SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Reducing Medicare Costs through 
Innovation Act''.

SEC. 2. MEDICARE COMMERCIALIZATION GRANTS.

    (a) Definitions.--In this section:
            (1) The term--
                    (A) ``Administrator'' means the Administrator of 
                the Centers for Medicare & Medicaid Services; and
                    (B) ``Secretary'' means the Secretary of Health and 
                Human Services.
            (2) The terms ``commercialization'', ``Phase I'', ``Phase 
        II'', ``Phase III'', ``SBIR'', and ``STTR'' have the meanings 
        given those terms in section 9(e) of the Small Business Act (15 
        U.S.C. 638(e)).
            (3) The term ``eligible medical product'' means a product--
                    (A) for which a grant recipient received a Medicare 
                commercialization grant;
                    (B) which will maintain or improve quality of care 
                while reducing costs (as determined by the Secretary); 
                and
                    (C)(i) that is a drug, as defined under section 
                201(g)(1) of Federal Food, Drug, and Cosmetic Act (21 
                U.S.C. 321(g)(1));
                    (ii) that is a biological product, as defined in 
                section 351 of the Public Health Service Act (42 U.S.C. 
                262);
                    (iii) that is a combination product, as described 
                in section 503(g) of the Federal Food, Drug, and 
                Cosmetic Act (21 U.S.C. 353(g)); or
                    (iv) that is a device, as defined in section 201(h) 
                of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
                321(h)), for which approval under section 515 of such 
                Act is required.
            (4) The term ``eligible small business concern'' means a 
        small business concern that--
                    (A) has a focus on the diseases or conditions that 
                are the top 10 cost drivers in the Medicare program 
                under title XVIII of the Social Security Act (42 U.S.C. 
                1395 et seq.), as determined by the Secretary in 
                accordance with subsection (b)(3);
                    (B) is otherwise eligible for a Centers for 
                Medicare & Medicaid Services SBIR or STTR program 
                grant;
                    (C) has completed Phase I activities; and
                    (D) has funding for Phase II activities.
            (5) The term ``small business concern'' has the meaning 
        given the term in section 3 of the Small Business Act (15 
        U.S.C. 632).
    (b) Medicare Commercialization Grants.--
            (1) Establishment of program.--The Secretary shall 
        establish within the Centers for Medicare & Medicaid Services 
        SBIR or STTR program a grant program referred to as the 
        ``Medicare commercialization grant program'' through which the 
        Secretary shall award grants to eligible small business 
        concerns with approved applications to assist such small 
        business concerns in Phase III activities related to developing 
        novel eligible medical products and receiving approval or 
        clearance by the Food and Drug Administration for such eligible 
        medical products in accordance with paragraph (2).
            (2) Approval process for grant recipient's novel drugs, 
        devices, or diagnostics.--A grantee may choose to submit an 
        application for approval of novel drugs, devices, or 
        diagnostics through a traditional approval process or through 
        the pilot program for parallel review of medical products 
        described in subsection (c).
            (3) Applications.--
                    (A) Solicitation of applications.--The Secretary 
                shall issue an annual solicitation of applications for 
                the grant program under paragraph (1), with a focus on 
                the diseases or conditions that are the top 10 cost 
                drivers in the Medicare program under title XVIII of 
                the Social Security Act (42 U.S.C. 1395 et seq.), as 
                determined by the Secretary in accordance with 
                subparagraph (B).
                    (B) Cost drivers in medicare.--The Secretary shall 
                assess, in consultation with stakeholders, and take 
                into consideration for purposes of determining such 
                cost drivers and the eligibility of a small business 
                concern, as described in subsection (a)(4)(A)--
                            (i) high volume medical procedures that are 
                        paid for under the Medicare program;
                            (ii) diseases or conditions that a high 
                        number of Medicare beneficiaries are affected 
                        by;
                            (iii) high cost medical procedures that are 
                        paid for under the Medicare program;
                            (iv) diseases or conditions that Medicare 
                        beneficiaries are affected by that result in a 
                        high cost to the Medicare program; and
                            (v) areas described in clauses (i) through 
                        (iv) for which there is a high potential for 
                        innovation or cost reduction.
                    (C) Application requirement.--Each eligible small 
                business concern that applies for a Medicare 
                commercialization grant shall include in the 
                application for such grant a description of each source 
                of funding for the eligible business concern and the 
                amount of funding from each such source.
            (4) Duration.--An eligible small business concern may 
        receive a Medicare commercialization grant for a period of not 
        less than 1 year and not more than 3 years.
            (5) No limit on number of recipients.--The Secretary shall 
        not limit the number of eligible small business concerns that 
        may receive a Medicare commercialization grant.
