the pharmacy submits a claim for payment 
for such drug (as determined based upon 
the retail survey prices obtained under sec-
tion 1927(f)(1)), or, in the case of a drug 
for which no such national average drug 
acquisition cost is available, the wholesale 
acquisition cost for such drug as of such 
day; and 
‘‘(ii) an amount equal to 4 percent of 
the amount described in clause (i), or $50, 
whichever is less. 
‘‘(B) With respect to each covered part D 
drug obtained from an in-network pharmacy by 
an individual enrolled in the prescription drug 
plan, the sponsor, PBM, or affiliate— 
‘‘(i) pays such pharmacy a dispensing 
fee that is equal to the dispensing fee paid 
for such drug under the State plan under 
title XIX in the State in which such phar-
macy is located, as reported by the State 
under section 1927(f)(2); and 
‘‘(ii) does not require such individual 
to reimburse such dispensing fee or other-
wise increase the amount owed by such in-
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dividual with respect to such drug to ac-
count for such dispensing fee. 
‘‘(C) The sponsor, PBM, or affiliate does 
not impose any fee or other payment require-
ment upon an in-network pharmacy that would 
have the effect of reducing the amount received 
by the pharmacy under the other provisions of 
this paragraph. 
‘‘(3) 
REBATE
PASS-THROUGH
REQUIRE-
MENTS.—For purposes of paragraph (1)(A)(ii), the 
rebate pass-through requirements described in this 
paragraph are, with respect to a PDP sponsor (and 
a PBM acting on behalf of such sponsor, including 
any affiliate of such PBM, as applicable), that, in 
the case that such sponsor, PBM, or affiliate re-
ceives a manufacturer rebate in connection with a 
covered part D drug— 
‘‘(A) in the case that such drug is obtained 
from an in-network pharmacy by an individual 
enrolled in the prescription drug plan, the PDP 
sponsor, PBM, or affiliate applies, at the point 
of sale of such drug, a reduction to the amount 
of any coinsurance or copayment owed by such 
individual with respect to such drug, such that 
the amount of coinsurance or copayment so 
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owed is calculated based on an amount equal to 
the reimbursement amount for such drug deter-
mined under paragraph (2)(A), less the amount 
of such rebate (or, in the case of a rebate de-
scribed in paragraph (5)(B)(ii), the amount of 
such rebate that is attributable to such drug 
and such individual); and 
‘‘(B) in the case that the entity receiving 
the manufacturer rebate in connection with 
such drug is a PBM (or any affiliate of such 
PBM), the PBM (or affiliate) remits to the 
PDP sponsor an amount (in this subparagraph 
referred to as the ‘rebate remittance payment’) 
equal to the amount of such rebate (or, in the 
case of a rebate described in paragraph 
(5)(B)(ii), the amount of such rebate that is at-
tributable to such drug and such individual), 
less the amount by which the coinsurance or co-
payment owed by an individual enrolled in the 
prescription drug plan with respect to such 
drug was reduced pursuant to subparagraph 
(A); and 
‘‘(C) in the case that such drug is obtained 
from an in-network pharmacy by an individual 
enrolled in the prescription drug plan who is a 
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subsidy eligible individual (as defined in section 
1860D–14(a)(3)), the PDP sponsor remits to 
the Secretary, at such time and in such manner 
as the Secretary may specify— 
‘‘(i) in the case that the entity receiv-
ing the manufacturer rebate in connection 
with such drug is a PBM (or any affiliate 
of such PBM), the amount received by the 
sponsor under subparagraph (B) with re-
spect to such drug and such individual; 
and 
‘‘(ii) in the case that the entity receiv-
ing the manufacturer rebate in connection 
with such drug is the PDP sponsor, an 
amount equal to the amount of such rebate 
(or, in the case of a rebate described in 
paragraph (5)(B)(ii), the amount of such 
rebate that is attributable to such drug 
and such individual), less the amount by 
which the coinsurance or copayment owed 
by such individual with respect to such 
drug was reduced pursuant to subpara-
graph (A). 
‘‘(4) REPORTING
REQUIREMENT.—For pur-
poses of paragraph (1)(A)(iii), the reporting require-
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ment described in this paragraph is, with respect to 
a PBM and any affiliate of such PBM, that, not 
later than July 1, 2028, and not less frequently than 
annually thereafter, the PBM (or affiliate) submits 
to the PDP sponsor and to the Secretary a report 
containing a certification that, during the preceding 
year, such PBM (or affiliate)— 
‘‘(A) complied with the requirements under 
paragraphs (2) and (3); and 
‘‘(B) did not engage in steering. 
