SEC. 1182. DISCOUNTS FOR CERTAIN PART D DRUGS IN ORIGINAL COVERAGE GAP.

Section- 1860D-2 of the Social Security Act [42 U.S.C. 1395w-102], as amended by section 1181[a], is amended--

[1] in subsection [b][4][C][ii], by inserting 'subject to subsection [g][2][C],' after '[ii]';

[2] in subsection [e][1], in the matter before subparagraph [A], by striking 'subsection [f]' and inserting 'subsections [f] and [g]' after 'this subsection'; and

[3] by adding at the end the following new subsection:

'[g] Requirement for Manufacturer Discount Agreement for Certain Qualifying Drugs-

'[1] IN GENERAL- In this part, the term 'covered part D drug' does not include any drug or biologic that is manufactured by a manufacturer that has not entered into and have in effect for all qualifying drugs [as defined in paragraph [5][A]] a discount agreement described in paragraph [2].

'[2] DISCOUNT AGREEMENT-

'[A] PERIODIC DISCOUNTS- A discount agreement under this paragraph shall require the manufacturer involved to provide, to each PDP sponsor with respect to a prescription drug plan or each MA organization with respect to each MA-PD plan, a discount in an amount specified in paragraph [3] for qualifying drugs [as defined in paragraph [5][A]] of the manufacturer dispensed to a qualifying enrollee after December 31, 2010, insofar as the individual is in the original gap in coverage [as defined in paragraph [5][E]].

'[B] DISCOUNT AGREEMENT- Insofar as not inconsistent with this subsection, the Secretary shall establish terms and conditions of such agreement, including terms and conditions relating to compliance, similar to the terms and conditions for rebate agreements under paragraphs [2], [3], and [4] of section 1927[b], except that--

'[i] discounts shall be applied under this subsection to prescription drug plans and MA-PD plans instead of State plans under title XIX;

'[ii] PDP sponsors and MA organizations shall be responsible, instead of States, for provision of necessary utilization information to drug manufacturers; and

'[iii] sponsors and MA organizations shall be responsible for reporting information on drug-component negotiated price, instead of other manufacturer prices.

'[C] COUNTING DISCOUNT TOWARD TRUE OUT-OF-POCKET COSTS- Under the discount agreement, in applying subsection [b][4], with regard to subparagraph [C][i] of such subsection, if a qualified enrollee purchases the qualified drug insofar as the enrollee is in an actual gap of coverage [as defined in paragraph [5][D]], the amount of the discount under the agreement shall be treated and counted as costs incurred by the plan enrollee.

'[3] DISCOUNT AMOUNT- The amount of the discount specified in this paragraph for a discount period for a plan is equal to 50 percent of the amount of the drug-component negotiated price [as defined in paragraph [5][C]] for qualifying drugs for the period involved.

'[4] ADDITIONAL TERMS- In the case of a discount provided under this subsection with respect to a prescription drug plan offered by a PDP sponsor or an MA-PD plan offered by an MA organization, if a qualified enrollee purchases the qualified drug--

'[A] insofar as the enrollee is in an actual gap of coverage [as defined in paragraph [5][D]], the sponsor or plan shall provide the discount to the enrollee at the time the enrollee pays for the drug; and

'[B] insofar as the enrollee is in the portion of the original gap in coverage [as defined in paragraph [5][E]] that is not in the actual gap in coverage, the discount shall not be applied against the negotiated price [as defined in subsection [d][1][B]] for the purpose of calculating the beneficiary payment.

'[5] DEFINITIONS- In this subsection:

'[A] QUALIFYING DRUG- The term 'qualifying drug' means, with respect to a prescription drug plan or MA-PD plan, a drug or biological product that--

'[i]

[I] is a drug produced or distributed under an original new drug application approved by the Food and Drug Administration, including a drug product marketed by any cross-licensed producers or distributors operating under the new drug application;

'[II] is a drug that was originally marketed under an original new drug application approved by the Food and Drug Administration; or

'[III] is a biological product as approved under Section- 351[a] of the Public Health Services Act;

'[ii] is covered under the formulary of the plan; and

'[iii] is dispensed to an individual who is in the original gap in coverage.

'[B] QUALIFYING ENROLLEE- The term 'qualifying enrollee' means an individual enrolled in a prescription drug plan or MA-PD plan other than such an individual who is a subsidy-eligible individual [as defined in section 1860D-14[a][3]].

'[C] DRUG-COMPONENT NEGOTIATED PRICE- The term 'drug-component negotiated price' means, with respect to a qualifying drug, the negotiated price [as defined in subsection [d][1][B]], as determined without regard to any dispensing fee, of the drug under the prescription drug plan or MA-PD plan involved.

'[D] ACTUAL GAP IN COVERAGE- The term 'actual gap in coverage' means the gap in prescription drug coverage that occurs between the initial coverage limit [as modified under subparagraph [B] of subsection [b][7]] and the annual out-of-pocket threshold [as modified under subparagraph [C] of such subsection].

'[E] ORIGINAL GAP IN COVERAGE- The term 'original in gap coverage' means the gap in prescription drug coverage that would occur between the initial coverage limit [described in subsection [b][3]] and the out-of-pocket threshold [as defined in subsection [b][4]][B] if subsection [b][7] did not apply.'.