 
tax that will be levied against manufacturers during periods 
when the manufacturer is noncompliant with the requirements of 
the fair price negotiation program by adding a new section 4192 
to Subchapter E of Chapter 32 of the Internal Revenue Code. The 
Joint Committee on Taxation estimates that this tax will not 
yield revenues because drug manufacturers would come to the 
table to negotiate drug prices rather than pay the tax.\30\
---------------------------------------------------------------------------
    \30\``Description of the Revenue Provisions of H.R. 3, the Lower 
Drug Costs Now Act Of 2019,'' The Joint Committee on Taxation, Congress 
of the United States (October 19, 2019). Available at: https://
www.jct.gov/publications.html?func=startdown&id=5224
---------------------------------------------------------------------------

                            EFFECTIVE DATES

    Section 101: Effective beginning on or after January 1, 
2021 (negotiations) and January 1, 2023 (fair prices in use).
    Section 102: Effective beginning after the date of 
enactment.

  Title II: Medicare Parts B and D Prescription Drug Inflation Rebates


                              PRESENT LAW

    Medicare pays for certain outpatient drugs and biologics 
under Part B (which covers physician, outpatient, and some home 
health and preventive services) rather than under the Part D 
retail prescription drug benefit.\31\ Part B-covered drugs 
include: 1) those administered ``incident to physician 
services'' where providers purchase ``separately payable'' 
drugs and bill Medicare after administering the products to 
patients; and 2) those that are not separately payable, but are 
covered under Part B as part of a procedure or treatment, such 
as end-stage renal disease dialysis, vaccinations, or new drugs 
included in outpatient hospital new technology transitional 
pass-through payments.\32\
---------------------------------------------------------------------------
    \31\Section 1833 of the Social Security Act (42 U.S.C. Sec. 1395l).
    \32\Id.
---------------------------------------------------------------------------
    With some exceptions, Part B payment for separately payable 
drugs or biologics is based on a product's average sales price 
(ASP) plus a 6 percent add-on payment.\33\ The ASP is a market 
price that excludes manufacturer price concessions, government 
sales, and other adjustments. Each ASP is based on a 
manufacturer's quarterly sales of a drug to most U.S. 
purchasers, divided by the total units of the drug sold to 
those purchasers in the quarter. To encourage the development 
of lower-priced biosimilar substitutes for biological products, 
the Part B payment rate for a biosimilar is the ASP of the 
biosimilar plus an add-on payment equal to 6 percent of the ASP 
of the more expensive, reference biological. For most Part B 
services, Medicare beneficiaries are responsible for 
coinsurance of 20 percent of the cost of the item or service. 
For Part B drugs, the 20 percent coinsurance is based on a 
drug's ASP plus the 6 percent add-on payment.\34\
---------------------------------------------------------------------------
    \33\Section 1847A of the Social Security Act (42 U.S.C. Sec. 1395w-
3a).
    \34\Id.
---------------------------------------------------------------------------
    The Secretary sets Part B drug payments by aggregating ASP 
data for individual drugs into Medicare billing codes. A 
payment amount for a billing code is the volume-weighted 
average of the ASPs for all drugs grouped into the code. 
Generally, there is one drug in a billing code for biological, 
biosimilar and single source brand name products. In the case 
of multiple source drugs, brand-name and generic products can 
be grouped within a billing code.\35\
---------------------------------------------------------------------------
    \35\Id.
---------------------------------------------------------------------------
    Manufacturers are not required to pay rebates to Medicare 
as a condition for having their drugs covered under Part B. By 
comparison, drug and biological manufacturers that choose to 
market their products to state Medicaid programs are required 
to provide rebates on their sales of outpatient drugs and 
biological products to state Medicaid programs. Medicaid's 
statutory rebates, which are shared between the federal 
government and states, include a basic rebate and an inflation 
rebate.\36\
---------------------------------------------------------------------------
    \36\Section 1927 of the Social Security Act (42 U.S.C. Sec. 1396r-
8).
---------------------------------------------------------------------------
    Computation of the Medicaid basic rebate varies depending 
on whether a drug is a generic or a brand name product and 
other characteristics, but is based on either: 1) a percentage 
of a drug's average manufacturer price (AMP), or 2) the 
difference between the AMP and the lowest statutorily-defined 
``best'' price at which the drug was sold to most retail 
pharmacies in the United States during the rebate period. The 
AMP, defined at section 1927(k)(1) of the Social Security Act, 
is the average price a manufacturer receives in the United 
States for sales to wholesalers that supply retail community 
pharmacies and for sales directly to retail community 
pharmacies. The AMP does not include manufacturer rebates or 
discounts to PBMs and health plans, certain manufacturer prompt 
pay discounts, sales to other government programs, and consumer 
coupons. Certain other types of sales are exempt for purposes 
of calculating the AMP.
    Manufacturers must pay an additional rebate to Medicaid if 
they increase a drug's AMP faster than the inflation rate since 
it was first marketed (with some exceptions), as measured by 
the change in the CPI-U. The total rebate owed by manufacturers 
is the sum of the per-drug basic and inflation rebates, up to 
the drug's rebate period AMP.\37\
---------------------------------------------------------------------------
    \37\42 C.F.R. Sec. 447.504.
---------------------------------------------------------------------------
    To carry out the Medicaid drug rebate program, 
participating manufacturers must report drug pricing data each 
calendar quarter. Manufacturers are required to report AMP data 
and to pay rebates on a quarterly basis for each dosage form 
and strength of a drug.\38\
---------------------------------------------------------------------------
    \38\42 C.F.R. Sec. 447.509.
---------------------------------------------------------------------------

                          REASONS FOR CHANGES

    To make modifications to Medicare at Title XVIII of the SSA 
to impose inflation-based rebates for certain prescription 
drugs administered in Part B and dispensed in Part D.

                       EXPLANATION OF PROVISIONS

    Section 201, ``Medicare Part B Rebate by Manufacturers,'' 
amends sections 1833, 1834, and 1847(A) of the Social Security 
Act and outlines standards for inflation rebates for 
manufacturers of drugs covered under Part B. To reverse 
unjustified price hikes, all of the single source drugs and 
biologicals in Part B would face a new inflation rebate. Drugs 
with annual total allowed charges less than $100 and vaccines 
are excluded. If a drug company has raised the price of a drug 
in Part B above the Consumer Price Index for All Urban 
Consumers (CPI-U), the above-inflation portion of the price 
(multiplied by units sold to the program) would be refunded to 
the Treasury and deposited into the Federal Supplementary 
Medical Insurance Trust Fund. If manufacturers do not comply 
with the rebate requirement under Part B, the Secretary may 
assess a civil money penalty (CMP) equal to at least 125 
percent of the rebate amount.
    Section 201 also directs the Secretary to study the 
feasibility of incorporating multiple source drugs, biologicals 
and drugs paid for under Medicare Advantage (MA), and other 
drugs excluded from the rebate system. Pending the results of 
this report, Section 201 grants the Secretary discretion to 
expand the rebate system to include multiple source drugs under 
Part B. Section 201 would be effective beginning July 1, 2021.
    Section 202, ``Medicare Part D Rebate by Manufacturers,'' 
amends Part D of title XVIII of the Social Security Act by 
adding a new section 1860D-14B. Section 202 outlines standards 
for inflation rebates for manufacturers of drugs covered under 
Part D. To reverse unjustified price hikes, all of the covered 
drugs and biologicals in Part D would face a new inflation 
rebate. Drugs with annual total allowed charges less than $100 
are excluded. If a drug company has raised the price of a drug 
in Part D above the CPI-U, the above-inflation portion of the 
price (multiplied by units sold to the program) would be 
refunded to the Treasury and deposited into the Federal 
Supplementary Medical Insurance Trust Fund. If manufacturers do 
not comply with the rebate requirement under Part B, the 
Secretary may assess a CMP equal to at least 125 percent of the 
rebate amount. Section 202 would be effective beginning in plan 
year 2022.
    The inflation rebate penalty is designed to discourage 
manufacturers from increasing prices in all markets because the 
drug prices on which the rebate are paid based on the average 
prices market-wide. The inflation rebate penalty will 
indirectly apply to the private market and will result in fewer 
price increases across the board. CBO's estimate of the 
inflation rebate provision in the Senate Finance bill notes 
that, ``CBO expects that the inflation rebate provision would 
reduce costs for prescription drug benefits offered by 
commercial plans.'' The HHS Office of the Actuary (OACT) notes 
as a result of this legislation, private health insurance (PHI) 
enrollees are expected to save $55 billion under the bill. And 
PHI sponsors will save $28 billion (federal/state) and $46 
billion (employer sponsored insurance).
    The policies established in Sections 201 and 202 will help 
to minimize prescription drug price hikes because rather than 
pay the rebate, manufacturers will choose to minimize increases 
over time, resulting in savings to Medicare and the private 
market.

                            EFFECTIVE DATES

    Section 201: Effective beginning on or after July 1, 2021.
    Section 202: Effective beginning on or after January 1, 
2022.

