I 

111TH CONGRESS 

2D SESSION H. R. 5234 

To amend the Public Health Service Act, the Employee Retirement Income 

Security Act, the Internal Revenue Code of 1986, and title XVIII of 

the Social Security Act to ensure transparency and proper operation 

of pharmacy benefit managers. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 6, 2010 

Mr. WEINER (for himself and Mr. MORAN of Kansas) 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 

Labor, 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, the Employee Retirement Income Security Act, the Internal Revenue Code 

of 1986, and title XVIII of the Social Security 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 ‘‘PBM Audit Reform 

5 and Transparency Act of 2010’’. 


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1 SEC. 2. PHARMACY BENEFITS MANAGER TRANSPARENCY 

2 AND PROPER OPERATION REQUIREMENTS. 

3 (a) IN GENERAL.— 

4 (1) AMENDMENTS TO THE PUBLIC HEALTH

5 SERVICE ACT RELATING TO THE GROUP MARKET.— 

6 Subpart 2 of part A of title XXVII of the Public 

7 Health Service Act (42 U.S.C. 300gg–4 et seq.) is 

8 amended by adding at the end 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, shall not enter into a contract 

16 with any pharmacy benefits manager to manage the pre17 scription drug coverage provided under such plan or insur18 ance coverage, or to control the costs of such prescription 

19 drug coverage, unless the PBM satisfies the following re20 quirements: 

21 ‘‘(1) REQUIRED DISCLOSURES TO GROUP

22 HEALTH PLAN OR HEALTH INSURANCE ISSUER IN

23 ANNUAL REPORT.— 

24 ‘‘(A) IN GENERAL.—The PBM shall pro25 vide at least annually a report to each group 


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1 health plan and health insurance issuer with 

2 which the PBM has a contract. 

3 ‘‘(B) CONTENTS.—With respect to the 

4 contract described under subparagraph (A), the 

5 report under subparagraph (A) shall include— 

6 ‘‘(i) information on the number and 

7 total cost of prescriptions under the con8 tract filled at each of the following types of 

9 pharmacies: mail order pharmacies, spe10 ciality pharmacies, and retail pharmacies; 

11 ‘‘(ii) the aggregate average payments 

12 under the contract, per prescription 

13 (weighted by prescription volume), made to 

14 such pharmacies; 

15 ‘‘(iii) the average amount, per pre16 scription (weighted by prescription vol17 ume), that the PBM was paid by the plan 

18 or issuer for prescriptions filled at such 

19 pharmacies; 

20 ‘‘(iv) the aggregate average payment 

21 per prescription (weighted by prescription 

22 volume) under the contract received from 

23 pharmaceutical manufacturers, including 

24 all rebates, discounts, price concessions, or 

25 administrative and other payments from 


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1 pharmaceutical manufacturers, and a de2 scription of the types of payments, the 

3 amount of these payments that were 

4 shared with the plan, and the percentage 

5 of prescriptions for which the PBM re6 ceived such payments; 

7 ‘‘(v) information on the overall per8 centage of generic drugs dispensed under 

9 the contract separately at retail and mail 

10 order pharmacies, and the percentage of 

11 cases in which a generic drug is dispensed 

12 when available; and 

13 ‘‘(vi) information on the percentage 

14 and number of cases under the contract in 

15 which individuals were switched, because of 

16 the policies of the PBM, from the drug 

17 originally prescribed to such individual by 

18 the health care provider to a drug with a 

19 higher cost to the plan or issuer, the ra20 tionale for these switches, and a descrip21 tion of the policies of the PBM applicable 

22 to such switches. 

23 ‘‘(2) PBM INTERACTIONS WITH PHARMACIES.— 

24 ‘‘(A) OBLIGATIONS ON PBM.—A PBM 

25 shall— 


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1 ‘‘(i) provide to pharmacies that con2 tract with the PBM— 

3 ‘‘(I) the methodology and re4 sources that the PBM utilizes to de5 termine reimbursement (including to 

6 calculate the maximum allowable cost 

7 list); and 

8 ‘‘(II) timely updates to pharmacy 

9 product reimbursement benchmarks 

10 used to calculate prescription reim11 bursement to pharmacies; 

12 ‘‘(ii) not less than one time per week, 

13 update the maximum allowable cost list 

14 and the reimbursement benchmarks; 

15 ‘‘(iii) establish a process for providing 

16 prompt notification of the updates under 

17 clause (ii) to the pharmacies; and 

18 ‘‘(iv) pay pharmacies promptly for 

19 clean claims, in a manner that is similar to 

20 the manner in which claims are paid under 

21 section 1860D–12(b)(4) of the Social Se22 curity Act (42 U.S.C. 1395w–112(b)(4)). 

