42 USC 1395w-102 - Prescription drug benefits

U.S Code last checked for updates: Jan 19, 2025

§ 1395w–102.

Prescription drug benefits

(a)

Requirements

(1)

In general

For purposes of this part and part C, the term “qualified prescription drug coverage” means either of the following:

(A)

Standard prescription drug coverage with access to negotiated prices

(B)

Alternative prescription drug coverage with at least actuarially equivalent benefits and access to negotiated prices

(2)

Permitting supplemental prescription drug coverage

(A)

In general

Subject to subparagraph (B), qualified prescription drug coverage may include supplemental prescription drug coverage consisting of either or both of the following:

(i)

Certain reductions in cost-sharing

(I)

In general

(II)

Construction

(ii)

Optional drugs

(B)

Requirement

(3)

Basic prescription drug coverage

For purposes of this part and part C, the term “basic prescription drug coverage” means either of the following:

(A)

Coverage that meets the requirements of paragraph (1)(A).

(B)

Coverage that meets the requirements of paragraph (1)(B) but does not have any supplemental prescription drug coverage described in paragraph (2)(A).

(4)

Application of secondary payor provisions

(5)

Construction

(b)

Standard prescription drug coverage

For purposes of this part and part C, the term “standard prescription drug coverage” means coverage of covered part D drugs that meets the following requirements:

(1)

Deductible

(A)

In general

Subject to paragraphs (8) and (9), the coverage has an annual deductible—

(i)

for 2006, that is equal to $250; or

(ii)

for a subsequent year, that is equal to the amount specified under this paragraph for the previous year increased by the percentage specified in paragraph (6) for the year involved.

(B)

Rounding

(2)

Benefit structure

(A)

25 percent coinsurance

(i)

equal to 25 percent; or

(ii)

actuarially equivalent (using processes and methods established under section 1395w–111(c) of this title) to an average expected payment of 25 percent of such costs.

(B)

Use of tiers

(C)

Coverage for generic drugs in coverage gap

(i)

In general

Except as provided in paragraphs (4), (8), and (9), for a year preceding 2025, the coverage for an applicable beneficiary (as defined in section 1395w–114a(g)(1) of this title) has coinsurance (for costs above the initial coverage limit under paragraph (3) and below the out-of-pocket threshold) for covered part D drugs that are not applicable drugs under section 1395w–114a(g)(2) of this title that is—

(I)

equal to the generic-gap coinsurance percentage (specified in clause (ii)) for the year; or

(II)

actuarially equivalent (using processes and methods established under section 1395w–111(c) of this title) to an average expected payment of such percentage of such costs for covered part D drugs that are not applicable drugs under section 1395w–114a(g)(2) of this title.

(ii)

Generic-gap coinsurance percentage

The generic-gap coinsurance percentage specified in this clause for—

(I)

2011 is 93 percent;

(II)

2012 and each succeeding year before 2020 is the generic-gap coinsurance percentage under this clause for the previous year decreased by 7 percentage points; and

(III)

2020 through 2024 is 25 percent.

(D)

Coverage for applicable drugs in coverage gap

(i)

In general

Except as provided in paragraphs (4), (8), and (9), for a year preceding 2025, the coverage for an applicable beneficiary (as defined in section 1395w–114a(g)(1) of this title) has coinsurance (for costs above the initial coverage limit under paragraph (3) and below the out-of-pocket threshold) for the negotiated price (as defined in section 1395w–114a(g)(6) of this title) of covered part D drugs that are applicable drugs under section 1395w–114a(g)(2) of this title that is—

(I)

equal to the difference between—

(aa)

the applicable gap percentage (specified in clause (ii) for the year); and

(bb)

the discount percentage specified in section 1395w–114a(g)(4)(A) of this title for such applicable drugs (or, in the case of each of years 2019 through 2024, 50 percent); or

(II)

actuarially equivalent (using processes and methods established under section 1395w–111(c) of this title) to an average expected payment of such percentage of such costs, for covered part D drugs that are applicable drugs under section 1395w–114a(g)(2) of this title.

