I 
111TH CONGRESS 
2D SESSION 
H. R. 4489 
To amend chapter 89 of title 5, United States Code, to ensure program 
integrity, transparency, and cost savings in the pricing and contracting 
of prescription drug benefits under the Federal Employees Health Bene-
fits Program. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 21, 2010 
Mr. LYNCH (for himself, Mr. CONNOLLY of Virginia, and Mr. CUMMINGS) in-
troduced the following bill; which was referred to the Committee on Over-
sight and Government Reform 
A BILL 
To amend chapter 89 of title 5, United States Code, to 
ensure program integrity, transparency, and cost savings 
in the pricing and contracting of prescription drug bene-
fits under the Federal Employees Health Benefits Pro-
gram. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be referred to as the ‘‘FEHBP Pre-
scription Drug Integrity, Transparency, and Cost Savings 
Act’’. 
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SEC. 2. IMPROVED PROGRAM INTEGRITY, TRANSPARENCY, 
AND 
COST 
SAVINGS 
FOR 
PRESCRIPTION 
DRUG BENEFITS IN THE FEDERAL EMPLOY-
EES HEALTH BENEFITS PROGRAM. 
(a) CHANGE
IN CONTRACTING REQUIREMENTS.— 
Section 8902 of title 5, United States Code, is amended 
by adding at the end the following: 
‘‘(p) A contract may not be made or a plan approved 
under this chapter, with respect to a carrier that is a party 
to a PBM carrier arrangement, unless the PBM and the 
carrier comply with the requirements of section 8915. The 
Office shall terminate such contract or discontinue such 
plan for failure to comply with such requirements.’’. 
(b) REQUIREMENTS FOR PBMS AND RELATED RE-
QUIREMENTS
FOR CARRIERS.—Chapter 89 of title 5, 
United States Code, is amended by adding at the end the 
following: 
‘‘§ 8915. Requirements for PBM arrangements 
‘‘(a) LIMITATIONS ON CROSS-OWNERSHIP.— 
‘‘(1) IN GENERAL.—Under a PBM carrier ar-
rangement under this chapter— 
‘‘(A) no pharmaceutical drug manufacturer 
or retail pharmacy may have a controlling inter-
est in the PBM; and 
‘‘(B) the PBM may not have a controlling 
interest in a retail pharmacy. 
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‘‘(2) COMPLIANCE.—Each carrier shall certify 
annually to the Office of Personnel Management 
that any PBM with which it has a PBM carrier ar-
rangement meets the requirements of paragraph (1). 
The Office shall terminate any contract with a car-
rier with a PBM carrier arrangement that does not 
comply with such requirements. 
‘‘(3) PROFIT RESTRICTION ON CARRIER CON-
TROLLED PBMS.—The Office may not permit a car-
rier that has a controlling interest in a PBM to earn 
a profit from such interest with respect to a contract 
under this chapter. 
‘‘(b) DRUG SUBSTITUTION RESTRICTIONS.—Under a 
PBM carrier arrangement under this chapter— 
‘‘(1) the PBM shall allow a drug substitution, 
if it is not a generic drug substitution, only after the 
prescriber (or another individual authorized to pre-
scribe drugs) provides the pharmacist with an ex-
press, verifiable authorization for such substitution; 
‘‘(2) to the extent appropriate, the PBM shall 
consult an enrollee concerning any drug substitution 
for a drug prescribed to such enrollee; 
‘‘(3) the PBM may not propose that the pre-
scriber or pharmacist substitute a prescription drug 
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that has a higher net cost for a prescription drug in 
the same class with a lower net cost; 
‘‘(4) the PBM may not propose that the pre-
scriber or pharmacist substitute a prescription drug 
that is a single source drug for a prescription drug 
in the same class that is a multiple source drug; 
‘‘(5) the PBM may not require a drug substi-
tution if the prescriber determines that such substi-
tution will endanger the health of the enrollee for 
whom the drug was prescribed; 
‘‘(6) the PBM will disclose to the prescriber of 
a drug, the carrier, and the enrollee for whom such 
drug was prescribed— 
‘‘(A) the reason why the PBM is sug-
gesting a drug substitution for such drug; and 
‘‘(B) the financial impact of the drug sub-
stitution on the PBM, the carrier, and the pa-
tient; and 
‘‘(7) if a PBM has a controlling interest in a 
mail order pharmacy, such PBM shall ensure that 
any drug which is dispensed by such pharmacy to an 
enrollee as a result of a drug substitution shall be 
dispensed with a written notice that such drug sub-
stitution occurred and that such substitution oc-
curred with the approval of the prescriber. 
