[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 979 Introduced in House (IH)]

112th CONGRESS
  1st Session
                                H. R. 979

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


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 9, 2011

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

_______________________________________________________________________

                                 A BILL


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

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

SECTION 1. SHORT TITLE.

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

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

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

``8915. Requirements for PBM arrangements.''.
    (d) Effective Date; Waiver; Regulations.--
            (1) Effective date.--The amendments made by this section 
        shall apply to contract years beginning on or after January 1, 
        2012.
            (2) Waiver.--The Office of Personnel Management may waive 
        the application of 1 or more of the requirements of section 
        8915 of title 5, United States Code, but only for contract year 
        2012.
            (3) Expediting implementation of regulations.--Not later 
        than 6 months after the date of the enactment of this Act, the 
        Office of Personnel Management shall issue interim final 
        regulations to carry out this section which may be effective 
        and final immediately on an interim basis as of the date of 
        publication of such regulations. If the Office provides for an 
        interim final regulation, the Office shall provide for a period 
        of public comment on such regulation after the date of 
        publication. The Office may change or revise such regulation 
        after completion of the period of public comment.
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