,,ii #aaith ,,congress #ast ,session ,s4 #ibg ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,march #aa 7legislative day1 ,march #aj71 #bjbe,mr4 ,welch 7for himself1 ,mr4 ,marshall1 ,mr4 ,warner1 and ,mr4 ,cassidy7 introduced the following bill2 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 ,medicaid4 #a4 ,short title ,this ,act may be cited as the ,protecting ,pharmacies in ,medicaid ,act4 #b4 ,ensuring accurate payments to pharmacies under ,medicaid 7a7 ,in general ,section #aibg7;f7 of the ,social ,security ,act 7#db ,u4,s4,c4 #acifr-#h7;f77 is amended-- 7#a7 in paragraph 7#a77;,a7-- 7,a7 by redesignating clause 7ii7 as clause 7iii72 and 7,b7 by striking and after the semicolon at the end of clause 7i7 and all that precedes it through 7#a7 and inserting the following3 7#a7 ,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 7as such term is defined by the ,secretary7 as follows3 7,a7 ,use of vendor ,the ,secretary may contract services for-- 7i7 with respect to retail community pharmacies1 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 drugs1 net of all discounts1 rebates1 and other price concessions 7to the extent any information with respect to such discounts1 rebates1 and other price concessions is available7 based on a monthly survey of such pharmacies2 and 7ii7 with respect to applicable non-retail pharmacies-- 7,i7 the determination of survey prices1 separate from the survey prices described in clause 7i71 of the non-retail national average drug acquisition cost for covered outpatient drugs that represent a nationwide average of consumer purchase prices for such drugs1 net of all discounts1 rebates1 and other price concessions 7to the extent any information with respect to such discounts1 rebates1 and other price concessions is available7 based on a monthly survey of such pharmacies2 and 7,,ii7 at the discretion of the ,secretary1 for each type of applicable non-retail pharmacy1 the determination of survey prices1 separate from the survey prices described in clause 7i7 or subclause 7,i7 of this clause1 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 drugs1 net of all discounts1 rebates1 and other price concessions 7to the extent any information with respect to such discounts1 rebates1 and other price concessions is available7 based on a monthly survey of such pharmacies2 and 2 7#b7 in subparagraph 7,b7 of paragraph 7#a71 by striking subparagraph 7,a77ii7 and inserting subparagraph 7,a77iii72 7#c7 in subparagraph 7,d7 of paragraph 7#a71 by striking clauses 7ii7 and 7iii7 and inserting the following3 7ii7 ,the vendor must update the ,secretary no less often than monthly on the survey prices for covered outpatient drugs4 7iii7 ,the vendor must differentiate1 in collecting and reporting survey data1 for all cost information collected1 whether a pharmacy is a retail community pharmacy or an applicable non-retail pharmacy1 including whether such pharmacy is an affiliate 7as defined in subsection 7k77#ad771 and1 in the case of an applicable non-retail pharmacy1 which type of applicable non-retail pharmacy it is using the relevant pharmacy type indicators included in the guidance required by subsection 7d77#b7 of section #b of the ,protecting ,pharmacies in ,medicaid ,act4 2 7#d7 by adding at the end of paragraph 7#a7 the following3 7,f7 ,survey reporting ,in order to meet the requirement of section #aijb7;a77#ed71 a ,state shall require that any retail community pharmacy or applicable non-retail pharmacy in the ,state that receives any payment1 reimbursement1 administrative fee1 discount1 rebate1 or other price concession related to the dispensing of covered outpatient drugs to individuals receiving benefits under this title1 regardless of whether such payment1 reimbursement1 administrative fee1 discount1 rebate1 or other price concession is received from the ,state or a managed care entity or other specified entity 7as such terms are defined in section #aijc7m77#i77;,d77 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 7as so defined71 shall respond to surveys conducted under this paragraph4 7,g7 ,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 following3 7i7 ,the monthly response rate to the survey including a list of pharmacies not in compliance with subparagraph 7,f74 7ii7 ,the sampling methodology and number of pharmacies sampled monthly4 7iii7 ,information on price concessions to pharmacies1 including discounts1 rebates1 and other price concessions1 to the extent that such information may be publicly released and has been collected by the ,secretary as part of the survey4 7,h7 ,penalties 7i7 ,in general ,subject to clauses 7ii71 7iii71 and 7iv71 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 pharmacy4 7ii7 ,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-- 7,i7 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 subsection2 7,,ii7 knowingly provides false information in response