23 ‘‘(B) PBM LIMITATIONS.—A PBM may 

24 not— 


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1 ‘‘(i) require that a pharmacy partici2 pate in one network of pharmacies man3 aged by such PBM as a condition for the 

4 pharmacy to participate in another net5 work managed by such PBM; 

6 ‘‘(ii) exclude an otherwise qualified 

7 pharmacy from participation in a network 

8 of pharmacies managed by such PBM if 

9 the person or entity that owns the phar10 macy accepts the terms, conditions and re11 imbursement rates of the PBM’s contract; 

12 and 

13 ‘‘(iii) automatically— 

14 ‘‘(I) enroll a pharmacy in a con15 tract with the PBM for participation 

16 in a pharmacy network; or 

17 ‘‘(II) modify an existing contract 

18 regarding participation in a pharmacy 

19 network, 

20 without a written agreement of the person 

21 or entity that owns the pharmacy. 

22 ‘‘(C) CONTRACT REQUIRED.—The person 

23 or entity that owns a pharmacy shall sign a 

24 contract with a PBM before assuming responsiVerDate Mar 15 2010 02:36 May 07, 2010 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5234.IH H5234

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1 bility to participate in a network managed by a 

2 PBM. 

3 ‘‘(3) PBM OWNERSHIP INTERESTS AND CON4 FLICTS OF INTEREST.—With respect to an indi5 vidual who is a beneficiary of pharmacy benefits 

6 managed by a PBM, the PBM may not mandate 

7 that such individual use a specific pharmacy or enti8 ty to fill a prescription if— 

9 ‘‘(A) the PBM has an ownership interest 

10 in the pharmacy or entity; or 

11 ‘‘(B) the pharmacy or entity has an owner12 ship interest in the PBM. 

13 ‘‘(4) PHARMACY CHOICE.—With respect to an 

14 individual who is a beneficiary of pharmacy benefits 

15 managed by a PBM, such PBM may not provide in16 centives to such individual (including variations in 

17 premiums, deductibles, co-payments, or co-insurance 

18 rates) to encourage such individual to utilize a spe19 cific pharmacy or other entity to fill a prescription, 

20 if such incentives only apply— 

21 ‘‘(A) to a pharmacy or entity that the 

22 PBM has an ownership interest in; or 

23 ‘‘(B) to a pharmacy or entity that has an 

24 ownership interest in the PBM. 


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1 ‘‘(5) PBM AUDIT OF PHARMACIES.—With re2 spect to an audit by a PBM (or an entity acting on 

3 behalf of the PBM) of a pharmacy or other entity 

4 (referred to in this paragraph as a ‘dispensing enti5 ty’) that contracts with a PBM to receive reimburse6 ment for dispensing prescription drugs to individuals 

7 covered by benefits managed by such PBM, the 

8 audit must comply with the following: 

9 ‘‘(A) The PBM (or an entity acting on be10 half of the PBM) shall give the pharmacy or 

11 other dispensing entity at least 15 days written 

12 notice prior to commencing an audit. 

13 ‘‘(B) The time period covered by the audit 

14 may not exceed one year from the date the 

15 claim being audited was submitted to or adju16 dicated by the PBM. 

17 ‘‘(C) To the extent that the audit requires 

18 the application of clinical or professional judg19 ment, such audit shall be conducted by or in 

20 consultation with a pharmacist who is licensed 

21 in the State in which the audit is being con22 ducted. 

23 ‘‘(D) The PBM cannot require more strin24 gent record keeping by a pharmacy or disVerDate Mar 15 2010 02:36 May 07, 2010 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H5234.IH H5234

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1 pensing entity than is required by State and 

2 Federal law and regulation. 

3 ‘‘(E) The PBM (or an entity acting on be4 half of the PBM) shall establish a written ap5 peals process that shall include procedures to 

6 allow pharmacies and other dispensing entities 

7 to appeal to the PBM the preliminary reports 

8 and final reports resulting from the audit and 

9 any resulting recoupment or penalty. 