(ii)

Applicable gap percentage

The applicable gap percentage specified in this clause for—

(I)

2013 and 2014 is 97.5 percent;

(II)

2015 and 2016 is 95 percent;

(III)

2017 is 90 percent;

(IV)

2018 is 85 percent; and

(V)

each of years 2019 through 2024 is 75 percent.

(E)

Maximum monthly cap on cost-sharing payments

(i)

In general

(ii)

Determination of maximum monthly cap

(iii)

Beneficiary monthly payments

(iv)

Maximum monthly cap defined

In this subparagraph, the term “maximum monthly cap” means, with respect to an enrollee—

(I)

for the first month for which the enrollee has made an election pursuant to clause (i), an amount determined by calculating—

(aa)

the annual out-of-pocket threshold specified in paragraph (4)(B) minus the incurred costs of the enrollee as described in paragraph (4)(C); divided by

(bb)

the number of months remaining in the plan year; and

(II)

for a subsequent month, an amount determined by calculating—

(aa)

the sum of any remaining out-of-pocket costs owed by the enrollee from a previous month that have not yet been billed to the enrollee and any additional out-of-pocket costs incurred by the enrollee; divided by

(bb)

the number of months remaining in the plan year.

(v)

Additional requirements

The following requirements shall apply with respect to the option to make an election pursuant to clause (i) under this subparagraph:

(I)

Secretarial responsibilities

(II)

Timing of election

An enrollee in a prescription drug plan or an MA–PD plan may make such an election—

(aa)

prior to the beginning of the plan year; or

(bb)

in any month during the plan year.

(III)

PDP sponsor and MA organization responsibilities

Each PDP sponsor offering a prescription drug plan or MA organization offering an MA–PD plan—

(aa)

may not limit the option for an enrollee to make such an election to certain covered part D drugs;

(bb)

shall, prior to the plan year, notify prospective enrollees of the option to make such an election in promotional materials;

(cc)

shall include information on such option in enrollee educational materials;

(dd)

shall have in place a mechanism to notify a pharmacy during the plan year when an enrollee incurs out-of-pocket costs with respect to covered part D drugs that make it likely the enrollee may benefit from making such an election;

(ee)

shall provide that a pharmacy, after receiving a notification described in item (dd) with respect to an enrollee, informs the enrollee of such notification;

(ff)

shall ensure that such an election by an enrollee has no effect on the amount paid to pharmacies (or the timing of such payments) with respect to covered part D drugs dispensed to the enrollee; and

(gg)

shall have in place a financial reconciliation process to correct inaccuracies in payments made by an enrollee under this subparagraph with respect to covered part D drugs during the plan year.

(IV)

Failure to pay amount billed

If an enrollee fails to pay the amount billed for a month as required under this subparagraph—

(aa)

the election of the enrollee pursuant to clause (i) shall be terminated and the enrollee shall pay the cost-sharing otherwise applicable for any covered part D drugs subsequently dispensed to the enrollee up to the annual out-of-pocket threshold specified in paragraph (4)(B); and

(bb)

the PDP sponsor or MA organization may preclude the enrollee from making an election pursuant to clause (i) in a subsequent plan year.

(V)

Clarification regarding past due amounts

(VI)

Treatment of unsettled balances

(3)

Initial coverage limit

(A)

In general

Except as provided in paragraphs (2)(C), (2)(D), (4), (8), and (9), for a year preceding 2025, the coverage has an initial coverage limit on the maximum costs that may be recognized for payment purposes (including the annual deductible)—

(i)

for 2006, that is equal to $2,250; or

(ii)

for each of years 2007 through 2024, that is equal to the amount specified in this paragraph for the previous year, increased by the annual percentage increase described in paragraph (6) for the year involved.

