[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 3345 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 3345
To amend titles XVIII and XIX of the Social Security Act to ensure
accurate payments to pharmacies under Medicaid and prevent the use of
abusive spread pricing in Medicaid, and to assure pharmacy access and
choice for Medicare beneficiaries and modernize and ensure PBM
accountability under Medicare.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
December 4, 2025
Mr. Crapo (for himself, Mr. Wyden, Mr. Grassley, Mr. Bennet, Mr.
Cornyn, Mr. Warner, Mr. Thune, Mr. Whitehouse, Mr. Cassidy, Ms. Hassan,
Mr. Lankford, Ms. Cortez Masto, Mr. Daines, Ms. Smith, Mr. Barrasso,
Mr. Lujan, Mr. Tillis, Mr. Warnock, Mrs. Blackburn, Mr. Welch, and Mr.
Marshall) introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend titles XVIII and XIX of the Social Security Act to ensure
accurate payments to pharmacies under Medicaid and prevent the use of
abusive spread pricing in Medicaid, and to assure pharmacy access and
choice for Medicare beneficiaries and modernize and ensure PBM
accountability under Medicare.
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 ``PBM Price Transparency and
Accountability Act''.
SEC. 2. ENSURING ACCURATE PAYMENTS TO PHARMACIES UNDER MEDICAID AND
PREVENTING THE USE OF ABUSIVE SPREAD PRICING IN MEDICAID.
(a) Ensuring Accurate Payments to Pharmacies Under Medicaid.--
(1) In general.--Section 1927(f) of the Social Security Act
(42 U.S.C. 1396r-8(f)) is amended--
(A) in paragraph (1)(A)--
(i) by redesignating clause (ii) as clause
(iii); and
(ii) by striking ``and'' after the
semicolon at the end of clause (i) and all that
precedes it through ``(1)'' and inserting the
following:
``(1) Determining pharmacy actual acquisition costs.--The
Secretary shall conduct a survey of retail community pharmacy
drug prices and applicable non-retail pharmacy drug prices to
determine national average drug acquisition cost benchmarks (as
such term is defined by the Secretary) as follows:
``(A) Use of vendor.--The Secretary may contract
services for--
``(i) with respect to retail community
pharmacies, the determination of retail survey
prices of the national average drug acquisition
cost for covered outpatient drugs that
represent a nationwide average of consumer
purchase prices for such drugs, net of all
discounts, rebates, and other price concessions
(to the extent any information with respect to
such discounts, rebates, and other price
concessions is available) based on a monthly
survey of such pharmacies;
``(ii) with respect to applicable non-
retail pharmacies--
``(I) the determination of survey
prices, separate from the survey prices
described in clause (i), of the non-
retail national average drug
acquisition cost for covered outpatient
drugs that represent a nationwide
average of consumer purchase prices for
such drugs, net of all discounts,
rebates, and other price concessions
(to the extent any information with
respect to such discounts, rebates, and
other price concessions is available)
based on a monthly survey of such
pharmacies; and
``(II) at the discretion of the
Secretary, for each type of applicable
non-retail pharmacy, the determination
of survey prices, separate from the
survey prices described in clause (i)
or subclause (I) of this clause, of the
national average drug acquisition cost
for such type of pharmacy for covered
outpatient drugs that represent a
nationwide average of consumer purchase
prices for such drugs, net of all
discounts, rebates, and other price
concessions (to the extent any
information with respect to such
discounts, rebates, and other price
concessions is available) based on a
monthly survey of such pharmacies;
and'';
(B) in subparagraph (B) of paragraph (1), by
striking ``subparagraph (A)(ii)'' and inserting
``subparagraph (A)(iii)'';
(C) in subparagraph (D) of paragraph (1), by
striking clauses (ii) and (iii) and inserting the
following:
``(ii) The vendor must update the Secretary
no less often than monthly on the survey prices
for covered outpatient drugs.
``(iii) The vendor must differentiate, in
collecting and reporting survey data, for all
cost information collected, whether a pharmacy
is a retail community pharmacy or an applicable
non-retail pharmacy, including whether such
pharmacy is an affiliate (as defined in
subsection (k)(13)), and, in the case of an
applicable non-retail pharmacy, which type of
applicable non-retail pharmacy it is using the
relevant pharmacy type indicators included in
the guidance required by subsection (a)(4)(A)
of section 2 of the PBM Price Transparency and
Accountability Act.'';
(D) by adding at the end of paragraph (1) the
following:
``(F) Survey reporting.--In order to meet the
requirement of section 1902(a)(54), a State shall
require that any retail community pharmacy or
applicable non-retail pharmacy in the State that
receives any payment, reimbursement, administrative
fee, discount, rebate, or other price concession
related to the dispensing of covered outpatient drugs
to individuals receiving benefits under this title,
regardless of whether such payment, reimbursement,
administrative fee, discount, rebate, or other price
concession is received from the State or a managed care
entity or other specified entity (as such terms are
defined in section 1903(m)(9)(D)) directly or from a
pharmacy benefit manager or another entity that has a
contract with the State or a managed care entity or
other specified entity (as so defined), shall respond
to surveys conducted under this paragraph.
``(G) Survey information.--Information on national
drug acquisition prices obtained under this paragraph
shall be made publicly available in a form and manner
to be determined by the Secretary and shall include at
least the following:
``(i) The monthly response rate to the
survey including a list of pharmacies not in
compliance with subparagraph (F).
``(ii) The sampling methodology and number
of pharmacies sampled monthly.
``(iii) Information on price concessions to
pharmacies, including discounts, rebates, and
other price concessions, to the extent that
such information may be publicly released and
has been collected by the Secretary as part of
the survey.
``(H) Penalties.--
``(i) In general.--Subject to clauses (ii),
(iii), and (iv), the Secretary shall enforce
the provisions of this paragraph with respect
to a pharmacy through the establishment of
civil money penalties applicable to a retail
community pharmacy or an applicable non-retail
pharmacy.
``(ii) Basis for penalties.--The Secretary
shall impose a civil money penalty established
under this subparagraph on a retail community
pharmacy or applicable non-retail pharmacy if--
``(I) the retail pharmacy or
applicable non-retail pharmacy refuses
or otherwise fails to respond to a
request for information about prices in
connection with a survey under this
subsection;
``(II) knowingly provides false
information in response to such a
survey; or
``(III) otherwise fails to comply
with the requirements established under
this paragraph.
``(iii) Parameters for penalties.--
``(I) In general.--A civil money
penalty established under this
subparagraph may be assessed with
respect to each violation, and with
respect to each non-compliant retail
community pharmacy (including a
pharmacy that is part of a chain) or
non-compliant applicable non-retail
pharmacy (including a pharmacy that is
part of a chain), in an amount not to
exceed $100,000 for each such
violation.
``(II) Considerations.--In
determining the amount of a civil money
penalty imposed under this
subparagraph, the Secretary may
consider the size, business structure,
and type of pharmacy involved, as well
as the type of violation and other
relevant factors, as determined
appropriate by the Secretary.
``(iv) Rule of application.--The provisions
of section 1128A (other than subsections (a)
and (b)) shall apply to a civil money penalty
under this subparagraph in the same manner as
such provisions apply to a civil money penalty
or proceeding under section 1128A(a).
