text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Patients' Formulary Rights Act of 
  1999''.
  
  SEC. 2. PATIENT PROTECTIONS AGAINST ABUSE OF FORMULARIES FOR 
                PRESCRIPTION DRUGS.
  
      (a) Group Health Plans.--
              (1) Public health service act amendments.--(A) Subpart 2 of 
          part A of title XXVII of the Public Health Service Act is 
          amended by adding at the end the following new section:
  
  ``SEC. 2707. STANDARDS RELATING TO USE OF FORMULARIES AND THERAPEUTIC 
                SUBSTITUTION.
  
      ``(a) Requirements on Use of Formularies.--
              ``(1) In general.--A group health plan, and a health 
          insurance issuer offering group health insurance coverage, 
          shall not use a formulary unless the plan or issuer--
                      ``(A) notifies participants, beneficiaries, and 
                  enrollees, prior to initial enrollment or coverage, and 
                  makes available at any time to health care 
                  professionals who prescribe prescription drugs under 
                  the plan or coverage of the information described in 
                  paragraph (2);
                      ``(B) notifies participants, beneficiaries, 
                  enrollees, and health care providers who prescribe 
                  covered prescription drugs under the plan or coverage 
                  on a routine and annual basis of any changes in 
                  (including deletions from) the formulary; and
                      ``(C) in the case of a participant, beneficiary, or 
                  enrollee who is provided coverage for a prescription 
                  drug at the time the drug is removed from the 
                  formulary, to permit the participant, beneficiary, or 
                  enrollee to continue to have the drug prescribed for 
                  treatment of the same condition for which it was 
                  previously prescribed.
              ``(2) Information to be disclosed.--The information 
          described in this paragraph is as follows (with respect to 
          prescription drug coverage under a group health plan or health 
          insurance coverage):
                      ``(A) Extent of therapeutic substitution.--What 
                  constitutes the practice or therapeutic substitution 
                  that may be effected under the plan or coverage.
                      ``(B) Formulary.--A complete list of all the 
                  prescription drugs included in the formulary and any 
                  changes in the formulary and how decisions to include 
                  drugs in the formulary are made.
                      ``(C) Access to nonformulary drugs.--The fact that 
                  a patient can have a prescription filled as written 
                  (rather than subject to therapeutic substitution) if 
                  the prescribing health care professional uses a 
                  `dispense as written' or similar endorsement.
                      ``(D) Payment for nonformulary drugs.--Whether or 
                  not the plan or coverage will cover or pay for 
                  prescription drugs not included in the formulary and, 
                  if it will, the extent of such coverage or payment.
                      ``(E) Cost-sharing.--The copayments and other cost-
                  sharing that is applicable under the plan or coverage 
                  for prescription drugs included on the formulary and 
                  for those not included on the formulary.
                      ``(F) Limits on payments.--Limitations on the 
                  dollar amount the plan or coverage will cover for 
                  outpatient prescription drugs, including any such 
                  limits on a per year, per lifetime, or per diagnosis 
                  basis.
              ``(3) Formulary defined.--For purposes of this subsection, 
          the term `formulary' includes any method under which a plan or 
          issuer limits the particular drugs (among those that may be 
          legally prescribed for treatment) for which coverage is made 
          available under the plan or health insurance coverage offered 
          by the issuer.
      ``(b) Notice of Requirement.--A group health plan under this part 
  shall comply with the notice requirement under section 714(b) of the 
  Employee Retirement Income Security Act of 1974 with respect to the 
  requirements of this section as if such section applied to such plan.
      ``(c) Formulary Defined.--For purposes of this section, the term 
  `formulary' includes any method under which a plan or issuer limits the 
  particular drugs (among those that may be legally prescribed for 
  treatment) for which coverage is made available under the plan or 
  health insurance coverage offered by the issuer.''.
              (B) Section 2723(c) of such Act (42 U.S.C. 300gg-23(c)) is 
          amended by striking ``section 2704'' and inserting ``sections 
          2704 and 2707''.
              (2) ERISA amendments.--(A) Subpart B of part 7 of subtitle 
          B of title I of the Employee Retirement Income Security Act of 
          1974 is amended by adding at the end the following new section:
  
  ``SEC. 714. STANDARDS RELATING TO USE OF FORMULARIES AND THERAPEUTIC 
                SUBSTITUTION.
  