            (6) Periodic assessment.--At the completion of the third 
        year for which grants are awarded under this subsection, the 
        Secretary shall prepare an assessment containing information 
        about the cost reductions and improvements in care that result 
        from such grants, including--
                    (A) a general assessment of the cost drivers that 
                the grants were intended to address;
                    (B) information about the novel eligible medical 
                products that the grantees developed or received 
                approval or clearance for with the aid of grant funding 
                under this subsection; and
                    (C) the potential for a reduction in costs that may 
                result if such novel eligible medical products were 
                used nationwide.
            (7) Report.--The Secretary shall prepare and submit to 
        Congress, at the completion of the third year for which grants 
        are awarded under this subsection and following the assessment 
        described in paragraph (6), a summary report containing the 
        information described in paragraph (6). The Secretary shall 
        also post each such report on the website of the Department of 
        Health and Human Services.
            (8) Funding.--To carry out the grant program under this 
        subsection, the Secretary shall use amounts allocated for the 
        SBIR and STTR programs of the Department of Health and Human 
        Services under subsections (f) and (n), respectively, of 
        section 9 of the Small Business Act (15 U.S.C. 638).
            (9) Collaboration.--The Secretary shall collaborate with 
        the heads of other divisions within the Department of Health 
        and Human Services as the Secretary determines necessary to 
        carry out this subsection.
    (c) Pilot Program for Parallel Review of Medical Products.--
            (1) In general.--Not later than 60 days after the date of 
        enactment of this section, the Secretary and the Administrator 
        shall jointly establish a pilot program for parallel review of 
        eligible medical products that is similar to the ``Pilot 
        Program for Parallel Review of Medical Products'' described in 
        the notice of the Centers for Medicare & Medicaid Services, 
        published in the Federal Register on October 11, 2011 (76 Fed. 
        Reg. 62808) (referred to in this subsection as the ``pilot 
        program''). Such pilot program shall not affect the applicable 
        criteria or standards for approving, clearing, or classifying 
        medical products under the Federal Food, Drug, and Cosmetic Act 
        (21 U.S.C. 301) and shall not affect the criteria and standards 
        relating to determinations about a reimbursement designation or 
        a national coverage determination under the Medicare program 
        under title XVIII of the Social Security Act.
            (2) Purpose.--The purposes of the pilot program are to--
                    (A) reduce the timeline of the review processes for 
                purposes of approval by the Food and Drug 
                Administration under the Federal Food, Drug, and 
                Cosmetic Act (21 U.S.C. 301) and a reimbursement 
                designation and a national coverage determination under 
                the Medicare program under title XVIII of the Social 
                Security Act for certain medical products developed by 
                Medicare commercialization grant recipients; and
                    (B) increase the efficiency of, and communication 
                between, the Department of Health and Human Services 
                and the Centers for Medicare & Medicaid Services.
            (3) Eligible participants.--The pilot program established 
        under this subsection shall be available--
                    (A) only to recipients of a Medicare 
                commercialization grant under this subsection (b) who 
                choose to participate in such pilot program; and
                    (B) only for the review of eligible medical 
                products.
            (4) Parallel review process.--As part of the pilot 
        program--
                    (A) to the extent practicable, the Secretary and 
                the Administrator shall notify participating grant 
                recipients of the data that may be necessary for the 
                grant recipient to submit at the beginning of the 
                review process; and
                    (B) the Administrator shall begin review for 
                purposes of a reimbursement designation and a national 
                coverage determination under the Medicare program under 
                title XVIII of the Social Security Act for an eligible 
                medical product while the Secretary of Health and Human 
                Services is reviewing that eligible medical product for 
                approval under the Federal Food, Drug, and Cosmetic Act 
                (21 U.S.C. 301).
            (5) Allocation of resources.--The Administrator shall 
        allocate the resources necessary to carry out the pilot 
        program.
Reducing Medicare Costs through Innovation Act This bill establishes a Medicare commercialization grant program, through which the Centers for Medicare &amp; Medicaid Services (CMS) shall award grants to eligible small businesses for certain activities related to developing novel eligible medical products and receiving Food and Drug Administration (FDA) approval for such products. CMS shall solicit grant applications annually, with a focus on the diseases or conditions that are the top ten cost drivers in the Medicare program. To carry out the grant program, CMS shall use amounts allocated under the Small Business Act for the Small Business Innovation Research&nbsp;and Small Business Technology Transfer&nbsp;programs. The bill also establishes a pilot program (similar to&nbsp;a pilot program&nbsp;that was previously established in regulation) for parallel review of medical products with the purpose of reducing, with respect to certain medical products developed by Medicare commercialization grant recipients,&nbsp;the timeline for FDA approval and&nbsp;Medicare national coverage determinations.  A Medicare commercialization grant applicant may choose to apply for FDA approval of novel medical products either through a traditional process or through the pilot program.
Reducing Medicare Costs through Innovation Act