``(I) Limitation on use of applicable non-retail
pharmacy pricing information.--No State shall use
pricing information reported by applicable non-retail
pharmacies under subparagraph (A)(ii) to develop or
inform payment methodologies for retail community
pharmacies.'';
(E) in paragraph (2)--
(i) in subparagraph (A), by inserting ``,
including payment rates and methodologies for
determining ingredient cost reimbursement under
managed care entities or other specified
entities (as such terms are defined in section
1903(m)(9)(D)),'' after ``under this title'';
and
(ii) in subparagraph (B), by inserting
``and the basis for such dispensing fees''
before the semicolon;
(F) by redesignating paragraph (4) as paragraph
(5);
(G) by inserting after paragraph (3) the following
new paragraph:
``(4) Oversight.--
``(A) In general.--The Inspector General of the
Department of Health and Human Services shall conduct
periodic studies of the survey data reported under this
subsection, as appropriate, including with respect to
substantial variations in acquisition costs or other
applicable costs, as well as with respect to how
internal transfer prices and related party transactions
may influence the costs reported by pharmacies that are
affiliates (as defined in subsection (k)(13)) or are
owned by, controlled by, or related under a common
ownership structure with a wholesaler, distributor, or
other entity that acquires covered outpatient drugs
relative to costs reported by pharmacies not affiliated
with such entities. The Inspector General shall provide
periodic updates to Congress on the results of such
studies, as appropriate, in a manner that does not
disclose trade secrets or other proprietary
information.
``(B) Appropriation.--There is appropriated to the
Inspector General of the Department of Health and Human
Services, out of any money in the Treasury not
otherwise appropriated, $5,000,000 for fiscal year
2026, to remain available until expended, to carry out
this paragraph.''; and
(H) in paragraph (5), as so redesignated--
(i) by inserting ``, and $9,000,000 for
fiscal year 2026 and each fiscal year
thereafter,'' after ``2010''; and
(ii) by inserting ``Funds appropriated
under this paragraph for fiscal year 2026 and
any subsequent fiscal year shall remain
available until expended.'' after the period.
(2) Definitions.--Section 1927(k) of the Social Security
Act (42 U.S.C. 1396r-8(k)) is amended--
(A) in the matter preceding paragraph (1), by
striking ``In the section'' and inserting ``In this
section''; and
(B) by adding at the end the following new
paragraphs:
``(12) Applicable non-retail pharmacy.--The term
`applicable non-retail pharmacy' means a pharmacy that is
licensed as a pharmacy by the State and that is not a retail
community pharmacy, including a pharmacy that dispenses
prescription medications to patients primarily through mail and
specialty pharmacies. Such term does not include nursing home
pharmacies, long-term care facility pharmacies, hospital
pharmacies, clinics, charitable or not-for-profit pharmacies,
government pharmacies, or low dispensing pharmacies (as defined
by the Secretary).
``(13) Affiliate.--The term `affiliate' means any entity
that is owned by, controlled by, or related under a common
ownership structure with a pharmacy benefit manager or a
managed care entity or other specified entity (as such terms
are defined in section 1903(m)(9)(D)).''.
(3) Effective date.--
(A) In general.--Subject to subparagraph (B), the
amendments made by this subsection shall take effect on
the first day of the first quarter that begins on or
after the date that is 6 months after the date of
enactment of this Act.
(B) Delayed application to applicable non-retail
pharmacies.--The pharmacy survey requirements
established by the amendments to section 1927(f) of the
Social Security Act (42 U.S.C. 1396r-8(f)) made by this
subsection shall apply to retail community pharmacies
beginning on the effective date described in
subparagraph (A), but shall not apply to applicable
non-retail pharmacies until the first day of the first
quarter that begins on or after the date that is 18
months after the date of enactment of this Act.
(4) Identification of applicable non-retail pharmacies.--
(A) In general.--Not later than January 1, 2027,
the Secretary of Health and Human Services shall, in
consultation with stakeholders as appropriate, publish
guidance specifying pharmacies that meet the definition
of applicable non-retail pharmacies (as such term is
defined in subsection (k)(12) of section 1927 of the
Social Security Act (42 U.S.C. 1396r-8), as added by
paragraph (2)), and that will be subject to the survey
requirements under subsection (f)(1) of such section,
as amended by paragraph (1).
(B) Inclusion of pharmacy type indicators.--The
guidance published under subparagraph (A) shall include
pharmacy type indicators to distinguish between
different types of applicable non-retail pharmacies,
such as pharmacies that dispense prescriptions
primarily through the mail and pharmacies that dispense
prescriptions that require special handling or
distribution. An applicable non-retail pharmacy may be
identified through multiple pharmacy type indicators.
(5) Implementation.--
(A) In general.--Notwithstanding any other
provision of law, the Secretary of Health and Human
Services may implement the amendments made by this
subsection by program instruction or otherwise.
(B) Nonapplication of administrative procedure
act.--Implementation of the amendments made by this
subsection shall be exempt from the requirements of
section 553 of title 5, United States Code.
(6) Nonapplication of paperwork reduction act.--Chapter 35
of title 44, United States Code, shall not apply to any data
collection undertaken by the Secretary of Health and Human
Services under section 1927(f) of the Social Security Act (42
U.S.C. 1396r-8(f)), as amended by this subsection.
(b) Preventing the Use of Abusive Spread Pricing in Medicaid.--
(1) In general.--Section 1927 of the Social Security Act
(42 U.S.C. 1396r-8) is amended--
(A) in subsection (e), by adding at the end the
following new paragraph:
``(6) Transparent prescription drug pass-through pricing
required.--
``(A) In general.--A contract between the State and
a pharmacy benefit manager (referred to in this
paragraph as a `PBM'), or a contract between the State
and a managed care entity or other specified entity (as
such terms are defined in section 1903(m)(9)(D) and
collectively referred to in this paragraph as the
`entity') that includes provisions making the entity
responsible for coverage of covered outpatient drugs
dispensed to individuals enrolled with the entity,
shall require that payment for such drugs and related
administrative services (as applicable), including
payments made by a PBM on behalf of the State or
entity, is based on a transparent prescription drug
pass-through pricing model under which--
``(i) any payment made by the entity or the
PBM (as applicable) for such a drug--
``(I) is limited to--
``(aa) ingredient cost; and
``(bb) a professional
dispensing fee that is not less
than the professional
dispensing fee that the State
would pay if the State were
making the payment directly in
accordance with the State plan;
``(II) is passed through in its
entirety (except as reduced under
Federal or State laws and regulations
in response to instances of waste,
fraud, or abuse) by the entity or PBM
to the pharmacy or provider that
dispenses the drug; and
``(III) is made in a manner that is
consistent with sections 447.502,
447.512, 447.514, and 447.518 of title
42, Code of Federal Regulations (or any
successor regulation) as if such
requirements applied directly to the
entity or the PBM, except that any
payment by the entity or the PBM for
the ingredient cost of such drug
purchased by a covered entity (as
defined in subsection (a)(5)(B)) may
exceed the actual acquisition cost (as
defined in 447.502 of title 42, Code of
Federal Regulations, or any successor
regulation) for such drug if--
``(aa) such drug was
subject to an agreement under
section 340B of the Public
Health Service Act;
``(bb) such payment for the
ingredient cost of such drug
does not exceed the maximum
payment that would have been
made by the entity or the PBM
for the ingredient cost of such
drug if such drug had not been
purchased by such covered
entity; and
``(cc) such covered entity
reports to the Secretary (in a
form and manner specified by
the Secretary), on an annual
basis and with respect to
payments for the ingredient
costs of such drugs so
purchased by such covered
entity that are in excess of
the actual acquisition costs
for such drugs, the aggregate
amount of such excess;
``(ii) payment to the entity or the PBM (as
applicable) for administrative services
performed by the entity or PBM is limited to an
administrative fee that reflects the fair
market value (as defined by the Secretary) of
such services;
``(iii) the entity or the PBM (as
applicable) makes available to the State, and
the Secretary upon request in a form and manner
specified by the Secretary, all costs and
payments related to covered outpatient drugs
and accompanying administrative services (as
described in clause (ii)) incurred, received,
or made by the entity or the PBM, broken down
(as specified by the Secretary), to the extent
such costs and payments are attributable to an
individual covered outpatient drug, by each
such drug, including any ingredient costs,
professional dispensing fees, administrative
fees (as described in clause (ii)), post-sale
and post-invoice fees, discounts, or related
adjustments such as direct and indirect
remuneration fees, and any and all other
remuneration, as defined by the Secretary; and
``(iv) any form of spread pricing whereby
any amount charged or claimed by the entity or
the PBM (as applicable) that exceeds the amount
paid to the pharmacies or providers on behalf
of the State or entity, including any post-sale
or post-invoice fees, discounts, or related
adjustments such as direct and indirect
remuneration fees or assessments, as defined by
the Secretary (after allowing for an
administrative fee as described in clause (ii))
is not allowable for purposes of claiming
Federal matching payments under this title.
