II 

113TH CONGRESS 

1ST SESSION S. 867 

To amend title XVIII of the Social Security Act to provide for pharmacy 

benefits manager standards under the Medicare prescription drug program, to establish basic audit standards of pharmacies, to further transparency of payment methodology to pharmacies, and to provide for 

recoupment returns to Medicare. 

IN THE SENATE OF THE UNITED STATES 

MAY 6, 2013 

Mr. PRYOR (for himself, Mr. MORAN, Mr. WICKER, and Mr. BOOZMAN) 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 provide 

for pharmacy benefits manager standards under the 

Medicare prescription drug program, to establish basic 

audit standards of pharmacies, to further transparency 

of payment methodology to pharmacies, and to provide 

for recoupment returns to Medicare. 

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 ‘‘Medicare Prescription 

5 Drug Program Integrity and Transparency Act of 2013’’. 

mstockstill on DSK4VPTVN1PROD with BILLS

2 

•S 867 IS

1 SEC. 2. PHARMACY BENEFITS MANAGER STANDARDS 

2 UNDER THE MEDICARE PROGRAM. 

3 (a) IN GENERAL.—Section 1860D–12(b) of the So4 cial Security Act (42 U.S.C. 1395w–112(b)) is amended 

5 by adding at the end the following new paragraphs: 

6 ‘‘(7) PHARMACY BENEFITS MANAGER TRANS7 PARENCY AND PROPER OPERATIONS REQUIRE8 MENTS.— 

9 ‘‘(A) IN GENERAL.—Each contract entered 

10 into with a PDP sponsor under this part with 

11 respect to a prescription drug plan offered by 

12 such sponsor shall provide that the PDP may 

13 not enter into a contract with any pharmacy 

14 benefits manager (referred to in this paragraph 

15 as a ‘PBM’) to manage the prescription drug 

16 coverage provided under such plan, or to con17 trol the costs of the prescription drug coverage 

18 under such plan, unless the PBM satisfies the 

19 requirements described in subparagraph (B). 

20 ‘‘(B) REQUIREMENTS.—The requirements 

21 described in this subparagraph are as follows: 

22 ‘‘(i) PROPER AUDIT PROCEDURES.— 

23 The following shall apply to each audit of 

24 a pharmacy conducted by or for the phar25 macy benefits manager with respect to 

26 such prescription drug plan: 

mstockstill on DSK4VPTVN1PROD with BILLS

3 

•S 867 IS

1 ‘‘(I) ASSURING RECOVERIES TO

2 MEDICARE.— 

3 ‘‘(aa) The PBM (or auditing 

4 entity) shall disclose the amount 

5 of each payment recovered pursu6 ant to the audit to the PDP 

7 sponsor with a copy to the phar8 macy. 

9 ‘‘(bb) Any payment recov10 ered by the PBM (or auditing en11 tity) pursuant to the audit shall 

12 be returned to the PDP sponsor. 

13 ‘‘(II) ASSURING CLINICAL DECI14 SIONS IN AUDITS.— 

15 ‘‘(aa) In the case the audit 

16 involves clinical or professional 

17 judgment, the audit shall be con18 ducted by, or in consultation 

19 with, a pharmacist licensed in the 

20 State of the audit or the State 

21 board of pharmacy. 

22 ‘‘(bb) The pharmacy, prac23 tice site, or other entity may use 

24 a nursing home’s medication ad25 ministration record (MAR), the 

mstockstill on DSK4VPTVN1PROD with BILLS

4 

•S 867 IS

1 records of a hospital, physician, 

2 rehabilitation facility, State-li3 censed healthcare facility, or 

4 other authorized practitioner to 

5 validate the pharmacy records 

6 and any legal prescription (one 

7 that complies with State Board 

8 of Pharmacy requirements) may 

9 be used to validate claims sub10 mitted by the pharmacy in con11 nection with prescriptions, refills, 

12 proof of delivery, or changes in 

13 prescriptions during any phase of 

14 the audit, including appeal. 

15 ‘‘(III) ASSURING PROPER PROCE16 DURES.— 

17 ‘‘(aa) The PBM (or auditing 

18 entity) may not apply record19 keeping or other requirements on 

20 the pharmacy that are more 

21 stringent than such requirements 

22 applied under Federal law or the 

23 State law involved. 

24 ‘‘(bb) The PBM (or auditing 

25 entity) shall accept all pharmacy 

mstockstill on DSK4VPTVN1PROD with BILLS

5 

•S 867 IS

1 prescription records related to 

2 the audit in an electronic format 

3 or other digital media. 

4 ‘‘(cc) The PBM (or auditing 

5 entity) may not, pursuant to the 

6 audit, disallow the entire pay7 ment with respect to a claim sub8 mitted by the pharmacy because 

9 of a clerical or recordkeeping 

10 error (such as a typographical 

11 error, scrivener’s error, or com12 puter error) if there is an ab13 sence of intent to commit fraud, 

14 as defined in section 1347 of title 

15 18, United States Code. In the 

16 case of errors that have no finan17 cial harm to the patient or plan, 

18 the PBM shall not assess any 

19 chargebacks. 