      ``(a) Requirements on Use of Formularies.--
              ``(1) In general.--A group health plan, and a health 
          insurance issuer offering group health insurance coverage, 
          shall not use a formulary unless the plan or issuer--
                      ``(A) notifies participants, beneficiaries, and 
                  enrollees, prior to initial enrollment or coverage, and 
                  makes available at any time to health care 
                  professionals who prescribe prescription drugs under 
                  the plan or coverage of the information described in 
                  paragraph (2);
                      ``(B) notifies participants, beneficiaries, 
                  enrollees, and health care providers who prescribe 
                  covered prescription drugs under the plan or coverage 
                  on a routine and annual basis of any changes in 
                  (including deletions from) the formulary; and
                      ``(C) in the case of a participant, beneficiary, or 
                  enrollee who is provided coverage for a prescription 
                  drug at the time the drug is removed from the 
                  formulary, to permit the participant, beneficiary, or 
                  enrollee to continue to have the drug prescribed for 
                  treatment of the same condition for which it was 
                  previously prescribed.
              ``(2) Information.--The information described in this 
          paragraph is as follows (with respect to prescription drug 
          coverage under a group health plan or health insurance 
          coverage):
                      ``(A) Extent of therapeutic substitution.--What 
                  constitutes the practice or therapeutic substitution 
                  that may be effected under the plan or coverage.
                      ``(B) Formulary.--A complete list of all the 
                  prescription drugs included in the formulary and any 
                  changes in the formulary and how decisions to include 
                  drugs in the formulary are made.
                      ``(C) Access to nonformulary drugs.--The fact that 
                  a patient can have a prescription filled as written 
                  (rather than subject to therapeutic substitution) if 
                  the prescribing health care professional uses a 
                  `dispense as written' or similar endorsement.
                      ``(D) Payment for nonformulary drugs.--Whether or 
                  not the plan or coverage will cover or pay for 
                  prescription drugs not included in the formulary and, 
                  if it will, the extent of such coverage or payment.
                      ``(E) Cost-sharing.--The copayments and other cost-
                  sharing that is applicable under the plan or coverage 
                  for prescription drugs included on the formulary and 
                  for those not included on the formulary.
                      ``(F) Limits on payments.--Limitations on the 
                  dollar amount the plan or coverage will cover for 
                  outpatient prescription drugs, including such any such 
                  limits on a per year, per lifetime, or per diagnosis 
                  basis.
      ``(b) Notice Under Group Health Plan.--The imposition of the 
  requirement of this section shall be treated as a material modification 
  in the terms of the plan described in section 102(a)(1), for purposes 
  of assuring notice of such requirements under the plan; except that the 
  summary description required to be provided under the last sentence of 
  section 104(b)(1) with respect to such modification shall be provided 
  by not later than 60 days after the first day of the first plan year in 
  which such requirement apply.
      ``(c) Formulary Defined.--For purposes of this section, the term 
  `formulary' includes any method under which a plan or issuer limits the 
  particular drugs (among those that may be legally prescribed for 
  treatment) for which coverage is made available under the plan or 
  health insurance coverage offered by the issuer.''.
              (B) Section 731(c) of such Act (29 U.S.C. 1191(c)) is 
          amended by striking ``section 711'' and inserting ``sections 
          711 and 714''.
              (C) Section 732(a) of such Act (29 U.S.C. 1191a(a)) is 
          amended by striking ``section 711'' and inserting ``sections 
          711 and 714''.
              (D) The table of contents in section 1 of such Act is 
          amended by inserting after the item relating to section 713 the 
          following new item:
  