‘‘(5) DEFINITIONS.—For purposes of this sub-
section: 
‘‘(A) AFFILIATE.—The term ‘affiliate’ 
means, with respect to a PBM or PDP sponsor, 
an entity that, directly or indirectly— 
‘‘(i) owns, controls, or has an invest-
ment interest in such PBM or PDP spon-
sor; 
‘‘(ii) is owned by such PBM or PDP 
sponsor or controlled by such PBM or 
PDP sponsor; 
‘‘(iii) that such PBM or PDP sponsor 
has an investment interest in; or 
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‘‘(iv) is under common ownership or 
corporate control of such PBM or PDP 
sponsor. 
‘‘(B) MANUFACTURER REBATE.—The term 
‘manufacturer rebate’— 
‘‘(i) means any price concession (in-
cluding any payment, discount, administra-
tion fee, credit, incentive, or penalty) pro-
vided by the manufacturer of a covered 
part D drug (or any affiliate, subsidiary, 
third party, or intermediary of such manu-
facturer) to a PDP sponsor (or any PBM 
acting on behalf of such sponsor, including 
any affiliate of such PBM, as applicable), 
in connection with the furnishing of such 
covered part D drug to an individual en-
rolled in a prescription drug plan offered 
by such sponsor; and 
‘‘(ii) includes any such price conces-
sion that is determined based upon— 
‘‘(I) the aggregate volume of 
such covered part D drug (or a group 
of covered part D drugs that includes 
such part D drug) furnished to indi-
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viduals enrolled in a prescription drug 
plan offered by such sponsor; or 
‘‘(II) the furnishing of any serv-
ice provided to the manufacturer by 
such sponsor (or any PBM acting on 
behalf of such sponsor, or any affiliate 
of such PBM (including an off-shore 
entity or group purchasing organiza-
tion), as applicable) in connection 
with the furnishing of such covered 
part D drug (or a group of covered 
part D drugs that includes such part 
D drug). 
‘‘(C) 
PHARMACY
BENEFIT
MANAGER; 
PBM.—The terms ‘pharmacy benefit manager’ 
and ‘PBM’ mean a person, business entity, af-
filiate, or other entity that performs pharmacy 
benefits management services. 
‘‘(D) PHARMACY BENEFITS MANAGEMENT 
SERVICES.—The term ‘pharmacy benefits man-
agement services’— 
‘‘(i) means the managing or adminis-
tration of a plan or program that pays for, 
reimburses, and covers the cost of prescrip-
tion drugs and medical devices; and 
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such enrollee chooses not to use an af-
filiate pharmacy; 
‘‘(iii) advertising, marketing, or pro-
moting a pharmacy, including an affiliate 
pharmacy, in a manner that encourages 
enrollees to choose such pharmacy over an-
other in-network pharmacy; 
‘‘(iv) creating more than one network 
of pharmacies with respect to a prescrip-
tion drug plan such that an in-network 
pharmacy belonging to a specific network 
(such as a preferred pharmacy network, 
narrow pharmacy network, or specialty 
pharmacy network) receives preferential 
treatment, or engaging in any practice (in-
cluding 
accreditation 
or 
credentialing 
standards, day supply limitations, or deliv-
ery method limitations) that has the effect 
of excluding an in-network pharmacy from 
participation in the network of the PDP 
sponsor or restricting an in-network phar-
macy from filling a prescription for a cov-
ered part D drug; or 
‘‘(v) engaging in any practice that at-
tempts to influence or induce a manufac-
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turer of a covered part D drug to limit the 
distribution of such drug to a small num-
ber of pharmacies or certain types of phar-
macies, or to restrict distribution of such 
drug to non-affiliate pharmacies.’’. 
(2) REQUIREMENT TO DEDUCT EXPECTED RE-
BATE AMOUNTS FROM PLAN BIDS.—Section 1860D– 
11(b)(2)(C) of the Social Security Act (42 U.S.C. 
1395w–111(b)(2)(C)) is amended— 
(A) in clause (iii), by striking ‘‘and’’ at the 
end; 
(B) by redesignating clause (iv) as clause 
(v); and 
(C) by inserting after clause (iii) the fol-
lowing new clause: 
‘‘(iv) with respect to bids beginning 
with plan year 2027, assumptions regard-
ing any rebate remittance payments pro-
vided under section 1860D–12(h)(3)(B), 
subtracted from the actuarial value to 
produce such bid; and’’. 
(3) MA–PD PLANS.—Section 1857(f)(3) of the 
Social Security Act (42 U.S.C. 1395w–27(f)(3)) is 
amended by adding at the end the following new 
subparagraph: 
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‘‘(F) REQUIREMENTS RELATING TO PHAR-
MACY BENEFIT MANAGERS.—For plan years be-
ginning on or after January 1, 2027, section 
1860D–12(h).’’. 
