I 
114TH CONGRESS 
1ST SESSION H. R. 2175 
To amend chapter 89 of title 5, United States Code, to ensure oversight 
and cost savings in the pricing and contracting of prescription drug 
benefits under the Federal Employees Health Benefits Program. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 30, 2015 
Mr. LYNCH (for himself, Mr. CUMMINGS, and Ms. NORTON) introduced the 
following bill; which was referred to the Committee on Oversight and 
Government Reform 
A BILL 
To amend chapter 89 of title 5, United States Code, to 
ensure oversight and cost savings in the pricing and 
contracting of prescription drug benefits under the Fed-
eral Employees Health Benefits Program. 
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 cited as the ‘‘FEHBP Prescription 
Drug Oversight and Cost Savings Act’’. 
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SEC. 2. IMPROVED PROGRAM OVERSIGHT AND COST SAV-
INGS FOR PRESCRIPTION DRUG BENEFITS IN 
THE FEDERAL EMPLOYEES HEALTH BENE-
FITS 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 such 
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 a PBM may not be under common cor-
porate control with— 
‘‘(A) a prescription drug manufacturer; or 
‘‘(B) a retail pharmacy. 
‘‘(2) PROFIT
RESTRICTION
ON
CORPORATELY 
AFFILIATED CARRIERS AND PBMS.—With respect to 
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a PBM carrier arrangement related to a contract 
under this chapter, the Office may not permit a car-
rier under common corporate control with a PBM to 
earn a profit resulting from such control. 
‘‘(3) CERTIFICATION.—Each carrier shall cer-
tify annually to the Office of Personnel Management 
that any PBM with which it has a PBM carrier ar-
rangement meets the requirements of this sub-
section. 
‘‘(4) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) COMMON
CORPORATE
CONTROL.— 
The term ‘common corporate control’ means 
that 2 entities are part of a controlled group of 
corporations (as such term is defined in section 
1563 of the Internal Revenue Code of 1986). 
‘‘(B) RETAIL PHARMACY.—The term ‘re-
tail pharmacy’ excludes any mail order phar-
macy. 
‘‘(b) RESTRICTIONS ON BRAND NAME PRESCRIPTION 
DRUG SUBSTITUTIONS.— 
‘‘(1) IN GENERAL.—Under a PBM carrier ar-
rangement, and with respect to a prescription drug 
prescribed to an enrollee covered under such ar-
rangement, a PBM may not request payment from 
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a carrier for a brand name prescription drug that 
was dispensed to the enrollee, at the request of the 
PBM, in substitution for the drug that was origi-
nally prescribed to such enrollee, unless each of the 
following requirements is met: 
‘‘(A) LOWER NET COST.—The substitute 
drug has a lower net cost than the drug origi-
nally prescribed to such enrollee. 
‘‘(B) AUTHORIZATION BY PRESCRIBER.— 
The prescriber of the originally prescribed drug 
submits an express, verifiable authorization of 
the substitution to the pharmacist and such au-
thorization includes a determination by the pre-
scriber that the drug substitution will not en-
danger the health of the enrollee for whom the 
drug is prescribed. 
‘‘(C) ADDITIONAL REQUIREMENTS.—Each 
of the requirements described in paragraph (2) 
are met. 
‘‘(2) ADDITIONAL
REQUIREMENTS.—The re-
quirements described in this paragraph are, with re-
spect to a brand name prescription drug that was 
dispensed to an enrollee, at the request of the PBM, 
in substitution for the drug that was originally pre-
scribed to such enrollee, the following: 
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the Federal Food, Drug, and Cosmetic Act (21 
U.S.C. 355(b)). 
‘‘(B) NET
COST.—The term ‘net cost’ 
means, with respect to a drug, a carrier, and an 
enrollee, the sum of— 
‘‘(i) the final cost of the drug to the 
carrier after all adjustments (including dis-
counts, rebates, associated dispensing fees 
and administrative fees, and enrollee cost 
sharing); and 
‘‘(ii) the final cost of the drug to the 
enrollee (including cost-sharing). 
‘‘(C) PRESCRIBER.—The term ‘prescriber’ 
means an individual who is authorized under 
State and Federal law to prescribe drugs and 
who prescribes a drug to an enrollee of a health 
benefits plan under this chapter. 
