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                                                     Calendar No. 225
116th Congress      }                                  {       Report
                                 SENATE
 1st Session        }                                  {      116-120

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



 
          THE PRESCRIPTION DRUG PRICING REDUCTION ACT OF 2019

                                _______
                                

               September 25, 2019.--Ordered to be printed

                                _______
                                

             Mr. Grassley, from the Committee on Finance, 
                        submitted the following

                              R E P O R T

                          [To accompany 2543]

    The Committee on Finance having considered an original bill 
(S. 2543) to amend titles XI, XVIII, and XIX of the Social 
Security Act to lower prescription drug prices in the Medicare 
and Medicaid programs, to improve transparency related to 
pharmaceutical prices and transactions, to lower patients' out-
of-pocket costs, and to ensure accountability to taxpayers, and 
for other purposes, having considered the same, reports 
favorably thereon without amendment and recommends that the 
bill do pass.

                                CONTENTS

 I. LEGISLATIVE BACKGROUND............................................1
II. EXPLANATION OF THE BILL...........................................6
III.BUDGET EFFECTS OF THE BILL.......................................49

IV. VOTES OF THE COMMITTEE...........................................49
 V. REGULATORY IMPACT AND OTHER MATTERS..............................50
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............50

                       I. LEGISLATIVE BACKGROUND

    The Committee on Finance, having considered S. 2543, as 
modified, a bill that would amend titles XI, XVIII, and XIX of 
the Social Security Act to lower prescription drug prices and 
strengthen safeguards related to prescription drugs, and for 
other purposes, reports favorably thereon that the bill as 
modified by the Committee do pass.

Background on Medicare and Medicaid prescription drug coverage

    Medicare is a federal program that provides health 
insurance coverage for individuals aged 65 and older, certain 
individuals under the age of 65 who have disabilities, and 
those with end-stage renal disease (ESRD). Medicare also pays 
for certain services for individuals dually eligible for both 
Medicare and Medicaid. Medicare consists of four parts: Part A 
covers inpatient hospital and other facility-based services; 
Part B covers physician visits and other outpatient-based care, 
including physician-administered prescription drugs; Part C, or 
Medicare Advantage, covers the same Part A and Part B services 
(and some supplemental services) through private insurance 
companies; and Part D covers prescription drugs through private 
prescription drug plan sponsors. Medicare pays for health care 
services and items that are ``reasonable and necessary.''
    Medicare pays for medically necessary prescription drugs 
(and biologicals and biosimilar products) that are prescribed 
and administered by a physician to a beneficiary in an 
outpatient setting through Medicare Part B. These physician-
administered drugs are paid based on an average sales price 
(ASP) methodology. Drug manufacturers are required by the 
Medicaid Drug Rebate Program (MDRP) to report the average price 
(minus rebates, discounts, and other price concessions) at 
which they sold their drugs to physicians, hospitals, and 
wholesalers. Medicare also provides an ``add-on'' payment, 
equal to six percent of the ASP for a drug. This ASP plus six 
percent amount is paid to the physician or hospital 
administering the drug to cover both the cost of the drug 
purchase and associated expenses. An across-the-board Medicare 
payment reduction of two percent established through the Budget 
Control Act of 2011 effectively reduced the payment to ASP plus 
4.3 percent. In 2017, Medicare spent approximately $32 billion 
on physician-administered drugs under Part B.
    Medicare provides a voluntary prescription drug benefit, 
known as the Part D program, in which beneficiaries can enroll 
to receive covered, medically necessary outpatient drugs 
prescribed by a physician or other qualified clinician. The 
Part D program uses private insurers offering prescription drug 
plans (PDPs) to provide prescription drug benefits to Medicare 
beneficiaries. Insurers compete for enrollees based on 
premiums, benefit structure, covered drugs, drug cost sharing, 
pharmacy networks, and quality of services. Over 3,000 
individual plans across 34 geographic areas were available in 
2019. Insurers bear risk for enrollees' drug spending and, in 
general, the federal government subsidizes about 75 percent of 
total premium costs, with a higher subsidy for the nearly 13 
million individuals who receive a Low-Income Subsidy (LIS). 
Insurers manage costs, typically through contracts with 
pharmacy benefit managers (PBMs), by using formularies to 
negotiate the amount paid for drugs with drug manufacturers and 
developing networks of preferred pharmacies to dispense drugs. 
In 2018, 43.9 million beneficiaries were enrolled in a Part D 
plan. In 2016, Medicare spent $146 billion on Part D drugs.
    Medicaid is a joint federal-state program that finances the 
delivery of primary and acute medical services, as well as 
long-term services and supports, for a diverse low-income 
population. Each state has a Medicaid state plan that describes 
how the state will administer its program. The benefits covered 
under Medicaid include both mandatory and optional services. 
Mandatory services include inpatient hospital services, 
outpatient hospital services, and a range of services for 
infants and children under the early and periodic screening, 
diagnostic, and treatment services benefit. Optional services 
include certain non-mandatory categories of services, which may 
include certain types of residential treatment, therapy, and 
counseling services as well as other services such as 
prescription drugs.
    Every state Medicaid program offers a prescription drug 
benefit. In 2017, net prescription drug spending totaled 
approximately $30 billion after rebates. Section 1927 of the 
Social Security Act (SSA) outlines the mandatory rebates that 
manufacturers must provide as part of their rebate agreement 
under the MDRP for coverage of a covered outpatient drugs (COD) 
by a state Medicaid program to ensure Medicaid receives the 
best price for such drugs from the manufacturer offered across 
markets, with some exceptions. When a manufacturer participates 
in Medicaid, states must make the manufacturer's drugs, with a 
few limited exceptions, available to Medicaid beneficiaries. 
The statutory rebates under the rebate agreement consist of a 
basic rebate of the greater of 23.1 percent of average 
manufacturer price (AMP) and AMP minus best price for single 
source and innovator multiple source drugs, the greater of 17.1 
percent of AMP and AMP minus best price for such drugs with 
certain clotting factors and drugs approved for exclusively 
pediatric indications, and 13 percent of AMP for non-innovator 
multiple source drugs (generics). There is also an inflationary 
rebate for all drugs in statute. States may also negotiate 
supplemental rebates under supplemental rebate agreements. 
States and the federal government have a role in ensuring the 
integrity of the program and must take steps to ensure 
appropriate beneficiary access to medically necessary covered 
drugs.

Background on rising prescription drug prices

    Prices for prescription drugs continue to rise, imposing 
significant hardship on millions of Americans and straining 
federal health care programs. Rising costs are due to new, 
expensive drugs but also in large part to price inflation for 
older drugs that have long been on the market. For example, the 
price of insulin doubled between 2012 and 2016,\1\ and some 
manufacturers have recently increased their insulin prices more 
than 500 percent.\2\ Prices for drugs with no competition from 
other products nearly doubled from 2007 to 2017,\3\ and prices 
for cancer drugs rose over five times faster than inflation 
from 2012 to 2017.
---------------------------------------------------------------------------
    \1\Spending on Individuals with Type 1 Diabetes and the Role of 
Rapidly Increasing Insulin Prices, Jean Fugleston Biniek and William 
Johnson, Health Care Cost Institute, January 21, 2019, available at 
https://www.healthcostinstitute.org/research/publications/entry/
spending-on-individuals-with-type-1-diabetes-and-the-role-of-rapidly-
increasing-insulin-prices.
    \2\Grassley, Wyden Launch Bipartisan Investigation into Insulin 
Prices, Senate Finance Committee, February 22, 2019, available at 
https://www.finance.senate.gov/chairmans-news/grassley-wyden-launch-
bipartisan-investigation-into-insulin-prices.
    \3\Report to the Congress: Medicare and the Health Care Delivery 
System, Medicare Payment Advisory Commission, March 2019.
---------------------------------------------------------------------------
    Prescription drug prices have risen faster than wages and 
Social Security checks, and medications continue to take a 
larger cut of Americans' income. The impact of patients' 
struggles to afford medicines can severely harm their health. 
The rising cost of insulin has led Americans with diabetes to 
dangerously ration their supply,\4\ which can lead to serious 
and sometimes fatal medical complications.
---------------------------------------------------------------------------
    \4\One-quarter of people with diabetes in the U.S. are rationing 
their insulin, Ed Silverman, Stat News, June 18, 2019, available at 
https://www.statnews.com/pharmalot/2019/06/18/one-quarter-of-people-
with-diabetes-in-the-u-s-are-rationing-their-insulin/.
---------------------------------------------------------------------------
    The Medicare Part D program as structured has been 
successful in expanding beneficiary access to prescription drug 
coverage and enabling patients to get needed medications. Part 
D spending has been lower than projected since the benefit was 
implemented in 2006. Nearly 90 percent of Part D drugs 
dispensed are generic.\5\ The average Part D premium has stayed 
stable over a number of years.\6\ Enrollees have a wide choice 
of plans options.\7\ More than 80 percent of enrollees have a 
high-level of satisfaction.\8\
---------------------------------------------------------------------------
    \5\``Report to the Congress: Medicare and the Health Care Delivery 
System,'' Medicare Payment Advisory Commission, March 2019, available 
at http://medpac.gov/docs/default-source/reports/
mar19_medpac_entirereport_sec.pdf?sfvrsn=0.
    \6\Id.
    \7\Id.
    \8\Id.
---------------------------------------------------------------------------
    Despite these successes, Medicare Part D faces a number of 
challenges for beneficiaries and taxpayers that provide 
opportunity for improvement. Many Part D beneficiaries are 
spending thousands of dollars out-of-pocket for their 
prescriptions. Unlike the private market, Part D does not have 
an out-of-pocket cap that limits how much a patient spends on 
their prescriptions annually. Seniors with autoimmune diseases 
and certain types of cancer can spend over $5,000 a year for a 
single drug, and some could spend more than $12,000.\9\ These 
costs can multiply if seniors have multiple prescriptions, and 
half of seniors take four or more prescription drugs.\10\
---------------------------------------------------------------------------
    \9\How Many Medicare Part D Enrollees Had High Out-of-Pocket Drug 
Costs in 2017, Juliette Cubanski, Tricia Neuman, and Anthony Damico, 
Kaiser Family Foundation, June 21, 2019, available at https://
www.kff.org/medicare/issue-brief/how-many-medicare-part-d-enrollees-
had-high-out-of-pocket-drug-costs-in-2017/.
    \10\KFF Health Tracking Poll--February 2019: Prescription Drugs, 
Ashley Kirzinger, Lunna Lopes, Bryan Wu, and Mollyann Brodie, Kaiser 
Family Foundation, March 1, 2019, available at https://www.kff.org/
health-costs/poll-finding/kff-health-tracking-poll-february-2019-
prescription-drugs/.
---------------------------------------------------------------------------
    Escalating costs from new, expensive therapies and cost 
increases for existing medications are also placing pressure on 
federal health care programs. Medicare and Medicaid together 
accounted for 40 percent of retail prescription drug spending 
in the United States in 2017.\11\ Medicare Part D spending, 
though less costly in the early years than initially expected, 
has doubled over the last decade largely in the federal 
reinsurance portion of the benefit, and is projected to 
increase faster than any other category of health spending over 
this time period.\12\ Medicaid has also seen prescription drug 
spending rise precipitously with the introduction of new 
specialty drugs. For example, when the hepatitis C drug Sovaldi 
was first introduced in 2014 at the price of $84,000 per course 
of treatment, Medicaid prescription drug spending increased by 
nearly 25 percent.\13\ The cost of Sovaldi put strain on 
limited state budgets, with some states initially restricting 
coverage for the curative drug.
---------------------------------------------------------------------------
    \11\10 Essential Facts About Medicare and Prescription Drug 
Spending, Kaiser Family Foundation, January 29, 2019, available at 
https://www.kff.org/infographic/10-essential-facts-about-medicare-and-
prescription-drug-spending/.
    \12\2019 Annual Report of the Boards of Trustees of the Federal 
Hospital Insurance and Federal Supplementary Medical Insurance Trust 
Funds, The Boards of Trustees, Federal Hospital Insurance and Federal 
Supplementary Medical Insurance Trust Funds, April 22, 2019, available 
at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-
Trends-and-Reports/ReportsTrustFunds/Downloads/TR2019.pdf.
    \13\High-Cost Hepatitis C Drugs in Medicaid, Medicaid and CHIP 
Payment and Access Commission, March 2017, available at https://
www.macpac.gov/publication/high-cost-hcv-drugs-in-medicaid/.
---------------------------------------------------------------------------
    Moreover, the prescription drug supply chain, which is a 
complex network of financial relationships, lacks transparency 
in drug prices. Middlemen like pharmacy benefit managers, or 
PBMs, negotiate discounts on behalf of payers, like the federal 
government, states, and health plans, as well as on behalf of 
patients, but PBM discounts are not always passed on to payers 
or patients at the pharmacy counter. In Medicare, seniors' 
cost-sharing is based on the list price, not the PBM's 
negotiated price that includes discounts. Several state 
Medicaid programs found some PBMs mark up the price of drugs 
paid by Medicaid--costing one state more than $200 million a 
year.\14\
---------------------------------------------------------------------------
    \14\Ohio ends pharmacy middlemen contracts over `spread pricing,' 
The Enquirer, August 14, 2018, available at https://www.cincinnati.com/
story/news/2018/08/14/ohio-ends-pharmacy-middlemen-contracts-over-
spread-pricing/993354002/.
---------------------------------------------------------------------------
    Over the past four years, the Senate Finance Committee has 
worked to bring more transparency to prescription drug pricing 
and hold drug companies and the supply chain accountable for 
pricing practices. In 2015, Senate Finance Chairman Chuck 
Grassley (then senior committee member) and Ranking Member Ron 
Wyden conducted an 18-month investigation into the pricing of 
Sovaldi and Harvoni, Gilead's breakthrough hepatitis C drugs. 
They found Gilead set a high list price for the drug treatments 
to maximize revenue and profit, while Gilead's internal 
analysis showed a lower price would allow more patients to be 
treated. In January 2019, Chairman Grassley and Ranking Member 
Ron Wyden launched an investigation into how insulin 
manufactures determine pricing for their insulin products and 
pharmacy benefit managers to determine whether they have 
functioned as designed and have resulted in lower drug costs 
for patients. The probe is seeking information on recent price 
increases of up to 500 percent or more that have led patients 
to dangerously ration their insulin or buy from overseas.
    In 2019, the Senate Finance Committee held three hearings 
on drug pricing, bringing executives from drug companies and 
PBMs to testify before Congress. On January 29, 2019, Finance 
Committee Chairman Chuck Grassley (R-IA) and Ranking Member Ron 
Wyden (D-OR) convened a hearing to examine existing 
prescription drug pricing issues in Medicare and Medicaid. On 
February 26, 2019, the Chairman and Ranking Member convened a 
hearing to specifically discuss the role of manufacturers in 
prescription drug pricing. On April 9, 2019, the Chairman and 
Ranking Member convened the third hearing in this series to 
discuss how PBMs and insurers influence prescription drug 
pricing.
    On July 23, 2019, Chairman Grassley released a Chairman's 
Mark that contained bipartisan Finance Committee member 
policies. These policies, plus additional policies and edits 
contained in the July 25, 2019, Modification to the Chairman's 
Mark comprise the reported bill that is described below.