(b) MEDICAID.— 
(1) IN GENERAL.—Section 1927 of the Social 
Security Act (42 U.S.C. 1396r–8) is amended— 
(A) in subsection (e), by adding at the end 
the following new paragraph: 
‘‘(6) REQUIREMENTS RELATED TO PHARMACY 
BENEFIT MANAGERS.—A contract between the State 
and a pharmacy benefit manager, or a contract be-
tween the State and a managed care entity or other 
specified entity (as such terms are defined in section 
1903(m)(9)(D) and collectively referred to in this 
paragraph as the ‘entity’) that includes provisions 
making the entity responsible for coverage of covered 
outpatient drugs dispensed to individuals enrolled 
with the entity, shall require— 
‘‘(A) that the entity or PBM (as applica-
ble) does not engage in steering; 
‘‘(B) that any payment made by the entity 
or the PBM (as applicable) for such a drug and 
related administrative services (as applicable), 
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including payments made by a PBM on behalf 
of the State or entity, is equal to— 
‘‘(i) the ingredient cost of such drug, 
which shall be in an amount equal to the 
sum of— 
‘‘(I) the national average drug 
acquisition cost for the drug as of the 
day that the pharmacy submits a 
claim for payment for such drug (as 
determined based upon the retail sur-
vey prices obtained under subsection 
(f)(1)), or, in the case of a drug for 
which no such national average drug 
acquisition cost is available, the 
wholesale acquisition cost for such 
drug as of such day; and 
‘‘(II) an amount equal to 4 per-
cent of the amount described in item 
(aa), or $50, whichever is less; and 
‘‘(ii) a dispensing fee that is equal to 
the dispensing fee paid for such drug 
under the State plan under this title in the 
State in which such pharmacy is located, 
as reported by the State under subsection 
(f)(2); and 
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‘‘(C) that, in the case that the entity or 
PBM (as applicable) receives from a manufac-
turer of a covered outpatient drug a rebate or 
discount in connection with the furnishing of 
such drug to an individual enrolled under the 
State plan (or waiver of such plan), the entity 
or PBM remits to the State an amount equal 
to the amount of such rebate.’’; and 
(B) in subsection (k), by adding at the end 
the following new paragraphs: 
‘‘(13) PHARMACY BENEFIT MANAGER; PBM.— 
The terms ‘pharmacy benefit manager’ and ‘PBM’ 
have the meaning given such terms in section 
1860D–12(h)(C). 
‘‘(14) STEERING.—The term ‘steering’ has the 
meaning given such term in section 1860D– 
12(h)(E), except that any reference in such section 
to the ‘PDP sponsor’ is deemed a reference to a 
managed care entity or other specified entity (as 
such terms are defined in section 1903(m)(9)(D)) 
that is responsible for coverage of covered outpatient 
drugs, and any reference to a ‘covered part D drug’ 
is deemed a reference to a covered outpatient 
drug.’’. 
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(2) 
CONFORMING
AMENDMENTS.—Section 
1903(m) of such Act (42 U.S.C. 1396b(m)) is 
amended— 
(A) in paragraph (2)(A)(xiii)— 
(i) by striking ‘‘and (III)’’ and insert-
ing ‘‘(III)’’; 
(ii) by inserting before the period at 
the end the following: ‘‘, and (IV) if the 
contract includes provisions making the en-
tity responsible for coverage of covered 
outpatient drugs, the entity shall comply 
with 
the 
requirements 
of 
section 
1927(e)(6)’’; and 
(iii) by moving the margin 2 ems to 
the left; and 
(B) by adding at the end the following new 
paragraph: 
‘‘(10) No payment shall be made under this title to 
a State with respect to expenditures incurred by the State 
for payment for services provided by an other specified 
entity (as defined in paragraph (9)(D)(iii)) unless such 
services are provided in accordance with a contract be-
tween the State and such entity which satisfies the re-
quirements of paragraph (2)(A)(xiii).’’. 
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(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to contracts between 
States and managed care entities, other specified en-
tities, or pharmacy benefit managers that have an 
effective date beginning on or after January 1, 
2027. 
(c) PENALTIES FOR NONCOMPLIANT PBMS.— 
(1) CRIMINAL PENALTIES.—Section 1128B of 
the Social Security Act (42 U.S.C. 1320a–7b) is 
amended by adding at the end the following new 
subsection: 
‘‘(i) Whoever provides pharmacy benefits manage-
ment services on behalf of a prescription drug plan spon-
sor under part D of title XVIII or a medicaid managed 
care organization under title XIX and— 
‘‘(1) knowingly and willfully fails to comply 
with the pharmacy payment requirements under sec-
tion 1860D–12(h)(2) or section 1927(e)(6)(A), as 
applicable; 
‘‘(2) knowingly and willfully engages in steering 
(as defined in section 1860D–12(h)); or 
‘‘(3) knowingly and willfully fails to comply 
with the rebate pass-through requirements under 
section 1860D–12(h)(3) or section 1927(e)(6)(C), as 
applicable, 
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shall be guilty of a felony and upon conviction thereof shall 
be fined not more than $1,000,000, or imprisoned for not 
more than 10 years, or both.’’. 