  ``Sec. 714. Standards relating to use of formularies and therapeutic 
                              substitution.''.
              (3) Internal revenue code amendments.--
                      (A) In general.--Subchapter B of chapter 100 of the 
                  Internal Revenue Code of 1986 is amended--
                              (i) in the table of sections, by inserting 
                          after the item relating to section 9812 the 
                          following new item:
  
                                ``Sec. 9813. Standards relating to use of 
                                          formularies and therapeutic 
                                          substitution.''; and
                              (ii) by inserting after section 9812 the 
                          following:
  
  ``SEC. 9813. STANDARDS RELATING TO USE OF FORMULARIES AND THERAPEUTIC 
                SUBSTITUTION.
  
      ``(a) Requirements on Use of Formularies.--
              ``(1) In general.--A group health plan shall not use a 
          formulary unless the plan or issuer--
                      ``(A) notifies participants and beneficiaries, 
                  prior to initial enrollment or coverage, and makes 
                  available at any time to health care professionals who 
                  prescribe prescription drugs under the plan of the 
                  information described in paragraph (2);
                      ``(B) notifies participants, beneficiaries, and 
                  health care providers who prescribe covered 
                  prescription drugs under the plan on a routine and 
                  annual basis of any changes in (including deletions 
                  from) the formulary; and
                      ``(C) in the case of a participant or beneficiary 
                  who is provided coverage for a prescription drug at the 
                  time the drug is removed from the formulary, to permit 
                  the participant or beneficiary to continue to have the 
                  drug prescribed for treatment of the same condition for 
                  which it was previously prescribed.
              ``(2) Information.--The information described in this 
          paragraph is as follows (with respect to prescription drug 
  coverage under a group health plan):
                      ``(A) Extent of therapeutic substitution.--What 
                  constitutes the practice or therapeutic substitution 
                  that may be effected under the plan.
                      ``(B) Formulary.--A complete list of all the 
                  prescription drugs included in the formulary and any 
                  changes in the formulary and how decisions to include 
                  drugs in the formulary are made.
                      ``(C) Access to nonformulary drugs.--The fact that 
                  a patient can have a prescription filled as written 
                  (rather than subject to therapeutic substitution) if 
                  the prescribing health care professional uses a 
                  `dispense as written' or similar endorsement.
                      ``(D) Payment for nonformulary drugs.--Whether or 
                  not the plan will cover or pay for prescription drugs 
                  not included in the formulary and, if it will, the 
                  extent of such coverage or payment.
                      ``(E) Cost-sharing.--The copayments and other cost-
                  sharing that is applicable under the plan for 
                  prescription drugs included on the formulary and for 
                  those not included on the formulary.
                      ``(F) Limits on payments.--Limitations on the 
                  dollar amount the plan will cover for outpatient 
                  prescription drugs, including such any such limits on a 
                  per year, per lifetime, or per diagnosis basis.
      ``(b) Formulary Defined.--For purposes of this section, the term 
  `formulary' includes any method under which a plan or issuer limits the 
  particular drugs (among those that may be legally prescribed for 
  treatment) for which coverage is made available under the plan.''
                      (B) Conforming amendment.--Section 4980D(d)(1) of 
                  such Code is amended by striking ``section 9811'' and 
                  inserting ``sections 9811 and 9813''.
      (b) Individual Health Insurance.--(1) Part B of title XXVII of the 
  Public Health Service Act is amended by inserting after section 2752 
  the following new section:
  
  ``SEC. 2753. STANDARD RELATING PATIENT FREEDOM OF CHOICE.
  
