I 

112TH CONGRESS 

1ST SESSION H. R. 1971 

To amend the Public Health Service Act to ensure transparency and proper 

operation of pharmacy benefit managers. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 24, 2011 

Mrs. MCMORRIS RODGERS (for herself and Mr. WEINER) introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committees on Ways and Means and Education and the Workforce, for a period to be subsequently determined by 

the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To amend the Public Health Service Act to ensure transparency and proper operation of pharmacy benefit managers. 

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 ‘‘Pharmacy Competition 

5 and Consumer Choice Act of 2011’’. 


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1 SEC. 2. PHARMACY BENEFITS MANAGER TRANSPARENCY 

2 AND PROPER OPERATION REQUIREMENTS. 

3 (a) AMENDMENT TO THE PUBLIC HEALTH SERVICE

4 ACT RELATING TO THE GROUP MARKET.— 

5 (1) IN GENERAL.—Subpart 2 of part A of title 

6 XXVII of the Public Health Service Act (42 U.S.C. 

7 300gg–4 et seq.) is amended by adding at the end 

8 the following: 

9 ‘‘SEC. 2729. PHARMACY BENEFITS MANAGER TRANS10 PARENCY AND PROPER OPERATION RE11 QUIREMENTS. 

12 ‘‘(a) IN GENERAL.—Notwithstanding any other pro13 vision of law, a group health plan, and a health insurance 

14 issuer providing health insurance coverage in connection 

15 with a group health plan (collectively, a ‘plan sponsor’), 

16 shall not enter into a contract with any pharmacy benefits 

17 manager (referred to in this section as a ‘PBM’) to man18 age the prescription drug coverage provided under such 

19 plan or insurance coverage, or to control the costs of such 

20 prescription drug coverage, unless the PBM satisfies the 

21 following requirements: 

22 ‘‘(1) REQUIRED DISCLOSURES TO PLAN SPON23 SOR IN ANNUAL REPORT.—The PBM shall provide 

24 at least annually a report to each plan sponsor, in25 cluding, at a minimum— 


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1 ‘‘(A) information on the number and total 

2 cost of prescriptions under the contract filled at 

3 mail order and at retail pharmacies; 

4 ‘‘(B) an estimate of aggregate average 

5 payments under the contract, per prescription 

6 (weighted by prescription volume), made to mail 

7 order and retail pharmacies, and the average 

8 amount per prescription that the PBM was 

9 paid by the plan for prescriptions filled at mail 

10 order and retail pharmacies; 

11 ‘‘(C) an estimate of the aggregate average 

12 payment per prescription (weighted by prescrip13 tion volume) under the contract received from 

14 pharmaceutical manufacturers, including all re15 bates, discounts, price concessions, or adminis16 trative and other payments from pharma17 ceutical manufacturers, and a description of the 

18 types of payments, the amount of such pay19 ments that were shared with the plan, and the 

20 percentage of prescriptions for which the PBM 

21 received such payments; 

22 ‘‘(D) information on the overall percentage 

23 of generic drugs dispensed under the contract 

24 separately at retail and mail order pharmacies, 


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1 and the percentage of cases in which a generic 

2 drug is dispensed when available; and 

3 ‘‘(E) information on the percentage and 

4 number of cases under the contract in which in5 dividuals who had been receiving a prescribed 

6 drug that had a lower cost for the plan were 

7 later given a drug with a higher cost for the 

8 plan, because of PBM policies or at the direct 

9 or indirect control of the PBM, and the ration10 ale for such changes and a description of the 

11 applicable PBM policies. 

12 ‘‘(2) PBM REQUIREMENTS WITH RESPECT TO

13 PHARMACIES.—With respect to contracts between a 

14 PBM and a pharmacy, the PBM shall— 

15 ‘‘(A) include in such contracts, the meth16 odology and resources utilized for the Maximum 

17 Allowable Cost (referred to in this section as 

18 ‘MAC’) pricing of the PBM, update pricing in19 formation on such list at least weekly, and es20 tablish a process for the prompt notification of 

21 such pricing updates to network pharmacies; 

22 ‘‘(B) agree to provide timely updates, not 

23 less than once every 3 business days, to phar24 macy product pricing files used to calculate preVerDate Mar 15 2010 02:12 May 28, 2011 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1971.IH H1971

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1 scription prices that will be used to reimburse 

2 pharmacies; 

3 ‘‘(C) agree to pay pharmacies promptly for 

4 clean claims under section 1860D–12(b)(4) of 

5 the Social Security Act (42 U.S.C. 1395w– 

6 112(b)(4)); 

7 ‘‘(D) not require that a pharmacist or 

8 pharmacy participate in a pharmacy network 

9 managed by such PBM as a condition for the 

10 pharmacy to participate in another network 

11 managed by such PBM, and shall not exclude 

12 an otherwise qualified pharmacist or pharmacy 

13 from participation in a particular network pro14 vided that the pharmacist or pharmacy— 

15 ‘‘(i) accepts the terms, conditions and 

16 reimbursement rates of the PBM; 

17 ‘‘(ii) meets all applicable Federal and 

18 State licensure and permit requirements; 

19 and 

20 ‘‘(iii) has not been excluded from par21 ticipation in any Federal or State program; 

22 ‘‘(E) not automatically enroll a pharmacy 

23 in a contract or modify an existing contract 

24 without written agreement from the pharmacy 

25 or pharmacist; and 


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1 ‘‘(F) require each pharmacy to sign a con2 tract before assuming responsibility to fill pre3 scriptions for the PBM. 