(B)

Rounding

(4)

Protection against high out-of-pocket expenditures

(A)

In general

(i)

In general

Subject to paragraphs (8) and (9), the coverage provides benefits, after the part D eligible individual has incurred costs (as described in subparagraph (C)) for covered part D drugs in a year equal to the annual out-of-pocket threshold specified in subparagraph (B), with cost-sharing that is equal to—

(I)

for a year preceding 2024, the greater of—

(aa)

a copayment of $2 for a generic drug or a preferred drug that is a multiple source drug (as defined in section 1396r–8(k)(7)(A)(i) of this title) and $5 for any other drug; or

(bb)

coinsurance that is equal to 5 percent; and

(II)

for 2024 and each succeeding year, $0.

(ii)

Adjustment of amount

(B)

Annual out-of-pocket threshold

(i)

In general

For purposes of this part, the “annual out-of-pocket threshold” specified in this subparagraph—

(I)

for 2006, is equal to $3,600;

(II)

for each of years 2007 through 2013, is equal to the amount specified in this subparagraph for the previous year, increased by the annual percentage increase described in paragraph (6) for the year involved;

(III)

for 2014 and 2015, is equal to the amount specified in this subparagraph for the previous year, increased by the annual percentage increase described in paragraph (6) for the year involved, minus 0.25 percentage point;

(IV)

for each of years 2016 through 2019, is equal to the amount specified in this subparagraph for the previous year, increased by the lesser of—

(aa)

the annual percentage increase described in paragraph (7) for the year involved, plus 2 percentage points; or

(bb)

the annual percentage increase described in paragraph (6) for the year;

(V)

for 2020, is equal to the amount that would have been applied under this subparagraph for 2020 if the amendments made by section 1101(d)(1) of the Health Care and Education Reconciliation Act of 2010 had not been enacted;

(VI)

for each of years 2021 through 2024, is equal to the amount specified in this subparagraph for the previous year, increased by the annual percentage increase described in paragraph (6) for the year involved;

(VII)

for 2025, is equal to $2,000; or

(VIII)

for a subsequent year, is equal to the amount specified in this subparagraph for the previous year, increased by the annual percentage increase described in paragraph (6) for the year involved.

(ii)

Rounding

(C)

Application

Except as provided in subparagraph (E) or subparagraph (F), in applying subparagraph (A)—

(i)

incurred costs shall only include costs incurred with respect to covered part D drugs for the annual deductible described in paragraph (1), for cost-sharing described in paragraph (2), and, for a year preceding 2025, for amounts for which benefits are not provided because of the application of the initial coverage limit described in paragraph (3), but does not include any costs incurred for covered part D drugs which are not included (or treated as being included) in the plan’s formulary;

(ii)

subject to clause (iii), such costs shall be treated as incurred only if they are paid by the part D eligible individual (or by another person, such as a family member, on behalf of the individual) and the part D eligible individual (or other person) is not reimbursed through insurance or otherwise, a group health plan, or other third-party payment arrangement (other than under such section or such a Program) for such costs; and

(iii)

such costs shall be treated as incurred and shall not be considered to be reimbursed under clause (ii) if such costs—

(I)

are borne or paid—— 1

 So in original.

(aa)

under section 1395w–114 of this title;

(bb)

under a State Pharmaceutical Assistance Program;

(cc)

by the Indian Health Service, an Indian tribe or tribal organization, or an urban Indian organization (as defined in section 1603 of title 25);

(dd)

 So in original. There are two items (dd).

under an AIDS Drug Assistance Program under part B of title XXVI of the Public Health Service Act [42 U.S.C. 300ff–21 et seq.]; or

(dd)

 ² under section 1395w–115(h) of this title; or

(II)

for 2025 and subsequent years, are reimbursed through insurance, a group health plan, or certain other third party payment arrangements, but not including the coverage provided by a prescription drug plan or an MA–PD plan that is basic prescription drug coverage (as defined in subsection (a)(3)) or any payments by a manufacturer under the manufacturer discount program under section 1395w–114c of this title.

