[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 979 Introduced in House (IH)]
112th CONGRESS
1st Session
H. R. 979
To amend chapter 89 of title 5, United States Code, to ensure program
integrity, transparency, and cost savings in the pricing and
contracting of prescription drug benefits under the Federal Employees
Health Benefits Program.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 9, 2011
Mr. Lynch (for himself, Mr. Cummings, Mr. Clay, Ms. Norton, Mr.
Connolly of Virginia, and Mr. Moran) introduced the following bill;
which was referred to the Committee on Oversight and Government Reform
_______________________________________________________________________
A BILL
To amend chapter 89 of title 5, United States Code, to ensure program
integrity, transparency, and cost savings in the pricing and
contracting of prescription drug benefits under the Federal Employees
Health Benefits Program.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``FEHBP Prescription Drug Integrity,
Transparency, and Cost Savings Act''.
SEC. 2. IMPROVED PROGRAM INTEGRITY, TRANSPARENCY, AND COST SAVINGS FOR
PRESCRIPTION DRUG BENEFITS IN THE FEDERAL EMPLOYEES
HEALTH BENEFITS PROGRAM.
(a) Change in Contracting Requirements.--Section 8902 of title 5,
United States Code, is amended by adding at the end the following:
``(p) A contract may not be made or a plan approved under this
chapter, with respect to a carrier that is a party to a PBM carrier
arrangement, unless the PBM and such carrier comply with the
requirements of section 8915. The Office shall terminate such contract
or discontinue such plan for failure to comply with such
requirements.''.
(b) Requirements for PBMs and Related Requirements for Carriers.--
Chapter 89 of title 5, United States Code, is amended by adding at the
end the following:
``Sec. 8915. Requirements for PBM arrangements
``(a) Limitations on Cross-Ownership.--
``(1) In general.--Under a PBM carrier arrangement a PBM
may not be under common corporate control with--
``(A) a prescription drug manufacturer; or
``(B) a retail pharmacy.
``(2) Profit restriction on corporately affiliated carriers
and pbms.--With respect to a PBM carrier arrangement related to
a contract under this chapter, the Office may not permit a
carrier under common corporate control with a PBM to earn a
profit resulting from such control.
``(3) Certification.--Each carrier shall certify annually
to the Office of Personnel Management that any PBM with which
it has a PBM carrier arrangement meets the requirements of this
subsection.
``(4) Definitions.--For purposes of this subsection--
``(A) Common corporate control.--The term `common
corporate control' means that 2 entities are part of a
controlled group of corporations (as such term is
defined in section 1563 of the Internal Revenue Code of
1986).
``(B) Retail pharmacy.--The term `retail pharmacy'
excludes any mail order pharmacy.
``(b) Restrictions on Brand Name Prescription Drug Substitutions.--
``(1) In general.--Under a PBM carrier arrangement, and
with respect to a prescription drug prescribed to an enrollee
covered under such arrangement, a PBM may not request payment
from a carrier for a brand name prescription drug that was
dispensed to the enrollee, at the request of the PBM, in
substitution for the drug that was originally prescribed to
such enrollee, unless each of the following requirements is
met:
``(A) Lower net cost.--The substitute drug has a
lower net cost than the drug originally prescribed to
such enrollee.
``(B) Authorization by prescriber.--The prescriber
of the originally prescribed drug submits an express,
verifiable authorization of the substitution to the
pharmacist and such authorization includes a
determination by the prescriber that the drug
substitution will not endanger the health of the
enrollee for whom the drug is prescribed.
``(C) Additional requirements.--Each of the
requirements described in paragraph (2) are met.
``(2) Additional requirements.--The requirements described
in this paragraph are, with respect to a brand name
prescription drug that was dispensed to an enrollee, at the
request of the PBM, in substitution for the drug that was
originally prescribed to such enrollee, the following:
``(A) To the extent appropriate, the PBM consults
the enrollee concerning such drug substitution.