``(B) Publication of information.--The Secretary
shall publish, not less frequently than on an annual
basis and in a manner that does not disclose the
identity of a particular covered entity or
organization, information received by the Secretary
pursuant to subparagraph (A)(iii)(III) that is broken
out by State and by each of the following categories of
covered entity within each such State:
``(i) Covered entities described in
subparagraph (A) of section 340B(a)(4) of the
Public Health Service Act.
``(ii) Covered entities described in
subparagraphs (B) through (K) of such section.
``(iii) Covered entities described in
subparagraph (L) of such section.
``(iv) Covered entities described in
subparagraph (M) of such section.
``(v) Covered entities described in
subparagraph (N) of such section.
``(vi) Covered entities described in
subparagraph (O) of such section.''; and
(B) in subsection (k), as amended by subsection
(a)(2), by adding at the end the following new
paragraph:
``(14) Pharmacy benefit manager.--The term `pharmacy
benefit manager' means any person or entity that, either
directly or through an intermediary, acts as a price negotiator
or group purchaser on behalf of a State, managed care entity
(as defined in section 1903(m)(9)(D)), or other specified
entity (as so defined), or manages the prescription drug
benefits provided by a State, managed care entity, or other
specified entity, including the processing and payment of
claims for prescription drugs, the performance of drug
utilization review, the processing of drug prior authorization
requests, the managing of appeals or grievances related to the
prescription drug benefits, contracting with pharmacies,
controlling the cost of covered outpatient drugs, or the
provision of services related thereto. Such term includes any
person or entity that acts as a price negotiator (with regard
to payment amounts to pharmacies and providers for a covered
outpatient drug or the net cost of the drug) or group purchaser
on behalf of a State, managed care entity, or other specified
entity or that carries out 1 or more of the other activities
described in the preceding sentence, irrespective of whether
such person or entity calls itself a pharmacy benefit
manager.''.
(2) Conforming amendments.--Section 1903(m) of such Act (42
U.S.C. 1396b(m)) is amended--
(A) in paragraph (2)(A)(xiii)--
(i) by striking ``and (III)'' and inserting
``(III)'';
(ii) by inserting before the period at the
end the following: ``, and (IV) if the contract
includes provisions making the entity
responsible for coverage of covered outpatient
drugs, the entity shall comply with the
requirements of section 1927(e)(6)''; and
(iii) by moving the margin 2 ems to the
left; and
(B) by adding at the end the following new
paragraph:
``(10) No payment shall be made under this title to a State
with respect to expenditures incurred by the State for payment
for services provided by an other specified entity (as defined
in paragraph (9)(D)(iii)) unless such services are provided in
accordance with a contract between the State and such entity
which satisfies the requirements of paragraph (2)(A)(xiii).''.
(3) Effective date.--The amendments made by this subsection
shall apply to contracts between States and managed care
entities, other specified entities, or pharmacy benefit
managers that have an effective date beginning on or after the
date that is 18 months after the date of enactment of this Act.
(4) Implementation.--
(A) In general.--Notwithstanding any other
provision of law, the Secretary of Health and Human
Services may implement the amendments made by this
subsection by program instruction or otherwise.
(B) Nonapplication of administrative procedure
act.--Implementation of the amendments made by this
subsection shall be exempt from the requirements of
section 553 of title 5, United States Code.
(5) Nonapplication of paperwork reduction act.--Chapter 35
of title 44, United States Code, shall not apply to any data
collection undertaken by the Secretary of Health and Human
Services under section 1927(e) of the Social Security Act (42
U.S.C. 1396r-8(e)), as amended by this subsection.
SEC. 3. ASSURING PHARMACY ACCESS AND CHOICE FOR MEDICARE BENEFICIARIES
AND MODERNIZING AND ENSURING PBM ACCOUNTABILITY UNDER
MEDICARE.
(a) Assuring Pharmacy Access and Choice for Medicare
Beneficiaries.--
(1) In general.--Section 1860D-4(b)(1) of the Social
Security Act (42 U.S.C. 1395w-104(b)(1)) is amended by striking
subparagraph (A) and inserting the following:
``(A) In general.--
``(i) Participation of any willing
pharmacy.--A PDP sponsor offering a
prescription drug plan shall permit any
pharmacy that meets the standard contract terms
and conditions under such plan to participate
as a network pharmacy of such plan.
``(ii) Contract terms and conditions.--
``(I) In general.--Notwithstanding
any other provision of law, for plan
years beginning on or after January 1,
2028, in accordance with clause (i),
contract terms and conditions offered
by such PDP sponsor shall be reasonable
and relevant according to standards
established by the Secretary under
subclause (II).
``(II) Standards.--Not later than
the first Monday in April of 2027, the
Secretary shall establish standards for
reasonable and relevant contract terms
and conditions for purposes of this
clause.
``(III) Request for information.--
Not later than April 1, 2026, for
purposes of establishing the standards
under subclause (II), the Secretary
shall issue a request for information
to seek input on trends in prescription
drug plan and network pharmacy contract
terms and conditions, current
prescription drug plan and network
pharmacy contracting practices, whether
pharmacy reimbursement and dispensing
fees paid by PDP sponsors to network
pharmacies sufficiently cover the
ingredient and operational costs of
such pharmacies, the use and
application of pharmacy quality
measures by PDP sponsors for network
pharmacies, PDP sponsor restrictions or
limitations on the dispensing of
covered part D drugs by network
pharmacies (or any subsets of such
pharmacies), PDP sponsor auditing
practices for network pharmacies, areas
in current regulations or program
guidance related to contracting between
prescription drug plans and network
pharmacies requiring clarification or
additional specificity, factors for
consideration in determining the
reasonableness and relevance of
contract terms and conditions between
prescription drug plans and network
pharmacies, and other issues as
determined appropriate by the
Secretary.''.
(2) Essential retail pharmacies.--Section 1860D-42 of the
Social Security Act (42 U.S.C. 1395w-152) is amended by adding
at the end the following new subsection:
``(e) Essential Retail Pharmacies.--
``(1) In general.--With respect to plan years beginning on
or after January 1, 2028, the Secretary shall publish reports,
at least once every 2 years until 2034, and periodically
thereafter, that provide information, to the extent feasible,
on--
``(A) trends in ingredient cost reimbursement,
dispensing fees, incentive payments and other fees paid
by PDP sponsors offering prescription drug plans and MA
organizations offering MA-PD plans under this part to
essential retail pharmacies (as defined in paragraph
(2)) with respect to the dispensing of covered part D
drugs, including a comparison of such trends between
essential retail pharmacies and pharmacies that are not
essential retail pharmacies;
``(B) trends in amounts paid to PDP sponsors
offering prescription drug plans and MA organizations
offering MA-PD plans under this part by essential
retail pharmacies with respect to the dispensing of
covered part D drugs, including a comparison of such
trends between essential retail pharmacies and
pharmacies that are not essential retail pharmacies;
``(C) trends in essential retail pharmacy
participation in pharmacy networks and preferred
pharmacy networks for prescription drug plans offered
by PDP sponsors and MA-PD plans offered by MA
organizations under this part, including a comparison
of such trends between essential retail pharmacies and
pharmacies that are not essential retail pharmacies;
``(D) trends in the number of essential retail
pharmacies, including variation in such trends by
geographic region or other factors;
``(E) a comparison of cost-sharing for covered part
D drugs dispensed by essential retail pharmacies that
are network pharmacies for prescription drug plans
offered by PDP sponsors and MA-PD plans offered by MA
organizations under this part and cost-sharing for
covered part D drugs dispensed by other network
pharmacies for such plans located in similar geographic
areas that are not essential retail pharmacies;
``(F) a comparison of the volume of covered part D
drugs dispensed by essential retail pharmacies that are
network pharmacies for prescription drug plans offered
by PDP sponsors and MA-PD plans offered by MA
organizations under this part and such volume of
dispensing by network pharmacies for such plans located
in similar geographic areas that are not essential
retail pharmacies, including information on any
patterns or trends in such comparison specific to
certain types of covered part D drugs, such as generic
drugs or drugs specified as specialty drugs by a PDP
sponsor under a prescription drug plan or an MA
organization under an MA-PD plan; and
``(G) a comparison of the information described in
subparagraphs (A) through (F) between essential retail
pharmacies that are network pharmacies for prescription
drug plans offered by PDP sponsors under this part and
essential retail pharmacies that are network pharmacies
for MA-PD plans offered by MA organizations under this
part.
