[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4489 Introduced in House (IH)]

111th CONGRESS
  2d Session
                                H. R. 4489

 To amend chapter 89 of title 5, United States Code, to ensure program 
     integrity, transparency, and cost savings in the pricing and 
 contracting of prescription drug benefits under the Federal Employees 
                        Health Benefits Program.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 21, 2010

  Mr. Lynch (for himself, Mr. Connolly of Virginia, and Mr. Cummings) 
 introduced the following bill; which was referred to the Committee on 
                    Oversight and Government Reform

_______________________________________________________________________

                                 A BILL


 
 To amend chapter 89 of title 5, United States Code, to ensure program 
     integrity, transparency, and cost savings in the pricing and 
 contracting of prescription drug benefits under the Federal Employees 
                        Health Benefits Program.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be referred to as the ``FEHBP Prescription Drug 
Integrity, Transparency, and Cost Savings Act''.

SEC. 2. IMPROVED PROGRAM INTEGRITY, TRANSPARENCY, AND COST SAVINGS FOR 
              PRESCRIPTION DRUG BENEFITS IN THE FEDERAL EMPLOYEES 
              HEALTH BENEFITS PROGRAM.

    (a) Change in Contracting Requirements.--Section 8902 of title 5, 
United States Code, is amended by adding at the end the following:
    ``(p) A contract may not be made or a plan approved under this 
chapter, with respect to a carrier that is a party to a PBM carrier 
arrangement, unless the PBM and the carrier comply with the 
requirements of section 8915. The Office shall terminate such contract 
or discontinue such plan for failure to comply with such 
requirements.''.
    (b) Requirements for PBMs and Related Requirements for Carriers.--
Chapter 89 of title 5, United States Code, is amended by adding at the 
end the following:
``Sec. 8915. Requirements for PBM arrangements
    ``(a) Limitations on Cross-Ownership.--
            ``(1) In general.--Under a PBM carrier arrangement under 
        this chapter--
                    ``(A) no pharmaceutical drug manufacturer or retail 
                pharmacy may have a controlling interest in the PBM; 
                and
                    ``(B) the PBM may not have a controlling interest 
                in a retail pharmacy.
            ``(2) Compliance.--Each carrier shall certify annually to 
        the Office of Personnel Management that any PBM with which it 
        has a PBM carrier arrangement meets the requirements of 
        paragraph (1). The Office shall terminate any contract with a 
        carrier with a PBM carrier arrangement that does not comply 
        with such requirements.
            ``(3) Profit restriction on carrier controlled pbms.--The 
        Office may not permit a carrier that has a controlling interest 
        in a PBM to earn a profit from such interest with respect to a 
        contract under this chapter.
    ``(b) Drug Substitution Restrictions.--Under a PBM carrier 
arrangement under this chapter--
            ``(1) the PBM shall allow a drug substitution, if it is not 
        a generic drug substitution, only after the prescriber (or 
        another individual authorized to prescribe drugs) provides the 
        pharmacist with an express, verifiable authorization for such 
        substitution;
            ``(2) to the extent appropriate, the PBM shall consult an 
        enrollee concerning any drug substitution for a drug prescribed 
        to such enrollee;
            ``(3) the PBM may not propose that the prescriber or 
        pharmacist substitute a prescription drug that has a higher net 
        cost for a prescription drug in the same class with a lower net 
        cost;
            ``(4) the PBM may not propose that the prescriber or 
        pharmacist substitute a prescription drug that is a single 
        source drug for a prescription drug in the same class that is a 
        multiple source drug;
            ``(5) the PBM may not require a drug substitution if the 
        prescriber determines that such substitution will endanger the 
        health of the enrollee for whom the drug was prescribed;
            ``(6) the PBM will disclose to the prescriber of a drug, 
        the carrier, and the enrollee for whom such drug was 
        prescribed--
                    ``(A) the reason why the PBM is suggesting a drug 
                substitution for such drug; and
                    ``(B) the financial impact of the drug substitution 
                on the PBM, the carrier, and the patient; and
            ``(7) if a PBM has a controlling interest in a mail order 
        pharmacy, such PBM shall ensure that any drug which is 
        dispensed by such pharmacy to an enrollee as a result of a drug 
        substitution shall be dispensed with a written notice that such 
        drug substitution occurred and that such substitution occurred 
        with the approval of the prescriber.
    ``(c) Reimbursement of Carriers.--Under a PBM carrier arrangement 
under this chapter, by the last day of each quarter of the contract 
year--
            ``(1) the PBM shall pay to a carrier an amount that is at 
        least 99 percent of the sum of--
                    ``(A) all compensation that the PBM received during 
                the previous quarter from a pharmaceutical drug 
                manufacturer under a PBM manufacturer arrangement (to 
                the extent such arrangement relates to the PBM carrier 
                arrangement) including compensation that the Office 
                categorizes (regardless of how such compensation is 