                      II. EXPLANATION OF THE BILL


                           TITLE I--MEDICARE

                           SUBTITLE A--PART B

SECTION 101. IMPROVING MANUFACTURERS' REPORTING OF AVERAGE SALES PRICES 
                     TO SET ACCURATE PAYMENT RATES

Current Law

    Prescription drug, biological, and biosimilar manufacturers 
that participate in the MDRP are required under Medicaid 
statute to report to the Secretary of Health and Human Services 
(HHS Secretary), through the Centers for Medicare and Medicaid 
Services (CMS), certain calendar quarter drug pricing 
information such as the ASP, the number of units sold, and for 
some drugs, the wholesale acquisition cost (WAC) or list price. 
ASP is defined as a manufacturer's quarterly sales of a drug to 
all U.S. purchasers divided by the drug's total units sold for 
the same quarter.
    Medicare pays providers for most Part B drugs, biologicals, 
and biosimilars based on the ASP. In general, in setting 
Medicare Part B drug payment rates, CMS aggregates drug 
manufacturer ASP data by Medicare billing codes, so that ASP is 
the weighted average of the manufacturer ASPs for each product 
classified under a Medicare billing code. Generally, there is 
one billing code for single-source products, and there can be 
many generic drugs that are equivalent products grouped under a 
single billing code with their reference brand drug.

Provision

    This provision would require prescription drug, biological, 
and biosimilar manufacturers that do not have a Medicaid drug 
rebate agreement to report ASP information to the HHS Secretary 
that would be used to help establish Medicare payment rates. 
These manufacturers would be required to report quarterly ASP 
information beginning with the first calendar quarter after the 
date of enactment.

SECTION 102. INCLUSION OF VALUE OF COUPONS IN DETERMINATION OF AVERAGE 
SALES PRICE FOR DRUGS, BIOLOGICALS, AND BIOSIMILARS UNDER MEDICARE PART 
                                   B

Current Law

    Prescription drug, biological, and biosimilar manufacturers 
often provide drug coupons for specific drugs to help privately 
insured patients reduce their cost-sharing obligations, 
including deductibles, copayments, and coinsurance. 
Manufacturers provide drug coupons for brand-name products as 
well as generic and biosimilar drugs. Manufacturers use coupons 
to help patients access needed medications but also to 
encourage patients to continue to use to their products, which 
can help generate more sales. Coupons are primarily provided to 
individuals with private insurance, as the anti-kickback 
statute prevents manufacturers from offering coupons for the 
purchase of drugs paid for by federal health care programs, 
including Medicare. Under Medicare statute, manufacturers are 
directed to calculate ASP for individual prescription drugs, 
biologicals, and biosimilars based on the price they sell to 
purchasers net of most price concessions, including volume, 
prompt-pay, and cash discounts and rebates, except Medicaid 
rebates. In calculating ASP, manufacturers are not required to 
include sales net of price concessions provided directly to 
patients, such as through drug coupons. When the value of 
patient coupons is high, ASP tends to overstate the amount drug 
manufacturers are receiving for their product, effectively 
resulting in higher Medicare Part B payments.

Provision

    This provision would require prescription drug, biological, 
and biosimilar manufacturers to exclude the value of coupons 
provided to privately insured individuals from each drug's ASP, 
as reported to the HHS Secretary. This provision would apply to 
manufacturers' product sales for calendar quarters beginning on 
July 1, 2021. This provision would define coupons to mean 
financial support provided by a manufacturer directly to a 
patient or indirectly to a patient through a physician, 
prescriber, pharmacy, or other provider that is specific to the 
manufacturer's drug and used to reduce or eliminate cost-
sharing or other out-of-pocket costs, including costs related 
to a deductible, coinsurance, or copayment. Manufacturers would 
not have to exclude contributions to patient assistance 
programs or foundations, which are generally provided to 
patients based on need and not specific to the contributing 
manufacturer's drug.

SECTION 103. REDUCED WAC-BASED PAYMENTS FOR NEW DRUGS, BIOLOGICALS, AND 
                              BIOSIMILARS

Current Law

    Medicare pays providers for most Medicare Part B drugs, 
biologicals, and biosimilars at 100 percent of each product's 
ASP plus a 6 percent add-on payment. In certain situations, 
however, Medicare may use different benchmark prices to pay 
providers for drugs, biologicals, and biosimilars, such as a 
drug's WAC, and also may use a different add-on payment. 
Medicare statute directs manufacturers to calculate ASP for 
individual prescription drugs, biologicals, and biosimilars net 
of most price concessions, including volume, prompt-pay, and 
cash discounts and rebates, except Medicaid rebates. WAC is a 
published price that is not adjusted for discounts; as a 
result, WAC is usually a higher price than ASP.
    Medicare uses WAC to set the Part B drug benchmark price in 
several situations. WAC is used to set the payment when the ASP 
is unavailable during a product's first two quarters on the 
market as manufacturers have not yet recorded sales that can be 
used to determine the average price. In these situations, by 
statute, the HHS Secretary may use either a WAC-based payment 
methodology or a payment methodology in effect on November 1, 
2003 when the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (P.L. 108-173) was enacted. Even 
though the statute does not specify the add-on payment amount 
when using the WAC methodology (or a payment methodology in 
effect on November 1, 2003), Medicare had used a 6 percent add-
on when basing payments on WAC; CMS reduced the WAC-based add-
on to 3 percent starting on January 1, 2019 through rulemaking.
    When ASP becomes available, the statute requires the HHS 
Secretary to pay Medicare Part B drugs and biologicals at ASP 
plus a 6 percent add-on payment.

Provision

    This provision would establish a WAC add-on payment of no 
greater than plus 3 percent when ASP is unavailable for new 
drugs, biologicals, and biosimilars furnished on or after 
January 1, 2020. This provision would comport with current 
Medicare payment rules that pay WAC plus 3 percent, an amount 
that CMS established using administrative authority.

SECTION 104. PAYMENT FOR BIOSIMILAR BIOLOGICAL PRODUCTS DURING INITIAL 
                                 PERIOD

Current Law

    Biological products are drugs derived from living organisms 
or that contain components of living organisms, whereas 
conventional drugs are manufactured from chemicals. In contrast 
to generic drugs, which are exact copies of brand-name chemical 
drugs, biosimilar biological products are similar, but not 
identical to brand-name biologicals (reference products).
    Medicare pays providers for most Part B drugs, biologicals, 
and biosimilars at the rate of the product's ASP plus a 6 
percent add-on payment. To encourage development of lower 
priced biosimilars, under Medicare statute the payment rate for 
biosimilars is the ASP of the biosimilar plus an add-on payment 
equal to 6 percent of the reference biological product's ASP.
    Medicare statute does not specifically address the payment 
rate for biosimilars during the initial product introduction 
period when ASP information may be unavailable, but current 
Medicare payment rules establish that biosimilars are paid at 
their WAC plus 3 percent during the roughly two-quarter initial 
period.

Provision

    This provision would establish a payment rate for 
biosimilars furnished on or after July 1, 2020 for the roughly 
two-quarter initial period that would be the lesser of: (1) the 
biosimilar's WAC plus 3 percent; or (2) ASP plus 6 percent of 
the reference biological product.

    SECTION 105. TEMPORARY INCREASE IN MEDICARE PART B PAYMENT FOR 
                     BIOSIMILAR BIOLOGICAL PRODUCTS

Current Law

    In contrast to generic drugs, which are exact copies of 
brand-name chemical drugs, biosimilar biological products are 
similar, but not identical to brand-name biologicals (reference 
products). Medicare pays providers for most Part B drugs, 
biologicals, and biosimilars at the rate of the product's ASP 
plus a 6 percent add-on payment. To encourage prescribing of 
lower priced biosimilar biological products, Medicare pays 
physicians for biosimilar biologicals the ASP of the biosimilar 
product plus an add-on payment equal to 6 percent of the 
reference biological product's ASP.

Provision

    This provision would increase the add-on payment for a 
biosimilar biological product from 6 percent of the reference 
product ASP to 8 percent of the reference product ASP for a 
period of five years. The temporary add-on payment increase 
would apply to a biosimilar: (1) paid by Medicare as of 
December 31, 2019, for a five-year period beginning January 1, 
2020; and (2) paid on or after January 1, 2020, for a five-year 
period that would begin on the first day of the first calendar 
quarter in which the product was paid under Medicare Part B. 
This payment would not exceed the total payment amount for the 
reference biological.

   SECTION 106. IMPROVEMENTS TO MEDICARE SITE-OF-SERVICE TRANSPARENCY

Current Law

    Medicare payments are generally determined by the type of 
service and the site where it is delivered. Differences across 
Medicare's payment systems have created instances where 
Medicare payment rates for similar or identical services differ 
depending on the site. This includes Medicare payments across 
hospital outpatient departments (HOPDs), ambulatory surgical 
centers (ASCs), and physician offices. Generally, beneficiaries 
are responsible for a 20 percent coinsurance payment for Part B 
services. Therefore, different Medicare payment rates across 
sites of service result in different cost-sharing amounts for 
similar or identical services depending on the site.
    To facilitate price transparency, the 21st Century Cures 
Act of 2015 (Public Law 114-255) required, beginning in 2018 
and for each year thereafter, the HHS Secretary to make 
available on a public website the Medicare estimated payment to 
HOPDs under the outpatient prospective payment system (OPPS) 
and ASCs under the ASC payment system as well as the estimated 
beneficiary cost-sharing liability in each setting.

Provision

    This provision would modify the transparency tool 
established under the 21st Century Cures Act of 2015 to require 
comparable information for services that can also be furnished 
in a physician office. Specifically, the HHS Secretary would be 
required to add the estimated payment to a physician under the 
Medicare physician fee schedule (PFS) and the associated 
estimated beneficiary cost-sharing liability, beginning in 
2021, to allow beneficiaries to compare across the three 
settings.

   SECTION 107. MEDICARE PART B REBATE BY MANUFACTURERS FOR DRUGS OR 
        BIOLOGICALS WITH PRICES INCREASING FASTER THAN INFLATION

Current Law

    No provision in current law.

Provision

    This provision would require prescription drug and 
biological manufacturers to pay a rebate to Medicare for the 
amount that the price of their Medicare Part B drugs or 
biologicals increased above the inflation rate, as measured by 
the Consumer Price Index for All Urban Consumers (CPI-U).
    This provision would define a ``rebatable'' drug as a 
brand-name prescription drug or biological that is separately 
payable under Part B, including when furnished in a physician 
office, HOPD, or ASC setting. This definition of rebatable drug 
would not include biosimilars or vaccines paid under Part B.
    Beginning on or after January 1, 2021, the HHS Secretary 
would be required within six months of the end of each calendar 
quarter to provide prescription drug and biological 
manufacturers with: the total number of billing units for each 
rebatable drug for the quarter; the amount, if any, of the 
excess ASP increase for the quarter; and the rebate amount for 
the rebatable drug. The total number of billing units would 
exclude: (1) units paid under the ESRD prospective payment 
system (ESRD PPS); and (2) units for which a manufacturer 
provides a discount under Section 340B of the Public Health 
Service Act (PHSA) or a rebate under the MDRP.
    Manufacturers would be required to pay the HHS Secretary 
the quarterly rebate within 30 days of receiving such 
information from the Secretary. Manufacturer rebates would be 
deposited in the Medicare Supplementary Medical Insurance Trust 
Fund. The HHS Secretary would be authorized to reduce or waive 
the rebate requirements for rebatable drugs if those products 
are on the Food and Drug Administration (FDA) drug shortage 
list. The HHS Secretary would be required to establish 
procedures for a manufacturer to request reconsideration of the 
calendar quarter rebate amount.
    The HHS Secretary would use the ASP payment amount for a 
rebatable drug in effect for the calendar quarter beginning 
July 1, 2019 (the ASP ``payment amount benchmark'') and apply 
the CPI-U percentage change in each subsequent quarter to 
adjust the benchmark payment amount and calculate the ASP 
``inflation-adjusted payment amount''. A manufacturer would owe 
a rebate in each quarter that the ASP payment amount exceeded 
the inflation-adjusted ASP payment amount.
    For new drugs, the Secretary would establish the payment 
amount benchmark as the date that the drug is first marketed by 
the manufacturer, with that payment amount benchmark being 
adjusted by the CPI-U percentage change in each subsequent 
quarter to arrive at the inflation-adjusted payment amount. The 
initial WAC-based payment amount benchmark would be compared to 
an inflation-adjusted WAC amount until an ASP-based payment 
amount is established. That ASP payment amount benchmark would 
then be compared to an inflation-adjusted ASP in each 
subsequent calendar quarter.
    The HHS Secretary would impose a civil monetary penalty 
(CMP) on a manufacturer that fails to pay a required rebate 
that is equal to 125 percent of the required, unpaid rebate 
amount. The HHS Secretary would ensure that no payment under 
Medicare Part B is available for a drug for which the 
manufacturer has failed to pay a CMP imposed by the Secretary 
for non-payment of a rebate. In addition, non-compliant 
manufacturers could be subject to other penalties and 
assessments applicable under Title XI of the SSA.
    This provision would amend the definition of Medicare ASP 
to exclude Medicare Part B rebatable drug rebates from the 
calculation of ASP.

   SECTION 108. REQUIRING MANUFACTURERS OF CERTAIN SINGLE-DOSE DRUGS 
 PAYABLE UNDER PART B OF THE MEDICARE PROGRAM TO PROVIDE REFUNDS WITH 
               RESPECT TO DISCARDED AMOUNTS OF SUCH DRUGS

Current Law

    Medicare pays for most prescription drugs, biologicals, and 
biosimilars covered under Medicare Part B based on a product's 
ASP plus a 6 percent add-on payment. Many Medicare Part B 
drugs, biologicals, and biosimilars are packaged in single-dose 
containers as identified from information included in the FDA 
approval, such as the label or package insert. Generally, 
Medicare pays providers for the total amount of product 
indicated on the single-dose package including the number of 
units of any unused product as well as the number of units 
administered to the patient.
    To help identify and track the amount of unused Medicare 
Part B prescription drugs, biologicals, and biosimilars, on 
January 1, 2017 Medicare started to require providers to enter 
on Part B claims the number of units of a prescription drug or 
biological packaged in a single-dose that were not administered 
to the patient. CMS's guidance accompanying the reporting 
requirement directed providers to include a modifier, 
identified as the ``JW'' modifier, on the billing claim form to 
indicate the unused portion. Providers were also required to 
record the amount administered in the patient medical record. 
Prior to January 1, 2017, Medicare contractors had discretion 
as to whether to require providers to identify the unused 
portion of single-dose drugs on the claims form.

Provision

    This provision would require the manufacturer of a 
prescription drug, biological, and biosimilar beginning on July 
1, 2021 to refund the amount of payment made to providers for 
unused amounts of certain single-dose drugs that exceed a 
minimum threshold.
    This provision would define ``refundable'' drugs as all 
drugs, biologicals, and biosimilars packaged as single-dose and 
covered under Medicare Part B, except for radiopharmaceuticals 
and imaging agents.
    For each calendar quarter beginning on or after July 1, 
2021, the HHS Secretary would be required to report to the 
manufacturer the number of units of refundable drugs that were 
discarded, as identified by the JW modifier that the billing 
provider included on the claim form. The HHS Secretary would be 
required to exclude units that are ``packaged'' and not paid 
separately under Part B.
    The amount that a manufacturer would owe for a refundable 
drug during a quarter is: the amount by which the Medicare 
payment attributed to the unused units exceeds 10 percent of 
the amount Medicare paid for the total units. This formula 
would ensure that a manufacturer of a refundable drug only pay 
a refund if the unused units are in excess of 10 percent of the 
total units. It provides an incentive for manufacturers to 
produce efficient sizes while recognizing that the amount of a 
drug will vary based on beneficiary characteristics and needs.
    The HHS Secretary shall increase the 10 percent allowance 
threshold before which a manufacturer would have to a pay a 
refund through notice and comment rulemaking for refundable 
drugs for which preparation instructions approved by the 
include filtration during the preparation process. The 
Secretary may increase the threshold through rulemaking for 
other refundable drugs that have unique circumstances that 
involve similar product loss.
    Manufacturer refunds would be deposited in the Medicare 
Supplementary Medical Insurance Trust Fund. This provision 
would require the HHS Secretary to conduct periodic audits on 
payment claims submitted by providers for refundable single-
dose drugs. The HHS Secretary would impose a CMP on a 
manufacturer that fails to pay a required refund. The CMP would 
be equal to 125 percent of the required, unpaid refund amount. 
In addition, non-compliant manufacturers could be subject to 
other penalties and assessments applicable under Title XI of 
the SSA.