``(2) Definition of essential retail pharmacy.--In this
subsection, the term `essential retail pharmacy' means, with
respect to a plan year, a retail pharmacy that--
``(A) is not a pharmacy that is an affiliate as
defined in paragraph (4); and
``(B) is located in--
``(i) a rural area in which there is no
other retail pharmacy within 10 miles, as
determined by the Secretary;
``(ii) a suburban area in which there is no
other retail pharmacy within 2 miles, as
determined by the Secretary; or
``(iii) an urban area in which there is no
other retail pharmacy within 1 mile, as
determined by the Secretary.
``(3) List of essential retail pharmacies.--
``(A) Publication of list of essential retail
pharmacies.--For each plan year (beginning with plan
year 2028), the Secretary shall publish, on a publicly
available internet website of the Centers for Medicare
& Medicaid Services, a list of pharmacies that meet the
criteria described in subparagraphs (A) and (B) of
paragraph (2) to be considered an essential retail
pharmacy.
``(B) Required submissions from pdp sponsors.--For
each plan year (beginning with plan year 2028), each
PDP sponsor offering a prescription drug plan and each
MA organization offering an MA-PD plan shall submit to
the Secretary, for the purposes of determining retail
pharmacies that meet the criterion specified in
subparagraph (A) of paragraph (2), a list of retail
pharmacies that are affiliates of such sponsor or
organization, or are affiliates of a pharmacy benefit
manager acting on behalf of such sponsor or
organization, at a time, and in a form and manner,
specified by the Secretary.
``(C) Reporting by pdp sponsors and ma
organizations.--For each plan year beginning with plan
year 2027, each PDP sponsor offering a prescription
drug plan and each MA organization offering an MA-PD
plan under this part shall submit to the Secretary
information on incentive payments and other fees paid
by such sponsor or organization to pharmacies, insofar
as any such payments or fees are not otherwise
reported, at a time, and in a form and manner,
specified by the Secretary.
``(D) Implementation.--Notwithstanding any other
provision of law, the Secretary may implement this
paragraph by program instruction or otherwise.
``(E) Nonapplication of paperwork reduction act.--
Chapter 35 of title 44, United States Code, shall not
apply to the implementation of this paragraph.
``(4) Definition of affiliate; pharmacy benefit manager.--
In this subsection, the terms `affiliate' and `pharmacy benefit
manager' have the meaning given those terms in section 1860D-
12(h)(7).''.
(3) Enforcement.--
(A) In general.--Section 1860D-4(b)(1) of the
Social Security Act (42 U.S.C. 1395w-104(b)(1)) is
amended by adding at the end the following new
subparagraph:
``(F) Enforcement of standards for reasonable and
relevant contract terms and conditions.--
``(i) Allegation submission process.--
``(I) In general.--Not later than
January 1, 2028, the Secretary shall
establish a process through which a
pharmacy may submit to the Secretary an
allegation of a violation by a PDP
sponsor offering a prescription drug
plan of the standards for reasonable
and relevant contract terms and
conditions under subparagraph (A)(ii),
or of subclause (VIII) of this clause.
``(II) Frequency of submission.--
``(aa) In general.--Except
as provided in item (bb), the
allegation submission process
under this clause shall allow
pharmacies to submit any
allegations of violations
described in subclause (I) not
more frequently than once per
plan year per contract between
a pharmacy and a PDP sponsor.
``(bb) Allegations relating
to contract modifications.--In
the case where a contract
between a pharmacy and a PDP
sponsor is modified following
the submission of allegations
by a pharmacy with respect to
such contract and plan year,
the allegation submission
process under this clause shall
allow such pharmacy to submit
an additional allegation
related to those modifications
with respect to such contract
and plan year.
``(III) Access to relevant
documents and materials.--A PDP sponsor
subject to an allegation under this
clause--
``(aa) shall provide
documents or materials, as
specified by the Secretary,
including contract offers made
by such sponsor to such
pharmacy or correspondence
related to such offers, to the
Secretary at a time, and in a
form and manner, specified by
the Secretary; and
``(bb) shall not prohibit
or otherwise limit the ability
of a pharmacy to submit such
documents or materials to the
Secretary for the purpose of
submitting an allegation or
providing evidence for such an
allegation under this clause.
``(IV) Standardized template.--The
Secretary shall establish a
standardized template for pharmacies to
use for the submission of allegations
described in subclause (I). Such
template shall require that the
submission include a certification by
the pharmacy that the information
included is accurate, complete, and
true to the best of the knowledge,
information, and belief of such
pharmacy.
``(V) Preventing frivolous
allegations.--In the case where the
Secretary determines that a pharmacy
has submitted frivolous allegations
under this clause on a routine basis,
the Secretary may temporarily prohibit
such pharmacy from using the allegation
submission process under this clause,
as determined appropriate by the
Secretary.
``(VI) Exemption from freedom of
information act.--Allegations submitted
under this clause shall be exempt from
disclosure under section 552 of title
5, United States Code.
``(VII) Rule of construction.--
Nothing in this clause shall be
construed as limiting the ability of a
pharmacy to pursue other legal actions
or remedies, consistent with applicable
Federal or State law, with respect to a
potential violation of a requirement
described in this subparagraph.
``(VIII) Anti-retaliation and anti-
coercion.--Consistent with applicable
Federal or State law, a PDP sponsor
shall not--
``(aa) retaliate against a
pharmacy for submitting any
allegations under this clause;
or
``(bb) coerce, intimidate,
threaten, or interfere with the
ability of a pharmacy to submit
any such allegations.
``(ii) Investigation.--The Secretary shall
investigate, as determined appropriate by the
Secretary, allegations submitted pursuant to
clause (i).
``(iii) Enforcement.--
``(I) In general.--In the case
where the Secretary determines that a
PDP sponsor offering a prescription
drug plan has violated the standards
for reasonable and relevant contract
terms and conditions under subparagraph
(A)(ii), the Secretary may use
authorities under sections 1857(g) and
1860D-12(b)(3)(E) to impose civil
monetary penalties or other
intermediate sanctions.
``(II) Application of civil
monetary penalties.--The provisions of
section 1128A (other than subsections
(a) and (b)) shall apply to a civil
monetary penalty under this clause in
the same manner as such provisions
apply to a penalty or proceeding under
section 1128A(a).''.