                categorized by the PBM) as market share incentives, 
                drug-switch programs, educational support, commissions, 
                mail service purchase discounts, administrative or 
                management fees, and all other forms of compensation 
                (excluding rebates);
                    ``(B) all compensation received by the PBM during 
                the previous quarter for sales of utilization or claims 
                data that the PBM possesses as a result of the PBM 
                carrier arrangement; and
                    ``(C) all rebates paid to the PBM during the 
                previous quarter by a pharmaceutical drug manufacturer 
                to the extent that such rebates are based on drugs 
                dispensed under the PBM carrier arrangement; and
            ``(2) the PBM shall disclose to the carrier and the Office, 
        in a form and manner specified by the Office--
                    ``(A) the compensation described in paragraph 
                (1)(A), reported by the amount of compensation for each 
                category recognized by the Office;
                    ``(B) the compensation described in paragraph 
                (1)(B); and
                    ``(C) the rebates described in paragraph (1)(C), 
                reported on a drug-by-drug basis.
    ``(d) Sale of Utilization and Claims Data.--Under a PBM carrier 
arrangement under this chapter, if the PBM intends to sell utilization 
or claims data that the PBM possesses as a result of such arrangement--
            ``(1) the PBM shall notify the Office before selling such 
        data and shall provide the Office with the name of the 
        potential purchaser of such data and the expected use of any 
        utilization or claims data by such purchaser; and
            ``(2) the PBM may not sell such data unless the sale 
        complies with all Federal and State laws and the PBM has 
        received approval for such sale from the Office.
    ``(e) Pricing.--
            ``(1) Spread pricing.--
                    ``(A) Limitation on charges to carrier.--The PBM 
                shall not charge the carrier more for a drug that is 
                covered under the PBM carrier arrangement than the 
                amount that the PBM reimburses a pharmacy which 
                dispensed such drug for the drug.
                    ``(B) Disclosures.--
                            ``(i) Initial disclosure.--Before entering 
                        into a PBM carrier arrangement under this 
                        chapter, the PBM shall disclose to the carrier 
                        and the Office--
                                    ``(I) the reimbursement basis that 
                                the PBM uses (including the type of 
                                benchmark price and the source of the 
                                data for determining such price) for 
                                reimbursing retail and mail order 
                                pharmacies; and
                                    ``(II) the methodology that the PBM 
                                uses to compute reimbursements to 
                                retail and mail order pharmacies that 
                                dispense the drug.
                            ``(ii) Updates.--Not later than 30 days 
                        after making a change to the reimbursement 
                        basis or methodology under clause (i), the PBM 
                        shall disclose such change to the carrier and 
                        the Office.
                            ``(iii) Transition rule.--Under a PBM 
                        carrier arrangement under this chapter that is 
                        in effect on the effective date of the FEHBP 
                        Prescription Drug Integrity, Transparency, and 
                        Cost Savings Act, the PBM shall disclose the 
                        information under clause (i) not later than 1 
                        year after such date.
            ``(2) Maximum price for prescription drugs.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                carrier under a PBM carrier arrangement under this 
                chapter may not pay a PBM an amount for a prescription 
                drug that is more than an amount that is equal to the 
                average manufacturer price for the drug minus any cost-
                sharing for such drug that is the responsibility of an 
                enrollee.
                    ``(B) Rule of construction.--Subparagraph (A) shall 
                not be construed to affect the payment--
                            ``(i) of any applicable cost-sharing to a 
                        pharmacy by an enrollee; or
                            ``(ii) subject to paragraph (3), the 
                        payment of any dispensing fee to a pharmacy by 
                        a PBM.
            ``(3) Maximum dispensing fee.--
                    ``(A) In general.--Under a PBM carrier arrangement, 
                a PBM may not pay to a pharmacy a dispensing fee that 
                exceeds the maximum dispensing fee determined under 
                subparagraph (B).
                    ``(B) Determination of maximum dispensing fee.--The 
                Office shall, with respect to each drug covered by a 
                health benefits plan under this chapter, determine the 
                maximum dispensing fee.
    ``(f) Right to Explanation of Benefits.--Under a PBM carrier 
arrangement under this chapter, not later than 90 days after the date 
on which a pharmacy dispenses a prescription drug covered under the 
