Congress Enacts Comprehensive Medicare Prescription Drug Legislation

Profession:Akin Gump Strauss Hauer & Feld LLP

By Jorge Lopez Jr. and Michael J. Parini

Congress today enacted the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the "Act"), ending a contentious, partisan debate over the form and substance of adding an outpatient prescription drug benefit under the Medicare Program. This historic legislation, which represents the most significant expansion of Medicare since the advent of the program in 1965, comes on the heels of the House and the Senate passing separate bills earlier this year, which were reconciled by a congressional conference committee this week after months of negotiations. On November 22, the conference agreement narrowly passed the House in a dramatic 220-215 vote and cleared the Senate today by a vote of 54-44. The measure now goes to President Bush, who has promised to sign it.

In general, the Act implements a Medicare prescription drug benefit to provide coverage for outpatient prescription drugs normally purchased in retail pharmacies and previously not covered by Medicare. The Act implements the benefit in phases, initially through a prescription discount card program similar to the President's discount card program that was enjoined by a federal court in September 2001, and, subsequently, through establishment of an outpatient prescription drug benefit program administered through private drug-only plans or through integrated health plans, similar to existing Medicare+Choice plans. In addition, the Act addresses a longstanding prescription drug reimbursement issue reform of the "average wholesale price" reimbursement methodology for drugs under Medicare Part B. The Act also mandates changes to the Medicare payment methodologies for nearly every provider type, and attempts to improve beneficiary access to lower cost drugs through amendments to the Hatch-Waxman Act and by authorizing drug reimportation.

Medicare Prescription Drug Benefit

Transitional Assistance

The Medicare prescription drug benefit will be provided first through a prescription drug discount card program. This program, to be implemented by the Secretary of Health and Human Services through the Centers for Medicare & Medicaid Services (CMS), is to take effect within six months of enactment of the Act. Enrollment is voluntary, and beneficiaries will be afforded access to price discounts negotiated by the card sponsor. Card sponsors may charge an annual enrollment fee of up to $30, and beneficiaries may enroll only in one card program at a time.

Under the discount card program, additional transitional assistance is available for beneficiaries whose income is at or below 135 percent of the poverty line. Qualifying individuals will be eligible to have their enrollment fees paid by the government and will receive $600 annually in financial assistance, with any unused assistance rolling over into the next year (although any leftover funds may not be used for drugs purchased after December 31, 2005 the last effective date of the discount card program).

Any nongovernmental entity that meets the requirements published by the Secretary may be endorsed as a qualifying card sponsor under the discount card program. While the full details of the program will be announced through an agency rulemaking, the Act requires that card sponsors obtain sufficient participation by...

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