FEHBP Prescription Drug Integrity, Transparency, and Cost Savings Act - Prohibits the Office of Personnel Management (OPM) from entering a contract or approving a health benefits plan with a carrier that is a party to a pharmacy benefit manager (PBM) carrier arrangement to provide or administer prescription drug coverage under the Federal Employees Health Benefits Program (FEHBP) unless the PBM and the carrier comply with requirements of this Act. Directs OPM to terminate a contract or discontinue a plan that fails to comply.
Prohibits: (1) a pharmaceutical drug manufacturer or retail pharmacy from having a controlling interest in the PBM; or (2) the PBM from having a controlling interest in a retail pharmacy. Requires each carrier to certify PBM compliance annually. Prohibits OPM from permitting a carrier that has a controlling interest in a PBM to earn a profit from such interest with respect to an FEHBP contract.
Sets forth requirements of PBM arrangements under the FEHBP, including regarding: (1) drug substitution restrictions; (2) PBM reimbursement of carriers; (3) sale by a PBM of utilization and claims data; (4) drug pricing and the basis for reimbursement; (5) provisions of an explanation of benefits to enrollees; (6) nondiscriminatory contracts regarding required participation; (7) OPM access to PBM contract information; (8) civil monetary penalties for making false statements or claims to the government; and (9) reports from drug manufacturers on average manufacturer prices for drugs each quarter.
[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.
<all>
Introduced in House
Introduced in House
Sponsor introductory remarks on measure. (CR E70-71)
Referred to the House Committee on Oversight and Government Reform.
Referred to the Subcommittee on Federal Workforce, Post Office, and the District of Columbia.
Subcommittee Hearings Held.
Subcommittee Consideration and Mark-up Session Held.
Forwarded by Subcommittee to Full Committee (Amended) by Voice Vote .
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