(D)

Information regarding third-party reimbursement

(i)

Procedures for exchanging information

In order to accurately apply the requirements of subparagraph (C)(ii), the Secretary is authorized to establish procedures, in coordination with the Secretary of the Treasury and the Secretary of Labor—

(I)

for determining whether costs for part D eligible individuals are being reimbursed through insurance or otherwise, a group health plan, or other third-party payment arrangement; and

(II)

for alerting the PDP sponsors and MA organizations that offer the prescription drug plans and MA–PD plans in which such individuals are enrolled about such reimbursement arrangements.

(ii)

Authority to request information from enrollees

(E)

Inclusion of costs of applicable drugs under medicare coverage gap discount program

(F)

Inclusion of costs paid under maximum monthly cap option

(5)

Construction

(6)

Annual percentage increase

(7)

Additional annual percentage increase

(8)

Treatment of cost-sharing for adult vaccines recommended by the Advisory Committee on Immunization Practices consistent with treatment of vaccines under part B

(A)

In general

For plan years beginning on or after January 1, 2023, with respect to an adult vaccine recommended by the Advisory Committee on Immunization Practices (as defined in subparagraph (B))—

(i)

the deductible under paragraph (1) shall not apply; and

(ii)

there shall be no coinsurance or other cost-sharing under this part with respect to such vaccine.

(B)

Adult vaccines recommended by the Advisory Committee on Immunization Practices

(9)

Treatment of cost-sharing for covered insulin products

(A)

No application of deductible

(B)

Application of cost-sharing

(i)

Plan years 2023 and 2024

(ii)

Plan year 2025 and subsequent plan years

(C)

Covered insulin product

(D)

Applicable copayment amount

In this paragraph, the term “applicable copayment amount” means, with respect to a covered insulin product under a prescription drug plan or an MA–PD plan dispensed—

(i)

during plan years 2023, 2024, and 2025, $35; and

(ii)

during plan year 2026 and each subsequent plan year, the lesser of—

(I)

$35;

(II)

an amount equal to 25 percent of the maximum fair price established for the covered insulin product in accordance with part E of subchapter XI; or

(III)

an amount equal to 25 percent of the negotiated price of the covered insulin product under the prescription drug plan or MA–PD plan.

(E)

Special rule for first 3 months of 2023

(c)

Alternative prescription drug coverage requirements

A prescription drug plan or an MA–PD plan may provide a different prescription drug benefit design from standard prescription drug coverage so long as the Secretary determines (consistent with section 1395w–111(c) of this title) that the following requirements are met and the plan applies for, and receives, the approval of the Secretary for such benefit design:

(1)

Assuring at least actuarially equivalent coverage

(A)

Assuring equivalent value of total coverage

(B)

Assuring equivalent unsubsidized value of coverage

(C)

Assuring standard payment for costs

The coverage is designed, based upon an actuarially representative pattern of utilization, to provide for the payment, with respect to costs incurred that are equal to the initial coverage limit under subsection (b)(3) for the year for a year preceding 2025 or the annual out-of-pocket threshold specified in subsection (b)(4)(B) for the year for 2025 and each subsequent year, of an amount equal to at least the product of—

(i)

the amount by which the initial coverage limit described in subsection (b)(3) for the year for a year preceding 2025 or the annual out-of-pocket threshold specified in subsection (b)(4)(B) for the year for 2025 and each subsequent year exceeds the deductible described in subsection (b)(1) for the year; and

(ii)

100 percent minus the coinsurance percentage specified in subsection (b)(2)(A)(i).

