II 

116TH CONGRESS 

1ST SESSION S. 640 

To amend title XVIII of the Social Security Act to require pharmacy-negotiated price concessions to be included in negotiated prices at the pointof-sale under part D of the Medicare program, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MARCH 4, 2019 

Mr. KENNEDY introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend title XVIII of the Social Security Act to require 

pharmacy-negotiated price concessions to be included in 

negotiated prices at the point-of-sale under part D of 

the Medicare program, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Phair Pricing Act of 

5 2019’’. 


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1 SEC. 2. REQUIRING PHARMACY-NEGOTIATED PRICE CON2 CESSIONS AND PHARMACY INCENTIVE PAY3 MENTS AND ADJUSTMENTS TO BE INCLUDED 

4 IN NEGOTIATED PRICES AT THE POINT-OF5 SALE UNDER PART D OF THE MEDICARE PRO6 GRAM. 

7 Section 1860D–2(d)(1)(B) of the Social Security Act 

8 (42 U.S.C. 1395w–102(d)(1)(B)) is amended— 

9 (1) by striking ‘‘PRICES.—For purposes’’ and 

10 inserting ‘‘PRICES.— 

11 ‘‘(i) IN GENERAL.—For purposes’’; 

12 and 

13 (2) by adding at the end the following new 

14 clauses: 

15 ‘‘(ii) PRICES NEGOTIATED WITH

16 PHARMACY AT POINT-OF-SALE.— 

17 ‘‘(I) IN GENERAL.—Subject to 

18 subclause (III), for plan years begin19 ning on or after January 1, 2020, ne20 gotiated prices for covered part D 

21 drugs described in clause (i) provided 

22 under a prescription drug plan, in23 cluding all contingent and noncontin24 gent concessions, adjustments, pay25 ments, and fees (including dispensing 

26 fees) negotiated with the pharmacy 


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1 dispensing such drug, shall be pro2 vided at the point-of-sale of such 

3 drug. Such negotiated price shall not 

4 include any incentive payments and 

5 adjustments or any other contingent 

6 concessions, adjustments, payments, 

7 or fees that increase the amount of 

8 such negotiated price. 

9 ‘‘(II) APPLICATION OF PHAR10 MACY INCENTIVE PAYMENTS AND AD11 JUSTMENTS.— 

12 ‘‘(aa) IN GENERAL.—For 

13 plan years beginning on or after 

14 January 1, 2020, a PDP spon15 sor— 

16 ‘‘(AA) shall apply a 

17 system under which incen18 tive payments and adjust19 ments using only quality 

20 measures established by the 

21 Secretary under item (bb) 

22 are made to a pharmacy 

23 with respect to payment for 

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1 pensed by such pharmacy; 

2 and 

3 ‘‘(BB) may not apply 

4 any other incentive pay5 ments and adjustments with 

6 respect to such payment 

7 outside of such system. 

8 Application of such system may 

9 not result in a decrease in reim10 bursement to such pharmacy for 

11 such drug after the point-of-sale 

12 of such drug. 

13 ‘‘(bb) STANDARD PHARMACY

14 QUALITY MEASURES.—The Sec15 retary shall establish standard 

16 quality measures that may be 

17 used in a system described in 

18 item (aa). Such measures shall 

19 be— 

20 ‘‘(AA) focused on im21 proving patient health out22 comes; 

23 ‘‘(BB) standardized 

24 across PDP sponsors; 


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1 ‘‘(CC) pharmacy-spe2 cific in application; 

3 ‘‘(DD) relevant to the 

4 type of pharmacy concerned 

5 (such as specialty phar6 macies), taking into account 

7 the items and services fur8 nished by the pharmacy and 

9 the patient population 

10 served by the pharmacy; 

11 ‘‘(EE) applied only 

12 when relevant to the specific 

13 drug (or drug class of such 

14 drug) being furnished by the 

15 pharmacy or when relevant 

16 to management of the condi17 tion for which such drug has 

18 been prescribed; and 

19 ‘‘(FF) based on achiev20 able and proven criteria 

21 measuring pharmacy per22 formance over which the 

23 pharmacy has meaningful 

24 control and ability to influ25 ence. 


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1 In establishing such standards, 

2 the Secretary shall consult with 

3 stakeholders, including PDP 

4 sponsors and MA organizations, 

5 pharmacies across pharmacy 

6 practice types, pharmacy benefit 

7 managers, patient advocacy orga8 nizations, drug manufacturers, 

9 appropriate standard-setting or10 ganizations, and other entities 

11 determined appropriate by the 

12 Secretary. 

13 ‘‘(III) NO INCREASE IN COST

14 SHARING.—Subclause (I) shall not 

15 apply in the case where application of 

16 such subclause would increase the 

17 amount owed by an individual in cost 

18 sharing above the amount such indi19 vidual would have owed in cost shar20 ing without application of such sub21 clause. 

