42 U.S. Code § 1395w–112 - Requirements for and contracts with prescription drug plan (PDP) sponsors
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(a) General requirements
Each PDP sponsor of a prescription drug plan shall meet the following requirements:
Subject to subsection (c) of this section, the sponsor is organized and licensed under State law as a risk-bearing entity eligible to offer health insurance or health benefits coverage in each State in which it offers a prescription drug plan.
(2) Assumption of financial risk for unsubsidized coverage
(A) In general
(b) Contract requirements
(1) In general
The Secretary shall not permit the enrollment under section 1395w–101 of this title in a prescription drug plan offered by a PDP sponsor under this part, and the sponsor shall not be eligible for payments under section 1395w–114 or 1395w–115 of this title, unless the Secretary has entered into a contract under this subsection with the sponsor with respect to the offering of such plan. Such a contract with a sponsor may cover more than one prescription drug plan. Such contract shall provide that the sponsor agrees to comply with the applicable requirements and standards of this part and the terms and conditions of payment as provided for in this part.
(2) Limitation on entities offering fallback prescription drug plans
The Secretary shall not enter into a contract with a PDP sponsor for the offering of a prescription drug plan (other than a fallback prescription drug plan) in a PDP region for a year if the sponsor—
(A) submitted a bid under section 1395w–111 (g) of this title for such year (as the first year of a contract period under such section) to offer a fallback prescription drug plan in any PDP region;
For purposes of this paragraph, an entity shall be treated as submitting a bid with respect to a prescription drug plan or offering a fallback prescription drug plan if the entity is acting as a subcontractor of a PDP sponsor that is offering such a plan. The previous sentence shall not apply to entities that are subcontractors of an MA organization except insofar as such organization is acting as a PDP sponsor with respect to a prescription drug plan.
(3) Incorporation of certain medicare advantage contract requirements
Except as otherwise provided, the following provisions of section 1395w–27 of this title shall apply to contracts under this section in the same manner as they apply to contracts under section 1395w–27 (a) of this title:
(A) Minimum enrollment
(i) the Secretary may increase the minimum number of enrollees required under such paragraph (1) as the Secretary determines appropriate; and
(B) Contract period and effectiveness
(D) Additional contract terms
Section 1395w–27 (e) of this title; except that section 1395w–27 (e)(2) of this title shall apply as specified to PDP sponsors and payments under this part to an MA–PD plan shall be treated as expenditures made under part D. Notwithstanding any other provision of law, information provided to the Secretary under the application of section 1395w–27 (e)(1) of this title to contracts under this section under the preceding sentence—
(i) may be used for the purposes of carrying out this part, improving public health through research on the utilization, safety, effectiveness, quality, and efficiency of health care services (as the Secretary determines appropriate); and
(ii) shall be made available to Congressional  support agencies (in accordance with their obligations to support Congress as set out in their authorizing statutes) for the purposes of conducting Congressional  oversight, monitoring, making recommendations, and analysis of the program under this subchapter.
(E) Intermediate sanctions
(4) Prompt payment of clean claims
(A) Prompt payment
(i) In general Each contract entered into with a PDP sponsor under this part with respect to a prescription drug plan offered by such sponsor shall provide that payment shall be issued, mailed, or otherwise transmitted with respect to all clean claims submitted by pharmacies (other than pharmacies that dispense drugs by mail order only or are located in, or contract with, a long-term care facility) under this part within the applicable number of calendar days after the date on which the claim is received.
(ii) Clean claim defined In this paragraph, the term “clean claim” means a claim that has no defect or impropriety (including any lack of any required substantiating documentation) or particular circumstance requiring special treatment that prevents timely payment from being made on the claim under this part.