(B) Conforming amendment.--Section 1857(g)(1) of
the Social Security Act (42 U.S.C. 1395w-27(g)(1)) is
amended--
(i) in subparagraph (J), by striking ``or''
after the semicolon;
(ii) by redesignating subparagraph (K) as
subparagraph (L);
(iii) by inserting after subparagraph (J),
the following new subparagraph:
``(K) fails to comply with the standards for
reasonable and relevant contract terms and conditions
under subparagraph (A)(ii) of section 1860D-4(b)(1);
or'';
(iv) in subparagraph (L), as redesignated
by clause (ii), by striking ``through (J)'' and
inserting ``through (K)''; and
(v) in the flush matter following
subparagraph (L), as so redesignated, by
striking ``subparagraphs (A) through (K)'' and
inserting ``subparagraphs (A) through (L)''.
(4) Accountability of pharmacy benefit managers for
violations of reasonable and relevant contract terms and
conditions.--
(A) In general.--Section 1860D-12(b) of the Social
Security Act (42 U.S.C. 1395w-112) is amended by adding
at the end the following new paragraph:
``(9) Accountability of pharmacy benefit managers for
violations of reasonable and relevant contract terms and
conditions.--For plan years beginning on or after January 1,
2028, 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 any pharmacy benefit manager acting
on behalf of such sponsor has a written agreement with the PDP
sponsor under which the pharmacy benefit manager agrees to
reimburse the PDP sponsor for any amounts paid by such sponsor
under section 1860D-4(b)(1)(F)(iii)(I) to the Secretary as a
result of a violation described in such section if such
violation is related to a responsibility delegated to the
pharmacy benefit manager by such PDP sponsor.''.
(B) MA-PD plans.--Section 1857(f)(3) of the Social
Security Act (42 U.S.C. 1395w-27(f)(3)) is amended by
adding at the end the following new subparagraph:
``(F) Accountability of pharmacy benefit managers
for violations of reasonable and relevant contract
terms.--For plan years beginning on or after January 1,
2028, section 1860D-12(b)(9).''.
(5) Biennial report on enforcement and oversight of
pharmacy access requirements.--Section 1860D-42 of the Social
Security Act (42 U.S.C. 1395w-152), as amended by paragraph
(2), is amended by adding at the end the following new
subsection:
``(f) Biennial Report on Enforcement and Oversight of Pharmacy
Access Requirements.--
``(1) In general.--Not later than 2 years after the date of
enactment of this subsection, and at least once every 2 years
thereafter, the Secretary shall publish a report on enforcement
and oversight actions and activities undertaken by the
Secretary with respect to the requirements under section 1860D-
4(b)(1).
``(2) Limitation.--A report under paragraph (1) shall not
disclose--
``(A) identifiable information about individuals or
entities unless such information is otherwise publicly
available; or
``(B) trade secrets with respect to any
entities.''.
(6) Funding.--In addition to amounts otherwise available,
there is appropriated to the Centers for Medicare & Medicaid
Services Program Management Account, out of any money in the
Treasury not otherwise appropriated, $188,000,000 for fiscal
year 2026, to remain available until expended, to carry out
this subsection.
(b) Modernizing and Ensuring PBM Accountability.--
(1) In general.--
(A) Prescription drug plans.--Section 1860D-12 of
the Social Security Act (42 U.S.C. 1395w-112) is
amended by adding at the end the following new
subsection:
``(h) Requirements Relating to Pharmacy Benefit Managers.--For plan
years beginning on or after January 1, 2028:
``(1) Agreements with pharmacy benefit managers.--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 any pharmacy benefit manager acting on
behalf of such sponsor has a written agreement with the PDP
sponsor under which the pharmacy benefit manager, and any
affiliates of such pharmacy benefit manager, as applicable,
agree to meet the following requirements:
``(A) No income other than bona fide service
fees.--
``(i) In general.--The pharmacy benefit
manager and any affiliate of such pharmacy
benefit manager shall not derive any
remuneration with respect to any services
provided on behalf of any entity or individual,
in connection with the utilization of covered
part D drugs, from any such entity or
individual other than bona fide service fees,
subject to clauses (ii) and (iii).
``(ii) Incentive payments.--For the
purposes of this subsection, an incentive
payment (as determined by the Secretary) paid
by a PDP sponsor to a pharmacy benefit manager
that is performing services on behalf of such
sponsor shall be deemed a `bona fide service
fee' (even if such payment does not otherwise
meet the definition of such term under
paragraph (7)(B)) if such payment is a flat
dollar amount, is consistent with fair market
value (as specified by the Secretary), is
related to services actually performed by the
pharmacy benefit manager or affiliate of such
pharmacy benefit manager, on behalf of the PDP
sponsor making such payment, in connection with
the utilization of covered part D drugs, and
meets additional requirements, if any, as
determined appropriate by the Secretary.
``(iii) Clarification on rebates and
discounts used to lower costs for covered part
d drugs.--Rebates, discounts, and other price
concessions received by a pharmacy benefit
manager or an affiliate of a pharmacy benefit
manager from manufacturers, even if such price
concessions are calculated as a percentage of a
drug's price, shall not be considered a
violation of the requirements of clause (i) if
they are fully passed through to a PDP sponsor
and are compliant with all regulatory and
subregulatory requirements related to direct
and indirect remuneration for manufacturer
rebates under this part, including in cases
where a PDP sponsor is acting as a pharmacy
benefit manager on behalf of a prescription
drug plan offered by such PDP sponsor.
``(iv) Evaluation of remuneration
arrangements.--Components of subsets of
remuneration arrangements (such as fees or
other forms of compensation paid to or retained
by the pharmacy benefit manager or affiliate of
such pharmacy benefit manager), as determined
appropriate by the Secretary, between pharmacy
benefit managers or affiliates of such pharmacy
benefit managers, as applicable, and other
entities involved in the dispensing or
utilization of covered part D drugs (including
PDP sponsors, manufacturers, pharmacies, and
other entities as determined appropriate by the
Secretary) shall be subject to review by the
Secretary, in consultation with the Office of
the Inspector General of the Department of
Health and Human Services, as determined
appropriate by the Secretary. The Secretary, in
consultation with the Office of the Inspector
General, shall review whether remuneration
under such arrangements is consistent with fair
market value (as specified by the Secretary)
through reviews and assessments of such
remuneration, as determined appropriate.
``(v) Disgorgement.--The pharmacy benefit
manager shall disgorge any remuneration paid to
such pharmacy benefit manager or an affiliate
of such pharmacy benefit manager in violation
of this subparagraph to the PDP sponsor.
``(vi) Additional requirements.--The
pharmacy benefit manager shall--
``(I) enter into a written
agreement with any affiliate of such
pharmacy benefit manager, under which
the affiliate shall identify and
disgorge any remuneration described in
clause (v) to the pharmacy benefit
manager; and
``(II) attest, subject to any
requirements determined appropriate by
the Secretary, that the pharmacy
benefit manager has entered into a
written agreement described in
subclause (I) with any relevant
affiliate of the pharmacy benefit
manager.
``(B) Transparency regarding guarantees and cost
performance evaluations.--The pharmacy benefit manager
shall--
``(i) define, interpret, and apply, in a
fully transparent and consistent manner for
purposes of calculating or otherwise evaluating
pharmacy benefit manager performance against
pricing guarantees or similar cost performance
measurements related to rebates, discounts,
price concessions, or net costs, terms such
as--
``(I) `generic drug', in a manner
consistent with the definition of the
term under section 423.4 of title 42,
Code of Federal Regulations, or a
successor regulation;
``(II) `brand name drug', in a
manner consistent with the definition
of the term under section 423.4 of
title 42, Code of Federal Regulations,
or a successor regulation;
``(III) `specialty drug';
``(IV) `rebate'; and
``(V) `discount';
``(ii) identify any drugs, claims, or price
concessions excluded from any pricing guarantee
or other cost performance measure in a clear
and consistent manner; and
``(iii) where a pricing guarantee or other
cost performance measure is based on a pricing
benchmark other than the wholesale acquisition
cost (as defined in section 1847A(c)(6)(B)) of
a drug, calculate and provide a wholesale
acquisition cost-based equivalent to the
pricing guarantee or other cost performance
measure.