     SECTION 109. CLARIFICATION OF MEDICARE ASP PAYMENT METHODOLOGY

Current Law

    Medicare pays providers for most Part B drugs, biologicals, 
and biosimilars at the ASP plus a 6 percent add-on fee. 
Manufacturers calculate ASP for each drug, biological, and 
biosimilar and are required to report to the HHS Secretary ASP 
and the number of Medicare Part B units sold during a calendar 
quarter.
    In calculating ASP, Medicare statute directs manufacturers 
to calculate their Part B drug sales net of price concessions 
such as volume discounts, prompt pay discounts, cash discounts, 
free goods that are contingent on purchase requirements, 
chargebacks, and rebates, other than Medicaid rebates. For 
sales after 2004, the HHS Secretary may include other price 
concessions, as recommended by the HHS Office of the Inspector 
General (OIG) which result in a reduction in cost to the 
purchaser, such as physicians, hospitals, or wholesalers. Sales 
transactions often include service and other fees that are 
added to Part B drug purchasers' cost. Service and other fees 
not deducted from ASP generally increases ASP and thereby the 
cost of Part B drugs to Medicare as well as Medicare Part B 
beneficiary cost sharing for Part B drugs.

Provision

    This provision would establish a statutory definition of 
``bona fide service fees,'' which manufacturers do not have to 
include as a concession when calculating and reporting the ASP 
for a drug, biological, or biosimilar. Specifically, this 
provision would narrow the existing definition of bona fide 
service fees that the HHS Secretary established using 
administrative authority. The more narrow definition of bona 
fide service fees exempt from ASP reporting would explicitly 
prohibit: fees based on the percentage of sales; and fees 
determined in a manner that takes into account the volume or 
value of any referrals or business otherwise generated between 
the parties. This provision would expand the types of fees that 
manufacturers pay to wholesalers and group purchasing 
organizations that must be treated as a price concession and 
included in the reported ASP.

    SECTION 110. ESTABLISHMENT OF MAXIMUM ADD-ON PAYMENT FOR DRUGS, 
                      BIOLOGICALS, AND BIOSIMILARS

Current Law

    Medicare pays providers for most Part B drugs, biologicals, 
and biosimilars at the rate of the product's ASP plus a 6 
percent add-on payment. The Medicare payment rate for 
biosimilars is the ASP of the biosimilar plus an add-on payment 
equal to 6 percent of the reference biological product's ASP. 
Medicare payment rate for a new drug during the first two 
quarters it is on the market is typically WAC plus a 3 percent 
add-on.

Provision

    This provision would establish $1,000 as the maximum add-on 
amount that a provider can be paid for each drug, biological, 
or biosimilar that is administered to a beneficiary on a 
calendar date beginning on January 1, 2021. Specifically, the 
provider billing for the drug would be paid the lesser of the 
add-on amount that would otherwise be paid-6 percent of the ASP 
for a drug or biological, 6 percent of the ASP for the 
reference product for a biosimilar, 3 percent of WAC for a new 
drug in the initial period-and $1,000 through December 31, 
2028. For 2029 and each subsequent year, the $1,000 maximum 
add-on amount would be updated by CPI-U. The provision would 
apply to drugs that are separately payable under Part B, 
including when furnished in a physician office, HOPD, and ASC 
setting.

SECTION 111. TREATMENT OF DRUG ADMINISTRATION SERVICES FURNISHED BY AN 
             OFF-CAMPUS OUTPATIENT DEPARTMENT OF A PROVIDER

Current Law

    Medicare Part B generally covers outpatient drugs that are 
administered by health professionals in physician offices and 
HOPDs. Health professionals receive a payment intended to cover 
the cost of purchasing the drug and another payment for the 
professional service of administering the drug to the 
beneficiary. Payments are determined under the PFS or OPPS 
depending on the site of service. Beneficiaries generally face 
cost sharing equal to 20 percent of the Medicare payment rate 
for the drug and administration of the drug.
    In addition to covered drugs, some Medicare-covered 
services can also be provided in a physician office, HOPD, or 
ASC. The payment amount for these services is determined under 
the payment system for each different site. The payment amount 
typically differs for the same or similar service under the 
PFS, the OPPS, and the ASC payment systems.
    The Bipartisan Budget Act of 2015 (Public Law 114-74) and 
the 21st Century Cures Act of 2016 (Public Law 114-255) 
specified that most HOPDs off the campus of the main hospital 
that had not billed Medicare under the OPPS prior to the date 
of enactment (or were in the process of being built) would be 
paid the lower rates under the PFS or ASC payment system, 
instead of the generally higher OPPS rates. Off-campus HOPDs 
paid under OPPS at the time of enactment of these laws are 
excepted from the policy and continue to be paid under the 
OPPS.

Provision

    This provision would remove the exception for 
``grandfathered'' off-campus HOPDs that was established by the 
Bipartisan Budget Act of 2015 and the 21st Century Cures Act of 
2015 for the service of administering a Medicare Part B drug, 
beginning on January 1, 2021. Thus, payment for drug 
administration services would be made at the PFS rate rather 
than the OPPS rate. The HHS Secretary would be instructed not 
to apply this provision in a budget neutral manner, meaning 
that the reduced payments would lower federal spending and 
beneficiary cost sharing.

    SECTION 112. AUTHORITY TO USE ALTERNATIVE PAYMENT FOR DRUGS AND 
                 BIOLOGICALS TO PREVENT DRUG SHORTAGES

Current Law

    The Federal Food, Drug, and Cosmetic Act (FFDCA) requires 
drug and biological manufacturers to submit certain drug 
shortage information to FDA. Manufacturers of drugs or 
biologicals that are life-supporting, life-sustaining, or are 
intended for use in prevention or treatment of debilitating 
diseases or conditions, are required to notify FDA of any 
permanent discontinuance or temporary manufacturing 
interruption that is likely to disrupt the U.S. supply. 
Manufacturers are required to notify FDA at least six months 
prior to manufacturing discontinuances or interruptions or as 
soon as practicable. FFDCA requires the FDA to maintain an up-
to-date publicly available list of drugs identified by 
manufacturers that are in shortage.
    Medicare covers outpatient drugs and biologicals under 
Medicare Part B. Medicare reimburses providers for most Part B 
drugs and biological products at a product's ASP plus an add-on 
fee of 6 percent of the product's ASP, regardless of providers' 
drug acquisition cost. WAC is a published price that is not 
adjusted for price concessions and as a result, WAC is usually 
a higher price than ASP.

Provision

    This provision would provide the HHS Secretary the 
authority to use a WAC-based (or other reasonable drug price 
measure) payment methodology under Medicare Part B instead of 
an ASP-based methodology for drugs that are currently in 
shortage and are on the FDA shortage list or for drugs which 
have a declining number of manufacturers that may result in a 
shortage in the future.
    This provision would also require the HHS Secretary to 
establish a modifier or other mechanism that hospitals would 
report to CMS on claims for inpatient services that would 
enable tracking of use of drugs and biologicals in shortage. 
Further, it would require the HHS Secretary to issue a public 
report to Congress related to shortages of generic drugs within 
the Medicare program.

               SECTION 113. STUDY OF AVERAGE SALES PRICE

Current Law

    No provision in current law.

Provision

    This provision would require the Government Accountability 
Office (GAO) to study the difference between commercial and 
Medicare prices reported for ASP.

                           SUBTITLE B--PART D

             SECTION 121. MEDICARE PART D BENEFIT REDESIGN

Current Law

    Medicare Part D provides outpatient prescription drug 
coverage for Medicare beneficiaries and is the primary source 
of drug coverage for low-income individuals enrolled in both 
Medicare and the state-federal Medicaid program. Part D 
coverage is voluntary and administered through private health 
insurers, often referred to as plan sponsors. Congress designed 
Part D as a market-oriented program in which insurers compete 
for enrollees based on plan premiums and scope of benefits, 
including cost-sharing amounts for enrolled beneficiaries.
    Medicare pays insurers for each Medicare beneficiary who 
enrolls in Part D and provides additional subsidies for low-
income individuals. Part D payment to insurers takes two 
general forms: the direct subsidy under which Medicare pays a 
monthly payment per enrollee calculated as 74.5 percent of the 
national average of plan sponsors' bids, and the reinsurance 
subsidy under which Medicare pays for 80 percent of drug 
spending when an enrollee's total drug cost exceeds a 
catastrophic threshold. Enrollees' premiums are 25.5 percent of 
the national average of insurers' bids plus or minus any 
difference between the insurer's bid for their plan benefit 
package and the national average bid, which means premiums vary 
by the plan selected. Medicare also pays insurers LIS to cover 
all or a portion of the cost-sharing and premiums of their low-
income enrollees.
    Insurers must offer ``standard coverage'' under Part D 
which consists of four phases (See Figure 1.):
           a deductible ($415 in 2019);
           initial coverage in which the enrollee is 
        responsible for 25 percent of the cost of drugs (with 
        the plan covering the remaining 75 percent);
           the coverage gap (``donut hole'') in which 
        the enrollee is responsible for coinsurance of 25 
        percent of the cost of brand-name drugs and 37 percent 
        of the cost of generic drugs, with insurers covering 
        the remaining 63 percent of generic drug costs and 5 
        percent of brand-name drug costs and manufacturers 
        providing discounts for the remaining 70 percent of 
        brand-name drugs; and
           catastrophic coverage (reinsurance) in which 
        the enrollee is responsible for 5 percent of their 
        prescription drug costs, insurers are responsible for 
        15 percent of costs, and Medicare subsidizes 80 percent 
        of costs (the reinsurance subsidy).
    Cost-sharing for Part D benefits is not capped, whereas a 
cap on out-of-pocket costs is customary with private insurance. 
Cost-sharing is based on insurers' negotiated prices for drugs, 
which are the amounts an insurer (or PBM) and the pharmacy have 
negotiated as payment for a drug. Insurers may pass on to 
enrollees the full value of any rebates and discounts that they 
have negotiated with manufacturers and pharmacies in the price 
paid at the pharmacy counter, but the majority do not, 
according to data from CMS. Most insurers use the majority of 
rebates and discounts on a drug list price to lower their 
premiums for Part D coverage. Although the list price may not 
reflect the final amount a manufacturer receives for a drug, it 
is often used as the basis for beneficiary cost sharing at the 
pharmacy counter.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Note: Above the catastrophic threshold, enrollee cost 
sharing is the greater of a nominal set copayment for drugs or 
5 percent coinsurance. In addition to prescription cost-sharing 
in the standard benefit figure, enrollees pay monthly premiums.
    The Medicare Payment Advisory Commission (MedPAC) has noted 
that Medicare's reinsurance payments to insurers for 
catastrophic coverage are the largest and fastest-growing 
component of Part D spending-increasing from 25 percent of 
Medicare payments to plans in 2007 to 54 percent in 2017. 
Specialty drugs are deemed as high-priced and a major driver of 
spending growth in Part D. Enrollees who take expensive drugs 
may face high out-of-pocket costs due to the lack of an annual 
cap on enrollee out-of-pocket spending in the program.
    Additionally, MedPAC analysis suggests that insurers' 
limited liability for drug spending during the coverage gap and 
catastrophic coverage phases of the benefit reduces their 
financial incentive to steer utilization toward the lowest cost 
drugs, including generic and biosimilar versions of brand-name 
drugs.

Provision

    This provision would make substantial changes to the 
structure of the Part D benefit in order to simplify the 
benefit design and realign incentives to encourage more 
efficient management of drug spending. Starting January 1, 
2022, it would: (1) change enrollee cost-sharing in the initial 
coverage limit and the coverage gap; (2) eliminate enrollee 
cost-sharing above the catastrophic out-of-pocket threshold; 
and (3) change the amount of annual out-of-pocket spending 
needed to trigger catastrophic coverage. In addition, the 
provision would modify Part D financing mechanisms to (1) lower 
federal reinsurance during the catastrophic coverage period; 
(2) sunset the existing manufacturer discount program in the 
coverage gap; and (3) institute a new manufacturer discount 
program in the catastrophic coverage phase of the benefit. See 
Figure 2.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    To simplify and reduce cost sharing for Part D enrollees, 
this provision would eliminate the coverage gap and establish 
25 percent cost sharing between the annual deductible and the 
catastrophic threshold. It would also completely eliminate 
beneficiary cost sharing during catastrophic coverage. The 
catastrophic out-of-pocket threshold would be set at $3,100 in 
2022 and indexed to growth in Part D spending. This amount 
reflects the true out-of-pocket spending enrollees face before 
reaching catastrophic coverage under Part D today. 
Additionally, the provision would reduce federal reinsurance 
payments so that Medicare is responsible for 20 percent and 
insurers for 60 percent, respectively, of total drug spending 
during catastrophic coverage. See Table 1.
    Finally, this provision would sunset the current coverage 
gap discount program in which manufacturers pay 70 percent of 
drug costs. Instead, the provision would establish a new 
manufacturer discount program in which manufacturers provide 
discounts for drugs and biologicals utilized during 
catastrophic coverage. Under the provision, manufacturers that 
choose to have their drugs covered under Part D would enter 
into agreements with the Secretary of HHS to provide 20 percent 
discounts off negotiated prices during catastrophic coverage, 
including for LIS beneficiaries. Insurers would subtract the 
anticipated manufacturer discounts from the actuarial value of 
the Part D benefit when submitting annual bids to CMS.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Manufacturers would provide catastrophic coverage discounts 
to applicable beneficiaries, defined as individuals who are: 
(1) enrolled in a Part D plan; (2) are not enrolled in a 
qualified retiree prescription drug plan; and (3) have incurred 
costs for covered part D drugs in a year that are equal to or 
exceed the annual out-of-pocket threshold. The discounts would 
be provided for applicable drugs, which are defined as brand-
name drugs and biologicals 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. The discounted prices 
would be provided at the point of sale at a pharmacy or through 
a mail-order service. Manufacturers would provide appropriate 
data to demonstrate they comply with the program.
    The catastrophic coverage discount would be administered in 
the same way as the coverage gap discount program is today. CMS 
would contract with one or more third parties to administer the 
discounts. If a third party administrator determined a 
manufacturer was not in compliance, the third party would be 
required to notify the Secretary. The Secretary could collect 
appropriate data from insurers in a timeframe that allowed for 
discounted prices to be provided for applicable drugs. 
Manufacturers would be subject to periodic CMS audits. HHS 
could impose CMPs on manufacturers that failed to provide 
required catastrophic coverage discounts. The penalty would be 
commensurate with the sum of: (1) the amount the manufacturer 
would have paid with respect to such discounts under the 
agreement; and (2) 25 percent of such amount. The Secretary 
could terminate a manufacturer agreement for a ``knowing and 
willful violation'' of program requirements. A manufacturer 
could request a hearing, which would be allowed with sufficient 
time for the effective date to be repealed if determined 
appropriate. A manufacturer would be allowed to terminate an 
agreement to provide discounts for any reason.

