DRUG Act

II 118TH CONGRESS 1ST SESSION S. 1542 To improve services provided by pharmacy benefit managers. IN THE SENATE OF THE UNITED STATES MAY 10, 2023 Mr. MARSHALL (for himself, Mr. TESTER, Mr. BRAUN, Mr. KAINE, and Mrs. CAPITO) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions A BILL To improve services provided by pharmacy benefit managers. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Delinking Revenue 4 from Unfair Gouging Act’’ or the ‘‘DRUG Act’’. 5 SEC. 2. IMPROVING PHARMACY BENEFIT MANAGER SERV- 6 ICES. 7 (a) PUBLIC HEALTH SERVICE ACT.—Part D of title 8 XXVII of the Public Health Service Act (42 U.S.C. 9 300gg–111 et seq.) is amended by adding at the end the 10 following: 11 VerDate Sep 11 2014 02:01 May 20, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1542.IS S1542 kjohnson on DSK79L0C42PROD with BILLS 2 •S 1542 IS ‘‘SEC. 2799A–11. IMPROVING PHARMACY BENEFIT MANAGER 1 SERVICES. 2 ‘‘(a) GENERAL.—For plan years beginning on or 3 after January 1, 2026, except as provided in subsection 4 (b), a pharmacy benefit manager shall not charge or re- 5 ceive fees from any entity for services provided to such 6 entity. 7 ‘‘(b) EXCEPTION FOR FLAT SERVICE FEES.— 8 ‘‘(1) IN GENERAL.—A pharmacy benefit man- 9 ager may charge an entity a flat service fee for the 10 provision of services to such entity if such fee is set 11 forth in an agreement between the pharmacy benefit 12 manager and such entity. 13 ‘‘(2) DEFINITIONS.—In this section— 14 ‘‘(A) the term ‘flat service fee’ means a 15 flat dollar amount that is not directly or indi- 16 rectly based on, or contingent upon, or other- 17 wise related to— 18 ‘‘(i) a drug price (such as wholesale 19 acquisition cost) or drug benchmark price 20 (such as average wholesale price); 21 ‘‘(ii) discounts, rebates, fees, or other 22 remuneration with respect to prescription 23 drugs prescribed to the participants, bene- 24 ficiaries, or enrollees in the group health 25 plan or coverage involved; or 26 VerDate Sep 11 2014 02:01 May 20, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1542.IS S1542 kjohnson on DSK79L0C42PROD with BILLS 3 •S 1542 IS ‘‘(iii) any other amounts specified by 1 the Secretary, the Secretary of Labor, and 2 the Secretary of the Treasury; and 3 ‘‘(B) the term ‘pharmacy benefit manager’ 4 means any person, business, or other entity 5 such as a third-party administrator, regardless 6 of whether it identifies itself as a pharmacy 7 benefit manager, that, either directly or 8 through an intermediary (including an affiliate, 9 subsidiary, or agent) or an arrangement with a 10 third party— 11 ‘‘(i) acts as a price negotiator for pre- 12 scription drugs on behalf of a group health 13 plan or health insurance issuer offering 14 group or individual health insurance cov- 15 erage; or 16 ‘‘(ii) manages or administers the pre- 17 scription drug benefits provided by a group 18 health plan or health insurance issuer of- 19 fering group or individual health insurance 20 coverage, including the processing and pay- 21 ment of claims for prescription drugs, ar- 22 ranging alternative access to or funding for 23 prescription drugs, the performance of 24 drug utilization review, the processing of 25 VerDate Sep 11 2014 02:01 May 20, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1542.IS S1542 kjohnson on DSK79L0C42PROD with BILLS 4 •S 1542 IS drug prior authorization requests, the ad- 1 judication of appeals or grievances related 2 to the prescription drug benefit, con- 3 tracting with network pharmacies, control- 4 ling the cost of covered prescription drugs, 5 or the provision of related services. 