to such a survey2 or 7,,iii7 otherwise fails to comply with the requirements established under this paragraph4 7iii7 ,parameters for penalties 7,i7 ,in general ,a civil money penalty established under this subparagraph may be assessed with respect to each violation1 and with respect to each non-compliant retail community pharmacy 7including a pharmacy that is part of a chain7 or non-compliant applicable non-retail pharmacy 7including a pharmacy that is part of a chain71 in an amount not to exceed #ajj1jjj for each such violation4 7,,ii7 ,considerations ,in determining the amount of a civil money penalty imposed under this subparagraph1 the ,secretary may consider the size1 business structure1 and type of pharmacy involved1 as well as the type of violation and other relevant factors1 as determined appropriate by the ,secretary4 7iv7 ,rule of application ,the provisions of section #aabh;,a 7other than subsections 7a7 and 7b77 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 #aabh;,a7a74 7,i7 ,limitation on use of applicable non-retail pharmacy pricing information ,no ,state shall use pricing information reported by applicable non-retail pharmacies under subparagraph 7,a77ii7 to develop or inform payment methodologies for retail community pharmacies4 2 7#e7 in paragraph 7#b7-- 7,a7 in subparagraph 7,a71 by inserting 1 including payment rates and methodologies for determining ingredient cost reimbursement under managed care entities or other specified entities 7as such terms are defined in section #aijc7m77#i77;,d771 after under this title2 and 7,b7 in subparagraph 7,b71 by inserting and the basis for such dispensing fees before the semicolon2 7#f7 by redesignating paragraph 7#d7 as paragraph 7#e72 7#g7 by inserting after paragraph 7#c7 the following new paragraph3 7#d7 ,oversight 7,a7 ,in general ,the ,inspector ,general of the ,department of ,health and ,human ,services shall conduct periodic studies of the survey data reported under this subsection1 as appropriate1 including with respect to substantial variations in acquisition costs or other applicable costs1 as well as with respect to how internal transfer prices and related party transactions may influence the costs reported by pharmacies that are affiliates 7as defined in subsection 7k77#ad77 or are owned by1 controlled by1 or related under a common ownership structure with a wholesaler1 distributor1 or other entity that acquires covered outpatient drugs relative to costs reported by pharmacies not affiliated with such entities4 ,the ,inspector ,general shall provide periodic updates to ,congress on the results of such studies1 as appropriate1 in a manner that does not disclose trade secrets or other proprietary information4 7,b7 ,appropriation ,there is appropriated to the ,inspector ,general of the ,department of ,health and ,human ,services1 out of any money in the ,treasury not otherwise appropriated1 #e1jjj1jjj for fiscal year #bjbf1 to remain available until expended1 to carry out this paragraph4 2 and 7#h7 in paragraph 7#e71 as so redesignated-- 7,a7 by inserting 1 and #i1jjj1jjj for fiscal year #bjbf and each fiscal year thereafter1 after #bjaj2 and 7,b7 by inserting ,funds appropriated under this paragraph for fiscal year #bjbf and any subsequent fiscal year shall remain available until expended4 after the period4 7b7 ,definitions ,section #aibg7k7 of the ,social ,security ,act 7#db ,u4,s4,c4 #acifr-#h7k77 is amended-- 7#a7 in the matter preceding paragraph 7#a71 by striking ,in the section and inserting ,in this section2 and 7#b7 by adding at the end the following new paragraphs3 7#ab7 ,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 pharmacy1 including a pharmacy that dispenses prescription medications to patients primarily through mail and specialty pharmacies4 ,such term does not include nursing home pharmacies1 long-term care facility pharmacies1 hospital pharmacies1 clinics1 charitable or not-for-profit pharmacies1 government pharmacies1 or low dispensing pharmacies 7as defined by the ,secretary74 7#ac7 ,affiliate ,the term affiliate means any entity that is owned by1 controlled by1 or related under a common ownership structure with a pharmacy benefit manager or a managed care entity or other specified entity 7as such terms are defined in section #aijc7m77#i77;,d774 4 7c7 ,effective date 7#a7 ,in general ,subject to paragraph 7#b71 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 #f months after the date of enactment of this ,act4 7#b7 ,delayed application to applicable non-retail pharmacies ,the pharmacy survey requirements established by the amendments to section #aibg7;f7 of the ,social ,security ,act 7#db ,u4,s4,c4 #acifr-#h7;f77 made by this section shall apply to retail community pharmacies beginning on the effective date described in paragraph 7#a71 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 #ah months after the date of enactment of this ,act4 7d7 ,identification of applicable non-,retail pharmacies 7#a7 ,in general ,not later than ,january #a1 #bjbg1 the ,secretary of ,health and ,human ,services shall1 in consultation with stakeholders as appropriate1 publish guidance specifying pharmacies that meet the definition of applicable non-retail pharmacies 7as such term is defined in subsection 7k77#ab7 of section #aibg of the ,social ,security ,act 7#db ,u4,s4,c4 #acifr-#h71 as added by subsection 7b771 and that will be subject to the survey requirements under subsection 7f77#a7 of such section1 as amended by subsection 7a74 7#b7 ,inclusion of pharmacy type indicators ,the guidance published under paragraph 7#a7 shall include pharmacy type indicators to distinguish between different types of applicable non-retail pharmacies1 such as pharmacies that dispense prescriptions primarily through the mail and pharmacies that dispense prescriptions that require special handling or distribution4 ,an applicable non-retail pharmacy may be identified through multiple pharmacy type indicators4 7e7 ,implementation 7#a7 ,in general ,notwithstanding any other provision of law1 the ,secretary of ,health and ,human ,services may implement the amendments made by this section by program instruction or otherwise4 7#b7 ,nonapplication of ,administrative ,procedure ,act ,implementation of the amendments made by this section shall be exempt from the requirements of section #eec of title #e1 ,united ,states ,code4 7f7 ,nonapplication of paperwork reduction act ,chapter #ce of title #dd1 ,united ,states ,code1 shall not apply to any data collection undertaken by the ,secretary of ,health and ,human ,services under section #aibg7;f7 of the ,social ,security ,act 7#db ,u4,s4,c4 #acifr-#h7;f771 as amended by this section4 #c4 ,preventing the use of abusive spread pricing in ,medicaid 7a7 ,in general ,section #aibg of the ,social ,security ,act 7#db ,u4,s4,c4 #acifr-#h7 is amended-- 7#a7 in subsection 7e71 by adding at the end the following new paragraph3 7#f7 ,transparent prescription drug pass-through pricing required 7,a7 ,in general ,a contract between the ,state and a pharmacy benefit manager 7referred to in this paragraph as a ,,pbm71 or a contract between the ,state and a managed care entity or other specified entity 7as such terms are defined in section #aijc7m77#i77;,d7 and collectively referred to in this paragraph as the entity7 that includes provisions making the entity responsible for coverage of covered outpatient drugs dispensed to individuals enrolled with the entity1 shall require that payment for such drugs and related administrative services 7as applicable71 including payments made by a ,,pbm on behalf of the ,state or entity1 is based on a transparent prescription drug pass-through pricing model under which-- 7i7 any payment made by the entity or the ,,pbm 7as applicable7 for such a drug-- 7,i7 is limited to-- 7aa7 ingredient cost2 and 7bb7 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 plan2 7,,ii7 is passed through in its entirety 7except as reduced under ,federal or ,state laws and regulations in response to instances of waste1 fraud1 or abuse7 by the entity or ,,pbm to the pharmacy or provider that dispenses the drug2 and 7,,iii7 is made in a manner that is consistent with sections #ddg4ejb1 #ddg4eab1 #ddg4ead1 and #ddg4eah of title #db1 ,code of ,federal ,regulations 7or any successor regulation7 as if such requirements applied directly to the entity or the ,,pbm1 except that any payment by the entity or the ,,pbm for the ingredient cost of such drug purchased by a covered entity 7as defined in subsection 7a77#e77;,b77 may exceed the actual acquisition cost 7as defined in #ddg4ejb of title #db1 ,code of ,federal ,regulations1 or any successor regulation7 for such drug if-- 7aa7 such drug was subject to an agreement under section #cdj;,b of the ,public ,health ,service ,act2 7bb7 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 entity2 and 7cc7 such covered entity reports to the ,secretary 7in a form and manner specified by the ,secretary71 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 drugs1 the aggregate amount of such excess2 7ii7 payment to the entity or the ,,pbm 7as applicable7 for administrative services performed by the entity or ,,pbm is limited to an administrative fee that reflects the fair market value 7as defined by the ,secretary7 of such services2 7iii7 the entity or the ,,pbm 7as applicable7 makes available to the ,state1 and the ,secretary upon request in a form and manner specified by the ,secretary1 all costs and payments related to covered outpatient drugs and accompanying administrative services 7as described in clause 7ii77 incurred1 received1 or made by the entity or the ,,pbm1 broken down 7as specified by the ,secretary71 to the extent such costs and payments are attributable to an individual covered outpatient drug1 by each such drug1 including