(2) CIVIL
MONETARY
PENALTIES.—Section 
1128A(a) of the Social Security Act (42 U.S.C. 
1320a–7a(a)) is amended— 
(A) in paragraph (10), by adding ‘‘or’’ at 
the end; 
(B) by inserting after paragraph (10) the 
following new paragraph: 
‘‘(11) commits an act described in section 
1128B(i);’’; and 
(C) in the first sentence— 
(i) by striking ‘‘or in cases under 
paragraph (9)’’ and inserting ‘‘in cases 
under paragraph (9)’’; and 
(ii) by striking ‘‘fact)’’ and inserting 
‘‘fact, or in cases under paragraph (11), 
$1,000,000 for each such act)’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply beginning on January 
1, 2027. 
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SEC. 3. IMPROVING PRESCRIPTION DRUG TRANSPARENCY 
UNDER THE MEDICAID PROGRAM. 
Section 1927(f) of the Social Security Act (42 U.S.C. 
1396r–8(f)) is amended— 
(1) in the subsection heading, by striking ‘‘RE-
TAIL’’ and inserting ‘‘COVERED OUTPATIENT DRUG’’; 
and 
(2) in paragraph (1)— 
(A) in the paragraph heading, by striking 
‘‘RETAIL’’ 
and 
inserting 
‘‘COVERED
OUT-
PATIENT DRUG’’; 
(B) in subparagraph (A)(i), by striking 
‘‘retail community pharmacy’’ and inserting 
‘‘pharmacy that dispenses covered outpatient 
drugs, including a retail community pharmacy, 
mail-order pharmacy, specialty pharmacy, nurs-
ing home pharmacy, long-term care facility 
pharmacy, hospital pharmacy, or clinic phar-
macy (but not including a charitable pharmacy 
or a not-for-profit pharmacy)’’; 
(C) in subparagraph (C)— 
(i) in clause (i)— 
(I) by striking ‘‘retail’’; and 
(II) by striking ‘‘prescription’’ 
and inserting ‘‘covered outpatient’’; 
and 
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(ii) in clause (ii), by striking ‘‘retail 
community’’; 
(D) in subparagraph (D)(ii), by striking 
‘‘retail’’; 
(E) in subparagraph (E), by striking the 
term ‘‘retail’’ each place it appears; and 
(F) by adding at the end the following new 
subparagraphs: 
‘‘(F) SURVEY
REPORTING.—In order to 
meet the requirement of section 1902(a)(54), a 
State shall require that any pharmacy in the 
State that receives any payment, reimburse-
ment, administrative fee, discount, rebate, or 
other price concession related to the dispensing 
of a covered outpatient drug to an individual re-
ceiving benefits under this title, regardless of 
whether such payment, reimbursement, fee, dis-
count, rebate, or other price concession is re-
ceived directly from the State or a managed 
care entity or other specified entity (as such 
terms are defined in section 1903(m)(9)(D)), or 
is received indirectly from a pharmacy benefits 
manager or another entity that has a contract 
with the State or a managed care entity or 
other specified entity (as so defined)— 
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‘‘(i) shall respond to surveys con-
ducted under this paragraph; and 
‘‘(ii) shall include in each such re-
sponse the pharmacy’s acquisition price for 
each such drug, net of all such payments, 
reimbursements, administrative fees, dis-
counts, rebates, and other price conces-
sions (or, in the case that the pharmacy is 
unable to determine the net acquisition 
cost for such a drug at the time that the 
survey is received, the pharmacy’s nego-
tiated price for such drug). 
‘‘(G) SURVEY
INFORMATION.—The Sec-
retary shall make information on national drug 
acquisition prices obtained under this para-
graph publicly available. Such information shall 
include at least the following: 
‘‘(i) The monthly response rate to the 
survey, including a list of pharmacies not 
in compliance with subparagraph (F). 
‘‘(ii) The sampling methodology and 
number of pharmacies sampled monthly. 
‘‘(iii) Information on price concessions 
to each pharmacy, including discounts, re-
bates, and other price concessions, to the 
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extent that such information is available 
during the survey period. 
‘‘(H) LIMITATION ON USE OF APPLICABLE 
NON-RETAIL
PHARMACY
PRICING
INFORMA-
TION.—No State shall use pricing information 
reported by a pharmacy that is not a retail 
pharmacy to develop or inform reimbursement 
rates for retail community pharmacies.’’. 
Æ 
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