``(C) Provision of information.--
``(i) In general.--Not later than July 1 of
each year, beginning in 2028, the pharmacy
benefit manager shall submit to the PDP
sponsor, and to the Secretary, a report, in
accordance with this subparagraph, and shall
make such report available to such sponsor at
no cost to such sponsor in a format specified
by the Secretary under paragraph (5). Each such
report shall include, with respect to such PDP
sponsor and each plan offered by such sponsor,
the following information with respect to the
previous plan year:
``(I) A list of all drugs covered
by the plan that were dispensed
including, with respect to each such
drug--
``(aa) the brand name,
generic or non-proprietary
name, and National Drug Code;
``(bb) the number of plan
enrollees for whom the drug was
dispensed, the total number of
prescription claims for the
drug (including original
prescriptions and refills,
counted as separate claims),
and the total number of dosage
units of the drug dispensed;
``(cc) the number of
prescription claims described
in item (bb) by each type of
dispensing channel through
which the drug was dispensed,
including retail, mail order,
specialty pharmacy, long term
care pharmacy, home infusion
pharmacy, or other types of
pharmacies or providers;
``(dd) the average
wholesale acquisition cost,
listed as cost per day's
supply, cost per dosage unit,
and cost per typical course of
treatment (as applicable);
``(ee) the average
wholesale price for the drug,
listed as price per day's
supply, price per dosage unit,
and price per typical course of
treatment (as applicable);
``(ff) the total out-of-
pocket spending by plan
enrollees on such drug after
application of any benefits
under the plan, including plan
enrollee spending through
copayments, coinsurance, and
deductibles;
``(gg) total rebates paid
by the manufacturer on the drug
as reported under the Detailed
DIR Report (or any successor
report) submitted by such
sponsor to the Centers for
Medicare & Medicaid Services;
``(hh) all other direct or
indirect remuneration on the
drug as reported under the
Detailed DIR Report (or any
successor report) submitted by
such sponsor to the Centers for
Medicare & Medicaid Services;
``(ii) the average pharmacy
reimbursement amount paid by
the plan for the drug in the
aggregate and disaggregated by
dispensing channel identified
in item (cc);
``(jj) the average National
Average Drug Acquisition Cost
(NADAC); and
``(kk) total manufacturer-
derived revenue, inclusive of
bona fide service fees,
attributable to the drug and
retained by the pharmacy
benefit manager and any
affiliate of such pharmacy
benefit manager.
``(II) In the case of a pharmacy
benefit manager that has an affiliate
that is a retail, mail order, or
specialty pharmacy, with respect to
drugs covered by such plan that were
dispensed, the following information:
``(aa) The percentage of
total prescriptions that were
dispensed by pharmacies that
are an affiliate of the
pharmacy benefit manager for
each drug.
``(bb) The interquartile
range of the total combined
costs paid by the plan and plan
enrollees, per dosage unit, per
course of treatment, per 30-day
supply, and per 90-day supply
for each drug dispensed by
pharmacies that are not an
affiliate of the pharmacy
benefit manager and that are
included in the pharmacy
network of such plan.
``(cc) The interquartile
range of the total combined
costs paid by the plan and plan
enrollees, per dosage unit, per
course of treatment, per 30-day
supply, and per 90-day supply
for each drug dispensed by
pharmacies that are an
affiliate of the pharmacy
benefit manager and that are
included in the pharmacy
network of such plan.
``(dd) The lowest total
combined cost paid by the plan
and plan enrollees, per dosage
unit, per course of treatment,
per 30-day supply, and per 90-
day supply, for each drug that
is available from any pharmacy
included in the pharmacy
network of such plan.
``(ee) The difference
between the average acquisition
cost of the affiliate, such as
a pharmacy or other entity that
acquires prescription drugs,
that initially acquires the
drug and the amount reported
under subclause (I)(jj) for
each drug.
``(ff) A list inclusive of
the brand name, generic or non-
proprietary name, and National
Drug Code of covered part D
drugs subject to an agreement
with a covered entity under
section 340B of the Public
Health Service Act for which
the pharmacy benefit manager or
an affiliate of the pharmacy
benefit manager had a contract
or other arrangement with such
a covered entity in the service
area of such plan.
``(III) Where a drug approved under
section 505(c) of the Federal Food,
Drug, and Cosmetic Act (referred to in
this subclause as the `listed drug') is
covered by the plan, the following
information:
``(aa) A list of currently
marketed generic drugs approved
under section 505(j) of the
Federal Food, Drug, and
Cosmetic Act pursuant to an
application that references
such listed drug that are not
covered by the plan, are
covered on the same formulary
tier or a formulary tier
typically associated with
higher cost-sharing than the
listed drug, or are subject to
utilization management that the
listed drug is not subject to.
``(bb) The estimated
average beneficiary cost-
sharing under the plan for a
30-day supply of the listed
drug.
``(cc) Where a generic drug
listed under item (aa) is on a
formulary tier typically
associated with higher cost-
sharing than the listed drug,
the estimated average cost-
sharing that a beneficiary
would have paid for a 30-day
supply of each of the generic
drugs described in item (aa),
had the plan provided coverage
for such drugs on the same
formulary tier as the listed
drug.
``(dd) A written
justification for providing
more favorable coverage of the
listed drug than the generic
drugs described in item (aa).
``(ee) The number of
currently marketed generic
drugs approved under section
505(j) of the Federal Food,
Drug, and Cosmetic Act pursuant
to an application that
references such listed drug.
``(IV) Where a reference product
(as defined in section 351(i) of the
Public Health Service Act) is covered
by the plan, the following information:
``(aa) A list of currently
marketed biosimilar biological
products licensed under section
351(k) of the Public Health
Service Act pursuant to an
application that refers to such
reference product that are not
covered by the plan, are
covered on the same formulary
tier or a formulary tier
typically associated with
higher cost-sharing than the
reference product, or are
subject to utilization
management that the reference
product is not subject to.
``(bb) The estimated
average beneficiary cost-
sharing under the plan for a
30-day supply of the reference
product.
``(cc) Where a biosimilar
biological product listed under
item (aa) is on a formulary
tier typically associated with
higher cost-sharing than the
reference product, the
estimated average cost-sharing
that a beneficiary would have
paid for a 30-day supply of
each of the biosimilar
biological products described
in item (aa), had the plan
provided coverage for such
products on the same formulary
tier as the reference product.
``(dd) A written
justification for providing
more favorable coverage of the
reference product than the
biosimilar biological product
described in item (aa).
``(ee) The number of
currently marketed biosimilar
biological products licensed
under section 351(k) of the
Public Health Service Act,
pursuant to an application that
refers to such reference
product.
``(V) Total gross spending on
covered part D drugs by the plan, not
net of rebates, fees, discounts, or
other direct or indirect remuneration.
``(VI) The total amount retained by
the pharmacy benefit manager or an
affiliate of such pharmacy benefit
manager in revenue related to
utilization of covered part D drugs
under that plan, inclusive of bona fide
service fees.
``(VII) The total spending on
covered part D drugs net of rebates,
fees, discounts, or other direct and
indirect remuneration by the plan.
``(VIII) An explanation of any
benefit design parameters under such
plan that encourage plan enrollees to
fill prescriptions at pharmacies that
are an affiliate of such pharmacy
benefit manager, such as mail and
specialty home delivery programs, and
retail and mail auto-refill programs.
``(IX) The following information:
``(aa) A list of all
brokers, consultants, advisors,
and auditors that receive
compensation from the pharmacy
benefit manager or an affiliate
of such pharmacy benefit
manager for referrals,
consulting, auditing, or other
services offered to PDP
sponsors related to pharmacy
benefit management services.
