S 1058

112th CONGRESS
1st Session

S. 1058

To amend the Public Health Service Act to ensure transparency and proper operation of pharmacy benefit managers.

IN THE SENATE OF THE UNITED STATES

May 24, 2011

Mr. PRYOR (for himself and Mr. MORAN) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions


A BILL

To amend the Public Health Service Act to ensure transparency and proper operation of pharmacy benefit managers.

    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 `Pharmacy Competition and Consumer Choice Act of 2011'.

SEC. 2. PHARMACY BENEFITS MANAGER TRANSPARENCY AND PROPER OPERATION REQUIREMENTS.

    (a) Amendment to the Public Health Service Act Relating to the Group Market-

      (1) IN GENERAL- Subpart 2 of part A of title XXVII of the Public Health Service Act (42 U.S.C. 300gg-4 et seq.) is amended by adding at the end the following:

`SEC. 2729. PHARMACY BENEFITS MANAGER TRANSPARENCY AND PROPER OPERATION REQUIREMENTS.

    `(a) In General- Notwithstanding any other provision of law, a group health plan, and a health insurance issuer providing health insurance coverage in connection with a group health plan (collectively, a `plan sponsor'), shall not enter into a contract with any pharmacy benefits manager (referred to in this section as a `PBM') to manage the prescription drug coverage provided under such plan or insurance coverage, or to control the costs of such prescription drug coverage, unless the PBM satisfies the following requirements:

      `(1) REQUIRED DISCLOSURES TO PLAN SPONSOR IN ANNUAL REPORT- The PBM shall provide at least annually a report to each plan sponsor, including, at a minimum--

        `(A) information on the number and total cost of prescriptions under the contract filled at mail order and at retail pharmacies;

        `(B) an estimate of aggregate average payments under the contract, per prescription (weighted by prescription volume), made to mail order and retail pharmacies, and the average amount per prescription that the PBM was paid by the plan for prescriptions filled at mail order and retail pharmacies;

        `(C) an estimate of the aggregate average payment per prescription (weighted by prescription volume) under the contract received from pharmaceutical manufacturers, including all rebates, discounts, price concessions, or administrative and other payments from pharmaceutical manufacturers, and a description of the types of payments, the amount of such payments that were shared with the plan, and the percentage of prescriptions for which the PBM received such payments;

        `(D) information on the overall percentage of generic drugs dispensed under the contract separately at retail and mail order pharmacies, and the percentage of cases in which a generic drug is dispensed when available; and

        `(E) information on the percentage and number of cases under the contract in which individuals who had been receiving a prescribed drug that had a lower cost for the plan were later given a drug with a higher cost for the plan, because of PBM policies or at the direct or indirect control of the PBM, and the rationale for such changes and a description of the applicable PBM policies.

      `(2) PBM REQUIREMENTS WITH RESPECT TO PHARMACIES- With respect to contracts between a PBM and a pharmacy, the PBM shall--

        `(A) include in such contracts, the methodology and resources utilized for the Maximum Allowable Cost (referred to in this section as `MAC') pricing of the PBM, update pricing information on such list at least weekly, and establish a process for the prompt notification of such pricing updates to network pharmacies;

        `(B) agree to provide timely updates, not less than once every 3 business days, to pharmacy product pricing files used to calculate prescription prices that will be used to reimburse pharmacies;

        `(C) agree to pay pharmacies promptly for clean claims under section 1860D-12(b)(4) of the Social Security Act (42 U.S.C. 1395w-112(b)(4));

        `(D) not require that a pharmacist or pharmacy participate in a pharmacy network managed by such PBM as a condition for the pharmacy to participate in another network managed by such PBM, and shall not exclude an otherwise qualified pharmacist or pharmacy from participation in a particular network provided that the pharmacist or pharmacy--

          `(i) accepts the terms, conditions and reimbursement rates of the PBM;

          `(ii) meets all applicable Federal and State licensure and permit requirements; and

          `(iii) has not been excluded from participation in any Federal or State program;

        `(E) not automatically enroll a pharmacy in a contract or modify an existing contract without written agreement from the pharmacy or pharmacist; and

        `(F) require each pharmacy to sign a contract before assuming responsibility to fill prescriptions for the PBM.

      `(3) PBM OWNERSHIP INTERESTS AND CONFLICTS OF INTEREST; PHARMACY CHOICE- A PBM shall not--

        `(A) mandate that a covered individual use a specific retail pharmacy, mail order pharmacy, specialty pharmacy, or other pharmacy practice site or entity if the PBM has an ownership interest in such pharmacy, practice site, or entity or the pharmacy, practice site, or entity has an ownership interest in the PBM; or

        `(B) provide incentives to covered plan beneficiaries, in the form of variations in premiums, deductibles, co-payments, or co-insurance rates, to encourage plan beneficiaries to use a specific pharmacy if such incentives are only applicable to a pharmacy, practice site, or entity that the PBM has an ownership interest in, unless such incentives are applicable to all network pharmacies.

      `(4) PBM AUDIT OF PHARMACY PROVIDERS- The following shall apply to audits of pharmacy providers by a PBM:

        `(A) The period covered by an audit may not exceed 2 years from the date the claim was submitted to or adjusted by the PBM.

        `(B) An audit that involves clinical or professional judgment shall be conducted by, or in consultation with, a pharmacist licensed in the State of the audit or the State board of pharmacy.

        `(C) The PBM may not require more stringent recordkeeping than that required by State or Federal law.

        `(D) The PBM or the entity conducting an audit for the PBM shall establish a written appeals process that shall include procedures for appeals for preliminary reports and final reports.