SECTION 122. PROVIDING THE MEDICARE PAYMENT ADVISORY COMMISSION AND THE 
MEDICAID AND CHIP PAYMENT AND ACCESS COMMISSION WITH ACCESS TO CERTAIN 
     DRUG PAYMENT INFORMATION, INCLUDING CERTAIN REBATE INFORMATION

Current Law

    Private insurers and pharmaceutical manufacturers that 
participate in Medicare Part D or the state-federal Medicaid 
program must provide drug price information to HHS for use in 
program payment and administration. For market competition 
reasons, federal law protects the confidentiality of the data.
    Under current law, Part D insurers must provide information 
as the HHS Secretary determines is necessary to calculate and 
administer payments (such as direct subsidies and reinsurance 
payments). During each plan year, CMS makes monthly prospective 
payments to insurers, based on cost and revenue estimates in 
their annual bids to provide benefits. Six months after the end 
of each year, CMS reconciles the projected payments with actual 
plan costs, based on updated data including actual enrollment, 
LIS eligibility, enrollee health risk scores, and prescription 
drug price data. Information disclosed or obtained pursuant to 
the drug data reporting requirements may be used by HHS to 
administer the program and conduct oversight, evaluation, and 
enforcement. The data may also be provided to the Department of 
Justice and the U.S. GAO for oversight.
    Under current law, manufacturers must provide price data 
necessary to allow HHS to implement the Medicaid drug rebate 
program. Under the program, manufacturers that want to sell 
covered outpatient drugs, including biologicals and insulin, to 
state Medicaid agencies must enter into rebate agreements with 
the Secretary. The agreements require manufacturers to provide 
state Medicaid programs with rebates on drugs purchased for 
Medicaid beneficiaries and to ensure that Medicaid receives the 
lowest or best price for which the manufacturer sold the drug 
during the previous quarter. The price information is 
confidential and may not be disclosed by the Secretary in a 
form that reveals the identity of a specific manufacturer or 
wholesaler, or prices charged for drugs by such manufacturer or 
wholesaler, except: as the Secretary determines to be necessary 
to administer the program; to the GAO and Congressional Budget 
Office (CBO) for review; to states to administer Medicaid; and 
for display on the HHS website in the form of a weighted 
average of the most recently reported monthly average price and 
retail survey price data.

Provision

    This provision would allow the HHS Secretary to share 
Medicare Part D and Medicaid drug price and rebate data with 
the executive directors of MedPAC and the Medicaid and CHIP 
Payment and Access Commission (MACPAC) for purposes of 
monitoring, program recommendations, and analysis of the 
Medicare Part D and Medicaid programs and the State Children's 
Health Insurance Program (CHIP).
    MedPAC and MACPAC would be barred from disclosing 
information about the specific amounts or identity of the 
source of rebates, price concessions, and other forms of direct 
or indirect remuneration (DIR) negotiated by insurers or price 
information submitted as part of an insurer's annual bid to 
offer program benefits. MedPAC and MACPAC could not publicly 
disclose data in a form that identified a specific manufacturer 
or wholesaler or prices charged for drugs by such manufacturer 
or wholesaler. This provision would be effective immediately.

  SECTION 123. PUBLIC DISCLOSURE OF DRUG DISCOUNTS AND OTHER PHARMACY 
                       BENEFIT MANAGER PROVISIONS

Current Law

    Health insurers typically contract with, or own, pharmacy 
benefit managers (PBMs) that perform a range of services 
including design of health plan formularies (or lists of 
covered drugs); set up of contracted networks of retail 
pharmacies that dispense drugs to enrollees; and drug price 
negotiation with pharmaceutical manufacturers, including up-
front discounts and rebates after the point of sale. PBMs 
generally negotiate prices for drugs provided in retail 
pharmacies, but in some cases PBMs dispense drugs from their 
own mail-order or specialty pharmacies.
    The terms of contracts between PBMs and insurers, and 
information about net drug prices negotiated by PBMs generally 
are confidential in order to preserve competition for drug 
price concessions. For this reason, it is difficult to monitor 
and assess the impact of the role of PBMs in managing Part D 
drug spending. PBMs and insurers are required to report some 
data about prescription drug sales and prices under Medicare 
Part D and Qualified Health Plans (QHPs) sold on the health 
insurance exchanges. (QHPs are individual health insurance 
plans that undergo an additional certification process by HHS, 
compared to other health insurance products sold to 
individuals.) PBMs that manage prescription drug coverage under 
Part D or for a QHP report the following data to the HHS 
Secretary each year:
           The percentage of prescriptions provided 
        through retail pharmacies compared to mail order 
        pharmacies;
           The percentage of prescriptions for which a 
        generic drug was available and dispensed by a pharmacy;
           The aggregate amount of rebates, discounts, 
        or price concessions (excluding certain bona fide 
        service fees), negotiated by a PBM on behalf of 
        insurers; the aggregate amount of rebates, discounts, 
        or price concessions negotiated by PBMs and passed on 
        to insurers; and the total number of prescriptions 
        dispensed; and,
           The aggregate amount of the difference 
        between what insurers pay a PBM, and what a PBM pays 
        retail pharmacies and mail-order pharmacies, and the 
        number of prescriptions dispensed.
    The reported data are confidential, and may not be 
disclosed by the Secretary or an insurer, with limited 
exceptions. Only the Secretary may disclose information--if in 
a form that does not disclose the identity of a PBM or insurer, 
or prices charged for individual drugs--in order to administer 
specific provisions of law, or for review by congressional 
agencies, such as the GAO and CBO. PBMs and insurers that do 
not comply with the provisions or that provide false 
information are subject to penalties.
    Prescription drug price concessions that are not passed on 
to enrollees at the point of sale are reported to CMS as direct 
and indirect remuneration (DIR). DIR includes discounts, 
chargebacks or rebates, cash discounts, free goods contingent 
on a purchase agreement, up-front payments, coupons, goods in 
kind, free or reduced-price services, grants, or other price 
concessions or similar benefits from manufacturers, pharmacies 
or similar entities obtained by a PBM or intermediary 
organization with which the Part D plan sponsor has contracted. 
Plans must submit detailed DIR reports to CMS within six months 
after the close of a plan year.

Provision

    This provision would require HHS to make public on its 
website, beginning on July 1, 2022, data that has been reported 
under this section, which includes information on aggregate 
price concessions (including rebates and discounts), the 
aggregate amount of the difference between what an insurer pays 
a PBM and what a PBM pays retail and mail order pharmacies, and 
the number of prescriptions dispensed. The Secretary would 
ensure information is displayed in a manner that prevents the 
disclosure of price concessions with respect to an individual 
drug or an individual plan in order to preserve competition for 
lower drug prices.
    Additionally, this provision would require Part D insurers 
to conduct, beginning January 1, 2022, financial audits of data 
related to their PBM contracts. The purpose is to ensure Part D 
insurers--large and small--monitor PBM compliance with contract 
terms, including with respect to accounting for the net price 
of Part D covered drugs. The audits would be conducted at least 
every two years by an independent third party. Insurers would 
require PBMs to make their rebate contracts with drug 
manufacturers available for review during the audits and data 
available within 45 days of the audit request. PBMs that do not 
comply with insurers' audit requests would be reported to the 
Secretary and upon confirmation the Secretary may impose CMPs 
on PDP sponsors or MA organization up to $10,000 per day. 
Audits would be subject to confidentiality agreements to 
prevent disclosure of confidential information. Audit reports 
would be submitted to the Secretary within 30 days and reviewed 
to determine the extent to which net price transparency between 
Part D insurers and PBMs occurs for each drug.
    Beginning in plan year 2022, Part D insurers would also be 
required to report to pharmacies any post-point-of-sale 
adjustments for price concessions or incentive payments for 
covered Part D drugs, including those made by a PBM, at least 
annually. These payment adjustments would be reported or 
approximated at the claim level. This provision also would 
require Part D insurers to report annually to the Secretary any 
statements of conflicts of interest from the members of 
pharmacy and therapeutics (P&T) committees used by the insurer.
    Finally, this provision would require Part D insurers to 
report, beginning in plan year 2022, actual and projected DIR 
amounts in their bids for Part D coverage, including those 
related to pharmacies. The purpose is to ensure that projected 
remuneration related to pharmacies and manufacturers is based 
on actual remuneration in a prior year.

  SECTION 124. PUBLIC DISCLOSURE OF DIRECT AND INDIRECT REMUNERATION 
                        REVIEW AND AUDIT RESULTS

Current Law

    Under Medicare Part D, enrollee cost sharing for drugs 
dispensed by network pharmacies is based on insurers' 
negotiated prices for covered drugs. The negotiated price, as 
defined by CMS, is the payment network pharmacies have 
negotiated to receive from Part D insurers for dispensing a 
covered drug, inclusive of all pharmacy price concessions 
except those that cannot reasonably be determined at the point 
of sale. Negotiated prices generally include pharmacy 
dispensing fees. Negotiated prices may not be rebated back to 
the insurer in full or in part. Insurers may pass on to 
enrollees the full value of any rebates and discounts 
negotiated with manufacturers and pharmacies in the price paid 
at the pharmacy counter, but the majority do not, according to 
data from CMS. Most insurers use the majority of rebates and 
discounts to lower their premiums for Part D coverage.
    Drug price concessions that are not passed on to enrollees 
at the point of sale are reported to CMS as DIR. DIR includes 
discounts, chargebacks or rebates, cash discounts, free goods 
contingent on a purchase agreement, up-front payments, coupons, 
or other price concessions or similar benefits from 
manufacturers, pharmacies or similar entities obtained by an 
intermediary organization with which the Part D insurer has 
contracted, such as a PBM. Plans must submit detailed DIR 
reports to CMS within six months after the close of a plan 
year.
    Medicare provides subsidies for each enrollee in a Part D 
plan that equal 74.5 percent of average, standard coverage. Six 
months after the end of each year, CMS reconciles the projected 
payments with actual plan costs based on updated data including 
enrollment, low-income subsidy eligibility, health risk, and 
drug cost data from prescription drug event (PDE) and DIR 
reports. The final reconciled payments are also subject to 
Medicare risk corridors that limit a plan's overall losses or 
profits.
    Federal regulations give HHS and GAO, or their designees, 
the right to audit, evaluate and inspect any books, contracts, 
records, computers, or other electronic systems, including 
medical records and documentation involving transactions 
related to CMS contracts with Part D sponsors. These rights 
continue for 10 years from the final date of the contract 
period or the date of audit completion, whichever is later.

Provision

    This provision would require the Secretary to publicly 
report on discrepancies related to DIR information submitted by 
plans, demonstrating the accuracy with which insurers report 
DIR. This would include the number of potential errors CMS 
identified for plan review, the extent to which plans 
resubmitted reports making changes to past contract years, and 
the extent to which errors in DIR reports resulted in an 
increase or decrease in DIR for a past year. The Secretary 
shall exclude Program for All-Inclusive Care for the Elderly 
(PACE) organization and Retiree Drug Subsidy Program 
information in calculating publicly available information.
    The Secretary would also be required to publicly report the 
results of the independent third party financial audits of 
plans conducted under current law, which includes DIR 
information, beginning in 2020. The report shall include 
information including the number of audits that: were closed 
without further action; prompted a corrective action plan; and 
resulted in an adverse opinion. It shall also include the 
number of plans for which a previously closed reconciliation 
was reopened and the extent to which the reopening of a 
reconciliation resulted in recoupment of an overpayment or 
issuance of an underpayment.

    SECTION 125. INCREASING USE OF REAL-TIME BENEFIT TOOLS TO LOWER 
                           BENEFICIARY COSTS

Current Law

    Under Medicare Part D, insurers and other plan sponsors 
enter into annual contracts with CMS to provide a defined 
package of outpatient drug benefits. There is no federally 
required formulary in Part D, except insurers must cover at 
least two drugs in each class and category and substantially 
all drugs in six protected classes. There is wide variation 
among Part D insurers with respect to their benefits offered, 
including drugs covered on formularies, prescription cost-
sharing amounts, and utilization management requirements (e.g., 
prior authorization or quantity limits). While variation in 
benefit design provides plan choice for beneficiaries, it can 
be difficult for clinicians to sort through the information 
with their patients at the point of prescribing.
    Part D insurers are now required to support an electronic 
prescription (e-prescribing) program, which enables 
transmission of prescription information between a clinician, 
pharmacy, PBM, and/or health plan, either directly or through 
an intermediary, such as an e-prescribing network. Technical 
transmission requirements for e-prescribing networks are based 
on standards set by the National Council for Prescription Drug 
Programs (NCPDP SCRIPT) and other outside organizations. While 
e-prescribing is optional for physicians and pharmacies, if 
they choose to transmit e-prescriptions and related 
communications then Part D insurers must comply with CMS 
standards. CMS also requires Part D insurers and prescribers to 
convey electronic formulary and benefits information amongst 
themselves using NCPDP Formulary and Benefits Standard 
Implementation Guides, referred to as F&B.
    Part D e-prescribing standards are updated periodically to 
take into account new technology or to respond to statutory 
requirements. In May 2019, CMS issued final regulations 
requiring Part D insurers, no later than January 1, 2021, to 
implement one or more electronic real-time benefit tools 
(RTBT). According to CMS, the existing NCPDP SCRIPT standard 
allows prescribers to conduct electronic prescribing, while the 
F&B standard allows prescribers to see what drugs are on a 
plan's formulary. However, neither of these standards provides 
patient-specific, real-time cost or coverage information, such 
as formulary requirements or utilization management data, at 
the point of prescribing.
    The Office of the National Coordinator for Health 
Information Technology (ONC) has the authority to establish a 
voluntary certification program for health information 
technology (HIT) developers to certify their HIT products are 
in compliance with specified certification criteria. Use of 
certified EHR technology is a requirement under the CMS 
Medicare Promoting Interoperability Program (formerly the EHR 
Incentive Program). The ONC established this voluntary 
certification program in 2011 (the ``ONC Health IT 
Certification Program''). The Secretary has the authority, 
through rulemaking, to require specified conditions of 
certification and maintenance of certification requirements for 
the Program, including that an HIT developer does not take any 
action that constitutes information blocking, among others.

Provision

    This provision would require Part D insurers to provide for 
a real-time benefit tool (RTBT) that enables electronic 
transmission of eligibility, formulary, and benefit information 
to each enrollee's prescribing clinician, using technology that 
integrates with clinicians' electronic prescribing and EHR 
systems. Information transmitted would include a list of any 
clinically-appropriate alternatives to a drug included on the 
formulary of such plan; information relating to cost sharing; 
pharmacy options (including the individual's preferred pharmacy 
and other retail pharmacies and a mail-order pharmacy, as 
applicable); and the formulary status and any applicable prior 
authorization or other utilization management policies applied 
by insurers. Plans would be required to implement this 
provision no earlier than standards are adopted by the 
Secretary.
    To be considered a RTBT, the electronic transmissions would 
have to comply with technical standards adopted by the HHS 
Secretary in consultation with the ONC; standard-setting 
organizations including NCPDP and others determined appropriate 
by the Secretary; and stakeholders including Part D insurers, 
health care professionals, and HIT software vendors. RTBT data 
would be used in conjunction with existing systems to provide a 
more complete view of a Medicare beneficiary's Part D drug 
benefit.
    This provision would also add a requirement for EHRs used 
by clinicians. That is, qualified EHRs under the ONC Health IT 
Certification Program also must include an RTBT that conveys 
patient-specific cost and coverage information as well as the 
Part D information specified in this provision. The Secretary 
would implement the EHR requirements through notice and comment 
rulemaking, but not before standards for RTBTs for Part D plans 
have been adopted. Nothing in this section would prohibit 
implementation of RTBT requirements for Part D plans that have 
been set out through regulation.
    In addition, this provision would enable physicians to get 
credit for using a RTBT in the Medicare PFS Merit-based 
Incentive Payment System (MIPS) by adding it to the menu of 
practice improvement activity options.

SECTION 126. IMPROVEMENTS TO PROVISION OF PARTS A AND B CLAIMS DATA TO 
                               DRUG PLANS

Current Law

    Private insurers offering Medicare Part D benefits through 
stand-alone plans that cover only prescription drugs generally 
do not have access to medical claims data collected under 
Medicare. Such data could provide more comprehensive 
information about an enrollee's medical condition and current 
treatments and enable Part D insurers to design formularies 
that reflect total costs of care. Under the Bipartisan Budget 
Act of 2018, Congress required HHS to establish a process, by 
2020, under which a Part D insurer could request Medicare Parts 
A and B medical claims data for enrollees in their drug plan. 
The data, which are to be as current as possible, may be used 
by Part D insurers for specified purposes including to improve 
therapeutic outcomes by improving medication use, improving 
care coordination to prevent adverse outcomes such as emergency 
room visits, and for other purposes approved by the Secretary.
    Congress specified limitations on the use of the Parts A 
and B claims data, including prohibiting use of the data to 
inform Part D coverage determinations. A coverage determination 
is any decision (whether an approval or denial) by an insurer 
with regard to covered benefits. Examples of coverage 
determinations include whether to provide or pay for a Part D 
drug that an enrollee believes to be covered; a decision 
concerning a request to cover a drug that is not included on an 
insurer's formulary; or a decision regarding whether an 
enrollee has satisfied a prior authorization or other 
utilization management policy.