``(bb) The amount of
compensation provided by such
pharmacy benefit manager or
affiliate to each such broker,
consultant, advisor, and
auditor.
``(cc) The methodology for
calculating the amount of
compensation provided by such
pharmacy benefit manager or
affiliate, for each such
broker, consultant, advisor,
and auditor.
``(X) A list of all affiliates of
the pharmacy benefit manager.
``(XI) A summary document submitted
in a standardized template developed by
the Secretary that includes such
information described in subclauses (I)
through (X).
``(ii) Written explanation of contracts or
agreements with drug manufacturers.--
``(I) In general.--The pharmacy
benefit manager shall, not later than
30 days after the finalization of any
contract or agreement between such
pharmacy benefit manager or an
affiliate of such pharmacy benefit
manager and a drug manufacturer (or
subsidiary, agent, or entity affiliated
with such drug manufacturer) that makes
rebates, discounts, payments, or other
financial incentives related to one or
more covered part D drugs or other
prescription drugs, as applicable, of
the manufacturer directly or indirectly
contingent upon coverage, formulary
placement, or utilization management
conditions on any other covered part D
drugs or other prescription drugs, as
applicable, submit to the PDP sponsor a
written explanation of such contract or
agreement.
``(II) Requirements.--A written
explanation under subclause (I) shall--
``(aa) include the
manufacturer subject to the
contract or agreement, all
covered part D drugs and other
prescription drugs, as
applicable, subject to the
contract or agreement and the
manufacturers of such drugs,
and a high-level description of
the terms of such contract or
agreement and how such terms
apply to such drugs; and
``(bb) be certified by the
Chief Executive Officer, Chief
Financial Officer, or General
Counsel of such pharmacy
benefit manager, or affiliate
of such pharmacy benefit
manager, as applicable, or an
individual delegated with the
authority to sign on behalf of
one of these officers, who
reports directly to the
officer.
``(III) Definition of other
prescription drugs.--For purposes of
this clause, the term `other
prescription drugs' means prescription
drugs covered as supplemental benefits
under this part or prescription drugs
paid outside of this part.
``(D) Audit rights.--
``(i) In general.--Not less than once a
year, at the request of the PDP sponsor, the
pharmacy benefit manager shall allow for an
audit of the pharmacy benefit manager to ensure
compliance with all terms and conditions under
the written agreement described in this
paragraph and the accuracy of information
reported under subparagraph (C).
``(ii) Auditor.--The PDP sponsor shall have
the right to select an auditor. The pharmacy
benefit manager shall not impose any
limitations on the selection of such auditor.
``(iii) Provision of information.--The
pharmacy benefit manager shall make available
to such auditor all records, data, contracts,
and other information necessary to confirm the
accuracy of information provided under
subparagraph (C), subject to reasonable
restrictions on how such information must be
reported to prevent redisclosure of such
information.
``(iv) Timing.--The pharmacy benefit
manager must provide information under clause
(iii) and other information, data, and records
relevant to the audit to such auditor within 6
months of the initiation of the audit and
respond to requests for additional information
from such auditor within 30 days after the
request for additional information.
``(v) Information from affiliates.--The
pharmacy benefit manager shall be responsible
for providing to such auditor information
required to be reported under subparagraph (C)
or under clause (iii) of this subparagraph that
is owned or held by an affiliate of such
pharmacy benefit manager.
``(2) Enforcement.--
``(A) In general.--Each PDP sponsor shall--
``(i) disgorge to the Secretary any amounts
disgorged to the PDP sponsor by a pharmacy
benefit manager under paragraph (1)(A)(v);
``(ii) require, in a written agreement with
any pharmacy benefit manager acting on behalf
of such sponsor or affiliate of such pharmacy
benefit manager, that such pharmacy benefit
manager or affiliate reimburse the PDP sponsor
for any civil money penalty imposed on the PDP
sponsor as a result of the failure of the
pharmacy benefit manager or affiliate to meet
the requirements of paragraph (1) that are
applicable to the pharmacy benefit manager or
affiliate under the agreement; and
``(iii) require, in a written agreement
with any such pharmacy benefit manager acting
on behalf of such sponsor or affiliate of such
pharmacy benefit manager, that such pharmacy
benefit manager or affiliate be subject to
punitive remedies for breach of contract for
failure to comply with the requirements
applicable under paragraph (1).
``(B) Reporting of alleged violations.--The
Secretary shall make available and maintain a mechanism
for manufacturers, PDP sponsors, pharmacies, and other
entities that have contractual relationships with
pharmacy benefit managers or affiliates of such
pharmacy benefit managers to report, on a confidential
basis, alleged violations of paragraph (1)(A) or
subparagraph (C).
``(C) Anti-retaliation and anti-coercion.--
Consistent with applicable Federal or State law, a PDP
sponsor shall not--
``(i) retaliate against an individual or
entity for reporting an alleged violation under
subparagraph (B); or
``(ii) coerce, intimidate, threaten, or
interfere with the ability of an individual or
entity to report any such alleged violations.
``(3) Certification of compliance.--
``(A) In general.--Each PDP sponsor shall furnish
to the Secretary (at a time and in a manner specified
by the Secretary) an annual certification of compliance
with this subsection, as well as such information as
the Secretary determines necessary to carry out this
subsection.
``(B) Implementation.--Notwithstanding any other
provision of law, the Secretary may implement this
paragraph by program instruction or otherwise.
``(4) Rule of construction.--Nothing in this subsection
shall be construed as--
``(A) prohibiting flat dispensing fees or
reimbursement or payment for ingredient costs
(including customary, industry-standard discounts
directly related to drug acquisition that are retained
by pharmacies or wholesalers) to entities that acquire
or dispense prescription drugs; or
``(B) modifying regulatory requirements or sub-
regulatory program instruction or guidance related to
pharmacy payment, reimbursement, or dispensing fees.
``(5) Standard formats.--
``(A) In general.--Not later than June 1, 2027, the
Secretary shall specify standard, machine-readable
formats for pharmacy benefit managers to submit annual
reports required under paragraph (1)(C)(i).
``(B) Implementation.--Notwithstanding any other
provision of law, the Secretary may implement this
paragraph by program instruction or otherwise.
``(6) Confidentiality.--
``(A) In general.--Information disclosed by a
pharmacy benefit manager, an affiliate of a pharmacy
benefit manager, a PDP sponsor, or a pharmacy under
this subsection that is not otherwise publicly
available or available for purchase shall not be
disclosed by the Secretary or a PDP sponsor receiving
the information, except that the Secretary may disclose
the information for the following purposes:
``(i) As the Secretary determines necessary
to carry out this part.
``(ii) To permit the Comptroller General to
review the information provided.
``(iii) To permit the Director of the
Congressional Budget Office to review the
information provided.
``(iv) To permit the Executive Director of
the Medicare Payment Advisory Commission to
review the information provided.
``(v) To the Attorney General for the
purposes of conducting oversight and
enforcement under this title.
``(vi) To the Inspector General of the
Department of Health and Human Services in
accordance with its authorities under the
Inspector General Act of 1978 (section 406 of
title 5, United States Code), and other
applicable statutes.
``(B) Restriction on use of information.--The
Secretary, the Comptroller General, the Director of the
Congressional Budget Office, and the Executive Director
of the Medicare Payment Advisory Commission shall not
report on or disclose information disclosed pursuant to
subparagraph (A) to the public in a manner that would
identify--
``(i) a specific pharmacy benefit manager,
affiliate, pharmacy, manufacturer, wholesaler,
PDP sponsor, or plan; or
``(ii) contract prices, rebates, discounts,
or other remuneration for specific drugs in a
manner that may allow the identification of
specific contracting parties or of such
specific drugs.