   Title III: Part D Improvements and Maximum Out-of-Pocket Cap for 
                         Medicare Beneficiaries


                              PRESENT LAW

    Part D provides a voluntary, outpatient prescription drug 
benefit for Medicare beneficiaries and is the primary source of 
drug coverage for dual-eligible individuals enrolled in both 
Medicare and the state-federal Medicaid program.\39\ Part D 
coverage is provided by private insurers, or plan sponsors, 
that submit annual bids to offer drug-only plans or Part C 
Medicare Advantage managed care plans with a Part D benefit. 
Congress designed Part D as a market- oriented program in which 
sponsors compete for enrollees based on plan premiums and scope 
of benefits, including cost-sharing requirements. Private drug 
plans participating in Part D bear some financial risk, 
although federal subsidies cover most program costs in an 
effort to encourage participation and keep benefits affordable. 
Plans are offered on a calendar year basis and enrollees may 
change plans each year during an annual enrollment period.
---------------------------------------------------------------------------
    \39\Section 1395w-101 et seq. of the Social Security Act (42 U.S.C. 
Sec. 1395w-101 et seq.).
---------------------------------------------------------------------------
    At a minimum, Part D sponsors must offer a ``standard 
coverage'' package of benefits as defined in law.\40\ Plan 
sponsors may also offer alternative or enhanced coverage that 
is at least actuarially equivalent to a standard plan. Medicare 
provides subsidies to plan sponsors for each enrollee in a Part 
D plan that, on average, equal 74.5 percent of the value of 
standard coverage.\41\ Part D subsidies include direct 
subsidies, under which Medicare pays drug plans a risk-adjusted 
per enrollee payment and reinsurance under which Medicare 
subsidizes 80 percent of a plan's drug spending above a 
catastrophic threshold.\42\ Medicare covers a greater portion 
of costs for low-income individuals through the low-income 
subsidy (LIS), which varies by specified income and assets 
thresholds.
---------------------------------------------------------------------------
    \40\Section 1395w-102 of the Social Security Act (42 U.S.C. 
Sec. 1395w-102).
    \41\Section 1395w-115 of the Social Security Act (42 U.S.C. 
Sec. 1395w-115).
    \42\Id.
---------------------------------------------------------------------------
    In terms of beneficiary cost-sharing, under the standard 
Part D benefit in 2019, a beneficiary first pays a deductible 
($415). After the deductible has been met, the beneficiary is 
responsible for 25 percent of the cost of drugs (with the plan 
covering the remaining 75 percent) up to the initial coverage 
limit ($3,820).\43\
---------------------------------------------------------------------------
    \43\Section 1395w-102 of the Social Security Act (42 U.S.C. 
Sec. 1395w-102).
---------------------------------------------------------------------------
    After the initial coverage limit has been reached, a 
beneficiary enters the coverage gap (``doughnut hole'') and is 
responsible for coinsurance of 25 percent of the cost of brand-
name drugs and 37 percent of the cost of generic drugs until 
accumulating $5,100 in total out-of-pocket costs. While 
enrollees are in the coverage gap, plans cover the remaining 63 
percent of generic drug costs and 5 percent of brand-name drug 
costs, with the remaining 70 percent of costs for brand-name 
drugs, biologics and biosimilars covered through manufacturer 
discounts. Enrollee out-of-pocket costs in the coverage gap are 
calculated based on both the required beneficiary coinsurance 
and the manufacturer discounts. (The manufacturer discounts do 
not apply to drugs provided to LIS Part D beneficiaries in the 
coverage gap; rather, Medicare covers the full cost of the drug 
minus some lower cost-sharing for specified LIS beneficiaries.)
    At $5,100 in total out-of-pocket-costs, a beneficiary 
reaches the out-of-pocket threshold after which cost sharing is 
the greater of a nominal set co-payment for drugs ($3.40 for 
generic drugs and $8.50 brand-name drugs in 2019), or 5 percent 
coinsurance.\44\ There is no annual cap on cost-sharing for 
beneficiaries, with the exception of LIS beneficiaries with the 
lowest income and assets. During this catastrophic coverage 
period, plans are responsible for 15 percent of costs and 
Medicare subsidizes 80 percent of costs (the reinsurance 
subsidy).\45\ Total spending (beneficiary and plan costs 
together) needed for an enrollee to move to the catastrophic 
threshold is estimated at about $8,139.54 in 2019.
---------------------------------------------------------------------------
    \44\Id.
    \45\Section 1395w-115 of the Social Security Act (42 U.S.C. 
Sec. 1395w-115).
---------------------------------------------------------------------------
    Part D coverage parameters based on dollar amounts are 
generally updated for each plan year based on the percentage 
increase in average per-capita spending for covered Part D 
drugs during the 12-month period ending in July of the previous 
year. In addition, Part D enrollees also pay monthly premiums, 
which are based on a rate equal to 25.5 percent of the annual 
nationwide average of plan bids for standard benefits; however, 
actual premiums vary widely by the plan selected.

                          REASONS FOR CHANGES

    To make modifications to Medicare at Title XVIII of the SSA 
to reconfigure the Part D benefit to modify enrollee cost-
sharing, including capping annual out-of-pocket spending; 
reduce Medicare reinsurance subsidies to plan sponsors, and 
modify an existing manufacturer drug discount program.

                       EXPLANATION OF PROVISIONS

    Section 301, ``Medicare Part D Benefit Redesign,'' amends 
Part D of title XVIII of the Social Security Act by adding a 
new section 1860D-14C. Section 301 creates a cap on the costs 
for prescription drugs by setting the annual out-of-pocket 
limit at $2,000. Beneficiaries who have more than $2,000 in 
out-of-pocket prescription drug spending will face no 
additional cost-sharing over that amount. Section 301 reduces 
from 80 percent to 20 percent the government reinsurance in the 
catastrophic phase of Part D coverage, and increases plan 
responsibility from 20 percent to 50 percent. Reinsurance for 
the catastrophic spending grew by over 500 percent from $8.0 
billion in 2007 to nearly $40.9 billion in 2018--and is now the 
single-largest component of total Part D spending. The shift in 
plan responsibility will improve incentives for plans to better 
manage drug spending.
    Section 301 also converts the current coverage gap discount 
program into a benefit-wide responsibility, requiring 
manufacturers of single source drugs to contribute to payments 
in both the initial and catastrophic phases of the benefit. 
Under current law, manufacturers pay 70 percent of the costs 
for beneficiaries in the coverage gap. Changes made by section 
301 require that drug manufacturers be responsible for 30 
percent of costs in the catastrophic coverage phase, to ensure 
that drug companies help pay more of the costs for expensive 
drugs in catastrophic coverage. Additionally, manufacturers 
would be required to pay 10 percent costs in the initial 
coverage phase. The new manufacturer discount program would 
apply to applicable drugs, which would be defined as brand-name 
drugs, biologics, and biosimilars on the formulary of a Part D 
plan or otherwise covered by a Part D plan, including through 
an enrollee exception or appeal. Single source drugs selected 
by the Secretary for price negotiation under Section 101 of 
H.R. 3 would be exempt from the manufacturer discount program 
as long as the drug was covered under a price applicability 
period. Section 301 program enhancements would be implemented 
beginning in plan year 2022.
    Section 302, ``Allowing Certain Enrollees of Prescription 
Drugs Plans and MA-PD Plans Under Medicare Program to Spread 
Out Cost-Sharing under Certain Circumstances,'' amends Part D 
of title XVIII of the Social Security Act to direct the 
Secretary to engage in rulemaking in order to allow PDPs to 
give beneficiaries with high drug costs the option to pay for 
such costs in installments throughout the year, known as 
``smoothing.'' Eligible beneficiaries would be those who would 
meet the $2000 annual out-of-pocket deductible in a single 
prescription fill. Section 302 would be implemented beginning 
in plan year 2022.
    Section 303, ``Establishment of Pharmacy Quality Measures 
Under Medicare Part D,'' amends Part D of title XVIII of the 
Social Security Act and establishes pharmacy quality measures 
for the purposes of providing pharmacy incentive payments or 
price concessions. This section would require the Secretary to 
establish standardized pharmacy quality metrics that PDPs must 
use in any pharmacy incentive payment program. The Secretary 
would require PDPs to use these measures as soon as they are 
sufficient in number, but no later than in plan year January 1, 
2021.

                            EFFECTIVE DATES

    Section 301: Effective beginning on or after January 1, 
2022.
    Section 302: Effective beginning on or after January 1, 
2022.
    Section 303: Effective beginning on or after January 1, 
2021.

    Title IV: Prescription Drug Policies for Low-Income Individuals


                              PRESENT LAW

Medicare Part D Low Income Subsidy (LIS) Program

    Private insurers participating in Part D bear some 
financial risk, although federal subsidies cover most program 
costs in an effort to encourage participation and keep benefits 
affordable. Beneficiaries with limited incomes and resources 
may qualify for additional Medicare LIS that reduce their out-
of-pocket spending by covering all, or some, of the Part D 
monthly premiums and annual deductible, and limiting co-
payments or coinsurance.\46\ The LIS is progressive, with 
lower-income beneficiaries receiving greater assistance.\47\
---------------------------------------------------------------------------
    \46\Section 1395w-114 of the Social Security Act (42 U.S.C. 
Sec. 1395w-114).
    \47\Id.
---------------------------------------------------------------------------
    Certain groups of Medicare beneficiaries automatically 
qualify (and are deemed eligible) for the full LIS including 
the following: (1) full benefit dual-eligible individuals who 
qualify for Medicaid based on income and resources; (2) 
individuals who receive cost-sharing assistance from Medicaid 
through MSP; and (3) individuals eligible for SSI cash 
assistance. Medicare beneficiaries may apply to have their LIS 
eligibility determined by Social Security Administration or by 
their state Medicaid agency.
    For 2019, individuals may qualify for the full LIS if they 
have annual incomes below 135 percent of FPL (as applicable to 
family size) and resources that do not exceed $9,230 for a 
single person and $14,600 for a couple. Individuals may qualify 
for a partial LIS if they have incomes between 135 percent and 
150 percent of FPL (applicable to family size) and resources 
below $14,390 for a single person and $28,720 for a couple. The 
resource limits include $1,500 per person for burial expenses.
    There is a clear need to improve the programs that provide 
assistance with Medicare Part D premiums and cost sharing. 
Currently, an estimated 40 percent of low-income Medicare 
beneficiaries spend 20 percent or more of their incomes on 
premiums and health care costs.\48\ Roughly 3 in 10, or 13 
million, Part D enrollees receive cost sharing assistance 
through the LIS program. An additional 1 million LIS 
beneficiaries are paying premiums for Part D coverage even 
though they may be able to obtain coverage without a premium 
through a benchmark PDP.\49\ One-third (18 million people) had 
incomes below 150 percent of the federal poverty level (less 
than $18,000 annually for an individual), and at best, limited 
assets to last for the duration of their lifetimes.\50\
---------------------------------------------------------------------------
    \48\Cathy Schoen, et al., ``A Policy Option to Enhance Access and 
Affordability for Medicare's Low-Income Beneficiaries,'' The 
Commonwealth Foundation, (2018). Available at: https://
www.commonwealthfund.org/publications/issue-briefs/2018/sep/medicare-
low-income-beneficiaries
    \49\``10 Essential Facts About Medicare and Prescription Drug 
Spending,'' Henry J. Kaiser Family Foundation, (2019). Available at: 
https://www.kff.org/infographic/10-essential-facts-about-medicare-and-
prescription-drug- spending/
    \50\Cathy Schoen, et al., ``A Policy Option to Enhance Access and 
Affordability for Medicare's Low-Income Beneficiaries,'' The 
Commonwealth Foundation, (2018). Available at: https://
www.commonwealthfund.org/publications/issue-briefs/2018/sep/medicare-
low-income-beneficiaries
---------------------------------------------------------------------------
    For people with incomes near poverty ($12,120 per year for 
an individual), the sum of the Part A hospital deductible, Part 
B premium, and deductibles for other medical care could amount 
to nearly 25 percent of income. Prescription drug premiums and 
cost-sharing responsibilities are in addition to Part A and B 
cost-sharing obligations, indicating how critical it is to 
expand and improve these assistance programs for low- and 
moderate-income beneficiaries.