``(B) The PBM discloses to the prescriber of the
originally prescribed drug, the carrier, and the
enrollee for whom such drug was prescribed--
``(i) the reason why the PBM proposed a
drug substitution for such drug; and
``(ii) the financial impact of the drug
substitution on the PBM, the carrier, and the
enrollee.
``(C) In the case of a mail order pharmacy, the PBM
ensures that, at the time the drug is dispensed, the
enrollee receives a written notice that such drug
substitution occurred and that such substitution
occurred with the approval of the prescriber.
``(3) Definitions.--For purposes of this subsection--
``(A) Brand name prescription drug.--The term
`brand name prescription drug' means a drug approved
pursuant to an application submitted under section
505(b) of the Federal Food, Drug, and Cosmetic Act (21
U.S.C. 355(b)).
``(B) Net cost.--The term `net cost' means, with
respect to a drug, a carrier, and an enrollee, the sum
of--
``(i) the final cost of the drug to the
carrier after all adjustments (including
discounts, rebates, associated dispensing fees
and administrative fees, and enrollee cost
sharing); and
``(ii) the final cost of the drug to the
enrollee (including cost-sharing).
``(C) Prescriber.--The term `prescriber' means an
individual who is authorized under State and Federal
law to prescribe drugs and who prescribes a drug to an
enrollee of a health benefits plan under this chapter.
``(c) Reimbursement of Carriers.--Under a PBM carrier arrangement,
not later than the last day of each quarter of the contract year--
``(1) the PBM shall pay to a carrier an amount that is at
least 99 percent of the sum of--
``(A) all compensation that the PBM received during
the previous quarter from a prescription drug
manufacturer under a PBM manufacturer contract (to the
extent such arrangement relates to the PBM carrier
arrangement) including compensation (but excluding
rebates) that the Office of Personnel Management
categorizes (regardless of how such compensation is
categorized by the PBM) as--
``(i) market share incentives;
``(ii) prescription drug substitution
programs;
``(iii) educational support;
``(iv) commissions;
``(v) mail service purchase discounts;
``(vi) administrative or management fees;
or
``(vii) any other form of compensation;
``(B) all compensation received by the PBM during
the previous quarter for sales of utilization or claims
data that the PBM possesses as a result of the PBM
carrier arrangement; and
``(C) all rebates paid to the PBM during the
previous quarter by a prescription drug manufacturer to
the extent that such rebates are based on prescription
drugs dispensed under the PBM carrier arrangement; and
``(2) the PBM shall disclose to the carrier and the Office,
in a form and manner specified by the Office--
``(A) the compensation described in paragraph
(1)(A), by the amount of compensation for each category
under such paragraph;
``(B) the compensation described in paragraph
(1)(B); and
``(C) the rebates described in paragraph (1)(C), on
a drug-by-drug basis.
``(d) Sale of Utilization and Claims Data.--Under a PBM carrier
arrangement, if the PBM intends to sell utilization or claims data that
the PBM possesses as a result of such arrangement--
``(1) the PBM shall notify the Office of Personnel
Management before selling such data and shall provide the
Office with the name of the potential purchaser of such data
and the expected use of such data by such purchaser; and
``(2) the PBM may not sell such data unless the sale
complies with all Federal and State laws and the PBM has
received approval for such sale from the Office.
``(e) Pricing.--
``(1) Spread pricing.--
``(A) Limitation on charges to a carrier.--A PBM
under a PBM carrier arrangement shall not charge a
carrier an amount for a prescription drug that is
covered under such arrangement (and is dispensed by a
pharmacy) that is more than the amount (including the
ingredient cost and the dispensing fee) that the PBM
reimburses the pharmacy for the drug.
``(B) Disclosures.--
``(i) Initial disclosure.--Before entering
into a PBM carrier arrangement, the PBM shall
disclose to the carrier and the Office of
Personnel Management the reimbursement basis
(including the type of benchmark price and the
source of the data for determining such price)
and methodology that the PBM uses to compute
reimbursement amounts for retail and mail order
pharmacies.
``(ii) Updates.--Not later than 30 days
after making a change to the reimbursement
basis or methodology under clause (i), the PBM
shall disclose such change to the carrier and
the Office.