Provision

    This provision would create an exception to the limitation 
on Part D insurers' use of fee-for-service (FFS) claims data 
for Part D coverage determinations. The provision would allow 
insurers to use the data for Part D coverage determinations 
related to approved purposes, such as to improve therapeutic 
outcomes. The provision would also require claims data to be as 
current as practicable, specifying options that the HHS 
Secretary may use to deliver the data in the most timely and 
efficient manner. This provision would go into effect January 
1, 2021.

 SECTION 127. PERMANENTLY AUTHORIZE A SUCCESSFUL PILOT ON RETROACTIVE 
              PART D COVERAGE FOR LOW-INCOME BENEFICIARIES

Current Law

    There is no means test for eligibility for Medicare Part D 
coverage, but individuals who meet specified income and assets 
thresholds are eligible for LIS, which cover a greater share of 
out-of-pocket spending, including premiums and cost sharing for 
covered drugs. The actual amount of LIS varies based on an 
enrollee's assets and income and whether a beneficiary is 
institutionalized, or is receiving community-based care. Full-
subsidy LIS enrollees-including dual-eligible enrollees who 
qualify for Medicare and full Medicaid benefits, enrollees who 
qualify for Supplemental Security Income (SSI), as well as 
other specified individuals--have no deductible, minimal cost 
sharing for prescription drugs and a cap on annual out-of-
pocket spending. Partial-subsidy LIS enrollees--including 
individuals with assets below set thresholds and income up to 
150 percent of the federal poverty level (FPL)-may also qualify 
for this extra benefit, but they have somewhat higher 
prescription cost sharing compared to full-subsidy LIS 
enrollees.
    A beneficiary must first meet the income and asset 
thresholds to be eligible for LIS benefits. Next, the 
beneficiary must be enrolled in a Part D plan. Since inception 
of Part D, there has been concern about gaps in coverage for 
beneficiaries who qualify for the LIS but are not yet covered 
by a Part D plan. To address this, in 2010, HHS authorized a 
pilot program, the Limited Income Newly Eligible Transition (LI 
NET), to provide immediate temporary Part D coverage for 
certain LIS individuals. LI NET provides drug coverage for up 
to two months until an LIS-eligible individual is covered in a 
Part D plan, as well as up to 36 months retroactive coverage 
for full-subsidy LIS dual-eligibles and SSI beneficiaries, in 
cases where their dual or SSI eligibility is retroactive. LI 
NET coverage, currently administered through health insurer 
Humana, reimburses pharmacies for all Part D-covered drugs.

Provision

    This provision would permanently authorize the LI NET 
program, beginning no later than 2022. Individuals would 
qualify for LI NET if they were either full or partial LIS-
eligible and a) had not yet enrolled in a Part D plan or b) had 
enrolled, but coverage under the plan had not yet taken effect. 
The LI NET benefit would provide transitional coverage 
including immediate access to covered Part D drugs at the point 
of sale starting on the first day of the month such individual 
was determined to be LIS-eligible, and ending on the day Part D 
coverage took effect. For LI NET-eligible individuals who are 
full-benefit duals or receive SSI benefits, retroactive 
coverage of covered drugs would begin on the later of a) the 
date the individual was first eligible for the LIS or 2) 36 
months prior to the date such individual enrolled in a Part D 
plan. Retroactive coverage would end on the day Part D coverage 
took effect. To the extent feasible, HHS would operate the 
program through a single administrator.
    HHS would ensure that LI NET coverage 1) provides access to 
all covered Part D drugs under an open formulary, 2) permits 
all pharmacies determined to be in good standing to process 
claims, 3) operates consistent with requirements the Secretary 
considers necessary to improve patient safety and ensure 
appropriate dispensing, and 4) meets other requirements 
established by the Secretary. The provision would waive Part D 
marketing, formulary, and medication therapy management 
requirements for the LI NET program and would allow the 
Secretary to waive certain other requirements as may be 
necessary.

SECTION 128. MEDICARE PART D REBATE BY MANUFACTURERS FOR CERTAIN DRUGS 
              WITH PRICES INCREASING FASTER THAN INFLATION

Current Law

    As noted, under Medicare Part D, insurers submit annual 
bids to CMS to offer outpatient prescription drug benefits, and 
compete against each other for enrollees. Part D insurers, and 
the PBMs they own or contract with, seek to control costs, in 
part, by negotiating lower drug prices from manufacturers. 
Lower prices primarily take the form of manufacturer rebates or 
discounts off list prices for brand-name drugs and biologicals. 
Insurers and PBMs are able to secure rebates from a 
manufacturer in return for including a brand-name drug on a 
plan formulary or by setting favorable cost sharing that leads 
to higher market share for the manufacturer. The final value of 
a manufacturer rebate may be tied to sales volume, bundled with 
other drug products, and paid to insurers in quarterly 
installments.
    While there is no federally required Part D formulary, plan 
sponsors must cover at least two drugs in each class or 
category and substantially all available drugs in the following 
six categories: immunosuppressant, antidepressant, 
antipsychotic, anticonvulsant, antiretroviral, and 
antineoplastic. Part D sponsors and PBMs have the most leverage 
to negotiate price concessions when there are competing drugs 
on the market for treating a condition. They have less ability 
to negotiate price concessions for patented and sole-source 
drugs with no therapeutic substitutes and for drugs in the six 
protected classes (as insurers must cover all drugs). 
Manufacturers' rebates have risen from 11.1 percent of Part D 
prescription drug costs in 2008 to an estimated 25.3 percent in 
2018.
    Pharmaceutical manufacturers are not required to 
participate in Part D and are not required to provide price 
concessions from their list prices. Since 2011, manufacturers 
that choose to participate in Part D have been required to 
provide a discount on brand-name drugs (and starting in 2019, 
on biosimilars) purchased by enrollees in the coverage gap.
    By comparison, the state-federal Medicaid program 
administers a system of statutory and voluntary rebates for 
covered outpatient drugs, including biologicals and insulin, to 
ensure that Medicaid receives the lowest or best price for such 
drugs from the manufacturers. Medicaid drug rebates vary 
depending on the specific product, including whether the 
product is a brand-name drug or generic. In addition to a flat 
rebate, manufacturers who choose to have their products sold 
through Medicaid must also provide an additional rebate if they 
increase the average price of a prescription drug faster than 
the rate of retail inflation, as measured by the Consumer Price 
Index for all urban consumers (CPI-U). State may also negotiate 
supplemental rebates with manufacturers. Several studies by the 
CBO and the HHS Office of Inspector General (OIG), based on 
confidential HHS drug rebate data, have found that Part D plans 
pay higher average net prices for brand-name prescription drugs 
than Medicaid and that the Medicaid inflation rebate is a major 
factor in the price difference.
    Manufacturers set their own list prices for drugs and 
biologicals sold in the U.S. List prices are generally 
reflected in the WAC defined under SSA Section 1847A(c)(6)(B). 
The WAC does not include rebates, prompt pay or other 
discounts, or reductions in price and is reported in wholesale 
price guides or other publications of drug or biological 
pricing data.

Provision

    This provision would establish rebates with pharmaceutical 
manufacturers if they increase their list price for certain 
covered Part D drugs above the rate of inflation. Beginning on 
January 1, 2022, manufacturers that choose to sell their 
products under Part D would provide rebates to Medicare for 
each six-month period in which the list price for a rebatable 
drug, as specified in the provision, increases faster than the 
change in inflation measured by CPI-U for the same period. A 
manufacturer's list price under this provision would be based 
on a drug's WAC. Rebatable drugs would be defined as Part D-
covered products that are brand drugs (and not a generic drug) 
or that are licensed as a biological (and not a biosimilar).
    To determine whether the price of a rebatable drug 
increased faster than inflation, and to calculate the amount of 
any required rebate, HHS would determine the inflation-adjusted 
average list price for each drug. The inflation-adjusted 
average list price for existing drugs would be the price for a 
drug at the dosage form and strength level, taking into account 
each unique National Drug Code, as of July 1, 2019 (or as of 
the day the drug was first marketed for newly approved drugs), 
increased by the percentage change in the CPI-U. The rebate 
amount would be the product of the quantity of each covered 
drug dispensed during the rebate period and the amount by which 
the drug's actual average list price exceeded the inflation-
adjusted list price. The inflation-adjusted average list price 
for new drugs would be the price for a drug at the dosage form 
and strength level, taking into account each unique National 
Drug Code in the first full rebate period that begins after the 
six-month initial period in which the drug is first marketed.
    HHS would provide participating manufacturers with 
information on rebatable covered Part D drugs, no later than 
six months after the end of each rebate period. Such 
information would include the number of dispensed drugs, the 
excess list price increase, if any; and the amount of any 
required rebate. The HHS Secretary would be allowed to reduce 
or waive a required rebate in the case of a drug shortage.
    A manufacturer would have 30 days from receipt of the HHS 
notice to pay the required amount or request a reconsideration 
of the rebate amount. Manufacturers would be subject to CMPs if 
they did not comply with rebate requirements. The penalty for 
failing to provide a required rebate would be the amount of the 
original rebate plus 25 percent. There would be no judicial 
review of the rebate amount.
    Manufacturers would voluntarily enter into rebate 
agreements with the Secretary for their drugs to be covered 
under Part D, and would be required to provide specific 
information to HHS to implement the rebate. Manufacturers would 
be subject to HHS audits to ensure reporting compliance and 
civil monetary penalties for noncompliance.
    Information disclosed by manufacturers or wholesalers would 
be confidential and could not be disclosed by the Secretary in 
a form that reveals the identity of a specific manufacturer or 
wholesaler, or prices charged for drugs by such manufacturer or 
wholesaler, except as the Secretary determined would be 
necessary to carry out this provision.
    The inflation-based rebates would have no impact on 
formulary design or manufacturer discounts negotiated by Part D 
insurers. Rebates paid to Medicare would be deposited into the 
Medicare Supplementary Medical Insurance Trust Fund.

         SECTION 129. PROHIBIT BRANDING ON PART D BENEFIT CARDS

Current Law

    The HHS Secretary is required to establish limitations 
related to a Part D plan's use of the name or logo of a network 
provider on its membership and marketing material. CMS 
implementing regulations prohibit names and/or logos of co-
branded providers on the plan's enrollee ID card, unless the 
provider names and/or logos are in the name of the plan name 
and/or are related to an enrollee's selection of a specific 
provider or provider organization.

Provision

    This provision would prohibit Part D plan sponsors from 
including any pharmacy branding information on the cards 
provided to beneficiaries for the purpose of accessing Part D 
benefits.

            SECTION 130. PREVENTING FRAUD IN MEDICARE PART D

Current Law

    Numerous statutory provisions aim to curb instances of 
waste, fraud, and abuse within the healthcare system. The 
Bipartisan Budget Act of 2018 includes a provision that 
requires: the HHS Secretary to have a mechanism through which 
CMS, its fraud-focused contractors, and Part D plans share 
information related to waste, fraud, and abuse; and a Part D 
plan to report to the Secretary suspicious activities and 
actions taken related to inappropriate prescribing of opioids.

Provision

    This provision would implement HHS OIG recommendations to 
require Part D plan sponsors to report substantiated or 
suspicious activities related to waste, fraud, and abuse. Plan 
sponsors would also have to report any corrective actions taken 
to address these instances.

 SECTION 131. TO ESTABLISH PHARMACY QUALITY METRICS IN MEDICARE PART D

Current Law

    Under current law, CMS publishes Part C and D Star Ratings 
each year to promote patient-focused care. The Star Ratings 
measure the quality of both Medicare Advantage Plans (Part C) 
and Prescription Drug Plans (PDPs or Part D plans). Part D plan 
contracts with pharmacies typically base a portion of payment 
on performance on quality measures. These quality measures are 
not necessarily aligned with the Star Ratings measures on which 
CMS assesses and publicly posts plan performance. In addition, 
measures of pharmacy performance are typically specific to the 
plan, with few measures having been vetted through a multi-
stakeholder process.

Provision

    This provision would require the Secretary to establish a 
standardized pharmacy quality metrics program in Medicare Part 
D.

    SECTION 132. STAR RATING MEASURES TO ENCOURAGE BIOSIMILAR UPTAKE

Current Law

    Under current law, CMS publishes Part C and D Star Ratings 
each year to promote patient-focused care. The Star Ratings 
measure the quality of both Medicare Advantage Plans (Part C) 
and Part D plans. The 14 Part D Star Ratings quality measures 
established for 2020 are below.
           Appeals Auto-Forward
           Appeals Upheld Measures
           Complaints about the Drug Plan
           Members Choosing to Leave the Plan
           Drug Plan Quality Improvement
           Rating of Drug Plan
           Getting Needed Prescription Drugs
           MPF Price Accuracy
           Medication Adherence for Diabetes 
        Medications
           Medication Adherence for Hypertension (RAS 
        antagonists)
           Medication Adherence for Cholesterol 
        (Statins)
           MTM Program Completion Rate for CMR
           Statin Use in Persons with Diabetes

Provision

    This provision would require Medicare quality measures for 
Part D plan sponsors in the Star Rating system to include 
assessments of plan benefit and formulary design in encouraging 
patient access to biosimilars.

 SECTION 133. HHS STUDY AND REPORT ON THE INFLUENCE OF PHARMACEUTICAL 
       MANUFACTURER DISTRIBUTION ON PROVIDER PRESCRIBING BEHAVIOR

Current Law

    No provision in current law.

Provision

    This provision would require HHS to conduct a study on the 
influence of pharmaceutical manufacturer distribution models 
that provide third-party reimbursement hub services on health 
care providers who prescribe the manufacturer's drugs. The 
report would seek to identify whether these hub services 
influence or incentivize a provider to prescribe a drug, thus 
mitigating the effectiveness of cost-control measures like 
prior authorization and step therapy that a Part D plan may 
utilize. The report would also seek to identify whether these 
hub services violate any existing federal laws.

                       SUBTITLE C--MISCELLANEOUS

           SECTION 141. DRUG MANUFACTURER PRICE TRANSPARENCY

Current Law

    Pharmaceutical manufacturers set initial, or list, prices 
for the prescription drugs and biological products they sell. 
There are different published drug list prices, but one 
commonly used commercial list price is the WAC, defined at SSA 
Section 1847A(c)(6)(B). Pharmaceutical list prices can differ 
substantially from final, net prices that manufacturers may 
receive after negotiations with wholesalers, pharmacies, and 
other entities along the distribution chain as well as separate 
negotiations with PBMs that work for or are owned by health 
plans.
    Although a list price may not reflect the final payment 
amount a manufacturer receives for a drug, it is often used as 
the basis for consumer drug spending. Insurers may require 
enrollees to pay coinsurance for prescriptions (a percentage of 
the drug price) based on a list price rather than the insurer's 
lower net price. Consumers may also be charged a drug's list 
price if they are uninsured or have not met a health plan 
deductible, which is a period during the benefit when they are 
responsible for 100 percent of costs, when the deductible 
covers spending on drugs as well as medical services.
    Contract terms and statutory or regulatory provisions in 
government health care programs generally prohibit government 
agencies from publicly releasing specific information in a form 
that discloses the identity of a specific manufacturer or 
wholesaler, or prices charged for specific drugs by such 
manufacturer or wholesaler.