State Health Insurance Assistance Program (SHIP)

    The SHIP provides funding to states and U.S. territories 
for outreach, counseling, and information assistance to 
Medicare beneficiaries and their families and caregivers on 
Medicare and other health insurance issues. Authorized under 
Section 4360 of the Omnibus Budget Reconciliation Act of 1990 
(OBRA '90; P.L. 101-508; 42 U.S.C. 1395b-4), SHIP grants are 
administered by the Administration for Community Living within 
HHS. There are SHIP projects in all 50 states, as well as the 
District of Columbia, Guam, Puerto Rico, and the Virgin 
Islands.
    The majority of SHIP funding is provided annually under 
discretionary budget authority in appropriations for Labor, 
Health and Human Services, Education, and Related Agencies 
(LHHS). SHIPs received $49 million in discretionary 
appropriations for FY2019 and grants are provided to states 
(including certain U.S. territories) based on formulas 
specified in regulation and guidance. In addition to 
discretionary funding, beginning in FY2009, the Medicare 
Improvements for Patients and Providers Act of 2008 (MIPPA) 
provided funding for specific outreach and assistance 
activities to Medicare beneficiaries to SHIPs and other 
entities.\51\ This mandatory funding was extended multiple 
times, most recently under the Bipartisan Budget Act of 2018 
through FY2019.\52\ MIPPA funding for SHIPs provided for 
outreach and assistance to low-income Medicare beneficiaries 
including those who may be eligible for LIS and MSP. The HHS 
Secretary was required to transfer specified amounts for MIPPA 
program activities from the Medicare Trust Funds. SHIPs 
received $13 million in mandatory funding for FY2019 which was 
provided to states based on a statutory funding formula.
---------------------------------------------------------------------------
    \51\Medicare Improvements for Patients and Providers Act of 2008, 
(H.R. 6331; P.L. 110-275) (July 15, 2008).
    \52\Bipartisan Budget Act of 2018, (H.R. 1892; P.L. 115-123) 
(February 9, 2018).
---------------------------------------------------------------------------

                          REASONS FOR CHANGES

    To make modifications to Medicare at Title XVIII of the SSA 
to refine eligibility standards and administration of the Low 
Income Subsidy (LIS) program under Part D.

                       EXPLANATION OF PROVISIONS

    Section 401, ``Adjustments to Medicare Part D Cost-Sharing 
Reductions for Low-Income Individuals,'' amends section 1860D-
14 of title XVIII of the Social Security Act to eliminate cost-
sharing for beneficiaries who receive generic drugs under Part 
D. PDP sponsors are required under current law to apply 
specific copayments for generic drugs obtained by LIS eligible 
enrollees and enrollees with spending above the out-of-pocket 
threshold (catastrophic coverage). PDPs must ensure that the 
appropriate cost-sharing is applied to the generic drug as 
defined under CMS regulations, and when a drug is provided 
across multiple phases of Part D, each requiring different co-
payments, Part D sponsors charge beneficiaries only one 
copayment per prescription. Section 401 fully incorporates H.R. 
2757, the Creating Lower Cost Alternative for Your Prescription 
Drugs Act.
    Section 402, ``Dissemination to Medicare Part D Subsidy 
Eligible Individuals of Information Comparing Premiums of 
Certain Prescription Drug Plans,'' amends section 1860D-1 of 
title XVIII of the Social Security Act to require CMS to send a 
``choosers notice'' to all LIS beneficiaries with any premium 
under their current plan, not just those who opt to retain 
their existing PDP. Under current law, LIS enrolled 
beneficiaries receive an annual notice prior to each plan year 
if their plan requires a premium, but they actively chose to 
retain their current plan instead of a $0 premium plan. CMS 
refers to these beneficiaries as ``choosers.'' Medicare 
beneficiaries on LIS are eligible for premium-free prescription 
drug plans. The chooser's notice would outline the out-of-
pocket costs associated with coverage under comparable PDPs. 
Section 402 fully incorporates H.R. 4632, the Better 
Transparency in Information for Medicare Beneficiaries Act.
    Section 403, ``Providing for Intelligent Assignment of 
Certain Subsidy Eligible Individuals Auto-Enrolled Under 
Medicare Prescription Drug Plans and MA-PD Plans,'' amends 
section 1860D-1 of title XVIII of the Social Security Act to 
require ``intelligent assignment'' of LIS-eligible individuals 
so Medicare can better prioritize enrolling patients into high-
quality plans that can reduce the costs and improve access to 
the drugs that individual needs. Under current law, CMS 
annually automatically enrolls certain Medicare beneficiaries 
who have not already chosen a plan into a Part D plan. CMS 
auto-enrolls full-benefit dual eligible individuals who have 
not elected a Part D plan, and also ``passively enrolls'' low-
income beneficiaries from plans with premiums above the 
regional LIS benchmark and those that are terminating. These 
passively enrolled beneficiaries are reassigned into a plan 
with premiums below the regional LIS benchmark. Unless the plan 
in which a beneficiary is enrolled is terminating or reducing 
its service area and the beneficiary would be without Part D 
coverage, CMS does not reassign beneficiaries that are eligible 
for a full LIS premium subsidy and who have voluntarily elected 
a plan. Section 403 fully incorporates H.R. 4669, the 
Maximizing Drug Coverage for Low-Income Seniors Act.
    Section 404, ``Expanding Eligibility for Low-Income 
Subsidies Under Part D of the Medicare Program,'' amends 
section 1860D-14 of title XVIII of the Social Security Act to 
authorize expansion of the income eligibility thresholds for 
the LIS Program. The bill increases the income thresholds for 
partial subsidy LIS benefits from 150 percent to 200 percent of 
the federal poverty level (FPL) (or from $25,365 to $33,820 for 
a married couple, and for full LIS program benefits, from 135 
to 150 percent of FPL ($22,829 to $25,365 for a married 
couple), beginning January 1, 2022. Most beneficiaries who are 
dually eligible for Medicare and Medicaid are ``deemed 
eligible'' for LIS and automatically enrolled into the program. 
Those who are not dually eligible individuals may also receive 
subsidies, but they must apply for the LIS program and 
demonstrate that their income and assets meet the program's 
thresholds. Section 404 fully incorporates H.R. 4620, the More 
Help for Seniors Act.
    Section 405, ``Automatic Eligibility of Certain Low-Income 
Territorial Residents for Premium and Cost-Sharing Subsidies 
under the Medicare Program; Sunset of Enhanced Allotment 
Program,'' amends sections 1860D-14 and 1860D-31of title XVIII 
and section 1935 of the Social Security Act, to make 
territorial residents to eligible for the Medicare Part D LIS 
program, beginning January 1, 2021. Currently, territorial 
residents are prohibited under law from receiving LIS under 
Part D. In lieu of LIS, territories receive a fixed amount of 
funding to provide Medicaid covered prescription drugs for low-
income beneficiaries. This funding is provided under the 
enhanced allotment program and can be substantially less than 
the amount of out-of-pocket assistance low-income territorial 
residents would receive if were eligible for the LIS program.
    Section 406, ``Automatic Qualification of Certain Medicaid 
Beneficiaries for Premium and Cost-Sharing Subsidies Under Part 
D of the Medicare Program,'' amends section 1860D-14 of title 
XVIII of the Social Security Act to require automatic 
enrollment into LIS for all adults who reach age 65 with 
incomes below 200 percent of FPL and who were enrolled in 
Medicaid, either through the State Plan or after January 1, 
2014 under the ACA Medicaid expansion. The LIS program 
automatic enrollment on or after January 1, 2022, will be for a 
limited period of time, to be defined by the Secretary of the 
Department of Health and Human Services.
    The Patient Protection and Affordable Care Act (ACA) 
directed states to cover lower income adults with incomes up to 
133 percent of the FPL, and offered states the option to add 
coverage for adults whose incomes exceed 133 percent of FPL. 
This ``Medicaid expansion'' created a pathway to coverage for 
millions of Americans with lower incomes. While individuals on 
Medicaid expansion are likely eligible for LIS because of the 
income thresholds, when individuals reach age 65 and enroll in 
Medicare, they experience an unnecessary delay in LIS 
enrollment. This delay not only has an adverse impact on one's 
ability to afford and adhere to prescription drugs, but it also 
exposes the individual to late enrollment penalties when they 
do eventually apply to the LIS program. Section 406 fully 
incorporates H.R. 4661, the Advancing Enrollment and Reducing 
Drug Costs Act.
    Section 407, ``Eliminating the Resource Requirement with 
Respect to Subsidy Eligible Individuals Under Part D of the 
Medicare Program,'' amends section 1860D-14 of title XVIII of 
the Social Security Act to reduce red tape by eliminating the 
resource and asset requirement to streamline the eligibility 
process for the Part D LIS program. LIS program eligibility 
includes income and asset requirements, and the application 
process is administered through the Social Security 
Administration and state governments. Section 407 fully 
incorporates H.R. 4628, the Better Tools to Lower Costs Act.
    Section 408, ``Providing for Certain Rules Regarding the 
Treatment of Eligible Retirement Plans in Determining the 
Eligibility of Individuals for Premium and Cost-Sharing 
Subsidies Under Part D of the Medicare Program,'' amends 
section 1860D-14 of title XVIII of the Social Security Act to 
include disbursements from covered retirement accounts as 
income for LIS eligibility determinations. Section 408 
partially incorporates H.R. 4655, the Enhancing Retirement 
Security for Medicare Beneficiaries Act, and in conjunction 
with Section 407, will to help incentivize savings and provide 
more out-of-pocket protection for Medicare beneficiaries by 
counting disbursements from those accounts in income 
calculations for prescription drug plan years beginning 2022.