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‘‘(c) REIMBURSEMENT
OF
CARRIERS.—Under a 
PBM carrier arrangement under this chapter, by the last 
day of each quarter of the contract year— 
‘‘(1) the PBM shall pay to a carrier an amount 
that is at least 99 percent of the sum of— 
‘‘(A) all compensation that the PBM re-
ceived during the previous quarter from a phar-
maceutical drug manufacturer under a PBM 
manufacturer arrangement (to the extent such 
arrangement relates to the PBM carrier ar-
rangement) including compensation that the Of-
fice categorizes (regardless of how such com-
pensation is categorized by the PBM) as mar-
ket share incentives, drug-switch programs, 
educational support, commissions, mail service 
purchase discounts, administrative or manage-
ment fees, and all other forms of compensation 
(excluding rebates); 
‘‘(B) all compensation received by the 
PBM during the previous quarter for sales of 
utilization or claims data that the PBM pos-
sesses as a result of the PBM carrier arrange-
ment; and 
‘‘(C) all rebates paid to the PBM during 
the previous quarter by a pharmaceutical drug 
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manufacturer to the extent that such rebates 
are based on drugs dispensed under the PBM 
carrier arrangement; and 
‘‘(2) the PBM shall disclose to the carrier and 
the Office, in a form and manner specified by the 
Office— 
‘‘(A) the compensation described in para-
graph (1)(A), reported by the amount of com-
pensation for each category recognized by the 
Office; 
‘‘(B) the compensation described in para-
graph (1)(B); and 
‘‘(C) the rebates described in paragraph 
(1)(C), reported on a drug-by-drug basis. 
‘‘(d) SALE OF UTILIZATION AND CLAIMS DATA.— 
Under a PBM carrier arrangement under this chapter, if 
the PBM intends to sell utilization or claims data that 
the PBM possesses as a result of such arrangement— 
‘‘(1) the PBM shall notify the Office before sell-
ing such data and shall provide the Office with the 
name of the potential purchaser of such data and 
the expected use of any utilization or claims data by 
such purchaser; and 
‘‘(2) the PBM may not sell such data unless the 
sale complies with all Federal and State laws and 
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the PBM has received approval for such sale from 
the Office. 
‘‘(e) PRICING.— 
‘‘(1) SPREAD PRICING.— 
‘‘(A) LIMITATION
ON
CHARGES
TO
CAR-
RIER.—The PBM shall not charge the carrier 
more for a drug that is covered under the PBM 
carrier arrangement than the amount that the 
PBM reimburses a pharmacy which dispensed 
such drug for the drug. 
‘‘(B) DISCLOSURES.— 
‘‘(i) 
INITIAL
DISCLOSURE.—Before 
entering into a PBM carrier arrangement 
under this chapter, the PBM shall disclose 
to the carrier and the Office— 
‘‘(I) the reimbursement basis 
that the PBM uses (including the type 
of benchmark price and the source of 
the data for determining such price) 
for reimbursing retail and mail order 
pharmacies; and 
‘‘(II) the methodology that the 
PBM uses to compute reimburse-
ments to retail and mail order phar-
macies that dispense the drug. 
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