(iii) Date of receipt of claim In this paragraph, a claim is considered to have been received—
(I) with respect to claims submitted electronically, on the date on which the claim is transferred; and
(B) Applicable number of calendar days defined
In this paragraph, the term “applicable number of calendar days” means—
(C) Interest payment
(i) In general Subject to clause (ii), if payment is not issued, mailed, or otherwise transmitted within the applicable number of calendar days (as defined in subparagraph (B)) after a clean claim is received, the PDP sponsor shall pay interest to the pharmacy that submitted the claim at a rate equal to the weighted average of interest on 3-month marketable Treasury securities determined for such period, increased by 0.1 percentage point for the period beginning on the day after the required payment date and ending on the date on which payment is made (as determined under subparagraph (D)(iv)). Interest amounts paid under this subparagraph shall not be counted against the administrative costs of a prescription drug plan or treated as allowable risk corridor costs under section 1395w–115 (e) of this title.
(D) Procedures involving claims
(i) Claim deemed to be clean A claim is deemed to be a clean claim if the PDP sponsor involved does not provide notice to the claimant of any deficiency in the claim—
(I) with respect to claims submitted electronically, within 10 days after the date on which the claim is received; and
(ii) Claim determined to not be a clean claim
(I) In general If a PDP sponsor determines that a submitted claim is not a clean claim, the PDP sponsor shall, not later than the end of the period described in clause (i), notify the claimant of such determination. Such notification shall specify all defects or improprieties in the claim and shall list all additional information or documents necessary for the proper processing and payment of the claim.
(II) Determination after submission of additional information A claim is deemed to be a clean claim under this paragraph if the PDP sponsor involved does not provide notice to the claimant of any defect or impropriety in the claim within 10 days of the date on which additional information is received under subclause (I).
(iii) Obligation to pay A claim submitted to a PDP sponsor that is not paid or contested by the sponsor within the applicable number of days (as defined in subparagraph (B)) after the date on which the claim is received shall be deemed to be a clean claim and shall be paid by the PDP sponsor in accordance with subparagraph (A).
(iv) Date of payment of claim Payment of a clean claim under such subparagraph is considered to have been made on the date on which—
(E) Electronic transfer of funds
A PDP sponsor shall pay all clean claims submitted electronically by electronic transfer of funds if the pharmacy so requests or has so requested previously. In the case where such payment is made electronically, remittance may be made by the PDP sponsor electronically as well.
(F) Protecting the rights of claimants
(i) In general Nothing in this paragraph shall be construed to prohibit or limit a claim or action not covered by the subject matter of this section that any individual or organization has against a provider or a PDP sponsor.
(G) Rule of construction
A determination under this paragraph that a claim submitted by a pharmacy is a clean claim shall not be construed as a positive determination regarding eligibility for payment under this subchapter, nor is it an indication of government approval of, or acquiescence regarding, the claim submitted. The determination shall not relieve any party of civil or criminal liability with respect to the claim, nor does it offer a defense to any administrative, civil, or criminal action with respect to the claim.
(5) Submission of claims by pharmacies located in or contracting with long-term care facilities
Each contract entered into with a PDP sponsor under this part with respect to a prescription drug plan offered by such sponsor shall provide that a pharmacy located in, or having a contract with, a long-term care facility shall have not less than 30 days (but not more than 90 days) to submit claims to the sponsor for reimbursement under the plan.
(6) Regular update of prescription drug pricing standard
If the PDP sponsor of a prescription drug plan uses a standard for reimbursement of pharmacies based on the cost of a drug, each contract entered into with such sponsor under this part with respect to the plan shall provide that the sponsor shall update such standard not less frequently than once every 7 days, beginning with an initial update on January 1 of each year, to accurately reflect the market price of acquiring the drug.
(c) Waiver of certain requirements to expand choice
(1) Authorizing waiver
(A) In general
In the case of an entity that seeks to offer a prescription drug plan in a State, the Secretary shall waive the requirement of subsection (a)(1) of this section that the entity be licensed in that State if the Secretary determines, based on the application and other evidence presented to the Secretary, that any of the grounds for approval of the application described in paragraph (2) have been met.