                            EFFECTIVE DATES

    Section 401: Effective beginning on or after date January 
1, 2021.
    Section 402: Effective beginning after the of enactment.
    Section 403: Effective beginning on or after date January 
1, 2022.
    Section 404: Effective beginning on or after date January 
1, 2022.
    Section 405: Effective beginning on or after date January 
1, 2021.
    Section 406: Effective beginning on or after date January 
1, 2022.
    Section 407: Effective beginning on or after date January 
1, 2022.
    Section 408: Effective beginning on or after date January 
1, 2022.

                    Title V: Drug Price Transparency


                              PRESENT LAW

    Drug prices have been increasing astronomically over the 
past 20 years, and the lack of transparency around pricing 
leaves patients and the public at the mercy of drug 
manufacturers. Pharmaceutical companies are free to price their 
drugs as they wish, knowing there will be few to no 
repercussions. The recent scandals surrounding pricing of 
EpiPen and Daraprim were among the few times a drug company has 
been publicly shamed for drug prices. The dramatic 50 percent 
drop in price just announced by Eli Lilly also highlights 
exactly how unnecessary and unjustifiable the price was to 
begin with. The discount cost is still a significant jump in 
price from just a few years ago and may still be unaffordable 
to many diabetic patients. These realities spurred a demand for 
public accountability and transparency into the rationale 
behind prescription drug cost increases and high launch prices.

                          REASONS FOR CHANGES

    To make modifications to Medicare at Title XVIII of the SSA 
to require manufacturer transparency in prescription drug price 
setting.

                       EXPLANATION OF PROVISIONS

    Section 501, ``Drug Price Transparency,'' amends Part A of 
title XI of the Social Security Act to require drug 
manufacturers to submit a report to the Secretary 30 days 
before increasing the wholesale acquisition cost (WAC) of a 
qualifying drug if the estimated price of a qualifying drug for 
an applicable year per course of treatment is at least $26,000; 
if the manufacturer increases the price by 10 percent or more 
over a 12-month period or by 25 percent or more over a 36-month 
period; or if there was an increase in the price of the 
qualifying drug that resulted in an increase of the WAC that is 
equal to 10 percent or more within a 12 month period in the 5 
year period preceding January 1, 2021, or 25 percent or more 
within a 26 month period that begins and ends during the five 
year period preceding January 1, 2021. Qualifying drugs have a 
WAC of $100 and for which during the previous calendar year at 
least $1 of total sales were for individuals enrolled under 
Part D or Medicaid.
    In addition, a manufacturer of a qualifying drug will be 
required to report the total expenditures for manufacturing the 
drug, the research and development expenditures for the drug, 
and total revenue and net profit generated by the drug, as well 
as other documentation as applicable. The information provided 
by the manufacturer will be published unless it is considered 
trade secret and confidential. Section 501 also includes a 
civil monetary penalty of $75,000 per day should a manufacturer 
fail to comply. Section 501 incorporates elements of H.R. 2069, 
the Stopping the Pharmaceutical Industry from Keeping drugs 
Expensive Act.

                             EFFECTIVE DATE

    Section 501: Effective beginning after the of enactment.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the House of 
Representatives, the following statement is made concerning the 
votes of the Committee on Ways and Means during the markup 
consideration of H.R. 3, the ``Lower Drug Costs Act Now Act of 
2019'' on October 23, 2019.
    An amendment to the amendment in the nature of a substitute 
to change the name of the bill to ``Elijah E. Cummings Lower 
Drug Costs Now Act'' was offered by Rep. Pascrell. The 
amendment was agreed to by voice vote (with a quorum being 
present).
    An amendment to the amendment in the nature of a substitute 
offered by Mr. Brady was ruled nongermane. Mr. Brady moved to 
appeal the ruling of the Chair and Mr. Thompson moved to table 
the appeal. Mr. Thompson's motion to table the appeal of the 
ruling of the Chair was agreed to by a vote of 25 yeas to 16 
nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................       X   .......  .........  Mr. Brady..........  .......       X   .........
Mr. Lewis........................       X   .......  .........  Mr. Nunes..........  .......  .......  .........
Mr. Doggett......................       X   .......  .........  Mr. Buchanan.......  .......       X   .........
Mr. Thompson.....................       X   .......  .........  Mr. Smith..........  .......       X   .........
Mr. Larson.......................       X   .......  .........  Mr. Marchant.......  .......       X   .........
Mr. Blumenauer...................       X   .......  .........  Mr. Reed...........  .......       X   .........
Mr. Kind.........................       X   .......  .........  Mr. Kelly..........  .......       X   .........
Mr. Pascrell.....................       X   .......  .........  Mr. Holding........  .......       X   .........
Mr. Davis........................       X   .......  .........  Mr. Smith..........  .......       X   .........
Ms. Sanchez......................       X   .......  .........  Mr. Rice...........  .......       X   .........
Mr. Higgins......................       X   .......  .........  Mr. Schweikert.....  .......       X   .........
Ms. Sewell.......................       X   .......  .........  Ms. Walorski.......  .......       X   .........
Ms. DelBene......................       X   .......  .........  Mr. LaHood (IL)....  .......       X   .........
Ms. Chu (CA).....................       X   .......  .........  Mr. Wenstrup.......  .......       X   .........
Ms. Moore........................       X   .......  .........  Mr. Arrington......  .......       X   .........
Mr. Kildee.......................       X   .......  .........  Mr. Ferguson.......  .......       X   .........
Mr. Boyle........................       X   .......  .........  Mr. Estes..........  .......       X   .........
Mr. Beyer........................       X   .......  .........
Mr. Evans........................       X   .......  .........
Mr. Schneider....................       X   .......  .........
Mr. Suozzi.......................       X   .......  .........
Mr. Panetta......................       X   .......  .........
Ms. Murphy.......................       X   .......  .........
Mr. Gomez........................       X   .......  .........
Mr. Horsford.....................       X   .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would redesign and modernize the Medicare Part D program 
to add an out-of-office pocket spending cap for beneficiaries 
and for other purposes was offered by Mr. Brady. The amendment 
was defeated by a vote of 16 yeas to 24 nays. The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......  .......  .........  Mr. Nunes..........  .......  .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith (NE).....       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........  ...................
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would improve incentives of the add-on payment and cap the 
add-on amount for Part B drugs was offered by Mr. Smith of 
Nebraska. The amendment was defeated by a vote of 17 yeas to 24 
nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......  .......  .........  Mr. Nunes..........       X   .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would improve transparency of out-of-pocket costs for 
patients getting their Part B drugs in certain hospital 
settings or in a hospital-owned physician practice was offered 
by Mr. Wenstrup. The amendment was defeated by a vote of 19 
yeas to 23 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........       X   .......  .........
Mr. Doggett......................       X   .......  .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................       X   .......  .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would require a partial passthrough of Part D rebates at 
the point of sale was offered by Mr. Arrington. The amendment 
was defeated by voice vote (with a quorum being present).
    An amendment to the amendment in the nature of a substitute 
that would expand the cap on PDP offerings from three to four 
and allow plans that passthrough a portion of rebates at the 
point of sale to offer PDP's was offered by Mr. Reed. The 
amendment was defeated by a vote of 17 yeas to 23 nays. The 
vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........       X   .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......  .......  .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......  .......  .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would require rebates on insulin products in Part D to be 
delivered at the point of sale was offered by Mr. Reed. The 
amendment was defeated by a vote of 17 yeas to 24 nays. The 
vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........       X   .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......  .......  .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would require hospitals to pass along savings from the 
340B program directly to consumers to help lower their out of 
pocket costs for drugs was offered by Mr. Wenstrup. The 
amendment was withdrawn.
    An amendment to the amendment in the nature of a substitute 
that would promote competition in the market for drugs and 
biological products by stopping anti-competitive practices and 
reforming certain exclusivity conditions was offered by Mr. 
Ferguson. The amendment was withdrawn.
    An amendment to the amendment in the nature of a substitute 
that would strike the 95% excise tax imposed on certain drug 
manufacturers during noncompliance periods, repeal the 2.3 
percent excise tax on certain medical devices, and set the 
income threshold for the medical expense deduction at 7.5 
percent of adjusted gross income was offered by Ms. Walorski. 
The amendment was withdrawn.
    An amendment to the amendment in the nature of a substitute 
that would strike Title I of H.R. 3 was offered by Mr. Nunes. 
The amendment was defeated by a vote of 17 yeas to 24 nays.