20 ‘‘(dd) The PBM (or auditing 

21 entity) may not use extrapolation 

22 or other statistical expansion 

23 techniques in calculating any 

24 recoupment or penalty pursuant 

25 to the audit. 

mstockstill on DSK4VPTVN1PROD with BILLS

6 

•S 867 IS

1 ‘‘(ee) The period covered by 

2 the audit may not exceed 2 years 

3 from the date the claim involved 

4 was submitted to, or adjusted by, 

5 the PBM (or auditing entity). 

6 ‘‘(ff) The PBM (or auditing 

7 entity) shall have in place a writ8 ten appeals process that affords 

9 the pharmacy a minimum of 60 

10 days to respond to the auditor 

11 findings, shall include procedures 

12 for appeals from preliminary re13 ports and final reports related to 

14 such audit, and shall permit the 

15 pharmacy to introduce any docu16 mentation which would validate a 

17 claim contested in the audit until 

18 the final written decision is 

19 issued on appeal. 

20 ‘‘(ii) BUSINESS PRACTICE PREDICT21 ABILITY.—A PBM shall provide a par22 ticular aggregate average reimbursement 

23 rate for generics or a maximum average 

24 discount off of an accepted pharmaceutical 

25 pricing benchmark for multi-source 

mstockstill on DSK4VPTVN1PROD with BILLS

7 

•S 867 IS

1 generics as a whole (often referred to as a 

2 ‘generic effective rate’) and provide a proc3 ess for the generic effective rate to be ap4 pealed. For the purposes of this rate or 

5 benchmark amount, the PBM shall utilize 

6 a pharmaceutical pricing benchmark pub7 lished by a nationally available compen8 dium. The aggregate average reimburse9 ment rate for generics (generic effective 

10 rate) shall be calculated using the actual 

11 amount paid to the pharmacy (typically the 

12 amount of reimbursement to the PBM plus 

13 the patient co-pay), excluding the dis14 pensing fee, shall not be calculated solely 

15 according to the amount allowed by the 

16 plan, and shall include all generics dis17 pensed, regardless of whether they are sub18 ject to MAC pricing. 

19 ‘‘(iii) PROTECTING PATIENT AND

20 CLAIMS RELATED DATA.—A PBM shall ad21 here to the following criteria when han22 dling personally identifiable utilization and 

23 claims data or other sensitive patient data: 

24 ‘‘(I) A PBM may not transmit 

25 any personally identifiable utilization 

mstockstill on DSK4VPTVN1PROD with BILLS

8 

•S 867 IS

1 or claims data to a pharmacy owned 

2 by a PBM if the plan enrollee has not 

3 voluntarily elected in writing or via se4 cure electronic means to fill that par5 ticular prescription at the PBM-owned 

6 pharmacy. 

7 ‘‘(II) A PBM may not require 

8 that a plan enrollee use a retail phar9 macy, mail order pharmacy, specialty 

10 pharmacy, or other pharmacy entity 

11 providing pharmacy services in which 

12 the PBM has an ownership interest or 

13 that has an ownership interest in the 

14 PBM or provide an incentive to a ben15 eficiary to encourage the individual to 

16 use a retail pharmacy, mail order 

17 pharmacy, specialty pharmacy, or 

18 other pharmacy entity providing phar19 macy services in which the PBM has 

20 an ownership interest or that has an 

21 ownership interest in the PBM, if the 

22 incentive is applicable only to such 

23 pharmacies.’’. 

24 (b) DISCLOSURE AND REGULAR UPDATE OF PRE25 SCRIPTION DRUG REIMBURSEMENT.—Section 1860D– 

mstockstill on DSK4VPTVN1PROD with BILLS

9 

•S 867 IS

1 12(b) of the Social Security Act (42 U.S.C. 1395w– 

2 112(b)) is amended to read as follows: 

3 ‘‘(6) DISCLOSURE AND REGULAR UPDATE OF

4 PRESCRIPTION DRUG REIMBURSEMENT.—Each con5 tract entered into with a PDP sponsor under this 

6 part with respect to a prescription drug plan offered 

7 by such sponsor shall provide that the sponsor or 

8 subcontractor of such sponsor shall— 

9 ‘‘(A) disclose to a pharmacy, at the time 

10 when a contract is offered, the methodology and 

11 actual per unit reimbursement amount for each 

12 covered drug for each such pharmacy; and 

13 ‘‘(B) not less frequently than once every 7 

14 days, beginning with an initial update on Janu15 ary 1 of each year— 

16 ‘‘(i) update such reimbursement 

17 amount to accurately reflect the market 

18 price of acquiring the drug; and 

19 ‘‘(ii) disclose to each contracted phar20 macy such methodology and reimburse21 ment amounts.’’. 

22 (c) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to plan years beginning on or after 

24 January 1, 2015. 

Æ 

mstockstill on DSK4VPTVN1PROD with BILLS