(B) Application of regional plan waiver rule
In addition to the waiver available under subparagraph (A), the provisions of section 1395w–27a (d) of this title shall apply to PDP sponsors under this part in a manner similar to the manner in which such provisions apply to MA organizations under part C of this subchapter, except that no application shall be required under paragraph (1)(B) of such section in the case of a State that does not provide a licensing process for such a sponsor.
(2) Grounds for approval
(A) In general
The grounds for approval under this paragraph are—
(i) subject to subparagraph (B), the grounds for approval described in subparagraphs (B), (C), and (D) of section 1395w–25 (a)(2) of this title; and
(B) Special rules
In applying subparagraph (A)(i)—
(i) the ground of approval described in section 1395w–25 (a)(2)(B) of this title is deemed to have been met if the State does not have a licensing process in effect with respect to the PDP sponsor; and
(3) Application of waiver procedures
With respect to an application for a waiver (or a waiver granted) under paragraph (1)(A) of this subsection, the provisions of subparagraphs (E), (F), and (G) of section 1395w–25 (a)(2) of this title shall apply, except that clauses (i) and (ii) of such subparagraph (E) shall not apply in the case of a State that does not have a licensing process described in paragraph (2)(B)(i) in effect.
(4) References to certain provisions
In applying provisions of section 1395w–25 (a)(2) of this title under paragraphs (2) and (3) of this subsection to prescription drug plans and PDP sponsors—
(A) any reference to a waiver application under section 1395w–25 of this title shall be treated as a reference to a waiver application under paragraph (1)(A) of this subsection; and
(d) Solvency standards for non-licensed entities
(1) Establishment and publication
The Secretary, in consultation with the National Association of Insurance Commissioners, shall establish and publish, by not later than January 1, 2005, financial solvency and capital adequacy standards for entities described in paragraph (2).
(2) Compliance with standards
A PDP sponsor that is not licensed by a State under subsection (a)(1) of this section and for which a waiver application has been approved under subsection (c) of this section shall meet solvency and capital adequacy standards established under paragraph (1). The Secretary shall establish certification procedures for such sponsors with respect to such solvency standards in the manner described in section 1395w–25 (c)(2) of this title.
(e) Licensure does not substitute for or constitute certification
The fact that a PDP sponsor is licensed in accordance with subsection (a)(1) of this section or has a waiver application approved under subsection (c) of this section does not deem the sponsor to meet other requirements imposed under this part for a sponsor.
(f) Periodic review and revision of standards
(1) In general
Subject to paragraph (2), the Secretary may periodically review the standards established under this section and, based on such review, may revise such standards if the Secretary determines such revision to be appropriate.
(g) Prohibition of State imposition of premium taxes; relation to State laws
 So in original. Probably should not be capitalized.
Source(Aug. 14, 1935, ch. 531, title XVIII, § 1860D–12, as added Pub. L. 108–173, title I, § 101(a)(2),Dec. 8, 2003, 117 Stat. 2099; amended Pub. L. 110–275, title I, §§ 171(a), 172 (a)(1), 173 (a), 181,July 15, 2008, 122 Stat. 2578, 2580–2582.)
2008—Subsec. (b)(3)(D). Pub. L. 110–275, § 181, inserted at end “Notwithstanding any other provision of law, information provided to the Secretary under the application of section 1395w–27 (e)(1) of this title to contracts under this section under the preceding sentence—” and added cls. (i) and (ii).
Subsec. (b)(4). Pub. L. 110–275, § 171(a), added par. (4).
Subsec. (b)(5). Pub. L. 110–275, § 172(a)(1), added par. (5).
Subsec. (b)(6). Pub. L. 110–275, § 173(a), added par. (6).
Effective Date of 2008 Amendment
Amendment by section 171(a) ofPub. L. 110–275applicable to plan years beginning on or after Jan. 1, 2010, see section 171(c) ofPub. L. 110–275, set out as a note under section 1395w–27 of this title.
Amendment by section 172(a)(1) ofPub. L. 110–275applicable to plan years beginning on or after Jan. 1, 2010, see section 172(b) ofPub. L. 110–275, set out as a note under section 1395w–27 of this title.