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........       X   .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......  .......  .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would eliminate international reference pricing from H.R. 
3 was offered by Mr. Holding. The amendment was defeated by a 
vote of 17 yeas to 25 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........       X   .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would exempt any drug used to treat Alzheimer's disease 
from price setting was offered by Mr. LaHood. The amendment was 
defeated by a vote of 17 yeas to 23 nays. The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........  .......  .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......  .......  .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......  .......  .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......  .......  .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would exempt any drug used to treat or cure Cancer from 
price setting was offered by Ms. Walorski. The amendment was 
defeated by a vote of 16 yeas to 24 nays. The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........       X   .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......  .......  .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......  .......  .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would exempt any drug used to treat or cure any disease or 
any other disease most prevalent to seniors from price setting 
was offered by Mr. Smith of Nebraska. The amendment was 
defeated by a voice vote (with a quorum being present).
    An amendment to the amendment in the nature of a substitute 
that would allow New Drug applications for unmet medical needs 
that benefit Medicare beneficiaries was offered by Mr. Kelly. 
The amendment was defeated by a voice vote (with a quorum being 
present).
    An amendment to the amendment in the nature of a substitute 
offered by Mr. LaHood was ruled nongermane. Mr. LaHood moved to 
appeal the ruling of the Chair and Mr. Thompson moved to table 
the appeal. Mr. Thompson's motion to table the appeal of the 
ruling of the Chair was agreed to by a vote of 24 yeas to 16 
nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................       X   .......  .........  Mr. Brady..........  .......       X   .........
Mr. Lewis........................       X   .......  .........  Mr. Nunes..........  .......       X   .........
Mr. Doggett......................       X   .......  .........  Mr. Buchanan.......  .......       X   .........
Mr. Thompson.....................       X   .......  .........  Mr. Smith..........  .......       X   .........
Mr. Larson.......................       X   .......  .........  Mr. Marchant.......  .......       X   .........
Mr. Blumenauer...................       X   .......  .........  Mr. Reed...........  .......       X   .........
Mr. Kind.........................       X   .......  .........  Mr. Kelly..........  .......       X   .........
Mr. Pascrell.....................       X   .......  .........  Mr. Holding........  .......       X   .........
Mr. Davis........................       X   .......  .........  Mr. Smith..........  .......       X   .........
Ms. Sanchez......................  .......  .......  .........  Mr. Rice...........  .......       X   .........
Mr. Higgins......................       X   .......  .........  Mr. Schweikert.....  .......       X   .........
Ms. Sewell.......................       X   .......  .........  Ms. Walorski.......  .......  .......  .........
Ms. DelBene......................       X   .......  .........  Mr. LaHood (IL)....  .......       X   .........
Ms. Chu (CA).....................       X   .......  .........  Mr. Wenstrup.......  .......       X   .........
Ms. Moore........................       X   .......  .........  Mr. Arrington......  .......       X   .........
Mr. Kildee.......................       X   .......  .........  Mr. Ferguson.......  .......       X   .........
Mr. Boyle........................       X   .......  .........  Mr. Estes..........  .......       X   .........
Mr. Beyer........................       X   .......  .........
Mr. Evans........................       X   .......  .........
Mr. Schneider....................       X   .......  .........
Mr. Suozzi.......................       X   .......  .........
Mr. Panetta......................       X   .......  .........
Ms. Murphy.......................       X   .......  .........
Mr. Gomez........................       X   .......  .........
Mr. Horsford.....................       X   .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would require no provision of H.R. 3 be implemented until 
the Secretary of Health and Human Services certifies in writing 
that H.R. 3 will not reduce access to life-saving medications 
in rural areas within the United States was offered by Mr. 
Smith of Missouri. The amendment was defeated by a vote of 17 
yeas to 25 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........       X   .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......  .......  .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Mr. Ferguson was ruled nongermane. Mr. Ferguson 
moved to appeal the ruling of the Chair and Mr. Thompson moved 
to table the appeal. Mr. Thompson's motion to table the appeal 
of the ruling of the Chair was agreed to by a vote of 25 yeas 
to 17 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................       X   .......  .........  Mr. Brady..........  .......       X   .........
Mr. Lewis........................       X   .......  .........  Mr. Nunes..........  .......       X   .........
Mr. Doggett......................       X   .......  .........  Mr. Buchanan.......  .......       X   .........
Mr. Thompson.....................       X   .......  .........  Mr. Smith..........  .......       X   .........
Mr. Larson.......................       X   .......  .........  Mr. Marchant.......  .......       X   .........
Mr. Blumenauer...................       X   .......  .........  Mr. Reed...........  .......       X   .........
Mr. Kind.........................       X   .......  .........  Mr. Kelly..........  .......       X   .........
Mr. Pascrell.....................       X   .......  .........  Mr. Holding........  .......       X   .........
Mr. Davis........................       X   .......  .........  Mr. Smith..........  .......       X   .........
Ms. Sanchez......................       X   .......  .........  Mr. Rice...........  .......       X   .........
Mr. Higgins......................       X   .......  .........  Mr. Schweikert.....  .......       X   .........
Ms. Sewell.......................       X   .......  .........  Ms. Walorski.......  .......       X   .........
Ms. DelBene......................       X   .......  .........  Mr. LaHood (IL)....  .......       X   .........
Ms. Chu (CA).....................       X   .......  .........  Mr. Wenstrup.......  .......       X   .........
Ms. Moore........................       X   .......  .........  Mr. Arrington......  .......       X   .........
Mr. Kildee.......................       X   .......  .........  Mr. Ferguson.......  .......       X   .........
Mr. Boyle........................       X   .......  .........  Mr. Estes..........  .......       X   .........
Mr. Beyer........................       X   .......  .........
Mr. Evans........................       X   .......  .........
Mr. Schneider....................       X   .......  .........
Mr. Suozzi.......................       X   .......  .........
Mr. Panetta......................       X   .......  .........
Ms. Murphy.......................       X   .......  .........
Mr. Gomez........................       X   .......  .........
Mr. Horsford.....................       X   .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would create a Chief Pharmaceutical Negotiator at the 
Office of the United States Trade Representative was offered by 
Mr. Arrington. The amendment was withdrawn.
    An amendment to the amendment in the nature of a substitute 
that would create a technical expert panel to provide 
recommendations on alternative payment models under Medicare in 
order to encourage the development of cures was offered by Mr. 
Schweikert. The amendment was withdrawn.
    An amendment to the amendment in the nature of a substitute 
that would create a medication adherence pilot program was 
offered by Mr. Schweikert. The amendment was withdrawn.
    An amendment to the amendment in the nature of a substitute 
offered by Mr. Kelly was ruled nongermane. Mr. Kelly moved to 
appeal the ruling of the Chair and Mr. Thompson moved to table 
the appeal. Mr. Thompson's motion to table the appeal of the 
ruling of the Chair was agreed to by a vote of 25 yeas to 17 
nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................       X   .......  .........  Mr. Brady..........  .......       X   .........
Mr. Lewis........................       X   .......  .........  Mr. Nunes..........  .......       X   .........
Mr. Doggett......................       X   .......  .........  Mr. Buchanan.......  .......       X   .........
Mr. Thompson.....................       X   .......  .........  Mr. Smith..........  .......       X   .........
Mr. Larson.......................       X   .......  .........  Mr. Marchant.......  .......       X   .........
Mr. Blumenauer...................       X   .......  .........  Mr. Reed...........  .......       X   .........
Mr. Kind.........................       X   .......  .........  Mr. Kelly..........  .......       X   .........
Mr. Pascrell.....................       X   .......  .........  Mr. Holding........  .......       X   .........
Mr. Davis........................       X   .......  .........  Mr. Smith..........  .......       X   .........
Ms. Sanchez......................       X   .......  .........  Mr. Rice...........  .......       X   .........
Mr. Higgins......................       X   .......  .........  Mr. Schweikert.....  .......       X   .........
Ms. Sewell.......................       X   .......  .........  Ms. Walorski.......  .......       X   .........
Ms. DelBene......................       X   .......  .........  Mr. LaHood (IL)....  .......       X   .........
Ms. Chu (CA).....................       X   .......  .........  Mr. Wenstrup.......  .......       X   .........
Ms. Moore........................       X   .......  .........  Mr. Arrington......  .......       X   .........
Mr. Kildee.......................       X   .......  .........  Mr. Ferguson.......  .......       X   .........
Mr. Boyle........................       X   .......  .........  Mr. Estes..........  .......       X   .........
Mr. Beyer........................       X   .......  .........
Mr. Evans........................       X   .......  .........
Mr. Schneider....................       X   .......  .........
Mr. Suozzi.......................       X   .......  .........
Mr. Panetta......................       X   .......  .........
Ms. Murphy.......................       X   .......  .........
Mr. Gomez........................       X   .......  .........
Mr. Horsford.....................       X   .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Mr. Estes was ruled nongermane. Mr. Estes moved to 
appeal the ruling of the Chair and Mr. Thompson moved to table 
the appeal. Mr. Thompson's motion to table the appeal of the 
ruling of the Chair was agreed to by a vote of 25 yeas to 16 
nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................       X   .......  .........  Mr. Brady..........  .......       X   .........
Mr. Lewis........................       X   .......  .........  Mr. Nunes..........  .......       X   .........
Mr. Doggett......................       X   .......  .........  Mr. Buchanan.......  .......       X   .........
Mr. Thompson.....................       X   .......  .........  Mr. Smith..........  .......       X   .........
Mr. Larson.......................       X   .......  .........  Mr. Marchant.......  .......       X   .........
Mr. Blumenauer...................       X   .......  .........  Mr. Reed...........  .......       X   .........
Mr. Kind.........................       X   .......  .........  Mr. Kelly..........  .......       X   .........
Mr. Pascrell.....................       X   .......  .........  Mr. Holding........  .......       X   .........
Mr. Davis........................       X   .......  .........  Mr. Smith..........  .......       X   .........
Ms. Sanchez......................       X   .......  .........  Mr. Rice...........  .......       X   .........
Mr. Higgins......................       X   .......  .........  Mr. Schweikert.....  .......  .......  .........
Ms. Sewell.......................       X   .......  .........  Ms. Walorski.......  .......       X   .........
Ms. DelBene......................       X   .......  .........  Mr. LaHood (IL)....  .......       X   .........
Ms. Chu (CA).....................       X   .......  .........  Mr. Wenstrup.......  .......       X   .........
Ms. Moore........................       X   .......  .........  Mr. Arrington......  .......       X   .........
Mr. Kildee.......................       X   .......  .........  Mr. Ferguson.......  .......       X   .........
Mr. Boyle........................       X   .......  .........  Mr. Estes..........  .......       X   .........
Mr. Beyer........................       X   .......  .........
Mr. Evans........................       X   .......  .........
Mr. Schneider....................       X   .......  .........
Mr. Suozzi.......................       X   .......  .........
Mr. Panetta......................       X   .......  .........
Ms. Murphy.......................       X   .......  .........
Mr. Gomez........................       X   .......  .........
Mr. Horsford.....................       X   .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would provide relief from Obamacare's tax on branded drugs 
was offered by Mr. Rice. The amendment was defeated by a vote 
of 17 yeas to 25 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........       X   .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would amend the ``Fair Price Eligible Individual'' 
definition to include the uninsured was offered by Mr. Doggett. 
The amendment was defeated by a vote of 4 yeas to 20 nays, with 
17 voting present. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........  .......  .......         X
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........  .......  .......         X
Mr. Doggett......................       X   .......  .........  Mr. Buchanan.......  .......  .......         X
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........  .......  .......         X
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......  .......  .......         X
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........  .......  .......         X
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........  .......  .......         X
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........  .......  .......         X
Mr. Davis........................  .......       X   .........  Mr. Smith..........  .......  .......         X
Ms. Sanchez......................  .......  .......  .........  Mr. Rice...........  .......  .......         X
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....  .......  .......         X
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......  .......  .......         X
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....  .......  .......         X
Ms. Chu (CA).....................       X   .......  .........  Mr. Wenstrup.......  .......  .......         X
Ms. Moore........................       X   .......  .........  Mr. Arrington......  .......  .......         X
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......  .......  .......         X
Mr. Boyle........................  .......  .......  .........  Mr. Estes..........  .......  .......         X
Mr. Beyer........................       X   .......  .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
that would increase the minimum number of drugs to be 
negotiated to 50 within 5 years and 100 within 10 years was 
offered by Mr. Doggett. The amendment was defeated by a vote of 
3 yeas to 39 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........  .......       X   .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........  .......       X   .........
Mr. Doggett......................       X   .......  .........  Mr. Buchanan.......  .......       X   .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........  .......       X   .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......  .......       X   .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........  .......       X   .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........  .......       X   .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........  .......       X   .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........  .......       X   .........
Ms. Sanchez......................  .......  .......  .........  Mr. Rice...........  .......       X   .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....  .......       X   .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......  .......       X   .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....  .......       X   .........
Ms. Chu (CA).....................       X   .......  .........  Mr. Wenstrup.......  .......       X   .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......  .......       X   .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......  .......       X   .........
Mr. Boyle........................  .......  .......  .........  Mr. Estes..........  .......       X   .........
Mr. Beyer........................       X   .......  .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    The amendment in the nature of a substitute to H.R. 3 was 
agreed to by voice vote (with a quorum being present).
    H.R. 3 was ordered favorably reported to the House of 
Representatives as amended by an amendment in the nature of a 
substitute offered by Chairman Neal by a vote of 24 yeas to 17 
nays, with one voting present.
    The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................       X   .......  .........  Mr. Brady..........  .......       X   .........
Mr. Lewis........................       X   .......  .........  Mr. Nunes..........  .......       X   .........
Mr. Doggett......................  .......  .......         X   Mr. Buchanan.......  .......       X   .........
Mr. Thompson.....................       X   .......  .........  Mr. Smith (NE).....  .......       X   .........
Mr. Larson.......................       X   .......  .........  Mr. Marchant.......  .......       X   .........
Mr. Blumenauer...................       X   .......  .........  Mr. Reed...........  .......       X   .........
Mr. Kind.........................       X   .......  .........  Mr. Kelly..........  .......       X   .........
Mr. Pascrell.....................       X   .......  .........  Mr. Holding........  .......       X   .........
Mr. Davis........................       X   .......  .........  Mr. Smith (MO).....  .......       X   .........
Ms. Sanchez......................       X   .......  .........  Mr. Rice...........  .......       X   .........
Mr. Higgins......................       X   .......  .........  Mr. Schweikert.....  .......       X   .........
Ms. Sewell.......................       X   .......  .........  Ms. Walorski.......  .......       X   .........
Ms. DelBene......................       X   .......  .........  Mr. LaHood (IL)....  .......       X   .........
Ms. Chu (CA).....................       X   .......  .........  Mr. Wenstrup.......  .......       X   .........
Ms. Moore........................       X   .......  .........  Mr. Arrington......  .......       X   .........
Mr. Kildee.......................       X   .......  .........  Mr. Ferguson.......  .......       X   .........
Mr. Boyle........................       X   .......  .........  Mr. Estes..........  .......       X   .........
Mr. Beyer........................       X   .......  .........
Mr. Evans........................       X   .......  .........
Mr. Schneider....................       X   .......  .........
Mr. Suozzi.......................       X   .......  .........
Mr. Panetta......................       X   .......  .........
Ms. Murphy.......................       X   .......  .........
Mr. Gomez........................       X   .......  .........
Mr. Horsford.....................       X   .......  .........
----------------------------------------------------------------------------------------------------------------