4 ‘‘(3) PBM OWNERSHIP INTERESTS AND CON5 FLICTS OF INTEREST; PHARMACY CHOICE.—A PBM 

6 shall not— 

7 ‘‘(A) mandate that a covered individual use 

8 a specific retail pharmacy, mail order phar9 macy, specialty pharmacy, or other pharmacy 

10 practice site or entity if the PBM has an own11 ership interest in such pharmacy, practice site, 

12 or entity or the pharmacy, practice site, or enti13 ty has an ownership interest in the PBM; or 

14 ‘‘(B) provide incentives to covered plan 

15 beneficiaries, in the form of variations in pre16 miums, deductibles, co-payments, or co-insur17 ance rates, to encourage plan beneficiaries to 

18 use a specific pharmacy if such incentives are 

19 only applicable to a pharmacy, practice site, or 

20 entity that the PBM has an ownership interest 

21 in, unless such incentives are applicable to all 

22 network pharmacies. 

23 ‘‘(4) PBM AUDIT OF PHARMACY PROVIDERS.— 

24 The following shall apply to audits of pharmacy pro25 viders by a PBM: 


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1 ‘‘(A) The period covered by an audit may 

2 not exceed 2 years from the date the claim was 

3 submitted to or adjusted by the PBM. 

4 ‘‘(B) An audit that involves clinical or pro5 fessional judgment shall be conducted by, or in 

6 consultation with, a pharmacist licensed in the 

7 State of the audit or the State board of phar8 macy. 

9 ‘‘(C) The PBM may not require more 

10 stringent recordkeeping than that required by 

11 State or Federal law. 

12 ‘‘(D) The PBM or the entity conducting 

13 an audit for the PBM shall establish a written 

14 appeals process that shall include procedures 

15 for appeals for preliminary reports and final re16 ports. 

17 ‘‘(E) The pharmacy, practice site, or other 

18 entity may use the records of a hospital, physi19 cian, or other authorized practitioner to validate 

20 the pharmacy records and any legal prescription 

21 (one that complies with State Board of Phar22 macy requirements) may be used to validate 

23 claims in connection with prescriptions, refills, 

24 or changes in prescriptions. 


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1 ‘‘(F) Any clerical or recordkeeping error, 

2 such as a typographical error, scrivener’s error, 

3 or computer error, regarding a required docu4 ment or record shall not be subject to 

5 recoupment unless proof of intent to commit 

6 fraud or unless such discrepancy results in ac7 tual financial harm to an interested party. 

8 ‘‘(G) The entity conducting the audit shall 

9 not use extrapolation or other statistical expan10 sion techniques in calculating the recoupment 

11 or penalties for audits. 

12 ‘‘(H) The PBM shall disclose any audit 

13 recoupment to the group health plan or health 

14 insurance issuer with a copy to the pharmacy. 

15 ‘‘(5) PBM CONDUCT REGARDING COVERED IN16 DIVIDUALS.—A PBM shall— 

17 ‘‘(A) notify a plan sponsor if such PBM in18 tends to sell utilization or claims data that the 

19 PBM possesses as a result of an arrangement 

20 described in this section; 

21 ‘‘(B) notify the plan sponsor in writing at 

22 least 30 days before selling, leasing, or renting 

23 such data and shall provide the plan sponsor 

24 with the name of the potential purchaser of 


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1 such data and the expected use of any utiliza2 tion or claims data by such purchaser; 

3 ‘‘(C) not sell such data unless the sale 

4 complies with all Federal and State laws and 

5 the PBM has received written approval for such 

6 sale from the plan sponsor; 

7 ‘‘(D) not directly contact a covered indi8 vidual by any means (including via electronic 

9 delivery, telephonic, SMS text or direct mail) 

10 without the express written permission of the 

11 plan sponsor and the covered individual; 

12 ‘‘(E) not transmit any personally identifi13 able utilization or claims data to a pharmacy 

14 owned by the PBM if the patient has not volun15 tarily elected in writing to fill that particular 

16 prescription at the PBM-owned pharmacy; and 

17 ‘‘(F) provide each covered individual with 

18 an opportunity to affirmatively opt out of the 

19 sale of his or her data prior to entering into 

20 any arrangement for the lease, rental, or sale of 

21 such information. 