any ingredient costs1 professional dispensing fees1 administrative fees 7as described in clause 7ii771 post-sale and post-invoice fees1 discounts1 or related adjustments such as direct and indirect remuneration fees1 and any and all other remuneration1 as defined by the ,secretary2 and 7iv7 any form of spread pricing whereby any amount charged or claimed by the entity or the ,,pbm 7as applicable7 that exceeds the amount paid to the pharmacies or providers on behalf of the ,state or entity1 including any post-sale or post-invoice fees1 discounts1 or related adjustments such as direct and indirect remuneration fees or assessments1 as defined by the ,secretary1 7after allowing for an administrative fee as described in clause 7ii77 is not allowable for purposes of claiming ,federal matching payments under this title4 7,b7 ,publication of information ,the ,secretary shall publish1 not less frequently than on an annual basis and in a manner that does not disclose the identity of a particular covered entity or organization1 information received by the ,secretary pursuant to subparagraph 7,a77iii77,,iii7 that is broken out by ,state and by each of the following categories of covered entity within each such ,state3 7i7 ,covered entities described in subparagraph 7,a7 of section #cdj;,b7a77#d7 of the ,public ,health ,service ,act4 7ii7 ,covered entities described in subparagraphs 7,b7 through 7,k7 of such section4 7iii7 ,covered entities described in subparagraph 7,l7 of such section4 7iv7 ,covered entities described in subparagraph 7,m7 of such section4 7v7 ,covered entities described in subparagraph 7,n7 of such section4 7vi7 ,covered entities described in subparagraph 7,o7 of such section4 2 and 7#b7 in subsection 7k71 as amended by section #b7;b71 by adding at the end the following new paragraph3 7#ad7 ,pharmacy benefit manager ,the term pharmacy benefit manager means any person or entity that1 either directly or through an intermediary1 acts as a price negotiator or group purchaser on behalf of a ,state1 managed care entity 7as defined in section #aijc7m77#i77;,d771 or other specified entity 7as so defined71 or manages the prescription drug benefits provided by a ,state1 managed care entity1 or other specified entity1 including the processing and payment of claims for prescription drugs1 the performance of drug utilization review1 the processing of drug prior authorization requests1 the managing of appeals or grievances related to the prescription drug benefits1 contracting with pharmacies1 controlling the cost of covered outpatient drugs1 or the provision of services related thereto4 ,such term includes any person or entity that acts as a price negotiator 7with regard to payment amounts to pharmacies and providers for a covered outpatient drug or the net cost of the drug7 or group purchaser on behalf of a ,state1 managed care entity1 or other specified entity or that carries out #a or more of the other activities described in the preceding sentence1 irrespective of whether such person or entity calls itself a pharmacy benefit manager4 4 7b7 ,conforming amendments ,section #aijc7m7 of such ,act 7#db ,u4,s4,c4 #acif;b7m77 is amended-- 7#a7 in paragraph 7#b77;,a77xiii7-- 7,a7 by striking and 7,,iii7 and inserting 7,,iii72 7,b7 by inserting before the period at the end the following3 1 and 7,,iv7 if the contract includes provisions making the entity responsible for coverage of covered outpatient drugs1 the entity shall comply with the requirements of section #aibg7;e77#f72 and 7,c7 by moving the margin #b ems to the left2 and 7#b7 by adding at the end the following new paragraph3 7#aj7 ,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 7as defined in paragraph 7#i77;,d77iii77 unless such services are provided in accordance with a contract between the ,state and such entity which satisfies the requirements of paragraph 7#b77;,a77xiii74 4 7c7 ,effective date ,the amendments made by this section shall apply to contracts between ,states and managed care entities1 other specified entities1 or pharmacy benefit managers that have an effective date beginning on or after the date that is #ah months after the date of enactment of this ,act4 7d7 ,implementation 7#a7 ,in general ,notwithstanding any other provision of law1 the ,secretary of ,health and ,human ,services may implement the amendments made by this section by program instruction or otherwise4 7#b7 ,nonapplication of administrative procedure act ,implementation of the amendments made by this section shall be exempt from the requirements of section #eec of title #e1 ,united ,states ,code4 7e7 ,nonapplication of paperwork reduction act ,chapter #ce of title #dd1 ,united ,states ,code1 shall not apply to any data collection undertaken by the ,secretary of ,health and ,human ,services under section #aibg7;e7 of the ,social ,security ,act 7#db ,u4,s4,c4 #acifr-#h7;e771 as amended by this section4