6 ‘‘(c) ACCOUNTABILITY AND CONDUCT.— 7 ‘‘(1) IN GENERAL.—A pharmacy benefit man- 8 ager shall not— 9 ‘‘(A) charge a group health plan or health 10 insurance issuer offering group or individual 11 health insurance coverage a different amount 12 for a prescription drug’s ingredient cost or dis- 13 pensing fee as compared to the amount the 14 pharmacy benefit manager reimburses a phar- 15 macy for the prescription drug’s ingredient cost 16 or dispensing fee; 17 ‘‘(B) reimburse a network pharmacy or 18 pharmacist in an amount less than the amount 19 the pharmacy benefit manager would reimburse 20 a network pharmacy that is owned, controlled 21 by, or affiliated with the pharmacy benefit man- 22 ager for dispensing the same drug or for pro- 23 viding the same pharmacist services; or 24 VerDate Sep 11 2014 02:01 May 20, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1542.IS S1542 kjohnson on DSK79L0C42PROD with BILLS 5 •S 1542 IS ‘‘(C) directly or indirectly engage in steer- 1 ing (as defined in paragraph (2)) to a phar- 2 macy that is owned, controlled by, or affiliated 3 with the pharmacy benefit manager. 4 ‘‘(2) STEERING.—In paragraph (1), the term 5 ‘steering’ with respect to a pharmacy benefit man- 6 ager includes— 7 ‘‘(A) providing or implementing a benefit 8 design that encourages a participant, bene- 9 ficiary, or enrollee to utilize a pharmacy that is 10 owned, controlled by, or affiliated with the 11 pharmacy benefit manager, if such design in- 12 creases costs for the plan or the a participant, 13 beneficiary, or enrollee, including requiring a 14 participant, beneficiary, or enrollee to pay high- 15 er out-of-pocket costs for a prescription if the 16 participant, beneficiary, or enrollee chooses not 17 to use a pharmacy owned, controlled by, or af- 18 filiated with the pharmacy benefit manager; 19 ‘‘(B) requiring a participant, beneficiary, 20 or enrollee to use only a pharmacy that is 21 owned, controlled by, or affiliated with the 22 pharmacy benefit manager; 23 ‘‘(C) retaliating, making further attempts 24 to influence a participant, beneficiary, or en- 25 VerDate Sep 11 2014 02:01 May 20, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1542.IS S1542 kjohnson on DSK79L0C42PROD with BILLS 6 •S 1542 IS rollee, or treating a participant, beneficiary, or 1 enrollee or a participant, beneficiary, or enroll- 2 ee’s claim any differently if a participant, bene- 3 ficiary, or enrollee chooses to use a pharmacy 4 that is not owned, controlled by, or affiliated 5 with the pharmacy benefit manager; or 6 ‘‘(D) any other activities as defined by the 7 Secretary, the Secretary of Labor, and the Sec- 8 retary of the Treasury. 9 ‘‘(d) ENFORCEMENT.— 10 ‘‘(1) IN GENERAL.—The Secretary, in consulta- 11 tion with the Secretary of Labor and the Secretary 12 of the Treasury, shall enforce this section. 13 ‘‘(2) PENALTIES.—A pharmacy benefit man- 14 ager that violates subsection (a), (b), or (c) shall be 15 subject to a civil monetary penalty in the amount of 16 $10,000 for each day during which such violation 17 continues. 18 ‘‘(3) PROCEDURE.—The provisions of section 19 1128A of the Social Security Act, other than sub- 20 sections (a) and (b) and the first sentence of sub- 21 section (c)(1) of such section shall apply to civil 22 monetary penalties under this subsection in the 23 same manner as such provisions apply to a penalty 24 VerDate Sep 11 2014 02:01 May 20, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1542.IS S1542 kjohnson on DSK79L0C42PROD with BILLS 7 •S 1542 IS or proceeding under section 1128A of the Social Se- 1 curity Act. 2 ‘‘(e) REGULATIONS.