                    III. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    Clause 3(d)(1) of the Rules of the House of Representatives 
requires an estimate and a comparison of costs that would be 
incurred in carrying out H.R. 3. 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.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    Pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives, the Committee states that the bill 
involves no new or increased budget authority. The Committee 
further states that the bill involves no new tax expenditure.

      C. Cost Estimate Prepared by the Congressional Budget Office

    With respect to the requirements of clause 3(c)(3) of rule 
XIII of the Rules of the House of Representatives, the 
Committee has requested but not received a cost estimate for 
the bill from the Director of the Congressional Budget Office.

     IV. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to 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 made findings and recommendations that are 
reflected in this report.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

  D. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   E. Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
to Congress pursuant to section 21 of Public Law 111-139; or 
(3) a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance, published 
pursuant section 6104 of title 31, United States Code.

                              F. Hearings

    In compliance with Sec. 103(i) of H. Res. 6 (116th 
Congress) the following hearing was used to develop or consider 
H.R. 3:
    (1) On October 17, 2019, the Committee on Ways and Means 
held a full committee hearing entitled, ``Investing in the U.S. 
Health system by lowering drug prices, reducing out-of-pocket 
costs, and improving Medicare benefits'' to discuss how H.R. 3, 
the Lower Drug Costs Now Act, will lower prescription drug 
prices in Medicare and the commercial market, improve 
affordability of medicine, and reduce costs for patients and 
taxpayers in addition to ways savings from H.R. 3 can be 
reinvested to improve care and lower costs for seniors and 
people with disabilities enrolled in Medicare.
    (2) the following related hearings were also held:
          On February 12, 2019, the Committee on Ways and Means 
        held a full committee hearing entitled, ``The Cost of 
        Rising Prescription Drug Prices,'' to discuss the drug 
        pricing crisis.
          On March 7, 2019, the Committee on Ways and Means 
        held a health subcommittee hearing entitled, 
        ``Promoting Competition to Lower Medicare Drug 
        Prices,'' to discuss the complicated drug pricing 
        landscape, including how to lower prescription drug 
        prices through competition, pay for value, and lower 
        out-of-pocket costs for patients.
          On June 4, 2019, the Committee on Ways and Means held 
        a full committee Member Day hearing to discuss the 
        range of issues, concerns, and proposals among on-
        committee and off-committee members.

        V. Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e)(1)(B) of rule XIII of the 
Rules of the House of Representatives, changes in existing law 
proposed 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, existing law in 
which no change is proposed is shown in roman):

         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 A--General Provisions

           *       *       *       *       *       *       *


SEC. 1150C. REPORTING ON DRUG PRICES.

