To ensure and foster continued patient safety and quality of care by making the antitrust laws apply to negotiations between groups of independent pharmacies and health plans and health insurance issuers in the same manner as such laws apply to collective bargaining by labor organizations under the National Labor Relations Act, to ensure integrity in the operation of pharmacy benefit managers, and to preserve access standards to community pharmacies under the Medicare outpatient prescription drug program.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Community Pharmacy Preservation Act 
of 2004''.

SEC. 2. APPLICATION OF THE ANTITRUST LAWS TO INDEPENDENT PHARMACIES 
              NEGOTIATING WITH HEALTH PLANS.

    (a) In General.--Any independent pharmacies who are engaged in 
negotiations with a health plan regarding the terms of any contract 
under which the pharmacies provide health care items or services for 
which benefits are provided under such plan shall, in connection with 
such negotiations, be entitled to the same treatment under the 
antitrust laws as the treatment to which bargaining units which are 
recognized under the National Labor Relations Act are entitled in 
connection with such collective bargaining. Such a pharmacy shall, only 
in connection with such negotiations, be treated as an employee engaged 
in concerted activities and shall not be regarded as having the status 
of an employer, independent contractor, managerial employee, or 
supervisor.
    (b) Protection for Good Faith Actions.--Actions taken in good faith 
reliance on subsection (a) shall not be the subject under the antitrust 
laws of criminal sanctions nor of any civil damages, fees, or penalties 
beyond actual damages incurred.
    (c) Limitation.--
            (1) No new right for collective cessation of service.--The 
        exemption provided in subsection (a) shall not confer any new 
        right to participate in any collective cessation of service to 
        patients not already permitted by existing law.
            (2) No change in national labor relations act.--This 
        section applies only to independent pharmacies excluded from 
        the National Labor Relations Act. Nothing in this section shall 
        be construed as changing or amending any provision of the 
        National Labor Relations Act, or as affecting the status of any 
        group of persons under that Act.
    (d) Effective Date.--The exemption provided in subsection (a) shall 
apply to conduct occurring beginning on the date of the enactment of 
this Act.
    (e) Limitation on Exemption.--Nothing in this section shall exempt 
from the application of the antitrust laws any agreement or otherwise 
unlawful conspiracy that excludes, limits the participation or 
reimbursement of, or otherwise limits the scope of services to be 
provided by any independent pharmacy or group of independent pharmacies 
with respect to the performance of services that are within their scope 
of practice as defined or permitted by relevant law or regulation.
    (f) No Effect on Title VI of Civil Rights Act of 1964.--Nothing in 
this section shall be construed to affect the application of title VI 
of the Civil Rights Act of 1964.
    (g) No Application to Federal Programs.--Nothing in this section 
shall apply to negotiations between independent pharmacies and health 
plans pertaining to benefits provided under any of the following:
            (1) The Medicaid Program under title XIX of the Social 
        Security Act (42 U.S.C. 1396 et seq.).
            (2) The SCHIP program under title XXI of the Social 
        Security Act (42 U.S.C. 1397aa et seq.).
            (3) Chapter 55 of title 10, United States Code (relating to 
        medical and dental care for members of the uniformed services).
            (4) Chapter 17 of title 38, United States Code (relating to 
        Veterans' medical care).
            (5) Chapter 89 of title 5, United States Code (relating to 
        the Federal employees' health benefits program).
            (6) The Indian Health Care Improvement Act (25 U.S.C. 1601 
        et seq.).
    (h) Definitions.--For purposes of this section:
            (1) Antitrust laws.--The term ``antitrust laws''--
                    (A) has the meaning given it in subsection (a) of 
                the first section of the Clayton Act (15 U.S.C. 12(a)), 
                except that such term includes section 5 of the Federal 
                Trade Commission Act (15 U.S.C. 45) to the extent such 
                section 5 applies to unfair methods of competition; and
                    (B) includes any State law similar to the laws 
                referred to in subparagraph (A).
            (2) Health plan and related terms.--
                    (A) In general.--The term ``health plan'' means a 
                group health plan or a health insurance issuer that is 
                offering health insurance coverage.
                    (B) Health insurance coverage; health insurance 
                issuer.--The terms ``health insurance coverage'' and 
                ``health insurance issuer'' have the meanings given 
                such terms under paragraphs (1) and (2), respectively, 
                of section 733(b) of the Employee Retirement Income 
                Security Act of 1974 (29 U.S.C. 1191b(b)).
                    (C) Group health plan.--The term ``group health 
                plan'' has the meaning given that term in section 
                733(a)(1) of the Employee Retirement Income Security 
                Act of 1974 (29 U.S.C. 1191b(a)(1)).
            (3) Independent pharmacy.--The term ``independent 
        pharmacy'' means a pharmacy which is not owned (or operated) by 
        a publicly traded company. For purposes of the previous 
        sentence, the term ``publicly traded company'' means a company 
        that is an issuer within the meaning of section 2(a)(7) of the 
        Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a)(7)).

SEC. 3. REQUIREMENTS RELATING TO PHARMACY BENEFIT MANAGERS.