Provision

    The provision would add a new SSA Section 1128L, effective 
July 1, 2022, requiring drug manufacturers to report to the HHS 
Secretary information and supporting documentation to justify 
price increases for prescription drugs and biological products, 
as measured by the WAC or changes in the WAC in cases where the 
Secretary determines the manufacturer's price increase met or 
exceeded certain thresholds. The Secretary would be required to 
publicly post the price justifications, as specified in the 
provision.
    The reporting requirements for applicable drugs would apply 
to three categories, defined as:
    1. Prescription drugs or biologicals with a list price of 
at least $10 per dose and price increase:
           In 2020 of at least 100 percent since 
        enactment of the legislation;
           During 2021 of at least 100 percent in the 
        preceding 12 months or at least 150 percent in the 
        preceding 2 years;
           During 2022 of at least 100 percent in the 
        preceding 12 months or at least 200 percent in the 
        preceding 3 years;
           During 2023 of at least 100 percent in the 
        preceding 12 months or at least 250 percent in the 
        preceding 4 years; or,
           On or after January 1, 2024, of at least 100 
        percent in the preceding 12 months or at least 300 
        percent in the preceding 5 years;
    2. Prescription drugs and biologicals in the top 50 percent 
of net spending (per dose) in Medicare or Medicaid in at least 
one of the preceding 5 years and a list price increase:
           In 2020 of at least 15 percent since 
        enactment of the legislation;
           During 2021 of at least 15 percent in the 
        preceding 12 months or at least 20 percent in the 
        preceding 2 years;
           During 2022 of at least 15 percent in the 
        preceding 12 months or at least 30 percent in the 
        preceding 3 years;
           During 2023 of at least 15 percent in the 
        preceding 12 months or at least 40 percent in the 
        preceding 4 years; or,
           On or after January 1, 2024, of at least 15 
        percent in the preceding 12 months or at least 50 
        percent in the preceding 5 years.
    3. New prescription drugs and biologicals with a list price 
established for the first time, if the list price for a year 
supply or course of treatment exceeds the gross spending for 
covered Part D drugs necessary to meet the annual out-of-pocket 
threshold (about $10,000 in 2022).
    The Secretary would notify a manufacturer within 60 days of 
identifying a drug as an applicable drug. After being notified, 
the manufacturer would have 180 days to provide a price 
justification to the Secretary, which would be posted on the 
CMS website no later than 30 days after receipt, along with a 
summary written in a way that would be easily understandable to 
Medicare and Medicaid beneficiaries. A price justification 
would not be required if a manufacturer, after it received 
notification, reduced the list price for an applicable drug so 
that, for at least 6 months, it no longer met the qualifying 
criteria. Drugs that qualify based on new launch price would 
remain applicable drugs until the Secretary determines there is 
a therapeutic equivalent.
    The required information for the price justifications may 
include: individual factors contributing to the price increase; 
the role of each factor in the price increase; and manufacturer 
spending for materials and manufacturing, patents and licenses, 
or purchasing or acquiring the drug from another company, if 
applicable. Manufacturers may also describe the percentage of 
total research and development spending for the drug that came 
from federal funds; total manufacturer research and development 
spending on the drug; total revenue and net profit from the 
drug each year since approval; total costs for marketing and 
advertising the drug; and additional information about the 
manufacturer such as total revenue and net profit for the 
period of the price increase, metrics for setting executive 
compensation, and other information such as total spending on 
drug research and development or clinical trials on drugs that 
failed to receive FDA approval.
    HHS would be prohibited from publicly posting any 
proprietary manufacturer information.
    Drug manufacturers would be subject to current Medicare 
CMPs of $10,000 per day for failing to submit a timely price 
justification and up to $100,000 per false information item for 
knowingly submitting false information.

      SECTION 142. STRENGTHEN AND EXPAND PHARMACY BENEFIT MANAGER 
                       TRANSPARENCY REQUIREMENTS

Current Law

    Health insurers typically contract with, or own, pharmacy 
benefit managers (PBMs) that perform a range of services 
including design of health plan formularies (or lists of 
covered drugs); set up of contracted networks of retail 
pharmacies that dispense drugs to enrollees; and drug price 
negotiation with pharmaceutical manufacturers, including up-
front discounts and rebates after the point of sale. PBMs 
generally negotiate prices for drugs provided in retail 
pharmacies, but in some cases PBMs dispense drugs from their 
own mail-order or specialty pharmacies.
    The terms of contracts between PBMs and insurers, and 
information about net drug prices negotiated by PBMs generally 
are confidential in order to preserve competition for drug 
price concessions. For this reason, it is difficult to monitor 
and assess the impact of the role of PBMs in managing Part D 
drug spending. PBMs and insurers are required to report some 
data about prescription drug sales and prices under Medicare 
Part D and Qualified Health Plans (QHPs) sold on the health 
insurance exchanges. (QHPs are individual health insurance 
plans that undergo an additional certification process by HHS, 
compared to other health insurance products sold to 
individuals.) PBMs that manage prescription drug coverage under 
Part D or for a QHP report the following data to the HHS 
Secretary each year:
           The percentage of prescriptions provided 
        through retail pharmacies compared to mail order 
        pharmacies;
           The percentage of prescriptions for which a 
        generic drug was available and dispensed by a pharmacy;
           The aggregate amount of rebates, discounts, 
        or price concessions (excluding certain bona fide 
        service fees), negotiated by a PBM on behalf of 
        insurers; the aggregate amount of rebates, discounts, 
        or price concessions negotiated by PBMs and passed on 
        to insurers; and the total number of prescriptions 
        dispensed; and,
           The aggregate amount of the difference 
        between what insurers pay a PBM, and what a PBM pays 
        retail pharmacies and mail-order pharmacies, and the 
        number of prescriptions dispensed.
    The reported data are confidential, and may not be 
disclosed by the Secretary or an insurer, with limited 
exceptions. Only the Secretary may disclose information--if in 
a form that does not disclose the identity of a PBM or insurer, 
or prices charged for individual drugs--in order to administer 
specific provisions of law, or for review by congressional 
agencies, such as the GAO and CBO. PBMs and insurers that do 
not comply with the provisions or that provide false 
information are subject to penalties.

Provision

    This provision would amend SSA Section 1150A, which 
requires health plans or PBMs that manage prescription drug 
coverage to report aggregate information on prescriptions, 
price concessions, and PBM payments to pharmacies, to include 
PBMs contracting with state Medicaid programs in the types of 
PBMs required to report.
    It would remove the current exemption of reporting bona 
fide fees from the reporting of the aggregate amount of price 
concessions negotiated and reported by a PBM. This section 
would also permit the HHS Secretary to share the information 
submitted by a PBM with:
           States in carrying out their administration 
        and oversight of state Medicaid programs;
           The Federal Trade Commission; and
           The Department of Justice.

 SECTION 143. MEDICARE AND MEDICAID PRESCRIPTION DRUG PRICING DASHBOARD

Current Law

    No provision in current law.

Provision

    This provision would codify and build on the current CMS 
practice to maintain internet website-based dashboards that 
contain information on prescription drug and biological 
spending and utilization in Medicare Part B, Medicare Part D, 
and Medicaid.

    SECTION 144. IMPROVE COORDINATION BETWEEN THE US. FOOD AND DRUG 
   ADMINISTRATION AND THE CENTERS FOR MEDICARE AND MEDICAID SERVICES

Current Law

    No provision in current law.

Provision

    This provision would require the Secretary of HHS to 
convene a public meeting to discuss the challenges associated 
with the next generation of treatments and therapies that will 
be available to seniors. It also requires the Secretary to 
publish a report on coding, coverage, and payment processes 
under Medicare for new medical products.

     SECTION 145. PATIENT PERSPECTIVES IN MEDICARE LOCAL COVERAGE 
          DETERMINATIONS AND NATIONAL COVERAGE DETERMINATIONS

Current Law

    Under current law, CMS has the authority to make a national 
coverage determination (NCD) of whether or not Medicare will 
pay for a good or a service. If there is not an NCD, an item or 
service is covered based on a local coverage determination 
(LCD).
    NCDs are defined in statute and involve a process that 
includes: preliminary discussions, a national coverage 
determination request, staff review, external technology 
assessment and/or Medicare Coverage Advisory Committee, a draft 
decision memorandum, a public comment period, and final 
decision memorandum and implementation instructions.
    LCDs are defined in statute and involve a process that 
includes: informal meetings before the development of an LCD, 
consultations with experts, the proposed determination, a 
public comment period, the use of a Contractor Advisory 
Committee, and final determination.
    The 21st Century Cures Act of 2016 included changes to the 
LCD process, including requiring each MAC that develops an LCD 
to make it available on the both the Medicare Administrative 
Contractor website and the Medicare website at least 45 days 
before the effective date.

Provision

    This provision would authorize the Secretary of HHS to 
include patient perspectives in Medicare local and national 
coverage determinations in order to mitigate barriers in 
obtaining and assessing perspectives from patient and 
disability groups in the determination process.

  SECTION 146. GOVERNMENT ACCOUNTABILITY OFFICE STUDY ON INCREASES TO 
 MEDICARE SPENDING DUE TO PHARMACEUTICAL MANUFACTURER CONTRIBUTIONS TO 
               COPAY AND PATIENT ASSISTANCE ORGANIZATIONS

Current Law

    No provision in current law.

Provision

    This provision would require GAO to study the impact of 
copayment coupons and other patient assistance programs on 
prescription drug pricing and expenditures within the Medicare 
and Medicaid programs.

  SECTION 147. TO REQUIRE THE MEDICARE PAYMENT ADVISORY COMMISSION TO 
 SUBMIT TO CONGRESS A REPORT ON SHIFTING COVERAGE OF CERTAIN MEDICARE 
                    PART B DRUGS TO MEDICARE PART D

Current Law

    No provision in current law.

Provision

    This provision would require MedPAC to issue a report no 
later than June 30, 2021, describing the differences in 
reimbursement for drugs under Parts B and D and the feasibility 
of moving coverage of such drugs currently reimbursable under 
Part B into Part D, with recommendations.

   SECTION 148. TAKING STEPS TO FULFILL TREATY OBLIGATIONS TO TRIBAL 
                              COMMUNITIES

Current Law

    No provision in current law.

Provision

    This provision would require GAO to conduct a study of 
access to and cost of prescription drugs in Indian Country, 
including: a review of what tribal communities pay for drugs 
relative to other consumers; recommendations to align the value 
of discounts available to the Medicaid program and discounts 
available to tribal communities through the purchased and 
referred care program for physician administered drugs; and an 
examination of how tribal communities utilize the Medicare Part 
D program and recommendations to improve enrollment among these 
populations.

                           TITLE II-MEDICAID


 SECTION 201. MEDICAID PHARMACY AND THERAPEUTICS COMMITTEE IMPROVEMENTS

Current Law

    Prescription drugs are an optional Medicaid benefit, but 
all states cover outpatient drugs. Since 1990, pharmaceutical 
manufacturers who voluntarily agree to participate in Medicaid 
are required to rebate a portion of the cost of covered 
outpatient drugs back to states. When a manufacturer 
participates in Medicaid, states must make the manufacturer's 
drugs, with a few limited exceptions, available to Medicaid 
beneficiaries. States share the manufacturer rebates with the 
federal government. Beginning in 2010, drug manufacturers are 
also required to pay rebates on drugs provided to Medicaid 
beneficiaries enrolled in managed care.
    Even though states are required to cover most drugs offered 
by drug manufacturers, states are authorized to use certain 
drug utilization and other tools to manage drug expenditures, 
such as certain types of formularies. Under Medicaid statute, 
states may establish formularies as long as they meet certain 
requirements, including that the formulary was developed by a 
committee--formulary committees often are referred to as 
pharmacy and therapeutics committees (P&T committees)--composed 
of physicians, pharmacists, and other appropriate individuals 
appointed by the state governor. States must also ensure access 
to medically necessary covered outpatient drugs. States may 
elect for a drug use review (DUR) board to serve as a P&T 
committee. Under current law, state Medicaid programs are not 
required to identify, monitor, or report P&T committee member 
conflicts of interest.
    Under the Medicaid outpatient drug benefit statute, states 
are required to have a DUR program and board. The DUR program 
is required to ensure that covered outpatient drug (COD) 
prescriptions are appropriate, medically necessary, and are 
unlikely to result in adverse reactions. Medicaid DUR programs 
must include prospective and retrospective DUR activities. 
Prospective DUR requires review of Medicaid prescriptions prior 
to dispensing to prevent over- or under-utilization, harmful 
drug interactions, and clinical abuse or misuse. Retrospective 
DUR involves review of state prescribing to identify patterns 
such as gross misuse, fraud, or inappropriate or medically 
unnecessary care.
    Statutorily required DUR boards can be established directly 
or under contract, but must include health care professionals 
with recognized knowledge and expertise in appropriate COD 
prescribing, appropriate monitoring of COD prescribing, drug 
use review, evaluation, and intervention, and medical quality 
assurance. The DUR board also must be composed of at least one-
third but no more than 51 percent licensed practicing 
physicians and at least one-third licensed practicing 
pharmacists.
    State DUR boards are required to submit annual reports to 
the state Medicaid program and state Medicaid programs are 
required to submit an annual report to the HHS Secretary on the 
DUR program that identifies state Medicaid prescribing 
patterns, DUR cost savings, and adoption of innovative 
practices. State Medicaid programs may contract with companies, 
such as PBMs, and other organizations and academic institutions 
to conduct DUR activities and prepare a report, but must have a 
DUR board that manages or oversees the DUR contract.
    Beginning October 1, 2019, Medicaid managed care 
organizations with contracts to provide services to state 
Medicaid programs were required to be in compliance with 
statutory DUR requirements.

Provision

    This provision would amend the SSA Section 1927(d)(4) to 
enhance state Medicaid program requirements applicable to P&T 
committees.
    If a state establishes a formulary as under current law, 
this provision would require state Medicaid programs to 
establish P&T committees to develop and review the Medicaid COD 
formularies. P&T committees would be required to include 
physicians, pharmacists, and other appropriate individuals 
appointed by a governor. The state would be required to 
establish and implement a P&T committee conflict of interest 
policy that would: be publicly accessible; require all P&T 
committee members at least annually to disclose any 
relationships, associations, and financial dealings that might 
affect their independent judgement on committee matters; and 
identify committee processes, such as recusal from voting or 
discussion, for those members who report a conflict of 
interest, as well as processes if a member fails to report a 
conflict of interest.
    States would be required to include at least one practicing 
physician and one practicing pharmacist who are independent and 
free of manufacturer, Medicaid plan, and PBM conflicts of 
interest. The required P&T physician and pharmacist committee 
members would also be required to have expertise in the care of 
at least one Medicaid-specific beneficiary population, such as 
elderly or disabled, children with complex medical needs, or 
low-income individuals with chronic illnesses.
    Under this provision, states would have the option for the 
state DUR board to serve as the P&T committee as long as the 
DUR board met the enhanced P&T committee requirements.
    The HHS Secretary would be authorized to issue state 
Medicaid program guidance on P&T committee conflict of interest 
policies if GAO found or recommended, based on an investigation 
required under Section 203 of the Prescription Drug Pricing 
Reduction Act of 2019 that guidance was necessary related to 
appropriate standards and requirements for identifying, 
addressing, and reporting conflict of interest.
    The provision would amend SSA Section 1903(m)(2)(A) to 
require states to apply the state Medicaid program P&T 
committee requirements under this provision to formularies used 
by MCOs or other entities that dispensed CODs to Medicaid 
beneficiaries. This provision would be effective one year after 
the enactment date of this law.

