Washington, July 24 -- Two veteran senators - a Republican and a Democrat - unveiled compromise legislation Tuesday to reduce prescription drug costs for millions of Medicare recipients, while saving money for federal and state health care programs serving seniors and low-income people.

Iowa Republican Chuck Grassley and Oregon Democrat Ron Wyden said the bill would for the first time limit drug copays for people with Medicare's "Part D" prescription plan , by capping patients' out-of-pocket costs at $3,100 a year starting in 2022. They're hoping to have it ready soon for votes on the Senate floor.

The legislation would also require drugmakers to pay a price-hike penalty to Medicare if the cost of their medications goes up faster than i...