‘‘(c) REIMBURSEMENT
OF
CARRIERS.—Under a 
PBM carrier arrangement, not later than 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 pre-
scription drug manufacturer under a PBM 
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manufacturer contract (to the extent such ar-
rangement relates to the PBM carrier arrange-
ment) including compensation (but excluding 
rebates) that the Office of Personnel Manage-
ment categorizes (regardless of how such com-
pensation is categorized by the PBM) as— 
‘‘(i) market share incentives; 
‘‘(ii) prescription drug substitution 
programs; 
‘‘(iii) educational support; 
‘‘(iv) commissions; 
‘‘(v) mail service purchase discounts; 
‘‘(vi) administrative or management 
fees; or 
‘‘(vii) any other form of compensation; 
‘‘(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 prescription drug 
manufacturer to the extent that such rebates 
are based on prescription drugs dispensed 
under the PBM carrier arrangement; and 
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‘‘(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), by the amount of compensation 
for each category under such paragraph; 
‘‘(B) the compensation described in para-
graph (1)(B); and 
‘‘(C) the rebates described in paragraph 
(1)(C), on a drug-by-drug basis. 
‘‘(d) SALE OF UTILIZATION AND CLAIMS DATA.— 
Under a PBM carrier arrangement, 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 of Per-
sonnel Management before selling such data and 
shall provide the Office with the name of the poten-
tial purchaser of such data and the expected use of 
such data by such purchaser; and 
‘‘(2) the PBM may not sell such data unless the 
sale complies with all Federal and State laws and 
the PBM has received approval for such sale from 
the Office. 
‘‘(e) PRICING.— 
‘‘(1) SPREAD PRICING.— 
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‘‘(A) LIMITATION ON CHARGES TO A CAR-
RIER.—A PBM under a PBM carrier arrange-
ment shall not charge a carrier an amount for 
a prescription drug that is covered under such 
arrangement (and is dispensed by a pharmacy) 
that is more than the amount (including the in-
gredient cost and the dispensing fee) that the 
PBM reimburses the pharmacy for the drug. 
‘‘(B) DISCLOSURES.— 
‘‘(i) 
INITIAL
DISCLOSURE.—Before 
entering into a PBM carrier arrangement, 
the PBM shall disclose to the carrier and 
the Office of Personnel Management the 
reimbursement basis (including the type of 
benchmark price and the source of the 
data for determining such price) and meth-
odology that the PBM uses to compute re-
imbursement amounts for retail and mail 
order pharmacies. 
‘‘(ii) UPDATES.—Not later than 30 
days after making a change to the reim-
bursement basis or methodology under 
clause (i), the PBM shall disclose such 
change to the carrier and the Office. 
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‘‘(iii) TRANSITION RULE.—In the case 
of a PBM carrier arrangement that is in 
effect on the effective date of the FEHBP 
Prescription Drug Integrity, Transparency, 
and Cost Savings Act, the PBM shall dis-
close the information under clause (i) not 
later than 1 year after such date. 
‘‘(2) MAXIMUM FOR MAIL ORDER PRESCRIPTION 
DRUGS PRICES AND DISPENSING FEES.— 
‘‘(A) IN GENERAL.—If a prescription drug 
is supplied by a mail order pharmacy to an en-
rollee, under a PBM carrier arrangement, a 
PBM may not charge a carrier an amount for 
the ingredient cost for such prescription drug 
that is greater than an amount that is equal to 
the actual acquisition cost for the drug minus 
any cost sharing for such drug that is the re-
sponsibility of the enrollee. 
‘‘(B) DISPENSING
FEE.—Under a PBM 
carrier arrangement, a PBM may not charge a 
carrier an amount for a dispensing fee related 
to a prescription drug dispensed by a mail order 
pharmacy to an enrollee that is greater than 
the amount that the PBM charges health plans 
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for similar services that are not covered under 
a PBM carrier arrangement. 
‘‘(C) TRANSPARENCY.—Under a PBM car-
rier arrangement, a PBM shall provide the car-
rier and the Office of Personnel Management, 
at the request of such carrier or Office, infor-
mation on the method used to determine the 
amount of— 
‘‘(i) the ingredient cost under sub-
paragraph (A); and 
‘‘(ii) the dispensing fee under sub-
paragraph (B). 
‘‘(D) ACTUAL
ACQUISITION
COST
DE-
FINED.—For purposes of this paragraph, the 
term ‘actual acquisition cost’ means the amount 
a pharmacy pays for a prescription drug, net of 
discounts, rebates, charge backs, and other ad-
justments to the price of the drug. 
‘‘(f) RIGHT TO EXPLANATION OF BENEFITS.—Under 
a PBM carrier arrangement, not later than 90 days after 
the date on which a pharmacy dispenses a prescription 
drug covered under the arrangement, the PBM shall pro-
vide (by mail or electronically) to the enrollee to whom 
such drug was dispensed an explanation of benefits state-
ment that contains the following information: 
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