``(7) Definitions.--For purposes of this subsection:
``(A) Affiliate.--The term `affiliate' means, with
respect to any pharmacy benefit manager or PDP sponsor,
any entity that, directly or indirectly--
``(i) owns or is owned by, controls or is
controlled by, or is otherwise related in any
ownership structure to such pharmacy benefit
manager or PDP sponsor; or
``(ii) acts as a contractor, principal, or
agent to such pharmacy benefit manager or PDP
sponsor, insofar as such contractor, principal,
or agent performs any of the functions
described under subparagraph (C).
``(B) Bona fide service fee.--The term `bona fide
service fee' means a fee that is reflective of the fair
market value (as specified by the Secretary, through
notice and comment rulemaking) for a bona fide,
itemized service actually performed on behalf of an
entity, that the entity would otherwise perform (or
contract for) in the absence of the service arrangement
and that is not passed on in whole or in part to a
client or customer, whether or not the entity takes
title to the drug. Such fee must be a flat dollar
amount and shall not be directly or indirectly based
on, or contingent upon--
``(i) drug price, such as wholesale
acquisition cost or drug benchmark price (such
as average wholesale price);
``(ii) the amount of discounts, rebates,
fees, or other direct or indirect remuneration
with respect to covered part D drugs dispensed
to enrollees in a prescription drug plan,
except as permitted pursuant to paragraph
(1)(A)(ii);
``(iii) coverage or formulary placement
decisions or the volume or value of any
referrals or business generated between the
parties to the arrangement; or
``(iv) any other amounts or methodologies
prohibited by the Secretary.
``(C) Pharmacy benefit manager.--The term `pharmacy
benefit manager' means any person or entity that,
either directly or through an intermediary, acts as a
price negotiator or group purchaser on behalf of a PDP
sponsor or prescription drug plan, or manages the
prescription drug benefits provided by such sponsor or
plan, including the processing and payment of claims
for prescription drugs, the performance of drug
utilization review, the processing of drug prior
authorization requests, the adjudication of appeals or
grievances related to the prescription drug benefit,
contracting with network pharmacies, controlling the
cost of covered part D drugs, or the provision of
related services. Such term includes any person or
entity that carries out one or more of the activities
described in the preceding sentence, irrespective of
whether such person or entity calls itself a `pharmacy
benefit manager'.''.
(B) MA-PD plans.--Section 1857(f)(3) of the Social
Security Act (42 U.S.C. 1395w-27(f)(3)), as amended by
subsection (a)(4)(B), is amended by adding at the end
the following new subparagraph:
``(G) Requirements relating to pharmacy benefit
managers.--For plan years beginning on or after January
1, 2028, section 1860D-12(h).''.
(C) Nonapplication of paperwork reduction act.--
Chapter 35 of title 44, United States Code, shall not
apply to the implementation of this paragraph.
(D) Funding.--
(i) Secretary.--In addition to amounts
otherwise available, there is appropriated to
the Centers for Medicare & Medicaid Services
Program Management Account, out of any money in
the Treasury not otherwise appropriated,
$113,000,000 for fiscal year 2026, to remain
available until expended, to carry out this
paragraph.
(ii) OIG.--In addition to amounts otherwise
available, there is appropriated to the
Inspector General of the Department of Health
and Human Services, out of any money in the
Treasury not otherwise appropriated,
$20,000,000 for fiscal year 2026, to remain
available until expended, to carry out this
paragraph.
(2) GAO study and report on price-related compensation
across the supply chain.--
(A) Study.--The Comptroller General of the United
States (in this paragraph referred to as the
``Comptroller General'') shall conduct a study
describing the use of compensation and payment
structures related to a prescription drug's price
within the retail prescription drug supply chain in
part D of title XVIII of the Social Security Act (42
U.S.C. 1395w-101 et seq.). Such study shall summarize
information from Federal agencies and industry experts,
to the extent available, with respect to the following:
(i) The type, magnitude, other features
(such as the pricing benchmarks used), and
prevalence of compensation and payment
structures related to a prescription drug's
price, such as calculating fee amounts as a
percentage of a prescription drug's price,
between intermediaries in the prescription drug
supply chain, including--
(I) pharmacy benefit managers;
(II) PDP sponsors offering
prescription drug plans and Medicare
Advantage organizations offering MA-PD
plans;
(III) drug wholesalers;
(IV) pharmacies;
(V) manufacturers;
(VI) pharmacy services
administrative organizations;
(VII) brokers, auditors,
consultants, and other entities that--
(aa) advise PDP sponsors
offering prescription drug
plans and Medicare Advantage
organizations offering MA-PD
plans regarding pharmacy
benefits; or
(bb) review PDP sponsor and
Medicare Advantage organization
contracts with pharmacy benefit
managers; and
(VIII) other service providers that
contract with any of the entities
described in subclauses (I) through
(VII) that may use price-related
compensation and payment structures,
such as rebate aggregators (or other
entities that negotiate or process
price concessions on behalf of pharmacy
benefit managers, plan sponsors, or
pharmacies).
(ii) The primary business models and
compensation structures for each category of
intermediary described in clause (i).
(iii) Variation in price-related
compensation structures between affiliated
entities (such as entities with common
ownership, either full or partial, and
subsidiary relationships) and unaffiliated
entities.
(iv) Potential conflicts of interest among
contracting entities related to the use of
prescription drug price-related compensation
structures, such as the potential for fees or
other payments set as a percentage of a
prescription drug's price to advantage
formulary selection, distribution, or
purchasing of prescription drugs with higher
prices.
(v) Notable differences, if any, in the use
and level of price-based compensation
structures over time and between different
market segments, such as under part D of title
XVIII of the Social Security Act (42 U.S.C.
1395w-101 et seq.) and the Medicaid program
under title XIX of such Act (42 U.S.C. 1396 et
seq.).
(vi) The effects of drug price-related
compensation structures and alternative
compensation structures on Federal health care
programs and program beneficiaries, including
with respect to cost-sharing, premiums, Federal
outlays, biosimilar and generic drug adoption
and utilization, drug shortage risks, and the
potential for fees set as a percentage of a
drug's price to advantage the formulary
selection, distribution, or purchasing of drugs
with higher prices.
(vii) Other issues determined to be
relevant and appropriate by the Comptroller
General.
(B) Report.--Not later than 2 years after the date
of enactment of this paragraph, the Comptroller General
shall submit to Congress a report containing the
results of the study conducted under subparagraph (A),
together with recommendations for such legislation and
administrative action as the Comptroller General
determines appropriate.
(3) MedPAC reports on agreements with pharmacy benefit
managers with respect to prescription drug plans and ma-pd
plans.--
(A) In general.--The Medicare Payment Advisory
Commission shall submit to Congress the following
reports:
(i) Initial report.--Not later than the
first March 15 occurring after the date that is
2 years after the date on which the Secretary
makes the data available to the Commission, a
report regarding agreements with pharmacy
benefit managers with respect to prescription
drug plans and MA-PD plans. Such report shall
include, to the extent practicable--
(I) a description of trends and
patterns, including relevant averages,
totals, and other figures for the types
of information submitted;
(II) an analysis of any differences
in agreements and their effects on plan
enrollee out-of-pocket spending and
average pharmacy reimbursement, and
other impacts; and
(III) any recommendations the
Commission determines appropriate.
(ii) Final report.--Not later than 2 years
after the date on which the Commission submits
the initial report under clause (i), a report
describing any changes with respect to the
information described in clause (i) over time,
together with any recommendations the
Commission determines appropriate.
(B) Funding.--In addition to amounts otherwise
available, there is appropriated to the Medicare
Payment Advisory Commission, out of any money in the
Treasury not otherwise appropriated, $1,000,000 for
fiscal year 2026, to remain available until expended,
to carry out this paragraph.
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