10 ‘‘(F) The PBM (or an entity acting on be11 half of the PBM) shall accept records of a hos12 pital, physician, or other authorized practitioner 

13 that are made available to such PBM or entity 

14 by the pharmacy or dispensing entity to vali15 date pharmacy records and prescriptions with 

16 respect to confirming the validity of claims in 

17 connection with prescriptions, refills, or changes 

18 in prescriptions. 

19 ‘‘(G) To the extent that an audit results in 

20 the identification of any clerical or record-keep21 ing errors (such as typographical errors, scriv22 ener’s error, or computer error) in a required 

23 document or record, the pharmacy or dis24 pensing entity shall not be subject to 

25 recoupment of funds by the PBM unless— 


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1 ‘‘(i) the PBM can provide proof of in2 tent to commit fraud; or 

3 ‘‘(ii) such error results in actual fi4 nancial harm to the PBM, a health insur5 ance plan managed by the PBM, or a con6 sumer. 

7 ‘‘(H) The PBM (or an entity acting on be8 half of the PBM) shall not use extrapolation or 

9 other statistical expansion techniques in calcu10 lating the amount of any recoupment or penalty 

11 resulting from an audit of a pharmacy or dis12 pensing entity. 

13 ‘‘(I) With respect to prescriptions covered 

14 by a group health plan or health insurance 

15 issuer, after the conclusion of any appeals 

16 under subparagraph (E), a PBM shall— 

17 ‘‘(i) disclose any recoupment of funds 

18 from a pharmacy or dispensing entity 

19 that— 

20 ‘‘(I) results from an audit; and 

21 ‘‘(II) is related to prescriptions 

22 covered by such plan or issuer; and 

23 ‘‘(ii) shall provide a copy of such dis24 closure to the pharmacy or dispensing enti25 ty. 


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1 ‘‘(6) PBM CONDUCT REGARDING COVERED IN2 DIVIDUALS.— 

3 ‘‘(A) TREATMENT OF DATA.— 

4 ‘‘(i) NOTICE OF SALE.—The PBM 

5 shall notify a group health plan or health 

6 insurance issuer, in writing, at least 30 

7 days before selling, leasing, or renting any 

8 utilization or claims data that the PBM 

9 possesses as a result of a contract between 

10 such PBM and plan or issuer, of— 

11 ‘‘(I) the PBM’s intent to sell, 

12 lease, or rent such data; 

13 ‘‘(II) the name of the potential 

14 buyer, lessor, or renter of such data; 

15 and 

16 ‘‘(III) the expected use of any 

17 utilization or claims data by such 

18 buyer, lessor, or renter. 

19 ‘‘(ii) LIMITATIONS ON SALE.—The 

20 PBM may not sell, lease, or rent utilization 

21 or claims data that the PBM possesses as 

22 a result of a contract between such PBM 

23 and a group health plan or health insur24 ance issuer unless the PBM has received 


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1 written approval for such transaction from 

2 the plan or issuer. 

3 ‘‘(iii) OPT OUT FOR CONSUMERS.— 

4 Before a PBM sells, leases, or rents utili5 zation or claims data that the PBM pos6 sesses as a result of a contract between 

7 such PBM and a group health plan or 

8 health insurance issuer, the PBM shall 

9 provide each individual who is covered by 

10 benefits managed by the PBM with an op11 portunity to affirmatively opt out of the 

12 sale, leasing, or renting of data related to 

13 such individual. 

14 ‘‘(B) CONTACT WITH BENEFICIARIES.—A 

15 PBM may not directly contact, by any means 

16 (including via electronic delivery, telephonic, 

17 SMS text or direct mail), an individual who is 

18 covered by benefits managed by the PBM on 

19 behalf of a group health plan or health insur20 ance issuer unless the PBM has the express 

21 written permission of the group health plan or 

22 health insurance issuer and the covered indi23 vidual (through a request by the plan sponsor) 

24 to engage in such contact. 


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1 ‘‘(C) LIMITS ON SHARING DATA.—With re2 spect to an individual covered by a benefit man3 aged by a PBM, unless a patient has volun4 tarily elected to fill a prescription at a phar5 macy, a PBM shall not transmit personally 

6 identifiable utilization or claims data related to 

7 such individual to such pharmacy if— 

8 ‘‘(i) the PBM has an ownership inter9 est in the pharmacy; or 

10 ‘‘(ii) the pharmacy has an ownership 

11 interest in the PBM. 

