== — IMPROVEMENTS TO MEDICARE PART D==
. (a) In General.— Section 1860D–2(b) of such Act (42 U.S.C. 1395w–102(b)) is amended— (1) in paragraph (3)(A), by striking ``paragraph (4)´´ and inserting ``paragraphs (4) and (7)´´;
(2) in paragraph (4)(B)(i), by inserting ``subject to paragraph (7)´´ after ``purposes of this part´´; and
(3) by adding at the end the following new paragraph:
``(7) Phased-in elimination of coverage gap.—
``(A) In general.—For each year beginning with 2011, the Secretary shall consistent with this paragraph progressively increase the initial coverage limit (described in subsection (b)(3)) and decrease the annual out-of-pocket threshold from the amounts otherwise computed until there is a continuation of coverage from the initial coverage limit for expenditures incurred through the total amount of expenditures at which benefits are available under paragraph (4).
``(B) Increase in initial coverage limit.—For a year beginning with 2011, the initial coverage limit otherwise computed without regard to this paragraph shall be increased by ½ of the cumulative phase-in percentage (as defined in subparagraph (D)(ii) for the year) times the out-of-pocket gap amount (as defined in subparagraph (E)) for the year.
``(C) Decrease in annual out-of-pocket threshold.—For a year beginning with 2011, the annual out-of-pocket threshold otherwise computed without regard to this paragraph shall be decreased by ½ of the cumulative phase-in percentage of the out-of-pocket gap amount for the year multiplied by 1.75.
``(D) Phase–in.—For purposes of this paragraph: ``(i) Annual phase-in percentage.—The term ‘annual phase-in percentage’ means— ``(I) for 2011, 13 percent;
``(II) for 2012, 2013, 2014, and 2015, 5 percent;
``(III) for 2016 through 2018, 7.5 percent; and
``(IV) for 2019 and each subsequent year, 10 percent.
``(ii) Cumulative phase-in percentage.—The term ‘cumulative phase-in percentage’ means for a year the sum of the annual phase-in percentage for the year and the annual phase-in percentages for each previous year beginning with 2011, but in no case more than 100 percent.
``(E) Out-of-pocket gap amount.—For purposes of this paragraph, the term ‘out-of-pocket gap amount’ means for a year the amount by which— ``(i) the annual out-of-pocket threshold specified in paragraph (4)(B) for the year (as determined as if this paragraph did not apply), exceeds
``(ii) the sum of—
``(I) the annual deductible under paragraph (1) for the year; and
``(II) 1⁄4 of the amount by which the initial coverage limit under paragraph (3) for the year (as determined as if this paragraph did not apply) exceeds such annual deductible.´´.
(b) Requiring Drug Manufacturers to Provide Drug Rebates for Full-Benefit Dual Eligibles.— (1) In General.— Section 1860D–2 of the Social Security Act (42 U.S.C. 1396r–8) is amended— (A) in subsection (e)(1), in the matter before subparagraph (A), by inserting ``and subsection (f)´´ after ``this subsection´´; and
(B) by adding at the end the following new subsection:
``(f) Prescription drug rebate agreement for full-Benefit dual eligible individuals.— ``(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 a rebate agreement described in paragraph (2).
``(2) Rebate agreement.—A rebate agreement under this subsection shall require the manufacturer to provide to the Secretary a rebate for each rebate period (as defined in paragraph (6)(B)) ending after December 31, 2010, in the amount specified in paragraph (3) for any covered part D drug of the manufacturer dispensed after December 31, 2010, to any full-benefit dual eligible individual (as defined in paragraph (6)(A)) for which payment was made by a PDP sponsor under part D or a MA organization under part C for such period. Such rebate shall be paid by the manufacturer to the Secretary not later than 30 days after the date of receipt of the information described in section 1860D–12(b)(7), including as such section is applied under section 1857(f)(3).