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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 1038 Introduced in Senate (IS)]

<DOC>

118th CONGRESS
  1st Session
                                S. 1038

 To amend title XIX of the Social Security Act to improve transparency 
and prevent the use of abusive spread pricing and related practices in 
                         the Medicaid program.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             March 29, 2023

Mr. Welch (for himself and Mr. Marshall) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
 To amend title XIX of the Social Security Act to improve transparency 
and prevent the use of abusive spread pricing and related practices in 
                         the Medicaid program.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Drug Price Transparency in Medicaid 
Act of 2023''.

SEC. 2. IMPROVING TRANSPARENCY AND PREVENTING THE USE OF ABUSIVE SPREAD 
              PRICING AND RELATED PRACTICES IN MEDICAID.

    (a) Pass-Through Pricing Required.--
            (1) In general.--Section 1927(e) of the Social Security Act 
        (42 U.S.C. 1396r-8(e)) is amended by adding at the end the 
        following:
            ``(6) Pass-through pricing required.--A contract between 
        the State and a pharmacy benefit manager (referred to in this 
        paragraph as a `PBM'), or a contract between the State and a 
        managed care entity or other specified entity (as such terms 
        are defined in section 1903(m)(9)(D)) that includes provisions 
        making the entity responsible for coverage of covered 
        outpatient drugs dispensed to individuals enrolled with the 
        entity, shall require that payment for such drugs and related 
        administrative services (as applicable), including payments 
        made by a PBM on behalf of the State or entity, is based on a 
        pass-through pricing model under which--
                    ``(A) any payment made by the entity or the PBM (as 
                applicable) for such a drug--
                            ``(i) is limited to--
                                    ``(I) ingredient cost; and
                                    ``(II) a professional dispensing 
                                fee that is not less than the 
                                professional dispensing fee that the 
                                State plan or waiver would pay if the 
                                plan or waiver was making the payment 
                                directly;
                            ``(ii) is passed through in its entirety by 
                        the entity or PBM to the pharmacy or provider 
                        that dispenses the drug; and
                            ``(iii) is made in a manner that is 
                        consistent with section 1902(a)(30)(A) and 
                        sections 447.512, 447.514, and 447.518 of title 
                        42, Code of Federal Regulations (or any 
                        successor regulation) as if such requirements 
                        applied directly to the entity or the PBM, 
                        except that any payment by the entity or the 
                        PBM (as applicable) for the ingredient cost of 
                        a covered outpatient drug dispensed by 
                        providers and pharmacies referenced in clauses 
                        (i) or (ii) of section 447.518(a)(1) of title 
                        42, Code of Federal Regulations (or any 
                        successor regulation) shall be the same as the 
                        payment amount for the ingredient cost when 
                        dispensed by providers and pharmacies not 
                        referenced in such clauses, and in no case 
                        shall payment for the ingredient cost of a 
                        covered outpatient drug be based on the actual 
                        acquisition cost of a drug dispensed by 
                        providers and pharmacies referenced in such 
                        clauses or take into account a drug's status as 
                        a drug purchased at a discounted price by a 
                        provider or pharmacy referenced in such 
                        clauses;
                    ``(B) payment to the entity or the PBM (as 
                applicable) for administrative services performed by 
                the entity or PBM is limited to a reasonable 
                administrative fee that covers the reasonable cost of 
                providing such services;
                    ``(C) the entity or the PBM (as applicable) shall 
                make available to the State, and the Secretary upon 
                request, all costs and payments related to covered 
                outpatient drugs and accompanying administrative 
                services incurred, received, or made by the entity or 
                the PBM, including ingredient costs, professional 
                dispensing fees, administrative fees, post-sale and 
                post-invoice fees, discounts, or related adjustments 
                such as direct and indirect remuneration fees, and any 
                and all other remuneration; and
                    ``(D) any form of spread pricing whereby any amount 
                charged or claimed by the entity or the PBM (as 
                applicable) is in excess of the amount paid to the 
                pharmacies on behalf of the entity, including any post-
                sale or post-invoice fees, discounts, or related 
                adjustments such as direct and indirect remuneration 
                fees or assessments (after allowing for a reasonable 
                administrative fee as described in subparagraph (B)) is 
                not allowable for purposes of claiming Federal matching 
                payments under this title.''.
            (2) Conforming amendment.--Section 1903(m)(2)(A)(xiii) of 
        such Act (42 U.S.C. 1396b(m)(2)(A)(xiii)) is amended--
                    (A) by striking ``and (III)'' and inserting 
                ``(III)'';
                    (B) by inserting before the period at the end the 
                following: ``, and (IV) pharmacy benefit management 