—Notwithstanding any other 3 provision of law, the Secretary shall implement this section 4 through interim final regulations.’’. 5 (b) EMPLOYEE RETIREMENT INCOME SECURITY ACT 6 OF 1974.— 7 (1) IN GENERAL.—Subpart B of part 7 of sub- 8 title B of title I of the Employee Retirement Income 9 Security Act of 1974 (29 U.S.C. 1185 et seq.) is 10 amended by inserting after section 725 the fol- 11 lowing: 12 ‘‘SEC. 726. IMPROVING PHARMACY BENEFIT MANAGER 13 SERVICES. 14 ‘‘(a) GENERAL.—For plan years beginning on or 15 after January 1, 2026, except as provided in subsection 16 (b), a pharmacy benefit manager shall not charge or re- 17 ceive fees from any entity for services provided to such 18 entity. 19 ‘‘(b) EXCEPTION FOR FLAT SERVICE FEES.— 20 ‘‘(1) IN GENERAL.—A pharmacy benefit man- 21 ager may charge an entity a flat service fee for the 22 provision of services to such entity if such fee is set 23 forth in an agreement between the pharmacy benefit 24 manager and such entity. 25 VerDate Sep 11 2014 02:01 May 20, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1542.IS S1542 kjohnson on DSK79L0C42PROD with BILLS 8 •S 1542 IS ‘‘(2) DEFINITIONS.—In this section— 1 ‘‘(A) the term ‘flat service fee’ means a 2 flat dollar amount that is not directly or indi- 3 rectly based on, or contingent upon, or other- 4 wise related to— 5 ‘‘(i) a drug price (such as wholesale 6 acquisition cost) or drug benchmark price 7 (such as average wholesale price); 8 ‘‘(ii) discounts, rebates, fees, or other 9 remuneration with respect to prescription 10 drugs prescribed to participants or bene- 11 ficiaries in the group health plan or cov- 12 erage involved; or 13 ‘‘(iii) any other amounts specified by 14 the Secretary, the Secretary of Health and 15 Human Services, and the Secretary of the 16 Treasury; and 17 ‘‘(B) the term ‘pharmacy benefit manager’ 18 means any person, business, or other entity 19 such as a third-party administrator, regardless 20 of whether it identifies itself as a pharmacy 21 benefit manager, that, either directly or 22 through an intermediary (including an affiliate, 23 subsidiary, or agent) or an arrangement with a 24 third party— 25 VerDate Sep 11 2014 02:01 May 20, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1542.IS S1542 kjohnson on DSK79L0C42PROD with BILLS 9 •S 1542 IS ‘‘(i) acts as a price negotiator for pre- 1 scription drugs on behalf of a group health 2 plan or health insurance issuer offering 3 group health insurance coverage; or 4 ‘‘(ii) manages or administers the pre- 5 scription drug benefits provided by a group 6 health plan or health insurance issuer of- 7 fering group health insurance coverage, in- 8 cluding the processing and payment of 9 claims for prescription drugs, arranging al- 10 ternative access to or funding for prescrip- 11 tion drugs, the performance of drug utili- 12 zation review, the processing of drug prior 13 authorization requests, the adjudication of 14 appeals or grievances related to the pre- 15 scription drug benefit, contracting with 16 network pharmacies, controlling the cost of 17 covered prescription drugs, or the provision 18 of related services. 19 ‘‘(c) ACCOUNTABILITY AND CONDUCT.— 20 ‘‘(1) IN GENERAL.