12 ‘‘(b) PHARMACY BENEFIT MANAGER; PBM DE13 FINED.—For purposes of this section, the terms ‘phar14 macy benefit manager’ and ‘PBM’ mean an entity that 

15 provides pharmacy benefit management services on behalf 

16 of a group health plan or a health insurance issuer.’’. 

17 (2) AMENDMENTS TO THE PUBLIC HEALTH

18 SERVICE ACT RELATING TO THE INDIVIDUAL MAR19 KET.— 

20 (A) IN GENERAL.—The subpart 2 of part 

21 B of title XXVII of the Public Health Service 

22 Act (42 U.S.C. 300gg–51 et seq.) is amended 

23 by adding at the end the following: 


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1 ‘‘SEC. 2754. PHARMACY BENEFITS MANAGER TRANS2 PARENCY AND PROPER OPERATION RE3 QUIREMENTS. 

4 ‘‘The provisions of section 2729 shall apply to health 

5 insurance coverage offered by a health insurance issuer 

6 in the individual market in the same manner as such pro7 visions apply to a group health plan and a health insur8 ance issuer providing health insurance coverage under that 

9 section.’’. 

10 (3) CONFORMING AMENDMENTS.— 

11 (A) ERISA AMENDMENT.— 

12 (i) IN GENERAL.—Subpart B of part 

13 7 of subtitle B of title I of the Employee 

14 Retirement Income Security Act of 1974 

15 (29 U.S.C. 1185 et seq.) is amended by 

16 adding at the end the following: 

17 ‘‘SEC. 715. PHARMACY BENEFITS MANAGER TRANS18 PARENCY AND PROPER OPERATION RE19 QUIREMENTS. 

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

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

22 health insurance issuer providing health insurance cov23 erage in connection with a group health plan, in the same 

24 manner as such provisions apply to a group health plan 

25 and a health insurance issuer providing health insurance 

26 coverage under that section.’’. 


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1 (ii) CLERICAL AMENDMENT.—The 

2 table of contents in section 1 of the Em3 ployee Retirement Income Security Act of 

4 1974 is amended by inserting after the 

5 item relating to section 714 the following: 

‘‘Sec. 715. Pharmacy benefits manager transparency and proper operation requirements.’’. 

6 (B) IRC AMENDMENT.— 

7 (i) IN GENERAL.—Subpart B of chap8 ter 100 of the Internal Revenue Code of 

9 1986 (26 U.S.C. 9811 et seq.) is amended 

10 by adding at the end the following: 

11 ‘‘SEC. 9814. 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 a group health plan, and a 

16 health insurance issuer providing health insurance cov17 erage in connection with a group health plan, in the same 

18 manner as such provisions apply to a group health plan 

19 and a health insurance issuer providing health insurance 

20 coverage under that section.’’. 

21 (ii) CLERICAL AMENDMENT.—The 

22 table of sections for subpart B of chapter 

23 100 of the Internal Revenue Code of 1986 

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1 lating to section 9813 the following new 

2 item: 

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

3 (b) PBMS AND MEDICARE PART D.—Subpart 2 of 

4 part D of title XVIII of the Social Security Act is amended 

5 by adding at the end the following new section: 

6 ‘‘SEC. 1860D–17. PHARMACY BENEFITS MANAGER TRANS7 PARENCY AND PROPER OPERATION RE8 QUIREMENTS. 

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

10 Service Act shall apply to health insurance coverage of11 fered by a prescription drug plan under this part in the 

12 same manner as such provisions apply to a group health 

13 plan and a health insurance issuer providing health insur14 ance coverage under that section.’’. 

15 (c) EFFECTIVE DATES.— 

16 (1) GROUP MARKET AND MEDICARE.—The 

17 amendments made by paragraphs (1) and (3) of 

18 subsection (a) and by subsection (b) shall apply to 

19 group health plan or health insurance issuers for 

20 plan years beginning on or after the date of enact21 ment of this Act. 

22 (2) INDIVIDUAL MARKET.—The amendment 

23 made by subsection (a)(2) shall apply with respect to 

24 health insurance coverage offered, sold, issued, reVerDate Mar 15 2010 02:36 May 07, 2010 Jkt 089200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\H5234.IH H5234

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1 newed, in effect, or operated in the individual mar2 ket on or after the date of enactment of this Act. 

Æ 


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