``(iii) Transition rule.--In the case of a
PBM carrier arrangement that is in effect on
the effective date of the FEHBP Prescription
Drug Integrity, Transparency, and Cost Savings
Act, the PBM shall disclose the information
under clause (i) not later than 1 year after
such date.
``(2) Maximum for mail order prescription drugs prices and
dispensing fees.--
``(A) In general.--If a prescription drug is
supplied by a mail order pharmacy to an enrollee, under
a PBM carrier arrangement, a PBM may not charge a
carrier an amount for the ingredient cost for such
prescription drug that is greater than an amount that
is equal to the actual acquisition cost for the drug
minus any cost sharing for such drug that is the
responsibility of the enrollee.
``(B) Dispensing fee.--Under a PBM carrier
arrangement, a PBM may not charge a carrier an amount
for a dispensing fee related to a prescription drug
dispensed by a mail order pharmacy to an enrollee that
is greater than the amount that the PBM charges health
plans for similar services that are not covered under a
PBM carrier arrangement.
``(C) Transparency.--Under a PBM carrier
arrangement, a PBM shall provide the carrier and the
Office of Personnel Management, at the request of such
carrier or Office, information on the method used to
determine the amount of--
``(i) the ingredient cost under
subparagraph (A); and
``(ii) the dispensing fee under
subparagraph (B).
``(D) Actual acquisition cost defined.--For
purposes of this paragraph, the term `actual
acquisition cost' means the amount a pharmacy pays for
a prescription drug, net of discounts, rebates, charge
backs, and other adjustments to the price of the drug.
``(f) Right to Explanation of Benefits.--Under a PBM carrier
arrangement, not later than 90 days after the date on which a pharmacy
dispenses a prescription drug covered under the arrangement, the PBM
shall provide (by mail or electronically) to the enrollee to whom such
drug was dispensed an explanation of benefits statement that contains
the following information:
``(1) The date the claim for such drug was made by the
pharmacy.
``(2) The name of such drug and the strength and quantity
dispensed to the enrollee.
``(3) The amount paid by the enrollee for such drug.
``(4) The total amount paid to the pharmacy by the PBM for
such drug. Such amount shall include all amounts paid to the
pharmacy with respect to dispensing such drug, including fees.
``(5) The amount paid by the carrier to the PBM for such
drug.
``(g) Nondiscriminatory Contract.--
``(1) In general.--Under a PBM carrier arrangement, a PBM
may not require that a pharmacy participate in a pharmacy
network managed by such PBM as a condition of the pharmacy
participating in another network managed by such PBM.
``(2) Pharmacy network defined.--For purposes of this
subsection, the term `pharmacy network' means a group of
pharmacies that have agreed, through a contract with a PBM or
carrier, to provide prescription medications to enrollees at
rates and with discounts that are specified in such contract.
``(h) Access to PBM Contract Information.--
``(1) In general.--Under a PBM carrier arrangement, at the
request of the Office of Personnel Management, a PBM shall
provide to the Office and to the Inspector General of the
Office of Personnel Management full access to information
relating to contracts entered into by such PBM under such
arrangement (such as PBM manufacturer contracts and PBM
contracts with pharmacies). Such information shall include--
``(A) companywide rebate receipt aging reports that
cover all of the PBM's lines of business;
``(B) information and methodology used to calculate
and allocate rebates between the PBM's lines of
business;
``(C) information on average wholesale prices,
wholesale acquisition costs, and maximum allowable
costs;
``(D) information on dispensing fees paid; and
``(E) information and methodologies used to
calculate additional administrative and service fees
charged to the carrier.
``(2) Confidentiality.--Information provided by a PBM under
this subsection is confidential and shall not be disclosed by
the Office, except that nothing in this paragraph shall
prevent--
``(A) a disclosure required under the Inspector
General Act of 1978; or
``(B) any disclosure which the Office, in its sole
discretion, considers necessary in order to carry out
this section, if such disclosure is made in a form
which does not disclose the identity of a specific PBM
or carrier or the price charged for a particular
prescription drug.