—A pharmacy benefit man- 21 ager shall not— 22 ‘‘(A) charge a group health plan or health 23 insurance issuer offering group health insur- 24 ance coverage a different amount for a prescrip- 25 VerDate Sep 11 2014 02:01 May 20, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1542.IS S1542 kjohnson on DSK79L0C42PROD with BILLS 10 •S 1542 IS tion drug’s ingredient cost or dispensing fee as 1 compared to the amount the pharmacy benefit 2 manager reimburses a pharmacy for the pre- 3 scription drug’s ingredient cost or dispensing 4 fee; 5 ‘‘(B) reimburse a network pharmacy or 6 pharmacist in an amount less than the amount 7 the pharmacy benefit manager would reimburse 8 a network pharmacy that is owned, controlled 9 by, or affiliated with the pharmacy benefit man- 10 ager for dispensing the same drug or for pro- 11 viding the same pharmacist services; or 12 ‘‘(C) directly or indirectly engage in steer- 13 ing (as defined in paragraph (2)) to a phar- 14 macy that is owned, controlled by, or affiliated 15 with the pharmacy benefit manager. 16 ‘‘(2) STEERING.—In paragraph (1), the term 17 ‘steering’ with respect to a pharmacy benefit man- 18 ager includes— 19 ‘‘(A) providing or implementing a benefit 20 plan design that encourages a participant or 21 beneficiary to utilize a pharmacy that is owned, 22 controlled by, or affiliated with the pharmacy 23 benefit manager, if such plan design increases 24 costs for the plan or the participant or bene- 25 VerDate Sep 11 2014 02:01 May 20, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1542.IS S1542 kjohnson on DSK79L0C42PROD with BILLS 11 •S 1542 IS ficiary, including requiring a participant or ben- 1 eficiary to pay higher out-of-pocket costs for a 2 prescription if the participant or beneficiary 3 chooses not to use a pharmacy owned, con- 4 trolled by, or affiliated with the pharmacy ben- 5 efit manager; 6 ‘‘(B) requiring a participant or beneficiary 7 to use only a pharmacy that is owned, con- 8 trolled by, or affiliated with the pharmacy ben- 9 efit manager; 10 ‘‘(C) retaliating, making further attempts 11 to influence a participant or beneficiary, or 12 treating a participant or beneficiary or a partic- 13 ipant or beneficiary’s claim any differently if a 14 participant or beneficiary chooses to use a phar- 15 macy that is not owned, controlled by, or affili- 16 ated with the pharmacy benefit manager; or 17 ‘‘(D) any other activities as defined by the 18 Secretary, the Secretary of Health and Human 19 Services, and the Secretary of the Treasury. 20 ‘‘(d) ENFORCEMENT.— 21 ‘‘(1) IN GENERAL.—The Secretary, in consulta- 22 tion with the Secretary of Health and Human Serv- 23 ices and the Secretary of the Treasury, shall enforce 24 this section. 25 VerDate Sep 11 2014 02:01 May 20, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1542.IS S1542 kjohnson on DSK79L0C42PROD with BILLS 12 •S 1542 IS ‘‘(2) PENALTIES.—A pharmacy benefit man- 1 ager that violates subsection (a), (b), or (c) shall be 2 subject to a civil monetary penalty in the amount of 3 $10,000 for each day during which such violation 4 continues. 5 ‘‘(3) PROCEDURE.—The provisions of section 6 1128A of the Social Security Act, other than sub- 7 sections (a) and (b) and the first sentence of sub- 8 section (c)(1) of such section shall apply to civil 9 monetary penalties under this subsection in the 10 same manner as such provisions apply to a penalty 11 or proceeding under section 1128A of the Social Se- 12 curity Act. 13 ‘‘(e) REGULATIONS.—Notwithstanding any other 14 provision of law, the Secretary shall implement this section 15 through interim final regulations.’’. 16 (2) CLERICAL AMENDMENT.—The table of con- 17 tents in section 1 of the Employee Retirement In- 18 come Security Act of 1974 (29 U.S.C. 1001 et seq.) 19 is amended by inserting after the item relating to 20 section 725 the following new item: 21 ‘‘Sec. 726. Improving pharmacy benefit manager services.’’. (c) INTERNAL REVENUE CODE OF 1986 [Text truncated for display. Full text available on Congress.gov.]