    (a) Prohibition on Cross Ownership.--
            (1) In general.--No pharmaceutical drug manufacturer may 
        have a controlling interest in an entity that is a pharmacy 
        benefit manager.
            (2) Penalty.--The Secretary of Health and Human Services 
        may issue such civil penalties for a violation of paragraph (1) 
        as the Secretary of Health and Human Services determines 
        necessary.
    (b) Drug Interchange.--
            (1) Prohibitions.--
                    (A) Cost increase.--A pharmacy benefit manager 
                shall not make any drug interchange proposal for an 
                individual who is served by such manager where the net 
                cost of the drug to which the prescription would be 
                changed exceeds that of the drug from which the 
                prescription would be changed.
                    (B) Disclosure to individual.--A pharmacy benefit 
                manager shall not make any drug interchange for an 
                individual who is served by such manager unless the 
                pharmacy benefit manager discloses to the individual, 
                in a clear and conspicuous manner, the savings to the 
                individual associated with such interchange.
                    (C) Generics.--A pharmacy benefit manager shall not 
                make any drug interchange proposal for an individual 
                who is served by such manager if the drug from which 
                the prescription would be changed has generic 
                equivalents and the drug to which the prescription 
                would be changed has no generic equivalents, unless the 
                drug to which the prescription would be changed has a 
                lower net cost to the individual than does each of the 
                generic equivalents of the drug from which the 
                prescription would be changed.
            (2) Penalty.--A pharmacy benefit manager that violates 
        subparagraph (A), (B), or (C) of paragraph (1) with respect to 
        an individual and presents a claim for payment to the United 
        States Government as reimbursement for services to such 
        individual, shall be considered in violation of section 3729 of 
        title 31, United States Code.
    (c) Disclosure of Compensation From Drug Manufacturers.--
            (1) Quarterly and annual disclosures.--At the end of each 
        fiscal year quarter, each pharmacy benefit manager shall 
        disclose--
                    (A) to the client plans of such manager and to the 
                Antitrust Division of the Department of Justice, all 
                compensation and remuneration that the pharmacy benefit 
                manager received during such fiscal year quarter from a 
                pharmaceutical drug manufacturer, including, regardless 
                of how categorized, market share incentives, 
                commissions, mail service purchase discounts, and 
                administrative or management fees; and
                    (B) to the client plans of such manager, any fees 
                received for sales of utilization data to a 
                pharmaceutical drug manufacturer.
            (2) Disclosure at contracting stage.--Each pharmacy benefit 
        manager shall disclose to each client plan and prospective 
        client plan of such manager, in advance of executing an 
        agreement with such plan, information relating to the pharmacy 
        benefit manager's methodology of soliciting and receiving 
        payments from pharmaceutical drug manufacturers.
    (d) Definitions.--For purposes of this section:
            (1) Client plan.--The term ``client plan'' means a 
        pharmaceutical plan in which the entity that offers such plan 
        to its beneficiaries contracts directly with a pharmacy benefit 
        manager to provide or administer such plan.
            (2) Drug interchange.--The term ``drug interchange'' means 
        any change from one prescription drug to another prescription 
        drug that is intended to address or treat the same illness or 
        condition.

SEC. 4. COMMUNITY PHARMACY ACCESS STANDARDS UNDER THE MEDICARE 
              OUTPATIENT PRESCRIPTION DRUG PROGRAM.

    In establishing rules under subparagraph (C) of section 1860D-
4(b)(1) of the Social Security Act, as added by the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (Public 
Law 108-173), for convenient access to non-mail-order pharmacies 
consistent with the application of standards under clause (ii) of such 
subparagraph, the Secretary of Health and Human Services shall provide 
for application of the following standards:
            (1)(A) In each urban area, at least 90 percent of Medicare 
        beneficiaries in a plan's service area, on average, live within 
        2 miles of a retail pharmacy participation in the prescription 
        drug plan's or MA-PD plan's network.
            (B) In each suburban area, at least 90 percent of Medicare 
        beneficiaries in a plan's service area, on average, live within 
        5 miles of a retail pharmacy participation in the prescription 
        drug plan's or MA-PD plan's network.
            (C) In each rural area, at least 70 percent of Medicare 
        beneficiaries in a plan's service area, on average, live within 
        15 miles of a retail pharmacy participation in the prescription 
        drug plan's or MA-PD plan's network.
            (D) There shall be no averaging of such distances across or 
        among urban, suburban, and rural areas.
            (2) The rules shall require plans to measure traveling 
        distances from beneficiaries' homes to community pharmacies 
        based on commonly traveled routes.

Summary: Community Pharmacy Preservation Act of 2004 - Provides that antitrust laws shall apply to negotiations between groups of independent pharmacies and health plans and health insurance issuers in the same manner as such laws apply to collective bargaining by labor organizations under the National Labor Relations Act. Prohibits any pharmaceutical drug manufacturer from having a controlling interest in an entity that is a pharmacy benefit manager. Requires pharmacy benefit managers to disclose all compensation from drug manufacturers. Prohibits pharmacy benefit managers from making certain drug interchanges: (1) to a drug with a greater cost, (2) without disclosure to the individual. Or (3) from a drug with generic equivalents to a drug without generic equivalents, unless the latter is lower in cost than each of the generic equivalents of the drug from which the prescription would be changed. Directs the Secretary of Health and Human Services to apply specified standards for community pharmacy access under the Medicare outpatient prescription drug program.