``(3) Exemption from foia.--Any information obtained under
this subsection shall be exempt from disclosure under section
552.
``(4) Definitions.--For purposes of this subsection--
``(A) Generic drug.--The term `generic drug' means
a drug approved pursuant to an abbreviated application
submitted under section 505(j) of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 355(j)).
``(B) Maximum allowable cost.--The term `maximum
allowable cost' means a cost that is set by a PBM as
the upper payment limit on the ingredient costs for a
generic drug.
``(C) Wholesale acquisition cost.--The term
`wholesale acquisition cost' means a publicly available
list price for sales of a drug by a manufacturer to a
wholesaler.
``(i) Treatment of Non-Compliance.--
``(1) In general.--Under a PBM carrier arrangement, a PBM
that knowingly provides false information to a carrier related
to a claim made to such carrier by the PBM under such
arrangement shall be treated, for purposes of chapter 37 of
title 31, in the same manner as a person that makes a false
claim to the United States Government under section 3729 of
such chapter.
``(2) Use of collections.--Any monetary penalty collected
under paragraph (1) shall be deposited into the Employees
Health Benefits Fund under section 8909.
``(3) Additional penalties.--Any penalties resulting from
the application of paragraph (1) shall be in addition to any
other penalties available to the Office of Personnel Management
under law or regulation.
``(j) No Application to Community Rated Carriers.--The provisions
of this section and section 8902(p) of this title--
``(1) shall apply to experience-rated carriers; and
``(2) shall not apply to carriers that use rates based on a
per member per month capitation amount.
``(k) Limitation of Application to Prescription Drugs.--The
provisions of this section and section 8902(p) of this title shall not
be construed to apply to drugs that are not prescription drugs.
``(l) General Definitions.--For purposes of this section and
section 8902(p) of this title:
``(1) Dispensing fee.--The term `dispensing fee' means a
fee paid to a pharmacy for the service of filling or dispensing
prescriptions and excludes any payment for the cost of the drug
dispensed.
``(2) Drug substitution.--The term `drug substitution'
means any change from one prescription drug to another
prescription drug that is intended to address or treat the same
illness or condition.
``(3) PBM carrier arrangement.--The term `PBM carrier
arrangement' means a contract between a PBM and a carrier for
the provision or administration of a program of prescription
drug coverage under a health benefits plan under this chapter.
Such a contract may provide, among other duties, for the PBM
to--
``(A) process and pay prescription drug claims;
``(B) provide programs and services designed to--
``(i) maximize the effectiveness of
prescription drugs dispensed under such plan;
or
``(ii) contain prescription drug
expenditures under such plan; and
``(C) engage in other activities related to the
administration of such prescription drug coverage.
``(4) PBM manufacturer contract.--The term `PBM
manufacturer contract' means a contract between a PBM and a
prescription drug manufacturer for the provision of
prescription drugs to enrollees of health benefits plans with
prescription drug coverage that is administered or provided by
the PBM.
``(5) Pharmacy benefit manager; pbm.--The terms `pharmacy
benefit manager' and `PBM' mean an entity that contracts with a
carrier to provide or administer prescription drug coverage
under a health benefits plan under this chapter.''.
(c) Clerical Amendment.--The table of sections for chapter 89 of
title 5, United States Code, is amended by adding at the end the
following:
``8915. Requirements for PBM arrangements.''.
(d) Effective Date; Waiver; Regulations.--
(1) Effective date.--The amendments made by this section
shall apply to contract years beginning on or after January 1,
2012.
(2) Waiver.--The Office of Personnel Management may waive
the application of 1 or more of the requirements of section
8915 of title 5, United States Code, but only for contract year
2012.
(3) Expediting implementation of regulations.--Not later
than 6 months after the date of the enactment of this Act, the
Office of Personnel Management shall issue interim final
regulations to carry out this section which may be effective
and final immediately on an interim basis as of the date of
publication of such regulations. If the Office provides for an
interim final regulation, the Office shall provide for a period
of public comment on such regulation after the date of
publication. The Office may change or revise such regulation
after completion of the period of public comment.
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