  (a) Definitions.--In this section:
          (1) Manufacturer.--The term ``manufacturer'' means 
        the person--
                  (A) that holds the application for a drug 
                approved under section 505 of the Federal Food, 
                Drug, and Cosmetic Act or licensed under 
                section 351 of the Public Health Service Act; 
                or
                  (B) who is responsible for setting the 
                wholesale acquisition cost for the drug.
          (2) Qualifying drug.--The term ``qualifying drug'' 
        means any drug 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--
                  (A) that has a wholesale acquisition cost of 
                $100 or more, adjusted for inflation occurring 
                after the date of enactment of this section, 
                for a month's supply or a typical course of 
                treatment that lasts less than a month, and 
                is--
                          (i) subject to section 503(b)(1) of 
                        the Federal Food, Drug, and Cosmetic 
                        Act; and
                          (ii) not a preventative vaccine; and
                  (B) for which, during the previous calendar 
                year, at least 1 dollar of the total amount of 
                sales were for individuals enrolled under the 
                Medicare program under title XVIII or under a 
                State Medicaid plan under title XIX or under a 
                waiver of such plan.
          (3) Wholesale acquisition cost.--The term ``wholesale 
        acquisition cost'' has the meaning given that term in 
        section 1847A(c)(6)(B).
  (b) Report.--
          (1) Report required.--The manufacturer of a 
        qualifying drug shall submit a report to the Secretary 
        if, with respect to the qualifying drug--
                  (A) there is an increase in the price of the 
                qualifying drug that results in an increase in 
                the wholesale acquisition cost of that drug 
                that is equal to--
                          (i) 10 percent or more within a 12-
                        month period beginning on or after 
                        January 1, 2019; or
                          (ii) 25 percent or more within a 36-
                        month period beginning on or after 
                        January 1, 2019;
                  (B) the estimated price of the qualifying 
                drug or spending per individual or per user of 
                such drug (as estimated by the Secretary) for 
                the applicable year (or per course of treatment 
                in such applicable year as determined by the 
                Secretary) is at least $26,000 beginning on or 
                after January 1, 2021; or
                  (C) there was an increase in the price of the 
                qualifying drug that resulted in an increase in 
                the wholesale acquisition cost of that drug 
                that is equal to--
                          (i) 10 percent or more within a 12-
                        month period that begins and ends 
                        during the 5-year period preceding 
                        January 1, 2021; or
                          (ii) 25 percent or more within a 36-
                        month period that begins and ends 
                        during the 5-year period preceding 
                        January 1, 2021.
          (2) Report deadline.--Each report described in 
        paragraph (1) shall be submitted to the Secretary--
                  (A) in the case of a report with respect to 
                an increase in the price of a qualifying drug 
                that occurs during the period beginning on 
                January 1, 2019, and ending on the day that is 
                60 days after the date of the enactment of this 
                section, not later than 90 days after such date 
                of enactment;
                  (B) in the case of a report with respect to 
                an increase in the price of a qualifying drug 
                that occurs after the period described in 
                subparagraph (A), not later than 30 days prior 
                to the planned effective date of such price 
                increase for such qualifying drug;
                  (C) in the case of a report with respect to a 
                qualifying drug that meets the criteria under 
                paragraph (1)(B), not later than 30 days after 
                such drug meets such criteria; and
                  (D) in the case of a report with respect to 
                an increase in the price of a qualifying drug 
                that occurs during a 12-month or 36-month 
                period described in paragraph (1)(C), not later 
                than April 1, 2021.
  (c) Contents.--A report under subsection (b), consistent with 
the standard for disclosures described in section 213.3(d) of 
title 12, Code of Federal Regulations (as in effect on the date 
of enactment of this section), shall, at a minimum, include--
          (1) with respect to the qualifying drug--
                  (A) the percentage by which the manufacturer 
                will raise the wholesale acquisition cost of 
                the drug within the 12-month period or 36-month 
                period as described in subsection (b)(1)(A)(i), 
                (b)(1)(A)(ii), (b)(1)(C)(i), or (b)(1)(C)(ii), 
                as applicable, and the effective date of such 
                price increase or the cost associated with a 
                qualifying drug if such drug meets the criteria 
                under subsection (b)(1)(B) and the effective 
                date at which such drug meets such criteria;
                  (B) an explanation for, and description of, 
                each price increase for such drug that will 
                occur during the 12-month period or the 36-
                month period described in subsection 
                (b)(1)(A)(i), (b)(1)(A)(ii), (b)(1)(C)(i), or 
                (b)(1)(C)(ii), as applicable;
                  (C) an explanation for, and description of, 
                the cost associated with a qualifying drug if 
                such drug meets the criteria under subsection 
                (b)(1)(B), as applicable;
                  (D) if known and different from the 
                manufacturer of the qualifying drug, the 
                identity of--
                          (i) the sponsor or sponsors of any 
                        investigational new drug applications 
                        under section 505(i) of the Federal 
                        Food, Drug, and Cosmetic Act for 
                        clinical investigations with respect to 
                        such drug, for which the full reports 
                        are submitted as part of the 
                        application--
                                  (I) for approval of the drug 
                                under section 505 of such Act; 
                                or
                                  (II) for licensure of the 
                                drug under section 351 of the 
                                Pubic Health Service Act; and
                          (ii) the sponsor of an application 
                        for the drug approved under such 
                        section 505 of the Federal Food, Drug, 
                        and Cosmetic Act or licensed under 
                        section 351 of the Public Health 
                        Service Act;
                  (E) a description of the history of the 
                manufacturer's price increases for the drug 
                since the approval of the application for the 
                drug under section 505 of the Federal Food, 
                Drug, and Cosmetic Act or the issuance of the 
                license for the drug under section 351 of the 
                Public Health Service Act, or since the 
                manufacturer acquired such approved application 
                or license, if applicable;
                  (F) the current wholesale acquisition cost of 
                the drug;
                  (G) the total expenditures of the 
                manufacturer on--
                          (i) materials and manufacturing for 
                        such drug;
                          (ii) acquiring patents and licensing 
                        for such drug; and
                          (iii) purchasing or acquiring such 
                        drug from another manufacturer, if 
                        applicable;
                  (H) the percentage of total expenditures of 
                the manufacturer on research and development 
                for such drug that was derived from Federal 
                funds;
                  (I) the total expenditures of the 
                manufacturer on research and development for 
                such drug that is necessary to demonstrate that 
                it meets applicable statutory standards for 
                approval under section 505 of the Federal Food, 
                Drug, and Cosmetic Act or licensure under 
                section 351 of the Public Health Service Act, 
                as applicable;
                  (J) the total expenditures of the 
                manufacturer on pursuing new or expanded 
                indications or dosage changes for such drug 
                under section 505 of the Federal Food, Drug, 
                and Cosmetic Act or section 351 of the Public 
                Health Service Act;
                  (K) the total expenditures of the 
                manufacturer on carrying out postmarket 
                requirements related to such drug, including 
                under section 505(o)(3) of the Federal Food, 
                Drug, and Cosmetic Act;
                  (L) the total revenue and the net profit 
                generated from the qualifying drug for each 
                calendar year since the approval of the 
                application for the drug under section 505 of 
                the Federal Food, Drug, and Cosmetic Act or the 
                issuance of the license for the drug under 
                section 351 of the Public Health Service Act, 
                or since the manufacturer acquired such 
                approved application or license; and
                  (M) the total costs associated with marketing 
                and advertising for the qualifying drug;
          (2) with respect to the manufacturer--
                  (A) the total revenue and the net profit of 
                the manufacturer for each of the 12-month 
                period described in subsection (b)(1)(A)(i) or 
                (b)(1)(C)(i) or the 36-month period described 
                in subsection (b)(1)(A)(ii) or (b)(1)(C)(ii), 
                as applicable;
                  (B) all stock-based performance metrics used 
                by the manufacturer to determine executive 
                compensation for each of the 12-month periods 
                described in subsection (b)(1)(A)(i) or 
                (b)(1)(C)(i) or the 36-month periods described 
                in subsection (b)(1)(A)(ii) or (b)(1)(C)(ii), 
                as applicable; and
                  (C) any additional information the 
                manufacturer chooses to provide related to drug 
                pricing decisions, such as total expenditures 
                on--
                          (i) drug research and development; or
                          (ii) clinical trials, including on 
                        drugs that failed to receive approval 
                        by the Food and Drug Administration; 
                        and
          (3) such other related information as the Secretary 
        considers appropriate and as specified by the 
        Secretary.
  (d) Information Provided.--The manufacturer of a qualifying 
drug that is required to submit a report under subsection (b), 
shall ensure that such report and any explanation for, and 
description of, each price increase described in subsection 
(c)(1) shall be truthful, not misleading, and accurate.
  (e) Civil Monetary Penalty.--Any manufacturer of a qualifying 
drug that fails to submit a report for the drug as required by 
this section, following notification by the Secretary to the 
manufacturer that the manufacturer is not in compliance with 
this section, shall be subject to a civil monetary penalty of 
$75,000 for each day on which the violation continues.
  (f) False Information.--Any manufacturer that submits a 
report for a drug as required by this section that knowingly 
provides false information in such report is subject to a civil 
monetary penalty in an amount not to exceed $100,000 for each 
item of false information.
  (g) Public Posting.--
          (1) In general.--Subject to paragraph (4), the 
        Secretary shall post each report submitted under 
        subsection (b) on the public website of the Department 
        of Health and Human Services the day the price increase 
        of a qualifying drug is scheduled to go into effect.
          (2) Format.--In developing the format in which 
        reports will be publicly posted under paragraph (1), 
        the Secretary shall consult with stakeholders, 
        including beneficiary groups, and shall seek feedback 
        from consumer advocates and readability experts on the 
        format and presentation of the content of such reports 
        to ensure that such reports are--
                  (A) user-friendly to the public; and
                  (B) written in plain language that consumers 
                can readily understand.
          (3) List.--In addition to the reports submitted under 
        subsection (b), the Secretary shall also post a list of 
        each qualifying drug with respect to which the 
        manufacturer was required to submit such a report in 
        the preceding year and whether such manufacturer was 
        required to submit such report based on a qualifying 
        price increase or whether such drug meets the criteria 
        under subsection (b)(1)(B).
          (4) Protected information.--In carrying out this 
        section, the Secretary shall enforce applicable law 
        concerning the protection of confidential commercial 
        information and trade secrets.

SEC. 1150D. ANNUAL REPORT TO CONGRESS.

  (a) In General.--Subject to subsection (b), the Secretary 
shall submit to the Committees on Energy and Commerce and Ways 
and Means of the House of Representatives and the Committees on 
Health, Education, Labor, and Pensions and Finance of the 
Senate, and post on the public website of the Department of 
Health and Human Services in a way that is user-friendly to the 
public and written in plain language that consumers can readily 
understand, an annual report--
          (1) summarizing the information reported pursuant to 
        section 1150C;
          (2) including copies of the reports and supporting 
        detailed economic analyses submitted pursuant to such 
        section;
          (3) detailing the costs and expenditures incurred by 
        the Department of Health and Human Services in carrying 
        out section 1150C; and
          (4) explaining how the Department of Health and Human 
        Services is improving consumer and provider information 
        about drug value and drug price transparency.
  (b) Protected Information.--In carrying out this section, the 
Secretary shall enforce applicable law concerning the 
protection of confidential commercial information and trade 
secrets.

           *       *       *       *       *       *       *


  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 included as 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 
        subparagraph (A) 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 (d), 
        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;
                          (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; and
                          (iii) fair price eligible individuals 
                        who are entitled to benefits under part 
                        A of title XVIII or enrolled under part 
                        B of such title.
                  (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.
  (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.

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.

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TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