22 ‘‘(b) DEFINITION.—For purposes of this section, the 

23 term ‘fraud’ has the meaning given the term ‘health care 

24 fraud’ in section 1347 of title 18, United States Code.’’. 


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1 (2) EFFECTIVE DATE.—The amendment made 

2 by this subsection shall apply to plan sponsors for 

3 plan years beginning on or after the date of enact4 ment of this Act. 

5 (b) AMENDMENTS TO THE PUBLIC HEALTH SERVICE

6 ACT RELATING TO THE INDIVIDUAL MARKET.— 

7 (1) IN GENERAL.—Subpart 2 of part B of title 

8 XXVII of the Public Health Service Act (42 U.S.C. 

9 300gg–51 et seq.) is amended by adding at the end 

10 the following: 

11 ‘‘SEC. 2754. PHARMACY BENEFITS MANAGER TRANS12 PARENCY AND PROPER OPERATION RE13 QUIREMENTS. 

14 ‘‘The provisions of section 2729 of the Public Health 

15 Service Act shall apply to health insurance coverage of16 fered by a health insurance issuer in the individual market 

17 in the same manner as they apply to a group health plan 

18 and a health insurance issuer providing health insurance 

19 coverage under that section.’’. 

20 (2) CONFORMING AMENDMENTS.— 

21 (A) ERISA AMENDMENT.— 

22 (i) IN GENERAL.—Subpart B of part 

23 7 of subtitle B of title I of the Employee 

24 Retirement Income Security Act of 1974 


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1 (29 U.S.C. 1185 et seq.) is amended by 

2 adding at the end the following: 

3 ‘‘SEC. 716. PHARMACY BENEFITS MANAGER TRANS4 PARENCY AND PROPER OPERATION RE5 QUIREMENTS. 

6 ‘‘The provisions of section 2729 of the Public Health 

7 Service Act shall apply to a group health plan, and a 

8 health insurance issuer providing health insurance cov9 erage in connection with a group health plan, in the same 

10 manner as such provisions apply to a group health plan 

11 and a health insurance issuer providing health insurance 

12 coverage under that section.’’. 

13 (ii) CLERICAL AMENDMENT.—The 

14 table of contents in section 1 of the Em15 ployee Retirement Income Security Act of 

16 1974 is amended by inserting after the 

17 item relating to section 714 the following: 

‘‘Sec. 715. Additional market reforms. 

‘‘Sec. 716. Pharmacy benefits manager transparency and proper operation requirements.’’. 

18 (B) IRC AMENDMENT.— 

19 (i) IN GENERAL.—Subpart B of chap20 ter 100 of the Internal Revenue Code of 

21 1986 (26 U.S.C. 9811 et seq.) is amended 

22 by adding at the end the following: 


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1 ‘‘SEC. 9814. PHARMACY BENEFITS MANAGER TRANS2 PARENCY AND PROPER OPERATION RE3 QUIREMENTS. 

4 ‘‘The provisions of section 2729 of the Public Health 

5 Service Act shall apply to a group health plan, and a 

6 health insurance issuer providing health insurance cov7 erage in connection with a group health plan, in the same 

8 manner as such provisions apply to a group health plan 

9 and a health insurance issuer providing health insurance 

10 coverage under that section.’’. 

11 (ii) CLERICAL AMENDMENT.—The 

12 table of sections for subpart B of chapter 

13 100 of the Internal Revenue Code of 1986 

14 is amended by inserting after the item re15 lating to section 9813 the following new 

16 item: 

‘‘Sec. 9814. Pharmacy benefits manager transparency and proper operation requirements.’’. 

17 (3) EFFECTIVE DATE.—The amendments made 

18 by paragraphs (1) and (2) shall apply with respect 

19 to health insurance coverage offered, sold, issued, re20 newed, in effect, or operated in the individual mar21 ket on or after the date of enactment of this Act. 

22 (c) MEDICARE PRESCRIPTION DRUG PLANS.— 

23 (1) IN GENERAL.—Subpart 2 of part D of title 

24 XVIII of the Social Security Act (42 U.S.C. 1395w– 


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1 111 et seq.) is amended by adding at the end the 

2 following: 

3 ‘‘SEC. 1860D–17. PHARMACY BENEFITS MANAGER TRANS4 PARENCY AND PROPER OPERATION RE5 QUIREMENTS. 

6 ‘‘The provisions of section 2729 of the Public Health 

7 Service Act shall apply to health insurance coverage of8 fered by a prescription drug plan under this part in the 

9 same manner as such provisions apply to a group health 

10 plan and a health insurance issuer providing health insur11 ance coverage under that section.’’. 

12 (2) EFFECTIVE DATE.—The amendment made 

13 by this subsection shall apply with respect to plan 

14 years beginning on or after the date of enactment of 

15 this Act. 

Æ 


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