22 ‘‘(IV) DISCREPANCIES BETWEEN

23 NEGOTIATED PRICES AND ACTUAL RE24 IMBURSEMENT.—In the case that the 

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1 tiated price of a PDP sponsor applied 

2 at the point-of-sale with respect to a 

3 covered part D drug for a year dis4 pensed by a pharmacy was greater 

5 than the total reimbursement made to 

6 such pharmacy for such drug for such 

7 year, such sponsor shall, not later 

8 than 90 days after receiving notice of 

9 such determination, furnish to the 

10 pharmacy that dispensed such drug 

11 and to the Secretary a written expla12 nation of why such negotiated price 

13 was greater than such reimbursement. 

14 ‘‘(V) SPECIALTY PHARMACY.— 

15 For purposes of carrying out this 

16 clause (including subclause 

17 (II)(bb)(DD)), the Secretary shall, not 

18 later than December 31, 2019, define 

19 the term ‘specialty pharmacy’ in con20 sultation with relevant stakeholders. 

21 ‘‘(VI) DEFINITIONS.—In this 

22 clause: 

23 ‘‘(aa) INCENTIVE PAYMENTS

24 AND ADJUSTMENTS.—The term 

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1 ments’ means, with respect to 

2 payment to a pharmacy by a 

3 PDP sponsor for a covered part 

4 D drug, any prospective or retro5 spective price concessions, re6 bates, discounts, fees, reconcili7 ation adjustments, bonuses, per8 formance payments, incentives, 

9 and any other adjustment to 

10 such payment determined 

11 through the use of a quality 

12 measure, regardless of when such 

13 payments and adjustments are 

14 applied. Such term does not in15 clude any manufacturer rebates 

16 or concessions made with respect 

17 to such drug. 

18 ‘‘(bb) QUALITY MEASURE.— 

19 The term ‘quality measure’ 

20 means performance criteria used 

21 by a PDP sponsor (including an 

22 entity that contracts with such 

23 sponsor, such as a pharmacy ben24 efit manager) to determine the 


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1 amount or applicability of incen2 tive payments and adjustments. 

3 ‘‘(cc) PDP SPONSOR.—The 

4 term ‘PDP sponsor’ includes an 

5 MA organization offering an 

6 MA–PD plan under part C and 

7 an entity that contracts with 

8 such sponsor or organization, 

9 such as a pharmacy benefit man10 ager. 

11 ‘‘(iii) REASONABLE REIMBURSEMENT

12 REQUIREMENT.—In no case may a nego13 tiated price (as described in clause (ii)(I)) 

14 for a covered part D drug furnished by a 

15 pharmacy during a plan year beginning on 

16 or after January 1, 2020, be less than 

17 such pharmacy’s cost of purchasing and 

18 dispensing such drug and providing such 

19 other services associated with furnishing 

20 such drug as may be specified by the Sec21 retary. 

22 ‘‘(iv) CLAIM REIMBURSEMENT DIS23 CLOSURE REQUIREMENTS.—With respect 

24 to payment made by a PDP sponsor to a 

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1 nished by such pharmacy during a plan 

2 year beginning on or after January 1, 

3 2020, such sponsor shall promptly furnish 

4 all pricing components including the Net5 work Reimbursement ID used to price the 

6 claim, any fees, pharmacy price conces7 sions, discounts, incentives or any other 

8 forms of remuneration that affect payment 

9 and pricing of the claim as part of the 

10 claim adjudication response at the point-of11 sale. All aforementioned items, including 

12 Network Reimbursement ID, fees, phar13 macy price concessions, discounts, incen14 tives, or any other forms of remuneration 

15 that affect payment and pricing of the 

16 claim shall each be identified in a predeter17 mined line item in the remittance advice 

18 that is standard across the industry. The 

19 Part D sponsor shall include suitable 

20 claim-level detail on the electronic remit21 tance advice that accompanies each pay22 ment. This claim-level detail shall include, 

23 in an industry standardized format, all 

24 fields needed to properly identify the claim, 

25 including the Claim Authorization Number, 


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1 date of service, date of payment remit2 tance, ingredient cost reimbursed, dis3 pensing fee reimbursed, payment amounts 

4 including the Network ID used to price the 

5 claim, the specific dollar amounts and the 

6 appropriate qualifier codes for each pay7 ment adjustment including fees, pharmacy 

8 price concessions, or incentives. 

9 ‘‘(v) VIOLATION PROCESS.—A PDP 

10 sponsor shall participate in any process es11 tablished by the Secretary for purposes of 

12 determining whether such sponsor has vio13 lated a provision of clauses (ii) through 

14 (iv).’’. 

15 SEC. 3. PHARMACY BENEFIT MANAGER PROVISION OF IN16 FORMATION. 

17 (a) IN GENERAL.—Section 1150A(b)(2) of the Social 

18 Security Act (42 U.S.C. 1320b–23(b)(2)) is amended by 

19 striking ‘‘excluding’’ and inserting ‘‘including’’. 

20 (b) EFFECTIVE DATE.—The amendment made by 

21 subsection (a) shall apply with respect to contract years 

22 beginning on or after January 1, 2020. 

Æ 


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