119-s927

[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.
 <all>