arrangement, the PBM shall provide (by mail or electronically) to the 
enrollee to whom such drug was dispensed an explanation of benefits 
statement that contains the following information:
            ``(1) The date the claim for such prescription drug was 
        made by the pharmacy.
            ``(2) The name of such drug and the strength and quantity 
        dispensed to the enrollee.
            ``(3) The amount paid by the enrollee for the prescription 
        drug.
            ``(4) The amount paid to the pharmacy by the PBM to 
        reimburse such pharmacy for the prescription drug and the 
        provision of any covered service related to dispensing such 
        drug.
            ``(5) The amount paid by the carrier to the PBM for such 
        prescription drug.
    ``(g) Non-Discriminatory Contract.--Under a PBM carrier arrangement 
under this chapter, a PBM may not require that a pharmacy participate 
in a pharmacy network managed by such PBM in order for the pharmacy to 
participate in another network managed by such PBM.
    ``(h) Access to PBM Contract Information.--
            ``(1) In general.--Under a PBM carrier arrangement under 
        this chapter, on the request of the Office of Personnel 
        Management, a PBM shall provide to the Office and to the Office 
        of Inspector General of the Office of Personnel Management full 
        access to information relating to contracts entered into by 
        such PBM under such arrangement (such as PBM manufacturer 
        arrangements and contracts with pharmacies). Such information 
        shall include--
                    ``(A) corporate-wide rebate receipt aging reports 
                that cover all of the PBM's lines of business;
                    ``(B) information and methodology used to calculate 
                and allocate rebates between the PBM's lines of 
                business;
                    ``(C) information on average wholesale prices, 
                wholesale acquisition costs, and maximum allowable 
                costs;
                    ``(D) information on dispensing fees paid; and
                    ``(E) information and methodologies used to 
                calculate additional administrative and service fees 
                charged to the carrier.
            ``(2) Confidentiality.--Information disclosed by a health 
        benefits plan or PBM under this subsection is confidential and 
        shall not be disclosed by the Office or by a plan receiving the 
        information, except that nothing in this paragraph shall 
        prevent--
                    ``(A) a disclosure requird under the Inspector 
                General Act of 1978; or
                    ``(B) any disclosure which the Office, in its sole 
                discretion, considers necessary in order to carry out 
                this section, if such disclosure is made in a form 
                which does not disclose the identity of a specific PBM 
                or plan or the price charged for a particular drug.
            ``(3) Exemption from foia.--Any information obtained under 
        this subsection shall be exempt from disclosure under section 
        552 (commonly referred to as the `Freedom of Information Act').
    ``(i) Civil Monetary Penalties.--
            ``(1) In general.--A PBM or a carrier that makes a false 
        statement or false claim to the Government of the United States 
        with respect to the disclosure of information required under 
        this section shall be considered in violation of section 3729 
        of title 31.
            ``(2) Use of collections.--Any monetary penalty collected 
        under paragraph (1) shall be deposited into the Employees 
        Health Benefits Fund under section 8909.
    ``(j) Collection of Data on Average Manufacturer Price.--
            ``(1) Master agreement.--For quarters beginning on or after 
        January 1, 2011--
                    ``(A) each manufacturer of covered drugs shall 
                enter into a master agreement with the Office under 
                which, not later than 60 days after the last day of 
                each quarter for which the agreement is in effect, the 
                manufacturer reports to the Office the average 
                manufacturer price for the drug during such quarter; 
                and
                    ``(B) unless the manufacturer meets the requirement 
                of subparagraph (A) for a quarter, the manufacturer may 
                not receive payment from a carrier under this chapter 
                or from a PBM under a PBM carrier arrangement under 
                this chapter for the purchase of such drugs dispensed 
                during the period--
                            ``(i) beginning with the second subsequent 
                        quarter; and
                            ``(ii) ending with the second quarter after 
                        the next quarter for which such requirement is 
                        met).
            ``(2) Application of provisions.--The provisions of 
        subparagraphs (B), (C), and (D) of section 1927(b)(3) of the 
        Social Security Act shall apply to covered drugs and the Office 
        under this section with respect to information required to be 
        reported under paragraph (1)(A) in the same manner as such 
        provisions apply to covered outpatient drugs and the Secretary 
        of Health and Human Services with respect to information 
        required to be reported under subparagraph (A) of such section 
        1927(b)(3).
            ``(3) Covered drug defined.--For purposes of this 
        subsection, the term `covered drug' means a covered outpatient 