    SECTION 202. MEDICAID DRUG USE REVIEW CONFLICT OF INTEREST AND 
                         REPORTING REQUIREMENTS

Current Law

    Medicaid statute requires state Medicaid programs to 
establish state Medicaid DUR boards. DUR boards can be 
established directly or under contract, but must include health 
care professionals with recognized knowledge and expertise in 
appropriate COD prescribing, appropriate monitoring of COD 
prescribing, DUR, evaluation, intervention, and medical quality 
assurance. The DUR board also must be composed of at least one-
third but no more than 51 percent licensed practicing 
physicians and at least one-third licensed practicing 
pharmacists.
    State DUR boards are required to submit annual reports to 
the state Medicaid program and state Medicaid programs are 
required to submit an annual report to the HHS Secretary on the 
DUR program that identifies state Medicaid prescribing 
patterns, DUR cost savings, and adoption of innovative 
practices. Under current law, state Medicaid programs are not 
required to identify, monitor, or report DUR board member 
conflicts of interest.

Provision

    This provision would amend SSA Section 1927(g)(3) to 
require states to establish and implement conflict of interest 
policy for individuals who are members of state Medicaid DUR 
boards that would: be publicly accessible; require all DUR 
board members at least annually to disclose any relationships, 
associations, and financial dealings that might affect their 
independent judgement on board matters; and include clear 
processes, such as recusal from voting or discussion, for those 
members who report a conflict of interest, as well as processes 
if a member fails to report a conflict of interest. DUR boards 
would be required to submit to the state Medicaid program an 
annual report that identified DUR board members as well as any 
member conflicts of interest. This provision also would amend 
SSA Section 1932(i) to require that managed care plans under 
contract to state Medicaid programs comply with the conflict of 
interest reporting requirements for DUR boards.
    The HHS Secretary would be authorized to promulgate 
regulations or guidance to establish national standards for 
Medicaid FFS and managed care DUR programs in order to align 
prospective and retrospective DUR reporting criteria across all 
state Medicaid programs and help ensure alignment of standards 
across state Medicaid FFS and managed care DUR programs.
    Within 18 months of the enactment date, the HHS Secretary 
would be required to issue guidance to state Medicaid programs 
outlining the steps necessary for states to comply with the DUR 
requirements.
    The amendments made under this provision would be effective 
one year after the enactment date of this law.

 SECTION 203. GOVERNMENT ACCOUNTABILITY OFFICE REPORT ON CONFLICTS OF 
INTEREST IN STATE MEDICAID PROGRAM DRUG USE REVIEW BOARDS AND PHARMACY 
                      AND THERAPEUTICS COMMITTEES

Current Law

    Medicaid statute does not have a current requirement for a 
GAO report on state DUR Board and P&T committee conflicts of 
interest.

Provision

    This provision would require GAO to investigate potential 
and existing state Medicaid program DUR board and P&T committee 
conflicts of interest. GAO would be required to submit a report 
to Congress within 24 months of the enactment date that 
addressed the following:
    (1) A description of state DUR board and P&T Committee 
operations, including details on:
           The DUR board and P&T committee structure 
        and operation;
           states that operate separate FFS and 
        Medicaid managed care organization (MCO) P&T and
           states that allow Medicaid MCOs to operate 
        separate P&T committees and the extent to which PBMs 
        administer or participate in these separate P&T 
        committees;
    (2) A description of differences between state Medicaid DUR 
boards and P&T committees;
    (3) A description outlining the tools P&T committees may 
use to determine Medicaid drug coverage and utilization 
management policies;
    (4) An analysis of whether and how states or P&T committees 
establish participation and independence requirements for DUR 
boards and P&T committees, including with respect to entities 
with connections with drug manufacturers, state Medicaid 
programs, managed care organizations, and other entities or 
individuals in the pharmaceutical industry;
    (5) A description outlining how states, DUR boards, or P&T 
committees define conflicts of interest;
    (6) A description of how DUR boards and P&T committees 
address conflicts of interest, including who is responsible for 
implementing such policies;
    (7) A description of tools states use to ensure that there 
are no DUR board and P&T committee member conflicts of 
interest;
    (8) An analysis of state effectiveness in ensuring there 
are no DUR board and P&T committee member conflicts of interest 
and, applicable recommendations to improve state conflict of 
interest tools;
    (9) A review of state strategies to guard against DUR board 
and P&T committee conflicts of interest to ensure compliance 
with Medicaid and HHS requirements and access to effective, 
clinically appropriate, and medically necessary Medicaid 
beneficiary drug treatments, including GAO legislative and 
administrative action recommendations.

   SECTION 204. ENSURING THE ACCURACY OF MANUFACTURER PRICE AND DRUG 
       PRODUCT INFORMATION UNDER THE MEDICAID DRUG REBATE PROGRAM

Current Law

    COD manufacturers that participate in the MDRP are required 
under Medicaid statute to report to the HHS Secretary certain 
calendar quarter drug pricing information such as the average 
manufacturer price (AMP), average sales price (ASP), the number 
of units sold, and when applicable, best price and the 
wholesale acquisition cost (WAC) or list price. ASP is defined 
as a manufacturer's quarterly sales of a drug to all U.S. 
purchasers; divided by the drug's total units sold for the same 
quarter. AMP is defined in Medicaid statute and generally is 
the price manufacturers sold their products to retail community 
pharmacies, excluding most price concessions and sales at 
nominal price.

Provision

    This provision would amend SSA Section 1927(b)(3) to 
improve oversight of the information COD manufacturers agree to 
submit when they participate in the MDRP.
    This provision would require the HHS Secretary to audit the 
price and drug product information reported by COD 
manufacturers to ensure its accuracy and timeliness. The HHS 
Secretary would be authorized to use evaluation surveys, 
statistical sampling, predictive analytics, and other tools and 
methods.
    The HHS Secretary also would be authorized to survey 
wholesalers and manufacturers, including direct seller 
manufacturers, when necessary, to verify manufacturer prices, 
including WAC and AMP. A direct sale occurs when a drug 
manufacturer sells directly to a provider, such as a hospital 
or nursing home.
    In addition to other penalties as may be prescribed by law, 
the HHS Secretary would be authorized to impose CMPs up to 
$185,000 on wholesalers, manufacturers, or direct sellers of 
CODs if those entities refused to provide information about 
audit or surveyed charges or prices or knowingly provides false 
information. Certain additional civil money penalties 
applicable under SSA Section 1128A (other than SSA Section 
1128A(a) and (b)) would also apply to entities that failed to 
comply with information requests or knowingly provided false 
information.
    Within 18 months of the enactment date, the HHS Secretary 
would be required to submit a report to the congressional 
committees of jurisdiction on the need for additional 
regulatory or statutory changes that might be required to 
ensure accurate and timely reporting and oversight of drug 
price and product information.
    On at least an annual basis, the HHS Secretary would be 
required to submit a report to the congressional committees of 
jurisdiction summarizing the results of the drug price and 
product audits and surveys. This provision identifies 
requirements for the HHS Secretary's annual report to Congress 
on the drug price and product audit and surveys.
    In preparing annual reports to Congress, to prevent 
disclosure and safeguard the information, the HHS Secretary 
would be required to redact any manufacturer proprietary 
information.
    Out of any Treasury funds not otherwise appropriated, this 
provision would appropriate $2 million for fiscal year 2020 and 
each fiscal year thereafter to be used to implement this 
provision.
    This provision would also amend SSA Section 1927(b)(3)(C) 
to increase the CMP penalties for noncompliance with COD 
manufacturer reporting requirements from $10,000 per day for 
required information to $50,000 for the first day information 
is not reported for each drug and $19,000 for each subsequent 
day per drug. CMPs for knowingly reporting false information 
also would be increased from up to $100,000 to up to $500,000.
    This provision would be effective on the first day of the 
first fiscal quarter that begins after the date of enactment of 
this law.

  SECTION 205. EXCLUDING AUTHORIZED GENERICS FROM THE CALCULATION OF 
  AVERAGE MANUFACTURER PRICE FOR PURPOSES OF THE MEDICAID DRUG REBATE 
                                PROGRAM

Current Law

    According to the HHS OIG, an authorized generic drug is a 
brand-name drug that a brand manufacturer either sells or 
permits another manufacturer (referred to as the secondary 
manufacturer) to sell as a generic drug. Two statutory 
requirements related to calculating a brand-name drug AMP have 
the effect of lowering the product's AMP, thereby decreasing 
manufacturers' Medicaid rebate obligations for those products. 
These include: (1) the requirement that authorized generics be 
included with brand product sales and (2) the requirement that 
secondary manufacturers be included as wholesalers.

Provision

    This provision would amend SSA Section 1927(k)(1) to 
exclude authorized generic drugs from the calculation of AMP 
under the MDRP and for other purposes. In addition, this 
provision would amend the statutory definition of wholesaler to 
exclude COD manufacturers. The provision would be effective on 
the first day of the first fiscal quarter that begins after the 
enactment date.

 SECTION 206. IMPROVING TRANSPARENCY AND PREVENTING THE USE OF ABUSIVE 
            SPREAD PRICING AND RELATED PRACTICES IN MEDICAID

Current Law

    State Medicaid programs reimburse statutorily defined 
retail community pharmacies (RCPs) for CODs dispensed to 
Medicaid beneficiaries. Even though state Medicaid programs 
make only one payment to RCPs for covered outpatient drug 
payments, the payment has two components: an amount to cover 
the cost of acquiring the drug (ingredient cost) and an amount 
for the pharmacist's professional services in filling a 
prescription (dispensing fee). States, subject to CMS approval, 
determine the reimbursement amount for ingredient costs and 
dispensing fees. Dispensing fees usually are a fixed amount, 
but can vary depending on the drug or pharmacy. The ingredient 
cost is an approximation of a drug's market price, which is the 
drug's cost to the pharmacy. Medicaid statute requires CMS to 
limit the maximum federal payment for certain generic drug 
ingredients to no less than 175 percent of the most recently 
reported national weighted average of average manufacturer 
price (AMP). However, when the amount paid to RCPs is less than 
the average acquisition cost for these drugs, states may base 
their RCP reimbursement for these drugs on the average 
acquisition cost from the current national RCP survey. The HHS 
Secretary is authorized to conduct the national average drug 
acquisition cost (NADAC) survey in order to provide states a 
resource to determine drug costs to comply with federal maximum 
payment requirements.
    The ACA required drug manufacturers that participate in the 
MDRP to provide rebates on covered outpatient drugs that are 
dispensed to beneficiaries whose care is covered under an MCO 
that contracts with the state Medicaid program. Many MCOs and 
other entities that provide Medicaid prescription drug benefits 
contract with PBMs to manage and administer the drug benefits. 
Generally, MCOs pay PBMs for generic drugs supplied to Medicaid 
beneficiaries based on a published price, such as the average 
wholesale price (AWP) for all generic claims. Even though the 
difference (spread) between AWP-based MCO payments to PBMs and 
PBM payments to pharmacies may be small for individual drugs, 
it can be substantial when aggregated for all generic drugs, 
since generic drugs account for as much as 90 percent of 
prescription volume.

Provision

    This provision would amend the SSA Section 1927(e) to 
require pass-through pricing for CODs in Medicaid including 
under managed care. It would require payment for pharmacy 
management services to be limited to ingredient cost and a 
professional dispensing fee that is not less than the 
professional dispensing fee that the State plan or waiver would 
pay, passed through in their entirety to the pharmacy that 
dispenses the drug, and made in a manner that is consistent 
with Section 1902(a)(30)(A) and sections 447.512, 447.514, and 
447.518 of title 42, Code of Federal Regulations. It would 
require payment to the PBM for administrative services to be 
limited to a reasonable administrative fee and require that the 
entity or PBM make available to the State, and the HHS 
Secretary upon request, all costs and payments related to CODs 
and accompanying administrative services. It would make any 
form of spread pricing unallowable for purposes of claiming 
Federal matching payments under Medicaid. Such changes would be 
apply to contracts that are entered into or renewed on or after 
18 months after the date of enactment of this law.
    The provision would also amend Section 1927(f) to require 
the HHS Secretary to conduct a survey of retail community drug 
prices to include the national average drug acquisition cost. 
The HHS Secretary would be able to employ a vendor to contract 
for services with respect to the survey. Retail community 
pharmacies that receive payment related to the dispensing of 
CODs to individuals receiving benefits under Medicaid would be 
required to respond to the survey. Information on retail 
community prices obtained through the survey would be made 
publicly available and include at least the following: the 
monthly response rate and the list of pharmacies out of 
compliance with reporting requirements; the sampling frame and 
number of pharmacies sampled monthly; characteristics of 
reporting pharmacies; reporting of a separate national average 
drug acquisition cost for each drug for independent retail 
pharmacies and chain operated pharmacies; information on price 
concessions including on and off invoice discounts, rebates, 
and other price concessions; and information on average 
professional dispensing fees. A pharmacy that fails to respond 
to the survey or knowingly provides false information in 
response to the survey could be subject to penalties in 
addition to other penalties that may be imposed under law.
    The HHS Secretary would also be instructed to issue a 
report to Congress examining specialty drug coverage and 
reimbursement under Medicaid including a description of how 
State Medicaid programs define specialty drugs, how much State 
Medicaid programs pay for specialty drugs, how States and 
managed care plans determine payment for specialty drugs, the 
settings in which specialty drugs are dispensed, whether 
acquisition costs for specialty drugs are captured in the NADAC 
survey, and recommendations as to whether specialty pharmacies 
should be included in the survey of retail prices. The 
provision would appropriate $5 million for fiscal year 2020 and 
thereafter to carry out the survey and related activities. 
These changes would take effect 18 months after the date of 
enactment of this law.
    The provision would also require manufacturers to report 
wholesale acquisition cost for covered outpatient drugs and for 
the Secretary to make such information available on a public 
website.

 SECTION 207. TRANSFORMED MEDICAID STATISTICAL INFORMATION SYSTEM DRUG 
                         DATA ANALYTICS REPORTS

Current Law

    States are required as a condition of receiving federal 
financial participation (FFP), to provide for the electronic 
transmission of claims data in a format specified by the HHS 
Secretary and consistent with the Transformed Medicaid 
Statistical Information System (T-MSIS). These systems are 
capable of providing provider, physician, and patient profiles 
sufficient to provide specific information as to the use of 
types of services and supplies, including covered outpatient 
drugs. Enhanced federal funding is available to the states for 
the planning and operation of these systems.
    State Medicaid programs are required to submit an annual 
report to the HHS Secretary on COD payment rates, dispensing 
fees, and utilization rates for generic drugs. State Medicaid 
programs also are required to operate a DUR program to assure 
that COD prescriptions are appropriate, medically necessary, 
and unlikely to result in adverse medical results. The DUR 
program is required to compare drug use to certain industry 
standards. States are required to submit an annual report to 
the HHS Secretary on specified DUR activities. These reports 
are not submitted via T-MSIS.
    The HHS Secretary is required to encourage state Medicaid 
programs to implement point-of-sale claims processing 
information systems to perform on-line, real time eligibility 
verification, claims data capture, adjudication, and pharmacy 
assistance in covered outpatient drug claim payment. All states 
have implemented these systems.