        `(E) The pharmacy, practice site, or other entity may use the records of a hospital, physician, or other authorized practitioner to validate the pharmacy records and any legal prescription (one that complies with State Board of Pharmacy requirements) may be used to validate claims in connection with prescriptions, refills, or changes in prescriptions.

        `(F) Any clerical or recordkeeping error, such as a typographical error, scrivener's error, or computer error, regarding a required document or record shall not be subject to recoupment unless proof of intent to commit fraud or unless such discrepancy results in actual financial harm to an interested party.

        `(G) The entity conducting the audit shall not use extrapolation or other statistical expansion techniques in calculating the recoupment or penalties for audits.

        `(H) The PBM shall disclose any audit recoupment to the group health plan or health insurance issuer with a copy to the pharmacy.

      `(5) PBM CONDUCT REGARDING COVERED INDIVIDUALS- A PBM shall--

        `(A) notify a plan sponsor if such PBM intends to sell utilization or claims data that the PBM possesses as a result of an arrangement described in this section;

        `(B) notify the plan sponsor in writing at least 30 days before selling, leasing, or renting such data and shall provide the plan sponsor with the name of the potential purchaser of such data and the expected use of any utilization or claims data by such purchaser;

        `(C) not sell such data unless the sale complies with all Federal and State laws and the PBM has received written approval for such sale from the plan sponsor;

        `(D) not directly contact a covered individual by any means (including via electronic delivery, telephonic, SMS text or direct mail) without the express written permission of the plan sponsor and the covered individual;

        `(E) not transmit any personally identifiable utilization or claims data to a pharmacy owned by the PBM if the patient has not voluntarily elected in writing to fill that particular prescription at the PBM-owned pharmacy; and

        `(F) provide each covered individual with an opportunity to affirmatively opt out of the sale of his or her data prior to entering into any arrangement for the lease, rental, or sale of such information.

    `(b) Definition- For purposes of this section, the term `fraud' has the meaning given the term `health care fraud' in section 1347 of title 18, United States Code.'.

      (2) EFFECTIVE DATE- The amendment made by this subsection shall apply to plan sponsors for plan years beginning on or after the date of enactment of this Act.

    (b) Amendments to the Public Health Service Act Relating to the Individual Market-

      (1) IN GENERAL- Subpart 2 of part B of title XXVII of the Public Health Service Act (42 U.S.C. 300gg-51 et seq.) is amended by adding at the end the following:

`SEC. 2754. PHARMACY BENEFITS MANAGER TRANSPARENCY AND PROPER OPERATION REQUIREMENTS.

    `The provisions of section 2729 of the Public Health Service Act shall apply to health insurance coverage offered by a health insurance issuer in the individual market in the same manner as they apply to a group health plan and a health insurance issuer providing health insurance coverage under that section.'.

      (2) CONFORMING AMENDMENTS-

        (A) ERISA AMENDMENT-

          (i) IN GENERAL- Subpart B of part 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1185 et seq.) is amended by adding at the end the following:

`SEC. 716. PHARMACY BENEFITS MANAGER TRANSPARENCY AND PROPER OPERATION REQUIREMENTS.

    `The provisions of section 2729 of the Public Health Service Act shall apply to a group health plan, and a health insurance issuer providing health insurance coverage in connection with a group health plan, in the same manner as such provisions apply to a group health plan and a health insurance issuer providing health insurance coverage under that section.'.

          (ii) CLERICAL AMENDMENT- The table of contents in section 1 of the Employee Retirement Income Security Act of 1974 is amended by inserting after the item relating to section 714 the following:

      `Sec. 715. Additional market reforms.

      `Sec. 716. Pharmacy benefits manager transparency and proper operation requirements.'.

        (B) IRC AMENDMENT-

          (i) IN GENERAL- Subpart B of chapter 100 of the Internal Revenue Code of 1986 (26 U.S.C. 9811 et seq.) is amended by adding at the end the following:

`SEC. 9814. PHARMACY BENEFITS MANAGER TRANSPARENCY AND PROPER OPERATION REQUIREMENTS.

    `The provisions of section 2729 of the Public Health Service Act shall apply to a group health plan, and a health insurance issuer providing health insurance coverage in connection with a group health plan, in the same manner as such provisions apply to a group health plan and a health insurance issuer providing health insurance coverage under that section.'.

          (ii) CLERICAL AMENDMENT- The table of sections for subpart B of chapter 100 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 9813 the following new item:

      `Sec. 9814. Pharmacy benefits manager transparency and proper operation requirements.'.

      (3) EFFECTIVE DATE- The amendments made by paragraphs (1) and (2) shall apply with respect to health insurance coverage offered, sold, issued, renewed, in effect, or operated in the individual market on or after the date of enactment of this Act.

    (c) Medicare Prescription Drug Plans-

      (1) IN GENERAL- Subpart 2 of part D of title XVIII of the Social Security Act (42 U.S.C. 1395w-111 et seq.) is amended by adding at the end the following:

`SEC. 1860D-17. PHARMACY BENEFITS MANAGER TRANSPARENCY AND PROPER OPERATION REQUIREMENTS.

    `The provisions of section 2729 of the Public Health Service Act shall apply to health insurance coverage offered by a prescription drug plan under this part in the same manner as such provisions apply to a group health plan and a health insurance issuer providing health insurance coverage under that section.'.

      (2) EFFECTIVE DATE- The amendment made by this subsection shall apply with respect to plan years beginning on or after the date of enactment of this Act.

END