                services provided by the entity, or provided by a 
                pharmacy benefit manager on behalf of the entity under 
                a contract or other arrangement between the entity and 
                the pharmacy benefit manager, shall comply with the 
                requirements of section 1927(e)(6)''; and
                    (C) by moving the left margin 2 ems to the left.
            (3) Effective date.--The amendments made by this subsection 
        apply to contracts between States and managed care entities, 
        other specified entities, or pharmacy benefits managers that 
        are entered into or renewed on or after the date that is 18 
        months after the date of enactment of this Act.
    (b) Ensuring Accurate Payments to Pharmacies Under Medicaid.--
            (1) In general.--Section 1927(f) of the Social Security Act 
        (42 U.S.C. 1396r-8(f)) is amended--
                    (A) by striking ``and'' after the semicolon at the 
                end of paragraph (1)(A)(i) and all that precedes it 
                through ``(1)'' and inserting the following:
            ``(1) Determining pharmacy actual acquisition costs.--The 
        Secretary shall conduct a survey of retail community pharmacy 
        drug prices to determine the national average drug acquisition 
        cost as follows:
                    ``(A) Use of vendor.--The Secretary may contract 
                services for--
                            ``(i) with respect to retail community 
                        pharmacies, the determination of retail survey 
                        prices of the national average drug acquisition 
                        cost for covered outpatient drugs based on a 
                        monthly survey of such pharmacies; and'';
                    (B) by adding at the end of paragraph (1) the 
                following:
                    ``(F) Survey reporting.--In order to meet the 
                requirement of section 1902(a)(54), a State shall 
                require that any retail community pharmacy in the State 
                that receives any payment, reimbursement, 
                administrative fee, discount, or rebate related to the 
                dispensing of covered outpatient drugs to individuals 
                receiving benefits under this title, regardless of 
                whether such payment, fee, discount, or rebate is 
                received from the State or a managed care entity 
                directly or from a pharmacy benefit manager or another 
                entity that has a contract with the State or a managed 
                care entity, shall respond to surveys of retail prices 
                conducted under this subsection.
                    ``(G) Survey information.--Information on national 
                drug acquisition prices obtained under this paragraph 
                shall be made publicly available and shall include at 
                least the following:
                            ``(i) The monthly response rate of the 
                        survey including a list of pharmacies not in 
                        compliance with subparagraph (F).
                            ``(ii) The sampling frame and number of 
                        pharmacies sampled monthly.
                            ``(iii) Information on price concessions to 
                        the pharmacy, including discounts, rebates, and 
                        other price concessions, to the extent that 
                        such information is available during the survey 
                        period.
                    ``(H) Report on specialty pharmacies.--
                            ``(i) In general.--Not later than 1 year 
                        after the effective date of this subparagraph, 
                        the Secretary shall submit a report to Congress 
                        examining specialty drug coverage and 
                        reimbursement under this title.
                            ``(ii) Content of report.--Such report 
                        shall include a description of how State 
                        Medicaid programs define specialty drugs and 
                        specialty pharmacies, how much State Medicaid 
                        programs pay for specialty drugs, how States 
                        and managed care plans determine payment for 
                        specialty drugs, the settings in which 
                        specialty drugs are dispensed (such as retail 
                        community pharmacies or specialty pharmacies), 
                        to what extent acquisition costs for specialty 
                        drugs are captured in the national average drug 
                        acquisition cost survey or through another 
                        process, examples of specialty drug dispensing 
                        fees to support the services associated with 
                        dispensing specialty drugs, and recommendations 
                        as to whether specialty pharmacies should be 
                        included in the survey of retail prices to 
                        ensure national average drug acquisition costs 
                        capture drugs sold at specialty pharmacies and 
                        how such specialty pharmacies should be 
                        defined.'';
                    (C) in paragraph (2)--
                            (i) in subparagraph (A), by inserting ``, 
                        including payments rates under Medicaid managed 
                        care plans,'' after ``under this title''; and
                            (ii) in subparagraph (B), by inserting 
                        ``and the basis for such dispensing fees'' 
                        before the semicolon; and
                    (D) in paragraph (4), by inserting ``, and 
                $5,000,000 for fiscal year 2025 and each fiscal year 
                thereafter,'' after ``2010''.
            (2) Effective date.--The amendments made by this subsection 
        take effect on the first day of the first quarter that begins 
        on or after the date that is 18 months after the date of 
        enactment of this Act.
                                 <all>
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