        drug (as defined in section 1927(k) of the Social Security Act) 
        for which benefits are payable under a health benefits plan 
        under this chapter.
    ``(k) Definitions.--For purposes of this section and section 
8902(p):
            ``(1) Average manufacturer price.--The term `average 
        manufacturer price' means the average price for a drug that is 
        paid to a manufacturer by wholesalers, retail pharmacies, and 
        mail order pharmacies that buy directly from the manufacturer.
            ``(2) Average wholesale price.--The term `average wholesale 
        price' means a publicly available, suggested list price for a 
        prescription drug that is provided by a wholesaler to a 
        pharmacy or other entity that provides prescription drugs 
        directly to consumers.
            ``(3) Controlling interest.--An entity that has a 
        `controlling interest' in a second entity owns or otherwise 
        controls at least 20 percent of the second entity.
            ``(4) Dispensing fee.--The term `dispensing fee' means a 
        fee paid to a pharmacy for the service of filling or dispensing 
        prescriptions (excluding the cost of the drug dispensed).
            ``(5) Drug substitution.--The term `drug substitution' 
        means any change from one prescription drug to another 
        prescription drug that is intended to address or treat the same 
        illness or condition.
            ``(6) Maximum allowable cost.--The term `maximum allowable 
        cost' means a cost that is set by a PBM as the upper payment 
        limit on the ingredient costs for a multiple source drug.
            ``(7) Multiple source drug.--The term `multiple source 
        drug' has the meaning given such term in section 1927(k)(7) of 
        the Social Security Act.
            ``(8) Net cost.--The term `net cost' means the final cost 
        of the drug to the carrier (or an enrollee) after all 
        adjustments (including discounts, rebates, associated 
        dispensing fees and administrative fees, and enrollee cost 
        sharing).
            ``(9) PBM.--The term `PBM' means a pharmacy benefit 
        manager.
            ``(10) PBM carrier arrangement.--The term `PBM carrier 
        arrangement' means a contract between a PBM and a carrier for 
        the provision or administration of a program of prescription 
        drug coverage under a health benefits plan under this chapter. 
        Such a contract may provide, among other duties, for the PBM 
        to--
                    ``(A) process and pay prescription drug claims;
                    ``(B) provide programs and services designed to--
                            ``(i) maximize the effectiveness of drugs 
                        dispensed under such plan; or
                            ``(ii) contain drug expenditures under such 
                        plan; and
                    ``(C) engage in other activities related to the 
                administration of such prescription drug coverage.
            ``(11) PBM manufacturer arrangement.--The term `PBM 
        manufacturer arrangement' means a contract between a PBM and a 
        drug manufacturer for the provision of prescription drugs to 
        enrollees of health benefits plans with prescription drug 
        coverage that is administered or provided by the PBM.
            ``(12) Pharmacy benefit manager.--The term `pharmacy 
        benefit manager' means an entity that contracts with a carrier 
        to provide or administer prescription drug coverage under a 
        health benefits plan under this chapter.
            ``(13) Prescriber.--The term `prescriber' means an 
        individual who is authorized under State and Federal law to 
        prescribe drugs and who prescribes a drug to an enrollee of a 
        health benefits plan under this chapter.
            ``(14) Retail pharmacy.--The term `retail pharmacy' 
        excludes any mail order pharmacy.
            ``(15) Single source drug.--The term `single source drug' 
        has the meaning given such term in section 1927(k)(7) of the 
        Social Security Act.
            ``(16) Wholesale acquisition cost.--The term `wholesale 
        acquisition cost' means a publicly available list price for 
        sales of a drug by a manufacturer to a wholesaler.''.
    (c) Clerical Amendment.--The table of sections for chapter 89 of 
title 5, United States Code, is amended by adding at the end the 
following:

``8915. Requirements for PBM arrangements.''.
    (d) Effective Date; Waiver; Regulations.--
            (1) Effective date.--The amendments made by this section 
        shall apply to contract years beginning on or after January 1, 
        2011.
            (2) Waiver.--The Office of Personnel Management may waive 
        the application of 1 or more of the requirements of section 
        8915 of title 5, United States Code, but only for contract year 
        2011.
            (3) Expediting implementation of regulations.--Not later 
        than 6 months after the date of the enactment of this Act, the 
        Office of Personnel Management shall issue interim final 
        regulations to carry out this section which may be effective 
        and final immediately on an interim basis as of the date of 
        publication of such regulations. If the Office of Personnel 
        Management provides for an interim final regulation, the Office 
        of Personnel Management shall provide for a period of public 
        comment on such regulation after the date of publication. The 
        Office of Personnel Management may change or revise such 
        regulation after completion of the period of public comment.
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