Provision

    The HHS Secretary would be required to publish a report on 
Medicaid provider prescribing patterns for CODs for each state, 
and to the extent possible, for the five U.S. territories. The 
report would be required to be prepared by the CMS 
Administrator, and published on the CMS website each year 
beginning calendar year 2021.
    The report would be required to include a comparison of 
drug prescribing patterns for Medicaid CODs across the 
following dimensions: (1) all forms or models of reimbursement 
used under the plan or waiver; (2) within specialties and 
subspecialties, as defined by the HHS Secretary; (3) by 
episodes of care for (a) the 10 highest cost chronic disease 
categories, as defined by the HHS Secretary, (b) procedural 
groupings, and (c) rare disease diagnosis codes; (4) by patient 
demographic characteristics (e.g., race (as determined by the 
HHS Secretary), gender, and age); (5) by high-utilizer or high-
risk patient status; and (6) by high and low resource settings 
by facility and place of service categories, as determined by 
the HHS Secretary. The report would be required to include an 
analysis of the differences in Medicaid prescribing patterns 
for covered outpatient drugs prescribed under managed care as 
compared to the FFS delivery system.
    In addition, the report would be permitted to include a 
State-specific comparison of prescription utilization 
management tools used: (1) for populations covered under a 
Medicaid Section 1115 demonstration waiver as comparted to 
models applicable to non-waiver populations; (2) by Medicaid 
MCOs, PBMs, and related entities within the state; (3) for each 
Medicaid enrollment category; and (4) for high-utilizer or 
high-risk status patients. In addition, the report may include 
information about Medicaid prescription utilization management 
tools under programs to provide Medicaid long-term services and 
supports.
    If practical, the HHS Secretary would be required to 
include: (1) analyses of national, state, and local patterns of 
Medicaid population-based prescribing behaviors; and (2) 
recommendations for administrative or legislative action to 
improve the effectiveness of, and reduce costs for, Medicaid 
prescription drugs while ensuring timely beneficiary access to 
medically necessary covered outpatient drugs. The reports would 
be required to be prepared using data and definitions from the 
T-MSIS data set that is not more than 24 months old on the date 
the report is published; and as appropriate, include a 
description of the quality and completeness of the data for 
each state (or territory), as well as any necessary limitations 
associated with the state-reported data.
    The provision would appropriate $2 million to the HHS 
Secretary to carry out this section for each fiscal year 
beginning FY 2020.

SECTION 208. RISK-SHARING VALUE-BASED AGREEMENTS FOR COVERED OUTPATIENT 
                          DRUGS UNDER MEDICAID

Current Law

    Prescription drugs are an optional Medicaid benefit but all 
states provide an outpatient drug benefit. Drug manufacturers 
that voluntarily participate in the MDRP are required to offer 
their products to all state Medicaid programs at their lowest 
``best'' price or to pay a rebate, whichever results in a lower 
price to the Medicaid program. Under the statutory terms of the 
MDRP, the best price is the lowest price drug manufacturers 
offer their product for sale in the United States to RCPs 
during a rebate period. If a drug manufacturer sells their drug 
at a low price to any buyer, it is obligated to match that 
price for all state Medicaid programs. In addition, drug 
manufacturers are statutorily required to pay additional 
inflation rebates to the Medicaid program when they increase 
the price of their drug products faster than the inflation 
rate. States may also negotiate other, supplemental rebates 
from drug manufacturers in exchange for a commitment to 
purchase a certain drug volume or to direct all providers to 
prescribe only the manufacturer's product. Under these 
supplemental rebate agreements, states must make a process 
available for providers to prescribe other similar medically 
necessary products.
    The current pipeline for new drugs includes an increasing 
number of gene therapies, which may be administered once and 
lead to remission of symptoms or potential genetic cures. At 
present, many of these gene therapies are designated by the FDA 
for rare diseases or conditions, which is one that affects less 
than 200,000 individuals. The high cost of newer drugs can have 
a significant impact on state Medicaid spending even with 
Medicaid receiving the best price.
    Under current law, states may submit state plan amendments 
outlining supplemental rebate agreements, including for new 
drugs. Once supplemental rebate templates are approved, 
additional details are typically arranged between the state and 
manufacturer. Payments under approved supplemental rebate 
agreements do not trigger Medicaid's best price provision, with 
savings shared between the state and federal government.

Provision

    The provision would add an option for states under SSA 
Section 1927 to pay for certain covered outpatient drugs 
through risk-sharing value-based agreements beginning January 
1, 2022. Under the option, states would be able to use the 
risk-sharing value-based agreements with drug manufacturers for 
CODs that are potentially curative treatments intended for one-
time use. Specifically, the CODs would be a form of gene 
therapy for a rare disease that, if administered based on the 
drug's label to a patient for the treatment of a serious or 
life-threatening disease or condition, is expected to cure or 
reduce the symptoms of the disease after not more than three 
administrations.
    In order for the HHS Secretary to be able to approve the 
risk-sharing value-based agreement submitted by the state, the 
drug manufacturer would need to have a rebate agreement that is 
in effect and be in compliance with all the Medicaid 
requirements. Also, the Chief Actuary of CMS would need to 
certify that the agreement would not result in increased 
federal Medicaid payments.
    In consideration of an agreement, the HHS Secretary would 
be required to treat the state's request in the same manner as 
a Medicaid state plan amendment, including the timing 
requirements. The HHS Secretary would be required to consult 
with the FDA Commissioner, as needed, to determine whether the 
relevant clinical parameters specified in the agreement are 
appropriate.
    The payments for the agreement would be structured as 
installment-based payments with the state paying equal 
installments of the total installment year amount at regular 
intervals over the period of time. The first installment 
payment would be made no later than 30 days after the end of 
such year. The total installment year amount would be the 
amount equal to the product of the unit price of the drug 
charged under the agreement and the number of units dispensed 
under the agreement. The period of time the state would be able 
to make the installment payments would be no longer that five 
years. States would have the ability to not provide an 
installment payment or pay a reduced amount of the installment 
payment if the covered outpatient drug fails to meet the 
relevant clinical parameters of the agreement.
    The manufacturer of a covered outpatient drug approved 
under Section 505 of the Federal Food, Drug, and Cosmetic Act 
or licensed under Section 351 of the PHSA would be required to 
notify the HHS Secretary that the manufacturer is interested in 
entering into an agreement not more than 90 days after meeting 
with the FDA following the phase II clinical trials for such 
drug. Manufacturers of such drugs that are beyond 90 days after 
the phase II clinical trial meeting at the FDA as of January 1, 
2022 may also notify the Secretary of their interest in 
entering into a risk-sharing value-based agreement (but if 
already on the market, such a drug must be approved by the 
FDA). The HHS Secretary, in coordination with the CMS 
Administrator and the FDA Commissioner, would be able to 
provide parallel approval to a state's request for an agreement 
that otherwise meets the requirements of this state option.
    For Medicaid enrollees who are administered a unit of a 
covered outpatient drug purchased under a risk-sharing value-
based agreement in an installment year (i.e., a 12-month period 
during which a covered outpatient drug is dispensed), the state 
would remain liable to the drug manufacturer for payment for 
each installment year without regard to whether the enrollee 
remains enrolled in Medicaid, unless the Medicaid enrollee 
dies. The HHS Secretary would be required to provide guidance 
to states no later than January 1, 2022 about how to establish 
a process to notify the HHS Secretary when a Medicaid enrollee 
ceases to be enrolled in Medicaid before the end of the 
installment period. Subject to the approval of the Secretary, 
the terms of a proposed risk-sharing value-based payment 
agreement may provide that such requirements do not apply. The 
state would not be liable for remaining payment under the 
agreement if the HHS Secretary withdraws approval of the drug.
    For the purposes of determining the AMP and best price for 
the covered outpatient drug and the rebate period, the HHS 
Secretary would treat any payment made to the drug manufacturer 
under the agreement during such period in the same manner as 
the prices paid under a state supplemental rebate agreement. 
Payments under the agreement would be in lieu of rebates that 
would otherwise be paid under the MDRP with the decision to 
enter into such an agreement remaining solely within the 
discretion of a state upon HHS Secretary and actuarial 
certification as required under the provision.
    Not later than 180 days after each assessment period of an 
agreement, the HHS Secretary would be required to conduct an 
evaluation of the agreement, which would include an evaluation 
by the Chief Actuary of CMS to determine whether the actual 
program spending aligned with the projections. If the Chief 
Actuary of CMS finds the spending under the agreement is more 
than what expenditures would have been under a traditional 
rebate agreement including basic, additional, and any relevant 
supplemental rebates, then the HHS Secretary may terminate the 
agreement and would be required to conduct an evaluation of 
other ongoing risk-sharing value-based payment agreements to 
which the manufacturer is a party. The manufacturer would also 
be required to repay the difference to the state and federal 
government in a timely manner. Failure to comply with repayment 
obligations would result in various actions including 
termination of manufacturer risk-sharing value-based agreements 
and possible suspension or termination from the program.
    The HHS Secretary would be required to submit a report to 
Congress with specified information no later than five years 
after the first risk-sharing value-based agreement is approved 
including an assessment of the impact of such agreements on 
access to medically necessary covered outpatient drugs and 
related treatments for Medicaid enrollees, analysis of the 
impact of such agreements on overall State and Federal 
spending, an impact of such agreements on drug prices, and 
recommendations to Congress as appropriate.
    The HHS Secretary would be required to issue guidance no 
later than January 1, 2022 to states seeking to enter into a 
risk-sharing value-based agreement that includes a model 
template for such agreements. The HHS Secretary would be able 
to share approved agreements between a state and a manufacturer 
with states expressing interest in pursuing an agreement. The 
HHS Secretary would also be required to consult with the HHS 
OIG to determine whether there would be potential program 
integrity concerns with any such agreements. All other 
provisions of Section 1927 would continue to apply unless 
expressly provided under the new state option.
    For FY2020 and each following fiscal year, there would be 
appropriated to the HHS Secretary $5 million for the purpose of 
carrying out this state option.

SECTION 209. MODIFICATION OF MAXIMUM REBATE AMOUNT UNDER MEDICAID DRUG 
                             REBATE PROGRAM

Current Law

    Prescription drugs are an optional Medicaid benefit but all 
states provide an outpatient drug benefit. Drug manufacturers 
that voluntarily participate in the MDRP are required to offer 
their products to all state Medicaid programs at their lowest 
``best'' price or to pay a rebate, whichever results in a lower 
price to the Medicaid program. There are two statutory Medicaid 
rebates, a basic rebate and an additional rebate. The 
additional rebate, also referred to as the inflation rebate, is 
added to the amount of basic rebate to equal the total 
statutory rebate. The inflation rebate is applied when drug 
manufacturers increase product prices faster than the drug's 
inflation adjusted average manufacturer price (AMP).
    Drug manufacturers' Medicaid rebate obligations 
attributable to the inflation rebate do not continue to 
increase once a drug's AMP reaches the maximum rebate cap of 
100 percent of the product's rebate period AMP. Once a drug 
reaches the maximum rebate of 100 percent of the product's AMP, 
additional price increases will not result in larger rebates.

Provision

    This provision would revise SSA Section 1927(c)(2) by 
increasing the maximum allowable Medicaid rebate permissible in 
a rebate period from 100 percent of a covered outpatient drug's 
average manufacturer price (AMP) to 125 percent effective for 
rebate periods beginning October 1, 2022. For rebate periods 
between December 31, 2009 and October 1, 2022, the maximum 
allowable Medicaid rebate would remain at 100 percent of the 
product's rebate period AMP.
    In addition, starting in fiscal year 2022, if a 
manufacturer increases their AMP for a covered outpatient drug 
beyond their base year AMP trended forward by CPI-U, they would 
be subject to all rebate obligations that would otherwise be 
due if there was no cap on rebate obligations. Once the current 
quarter AMP is in alignment with the base year AMP trended 
forward by CPI-U for the covered outpatient drug, the 
manufacturer may continue to increase the AMP of the drug by no 
more than CPI-U with no additional rebate labiality above the 
125 percent AMP rebate cap in effect as of October 1, 2022.

    SECTION 210. APPLYING MEDICAID DRUG REBATE REQUIREMENT TO DRUGS 
            PROVIDED AS PART OF OUTPATIENT HOSPITAL SERVICES

Current Law

    Medicaid covered outpatient drugs are generally FDA-
approved drugs, biologicals, other than vaccines, and insulin 
available by prescription in the United States. Drugs provided 
as part of or incident to and in the same setting as other 
services, and where payment is made as part of the service, 
rather than separately for the drug, are not considered covered 
outpatient drugs such as drugs provided as part of the 
following: inpatient hospital services; hospice services; 
dental services, except if the state authorizes direct 
reimbursement to the dispensing dentist; physician services; 
outpatient hospital services; nursing facility services and 
services provided by an intermediate care facility for the 
mentally retarded; other laboratory and x-ray services; and 
renal dialysis.
    Under current law, a number of drugs are considered covered 
outpatient drugs even though they are administered by 
physicians in offices or in outpatient hospital outpatient 
departments because the drugs are separately payable. 
Increasingly, newer covered outpatient drugs could be paid for 
as part of a service bundle or as part of value-based treatment 
where providers are paid a single rate for a treatment that 
includes the administration of drugs as well as other services 
necessary to diagnose, plan treatment, and provide post-
treatment follow up. Medicaid statute requires participating 
drug manufacturers to provide the Medicaid program rebates or 
their best price on covered outpatient drugs.

Provision

    This provision would amend the SSA Section 1927(k)(3) to 
provide, at the option of a state, that the term ``covered 
outpatient drug'' may include any drug, biological product, or 
insulin as part of a bundled payment if it is provided on an 
outpatient basis as part of, or as incident to and in the same 
setting as, physicians' services or outpatient hospital 
services. The provision would take effect one year after date 
of enactment. The HHS Secretary would also be instructed to 
issue guidance and relevant informational bulletins for States, 
manufacturers and other relevant stakeholders, including health 
care providers, regarding implementation of the provision.

                    III. BUDGET EFFECTS OF THE BILL


                         A. COMMITTEE ESTIMATES

    In compliance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 308(a)(1) of the 
Congressional Budget and Impoundment Control Act of 1974, as 
amended (the ``Budget Act''), the following statement is made 
concerning the estimated budget effects of the revenue 
provisions of the Prescription Drug Pricing Reduction Act of 
2019, as reported. The spending effects of the bill will be 
included in the statement from the Congressional Budget Office 
that will be provided separately, as described in Part C below.

                          B. BUDGET AUTHORITY

    In compliance with section 308(a)(1) of the Budget Act, the 
Committee states that the extent to which the provisions of the 
bill as reported involve new or increased budget authority or 
affect levels of tax expenditures will be included in the 
statement from the Congressional Budget Office that will be 
provided separately, as described in Part C below.

            C. CONSULTATION WITH CONGRESSIONAL BUDGET OFFICE

    In accordance with section 403 of the Budget Act, the 
Committee advises that the Congressional Budget Office has not 
submitted a statement on the bill. The statement from the 
Congressional Budget Office will be provided separately.

                       IV. VOTES OF THE COMMITTEE

    In compliance with paragraph 7(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee states that, with a 
majority present, the Prescription Drug Pricing Reduction Act 
(PDPRA) of 2019 was ordered favorably reported by a roll call 
vote of 19 ayes and 9 nays on July 25, 2019.

                 V. REGULATORY IMPACT AND OTHER MATTERS


                          A. REGULATORY IMPACT

    Pursuant to paragraph 11(b) of rule XXVI of the Standing 
Rules of the Senate, the Committee makes the following 
statement concerning the regulatory impact that might be 
incurred in carrying out the provisions of the bill.

Impact on individuals and businesses, personal privacy and paperwork

    In carrying out the provisions of the bill, individuals and 
businesses across the drug supply chain including drug 
manufacturers, pharmacy benefit managers, health plans, and 
pharmacies that provide prescription drugs to individuals with 
Medicare or Medicaid coverage will be subject to new reporting 
requirements under the bill. The requirements range from drug 
manufacturers' reporting average sales price for all products 
and justifications of their price increases for drugs sold in 
the US to health plans' reporting financial audit data from 
pharmacy benefit managers that negotiate price concessions on 
their behalf. The new information will be reported to the HHS 
Secretary and in many cases the Secretary will share the 
reported information with the public.
    The provisions of the bill do not impact personal privacy.

                     B. UNFUNDED MANDATES STATEMENT

    The Committee adopts as its own the estimate of federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act of 1995 (P.L. 104-4), which will be provided separately.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    In the opinion of the Committee, it is necessary in order 
to expedite the business of the Senate, to dispense with the 
requirements of paragraph 12 of rule XXVI of the Standing Rules 
of the Senate (relating to the showing of changes in existing 
law made by the bill as reported by the Committee).

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