(2)

Maximum required deductible

(3)

Same protection against high out-of-pocket expenditures

(4)

Same maximum monthly cap on cost-sharing

(5)

Treatment of cost-sharing for adult vaccines recommended by the Advisory Committee on Immunization Practices

(6)

Treatment of cost-sharing for covered insulin products

(d)

Access to negotiated prices

(1)

Access

(A)

In general

(B)

Negotiated prices

(C)

Medicaid-related provisions

(D)

Application of maximum fair price for selected drugs

(2)

Disclosure

(3)

Audits

(e)

Covered part D drug defined

(1)

In general

Except as provided in this subsection, for purposes of this part, the term “covered part D drug” means—

(A)

a drug that may be dispensed only upon a prescription and that is described in subparagraph (A)(i), (A)(ii), or (A)(iii) of section 1396r–8(k)(2) of this title;

(B)

a biological product described in clauses (i) through (iii) of subparagraph (B) of such section or insulin described in subparagraph (C) of such section and medical supplies associated with the injection of insulin (as defined in regulations of the Secretary); or

(C)

for the period beginning on December 29, 2022, and ending on March 31, 2025, an oral antiviral drug that may be dispensed only upon a prescription and is authorized under section 360bbb–3 of title 21, on the basis of the declaration published in the Federal Register by the Secretary of Health and Human Services on April 1, 2020 (85 Fed. Reg. 18250 et seq.),

and such term includes a vaccine licensed under section 262 of this title (and, for vaccines administered on or after January 1, 2008, its administration) and any use of a covered part D drug for a medically accepted indication (as defined in paragraph (4)).

(2)

Exclusions

(A)

In general

(B)

Medicare covered drugs

(3)

Application of general exclusion provisions

A prescription drug plan or an MA–PD plan may exclude from qualified prescription drug coverage any covered part D drug—

(A)

for which payment would not be made if section 1395y(a) of this title applied to this part; or

(B)

which is not prescribed in accordance with the plan or this part.

Such exclusions are determinations subject to reconsideration and appeal pursuant to subsections (g) and (h), respectively, of section 1395w–104 of this title.

(4)

Medically accepted indication defined

(A)

In general

For purposes of paragraph (1), the term “medically accepted indication” has the meaning given that term—

(i)

in the case of a covered part D drug used in an anticancer chemotherapeutic regimen, in section 1395x(t)(2)(B) of this title, except that in applying such section—

(I)

“prescription drug plan or MA–PD plan” shall be substituted for “carrier” each place it appears; and

(II)

subject to subparagraph (B), the compendia described in section 1396r–8(g)(1)(B)(i)(III) of this title shall be included in the list of compendia described in clause (ii)(I) section 1395x(t)(2)(B) of this title; and

(ii)

in the case of any other covered part D drug, in section 1396r–8(k)(6) of this title.

(B)

Conflict of interest

(C)

Update

(Aug. 14, 1935, ch. 531, title XVIII, § 1860D–2, as added Pub. L. 108–173, title I, § 101(a)(2), Dec. 8, 2003, 117 Stat. 2075; amended Pub. L. 109–91, title I, § 103(a), Oct. 20, 2005, 119 Stat. 2092; Pub. L. 109–432, div. B, title II, § 202(b), Dec. 20, 2006, 120 Stat. 2986; Pub. L. 110–275, title I, §§ 175(a), 182(a)(1), July 15, 2008, 122 Stat. 2581, 2583; Pub. L. 111–148, title III, §§ 3301(c)(1), 3314(a), 3315, Mar. 23, 2010, 124 Stat. 467, 478, 479; Pub. L. 111–152, title I, § 1101(a)(2), (b)(3), (d), Mar. 30, 2010, 124 Stat. 1037–1039; Pub. L. 115–123, div. E, title XII, § 53116(a), Feb. 9, 2018, 132 Stat. 306; Pub. L. 117–169, title I, §§ 11001(b)(1)(D), 11201(a), (e)(1), 11202(a), (b), 11401(a), (c)(2), 11406(a), Aug. 16, 2022, 136 Stat. 1852, 1877, 1891, 1893, 1895, 1896, 1898, 1902; Pub. L. 117–328, div. FF, title IV, § 4131, Dec. 29, 2022, 136 Stat. 5918; Pub. L. 118–158, div. C, title II, § 3209, Dec. 21, 2024, 138 Stat. 1766.)

cite as: 42 USC 1395w-102

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