      ``(a) In General.--The provisions of section 2707(a) shall apply to 
  health insurance coverage offered by a health insurance issuer in the 
  individual market in the same manner as they apply to health insurance 
  coverage offered by a health insurance issuer in connection with a 
  group health plan in the small or large group market.
      ``(b) Notice.--A health insurance issuer under this part shall 
  comply with the notice requirement under section 714(b) of the Employee 
  Retirement Income Security Act of 1974 with respect to the requirements 
  referred to in subsection (a) as if such section applied to such issuer 
  and such issuer were a group health plan.''.
      (2) Section 2762(b)(2) of such Act (42 U.S.C. 300gg-62(b)(2)) is 
  amended by striking ``section 2751'' and inserting ``sections 2751 and 
  2753''.
      (c) Medicare+Choice Plans.--Section 1852 of the Social Security Act 
  (42 U.S.C. 1395w-22) is amended by adding at the end the following new 
  subsection:
      ``(l) Formulary Requirements.--
              ``(1) In general.--A Medicare+Choice organization shall 
          comply with the requirements of section 2707 of the Public 
          Health Service Act with respect to a Medicare+Choice plan it 
          offers in the same manner as such requirements apply to health 
          insurance coverage offered in connection with a group health 
          plan.
              ``(2) Construction.--Nothing in paragraph (1) shall be 
          construed as superseding other requirements of this part, 
          except to the extent the Secretary specifically finds that such 
          other requirements are less stringent, and do not duplicate, 
          the requirements referred to in such paragraph.''.
      (d) Effective Dates.--
              (1) Group health plans and group health insurance 
          coverage.--Subject to paragraph (4), the amendments made by 
          subsection (a) apply with respect to group health plans for 
          plan years beginning on or after January 1, 2001.
              (2) Individual health insurance coverage.--The amendments 
          made by subsection (b) apply with respect to health insurance 
          coverage offered, sold, issued, renewed, in effect, or operated 
          in the individual market on or after such date.
              (3) Medicare+choice plans.--The amendments made by 
          subsection (b) apply with respect to Medicare+Choice plans 
          offered on or after such date.
              (4) Collective bargaining exception.--In the case of a 
          group health plan maintained pursuant to 1 or more collective 
          bargaining agreements between employee representatives and 1 or 
          more employers ratified before the date of enactment of this 
          Act, the amendments made subsection (a) shall not apply to plan 
          years beginning before the later of--
                      (A) the date on which the last collective 
                  bargaining agreements relating to the plan terminates 
                  (determined without regard to any extension thereof 
                  agreed to after the date of enactment of this Act), or
                      (B) January 1, 2001.
          For purposes of subparagraph (A), any plan amendment made 
          pursuant to a collective bargaining agreement relating to the 
          plan which amends the plan solely to conform to any requirement 
          added by subsection (a) shall not be treated as a termination 
          of such collective bargaining agreement.
      (e) Coordination of Administration.--The Secretary of Labor, the 
  Secretary of the Treasury, and the Secretary of Health and Human 
  Services shall ensure, through the execution of an interagency 
  memorandum of understanding among such Secretaries, that--
              (1) regulations, rulings, and interpretations issued by 
          such Secretaries relating to the same matter over which two or 
          more such Secretaries have responsibility under the provisions 
          of this Act (and the amendments made thereby) are administered 
          so as to have the same effect at all times; and
              (2) coordination of policies relating to enforcing the same 
          requirements through such Secretaries in order to have a 
          coordinated enforcement strategy that avoids duplication of 
          enforcement efforts and assigns priorities in enforcement.
target: Includes within required formulary information: (1) the extent of therapeutic substitution; (2) a complete list of all drugs included in the formulary; (3) information on access to nonformulary drugs; (4) whether or not, and to what extent, coverage will exist for nonformulary drugs; (5) copayments or other cost-sharing for formulary drugs; and (6) limits on coverage payments for outpatient formulary and nonformulary drugs.
  Amends title XVIII (Medicare) of the Social Security Act to require its authorized health insurance issuers and any Medicare+Choice organization to comply with such notification requirements in the same manner that such requirements apply to health insurance coverage or issuers in connection with a group plan.
  Requires the coordination of notification and formulary requirements through an interagency memorandum of understanding among the Secretaries of Labor, the Treasury, and Health and Human Services.
feat_title: Patients' Formulary Rights Act of 1999