           *       *       *       *       *       *       *


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

           *       *       *       *       *       *       *


                          PAYMENT OF BENEFITS

  Sec.  1833. (a) Except as provided in section 1876, and 
subject to the succeeding provisions of this section, there 
shall be paid from the Federal Supplementary Medical Insurance 
Trust Fund, in the case of each individual who is covered under 
the insurance program established by this part and incurs 
expenses for services with respect to which benefits are 
payable under this part, amounts equal to--(1) in the case of 
services described in section 1832(a)(1)--80 percent of the 
reasonable charges for the services; except that (A) an 
organization which provides medical and other health services 
(or arranges for their availability) on a prepayment basis (and 
either is sponsored by a union or employer, or does not 
provide, or arrange for the provision of, any inpatient 
hospital services) may elect to be paid 80 percent of the 
reasonable cost of services for which payment may be made under 
this part on behalf of individuals enrolled in such 
organization in lieu of 80 percent of the reasonable charges 
for such services if the organization undertakes to charge such 
individuals no more than 20 percent of such reasonable cost 
plus any amounts payable by them as a result of subsection (b), 
(B) with respect to items and services described in section 
1861(s)(10)(A), the amounts paid shall be 100 percent of the 
reasonable charges for such items and services, (C) with 
respect to expenses incurred for those physicians' services for 
which payment may be made under this part that are described in 
section 1862(a)(4), the amounts paid shall be subject to such 
limitations as may be prescribed by regulations, (D) with 
respect to clinical diagnostic laboratory tests for which 
payment is made under this part (i)(I) on the basis of a fee 
schedule under subsection (h)(1) (for tests furnished before 
January 1, 2017) or section 1834(d)(1), the amount paid shall 
be equal to 80 percent (or 100 percent, in the case of such 
tests for which payment is made on an assignment-related basis) 
of the lesser of the amount determined under such fee schedule, 
the limitation amount for that test determined under subsection 
(h)(4)(B), or the amount of the charges billed for the tests, 
or (II) undersection 1834A (for tests furnished on or after 
January1, 2017), the amount paid shall be equal to 80 
percent(or 100 percent, in the case of such tests for 
whichpayment is made on an assignment-related basis) ofthe 
lesser of the amount determined under such sectionor the amount 
of the charges billed for the tests, or (ii) for tests 
furnished before January 1, 2017,on the basis of a negotiated 
rate established under subsection (h)(6), the amount paid shall 
be equal to 100 percent of such negotiated rate,,(E) with 
respect to services furnished to individuals who have been 
determined to have end stage renal disease, the amounts paid 
shall be determined subject to the provisions of section 
1881,(F) with respect to clinical social worker services under 
section 1861(s)(2)(N), the amounts paid shall be 80 percent of 
the lesser of (i) the actual charge for the services or (ii) 75 
percent of the amount determined for payment of a psychologist 
under clause (L),
                  (G) with respect to facility services 
                furnished in connection with a surgical 
                procedure specified pursuant to subsection 
                (i)(1)(A) and furnished to an individual in an 
                ambulatory surgical center described in such 
                subsection, for services furnished beginning 
                with the implementation date of a revised 
                payment system for such services in such 
                facilities specified in subsection (i)(2)(D), 
                the amounts paid shall be 80 percent of the 
                lesser of the actual charge for the services or 
                the amount determined by the Secretary under 
                such revised payment system,
          (H) with respect to services of a certified 
        registered nurse anesthetist under section 1861(s)(11), 
        the amounts paid shall be 80 percent of the least of 
        the actual charge, the prevailing charge that would be 
        recognized (or, for services furnished on or after 
        January 1, 1992, the fee schedule amount provided under 
        section 1848) if the services had been performed by an 
        anesthesiologist, or the fee schedule for such services 
        established by the Secretary in accordance with 
        subsection (l), (I) with respect to covered items 
        (described in section 1834(a)(13)), the amounts paid 
        shall be the amounts described in section 1834(a)(1), 
        and(J) with respect to expenses incurred for 
        radiologist services (as defined in section 
        1834(b)(6)), subject to section 1848, the amounts paid 
        shall be 80 percent of the lesser of the actual charge 
        for the services or the amount provided under the fee 
        schedule established under section 1834(b), (K) with 
        respect to certified nurse-midwife services under 
        section 1861(s)(2)(L), the amounts paid shall be 80 
        percent of the lesser of the actual charge for the 
        services or the amount determined by a fee schedule 
        established by the Secretary for the purposes of this 
        subparagraph (but in no event shall such fee schedule 
        exceed 65 percent of the prevailing charge that would 
        be allowed for the same service performed by a 
        physician, or, for services furnished on or after 
        January 1, 1992, 65 percent (or 100 percent for 
        services furnished on or after January 1, 2011) of the 
        fee schedule amount provided under section 1848 for the 
        same service performed by a physician), (L) with 
        respect to qualified psychologist services under 
        section 1861(s)(2)(M), the amounts paid shall be 80 
        percent of the lesser of the actual charge for the 
        services or the amount determined by a fee schedule 
        established by the Secretary for the purposes of this 
        subparagraph, (M) with respect to prosthetic devices 
        and orthotics and prosthetics (as defined in section 
        1834(h)(4)), the amounts paid shall be the amounts 
        described in section 1834(h)(1), (N) with respect to 
        expenses incurred for physicians' services (as defined 
        in section 1848(j)(3)) other than personalized 
        prevention plan services (as defined in section 
        1861(hhh)(1)), the amounts paid shall be 80 percent of 
        the payment basis determined under section 1848(a)(1), 
        (O) with respect to services described in section 
        1861(s)(2)(K) (relating to services furnished by 
        physician assistants, nurse practitioners, or clinic 
        nurse specialists), the amounts paid shall be equal to 
        80 percent of (i) the lesser of the actual charge or 85 
        percent of the fee schedule amount provided under 
        section 1848, or (ii) in the case of services as an 
        assistant at surgery, the lesser of the actual charge 
        or 85 percent of the amount that would otherwise be 
        recognized if performed by a physician who is serving 
        as an assistant at surgery, (P) with respect to 
        surgical dressings, the amounts paid shall be the 
        amounts determined under section 1834(i), (Q) with 
        respect to items or services for which fee schedules 
        are established pursuant to section 1842(s), the 
        amounts paid shall be 80 percent of the lesser of the 
        actual charge or the fee schedule established in such 
        section, (R) with respect to ambulance services, (i) 
        the amounts paid shall be 80 percent of the lesser of 
        the actual charge for the services or the amount 
        determined by a fee schedule established by the 
        Secretary under section 1834(l) and (ii) with respect 
        to ambulance services described in section 1834(l)(8), 
        the amounts paid shall be the amounts determined under 
        section 1834(g) for outpatient critical access hospital 
        services, (S) [with respect to] subject to subparagraph 
        (DD), with respect to drugs and biologicals (including 
        intravenous immune globulin (as defined in section 
        1861(zz))) not paid on a cost or prospective payment 
        basis as otherwise provided in this part (other than 
        items and services described in subparagraph (B)), the 
        amounts paid shall be 80 percent of the lesser of the 
        actual charge or the payment amount established in 
        section 1842(o) (or, if applicable, under section 1847, 
        1847A, or 1847B), (T) with respect to medical nutrition 
        therapy services (as defined in section 1861(vv)), the 
        amount paid shall be 80 percent (or 100 percent if such 
        services are recommended with a grade of A or B by the 
        United States Preventive Services Task Force for any 
        indication or population and are appropriate for the 
        individual) of the lesser of the actual charge for the 
        services or 85 percent of the amount determined under 
        the fee schedule established under section 1848(b) for 
        the same services if furnished by a physician, (U) with 
        respect to facility fees described in section 
        1834(m)(2)(B), the amounts paid shall be 80 percent of 
        the lesser of the actual charge or the amounts 
        specified in such section, (V) notwithstanding 
        subparagraphs (I) (relating to durable medical 
        equipment), (M) (relating to prosthetic devices and 
        orthotics and prosthetics), and (Q) (relating to 
        1842(s) items), with respect to competitively priced 
        items and services (described in section 1847(a)(2)) 
        that are furnished in a competitive area, the amounts 
        paid shall be the amounts described in section 
        1847(b)(5), (W) with respect to additional preventive 
        services (as defined in section 1861(ddd)(1)), the 
        amount paid shall be (i) in the case of such services 
        which are clinical diagnostic laboratory tests, the 
        amount determined under subparagraph (D) (if such 
        subparagraph were applied, by substituting ``100 
        percent'' for ``80 percent''), and (ii) in the case of 
        all other such services, 100 percent of the lesser of 
        the actual charge for the service or the amount 
        determined under a fee schedule established by the 
        Secretary for purposes of this subparagraph, (X) with 
        respect to personalized prevention plan services (as 
        defined in section 1861(hhh)(1)), the amount paid shall 
        be 100 percent of the lesser of the actual charge for 
        the services or the amount determined under the payment 
        basis determined under section 1848, (Y) with respect 
        to preventive services described in subparagraphs (A) 
        and (B) of section 1861(ddd)(3) that are appropriate 
        for the individual and, in the case of such services 
        described in subparagraph (A), are recommended with a 
        grade of A or B by the United States Preventive 
        Services Task Force for any indication or population, 
        the amount paid shall be 100 percent of (i) except as 
        provided in clause (ii), the lesser of the actual 
        charge for the services or the amount determined under 
        the fee schedule that applies to such services under 
        this part, and (ii) in the case of such services that 
        are covered OPD services (as defined in subsection 
        (t)(1)(B)), the amount determined under subsection (t), 
        (Z) with respect to Federally qualified health center 
        services for which payment is made under section 
        1834(o), the amounts paid shall be 80 percent of the 
        lesser of the actual charge or the amount determined 
        under such section, (AA) with respect to an applicable 
        disposable device (as defined in paragraph (2) of 
        section 1834(s)) furnished to an individual pursuant to 
        paragraph (1) of such section, the amount paid shall be 
        equal to 80 percent of the lesser of the actual charge 
        or the amount determined under paragraph (3) of such 
        section, (BB) with respect to home infusion therapy, 
        the amount paid shall be an amount equal to 80 percent 
        of the lesser of the actual charge for the services or 
        the amount determined under section 1834(u), [and (CC)] 
        (CC) with respect to opioid use disorder treatment 
        services furnished during an episode of care, the 
        amount paid shall be equal to the amount payable under 
        section 1834(w) less any copayment required as 
        specified by the Secretary, and (DD) with respect to a 
        part B rebatable drug (as defined in paragraph (2) of 
        section 1834(x)) for which the payment amount for a 
        calendar quarter under paragraph (3)(A)(ii)(I) of such 
        section for such quarter exceeds the inflation-adjusted 
        payment under paragraph (3)(A)(ii)(II) of such section 
        for such quarter, 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), subsections (i)(9) 
and (t)(3)(H), and section 1834(x)(5), the Secretary shall make 
such estimates and use such data as the Secretary determines 
appropriate, and notwithstanding any other provision of law, 
may do so by program instruction or otherwise.
  (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).
  (9) In the case of a part B rebatable drug (as defined in 
paragraph (2) of section 1834(x)) furnished on or after July 1, 
2021, under the system under this subsection, in lieu of 
calculation of coinsurance and the amount of payment otherwise 
applicable under this subsection, the provisions of section 
1834(x)(5), paragraph (1)(DD) of subsection (a), and the flush 
left matter following paragraph (9) of subsection (a), shall, 
as determined appropriate by the Secretary, apply under this 
subsection in the same manner as such provisions of section 
1834(x)(5) and subsection (a) apply under such section and 
subsection.
  (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.
  (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.
                  (H) Part b rebatable drugs.--In the case of a 
                part B rebatable drug (as defined in paragraph 
                (2) of section 1834(x)) furnished on or after 
                July 1, 2021, under the system under this 
                subsection, in lieu of calculation of 
                coinsurance and the amount of payment otherwise 
                applicable under this subsection, the 
                provisions of section 1834(x)(5), paragraph 
                (1)(DD) of subsection (a), and the flush left 
                matter following paragraph (9) of subsection 
                (a), shall, as determined appropriate by the 
                Secretary, apply under this subsection in the 
                same manner as such provisions of section 
                1834(x)(5) and subsection (a) apply under such 
                section and subsection.
          (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