[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 927 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 927
To amend title XIX of the Social Security Act to ensure accurate
payments to pharmacies under Medicaid and to prevent the use of abusive
spread pricing practices under Medicaid.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 11 (legislative day, March 10), 2025
Mr. Welch (for himself, Mr. Marshall, Mr. Warner, and Mr. Cassidy)
introduced the following bill; which was read twice and referred to the
Committee on Finance
_______________________________________________________________________
A BILL
To amend title XIX of the Social Security Act to ensure accurate
payments to pharmacies under Medicaid and to prevent the use of abusive
spread pricing practices under Medicaid.
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 ``Protecting Pharmacies in Medicaid
Act''.
SEC. 2. ENSURING ACCURATE PAYMENTS TO PHARMACIES UNDER MEDICAID.
(a) In General.--Section 1927(f) of the Social Security Act (42
U.S.C. 1396r-8(f)) is amended--
(1) in paragraph (1)(A)--
(A) by redesignating clause (ii) as clause (iii);
and
(B) 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; and
``(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'';
(2) in subparagraph (B) of paragraph (1), by striking
``subparagraph (A)(ii)'' and inserting ``subparagraph
(A)(iii)'';
(3) 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)(14)), 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 (d)(2) of
section 2 of the Protecting Pharmacies in
Medicaid Act.'';
(4) 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.'';
(5) in paragraph (2)--
(A) 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
(B) in subparagraph (B), by inserting ``and the
basis for such dispensing fees'' before the semicolon;
(6) by redesignating paragraph (4) as paragraph (5);
(7) 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)(14)) 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
(8) in paragraph (5), as so redesignated--
(A) by inserting ``, and $9,000,000 for fiscal year
2026 and each fiscal year thereafter,'' after ``2010'';
and
(B) by inserting ``Funds appropriated under this
paragraph for fiscal year 2026 and any subsequent
fiscal year shall remain available until expended.''
after the period.
(b) Definitions.--Section 1927(k) of the Social Security Act (42
U.S.C. 1396r-8(k)) is amended--
(1) in the matter preceding paragraph (1), by striking ``In
the section'' and inserting ``In this section''; and
(2) 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)).''.
(c) Effective Date.--
(1) In general.--Subject to paragraph (2), the amendments
made by this section 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.
(2) 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 section shall apply to
retail community pharmacies beginning on the effective date
described in paragraph (1), 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.
(d) Identification of Applicable Non-Retail Pharmacies.--
(1) 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 subsection (b)), and that will be subject to the
survey requirements under subsection (f)(1) of such section, as
amended by subsection (a).
(2) Inclusion of pharmacy type indicators.--The guidance
published under paragraph (1) 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.
(e) Implementation.--
(1) In general.--Notwithstanding any other provision of
law, the Secretary of Health and Human Services may implement
the amendments made by this section by program instruction or
otherwise.
(2) Nonapplication of administrative procedure act.--
Implementation of the amendments made by this section shall be
exempt from the requirements of section 553 of title 5, United
States Code.
(f) 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 section.
SEC. 3. PREVENTING THE USE OF ABUSIVE SPREAD PRICING IN MEDICAID.
(a) In General.--Section 1927 of the Social Security Act (42 U.S.C.
1396r-8) is amended--
(1) 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
(2) in subsection (k), as amended by section 2(b), 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.''.
(b) Conforming Amendments.--Section 1903(m) of such Act (42 U.S.C.
1396b(m)) is amended--
(1) in paragraph (2)(A)(xiii)--
(A) by striking ``and (III)'' and inserting
``(III)'';
(B) 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
(C) by moving the margin 2 ems to the left; and
(2) 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).''.
(c) Effective Date.--The amendments made by this section 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.
(d) Implementation.--
(1) In general.--Notwithstanding any other provision of
law, the Secretary of Health and Human Services may implement
the amendments made by this section by program instruction or
otherwise.
(2) Nonapplication of administrative procedure act.--
Implementation of the amendments made by this section shall be
exempt from the requirements of section 553 of title 5, United
States Code.
(e) 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 section.
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