community pharmacies under the Medicare outpatient 
prescription drug 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 ‘‘Community Pharmacy 
Preservation Act of 2004’’. 
SEC. 2. APPLICATION OF THE ANTITRUST LAWS TO INDE-
PENDENT PHARMACIES NEGOTIATING WITH 
HEALTH PLANS. 
(a) IN GENERAL.—Any independent pharmacies who 
are engaged in negotiations with a health plan regarding 
the terms of any contract under which the pharmacies pro-
vide health care items or services for which benefits are 
provided under such plan shall, in connection with such 
negotiations, be entitled to the same treatment under the 
antitrust laws as the treatment to which bargaining units 
which are recognized under the National Labor Relations 
Act are entitled in connection with such collective bar-
gaining. Such a pharmacy shall, only in connection with 
such negotiations, be treated as an employee engaged in 
concerted activities and shall not be regarded as having 
the status of an employer, independent contractor, mana-
gerial employee, or supervisor. 
(b) PROTECTION FOR GOOD FAITH ACTIONS.—Ac-
tions taken in good faith reliance on subsection (a) shall
not be the subject under the antitrust laws of criminal 
sanctions nor of any civil damages, fees, or penalties be-
yond actual damages incurred. 
(c) LIMITATION.— 
(1) NO
NEW
RIGHT
FOR
COLLECTIVE
CES-
SATION
OF
SERVICE.—The exemption provided in 
subsection (a) shall not confer any new right to par-
ticipate in any collective cessation of service to pa-
tients not already permitted by existing law. 
(2) NO
CHANGE
IN
NATIONAL
LABOR
RELA-
TIONS
ACT.—This section applies only to inde-
pendent pharmacies excluded from the National 
Labor Relations Act. Nothing in this section shall be 
construed as changing or amending any provision of 
the National Labor Relations Act, or as affecting 
the status of any group of persons under that Act. 
(d) EFFECTIVE DATE.—The exemption provided in 
subsection (a) shall apply to conduct occurring beginning 
on the date of the enactment of this Act. 
(e) LIMITATION ON EXEMPTION.—Nothing in this 
section shall exempt from the application of the antitrust 
laws any agreement or otherwise unlawful conspiracy that 
excludes, limits the participation or reimbursement of, or 
otherwise limits the scope of services to be provided by 
any independent pharmacy or group of independent phar-
macies with respect to the performance of services that 
are within their scope of practice as defined or permitted 
by relevant law or regulation. 
(f) NO EFFECT ON TITLE VI OF CIVIL RIGHTS ACT 
OF 1964.—Nothing in this section shall be construed to 
affect the application of title VI of the Civil Rights Act 
of 1964. 
(g) NO APPLICATION TO FEDERAL PROGRAMS.— 
Nothing in this section shall apply to negotiations between 
independent pharmacies and health plans pertaining to 
benefits provided under any of the following: 
(1) The Medicaid Program under title XIX of 
the Social Security Act (42 U.S.C. 1396 et seq.). 
(2) The SCHIP program under title XXI of the 
Social Security Act (42 U.S.C. 1397aa et seq.). 
(3) Chapter 55 of title 10, United States Code 
(relating to medical and dental care for members of 
the uniformed services). 
(4) Chapter 17 of title 38, United States Code 
(relating to Veterans’ medical care). 
(5) Chapter 89 of title 5, United States Code 
(relating to the Federal employees’ health benefits 
program). 
(6) The Indian Health Care Improvement Act 
(25 U.S.C. 1601 et seq.).
(h) DEFINITIONS.—For purposes of this section: 
(1) ANTITRUST
LAWS.—The term ‘‘antitrust 
laws’’— 
(A) has the meaning given it in subsection 
(a) of the first section of the Clayton Act (15 
U.S.C. 12(a)), except that such term includes 
section 5 of the Federal Trade Commission Act 
(15 U.S.C. 45) to the extent such section 5 ap-
plies to unfair methods of competition; and 
(B) includes any State law similar to the 
laws referred to in subparagraph (A). 
(2) HEALTH PLAN AND RELATED TERMS.— 
(A) IN GENERAL.—The term ‘‘health plan’’ 
means a group health plan or a health insur-
ance issuer that is offering health insurance 
coverage. 
(B) 
HEALTH
INSURANCE
COVERAGE; 
HEALTH
INSURANCE
ISSUER.—The 
terms 
‘‘health insurance coverage’’ and ‘‘health insur-
ance issuer’’ have the meanings given such 
terms under paragraphs (1) and (2), respec-
tively, of section 733(b) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 
1191b(b)).
(C) GROUP
HEALTH
PLAN.—The term 
‘‘group health plan’’ has the meaning given that 
term in section 733(a)(1) of the Employee Re-
tirement Income Security Act of 1974 (29 
U.S.C. 1191b(a)(1)). 
(3) 
INDEPENDENT
PHARMACY.—The 
term 
‘‘independent pharmacy’’ means a pharmacy which 
is not owned (or operated) by a publicly traded com-
pany. For purposes of the previous sentence, the 
term ‘‘publicly traded company’’ means a company 
that is an issuer within the meaning of section 
2(a)(7) of the Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7201(a)(7)). 
SEC. 3. REQUIREMENTS RELATING TO PHARMACY BENEFIT 
MANAGERS. 
(a) PROHIBITION ON CROSS OWNERSHIP.— 
(1) IN
GENERAL.—No pharmaceutical drug 
manufacturer may have a controlling interest in an 
entity that is a pharmacy benefit manager. 
(2) PENALTY.—The Secretary of Health and 
Human Services may issue such civil penalties for a 
violation of paragraph (1) as the Secretary of 
Health and Human Services determines necessary. 
(b) DRUG INTERCHANGE.— 
(1) PROHIBITIONS.—
(A) COST INCREASE.—A pharmacy benefit 
manager shall not make any drug interchange 
proposal for an individual who is served by such 
manager where the net cost of the drug to 
which the prescription would be changed ex-
ceeds that of the drug from which the prescrip-
tion would be changed. 
(B) 
DISCLOSURE
TO
INDIVIDUAL.—A 
pharmacy benefit manager shall not make any 
drug interchange for an individual who is 
served by such manager unless the pharmacy 
benefit manager discloses to the individual, in a 
clear and conspicuous manner, the savings to 
the individual associated with such interchange. 
(C) GENERICS.—A pharmacy benefit man-
ager shall not make any drug interchange pro-
posal for an individual who is served by such 
manager if the drug from which the prescrip-
tion would be changed has generic equivalents 
and the drug to which the prescription would be 
changed has no generic equivalents, unless the 
drug to which the prescription would be 
changed has a lower net cost to the individual 
than does each of the generic equivalents of the
drug from which the prescription would be 
changed. 
(2) PENALTY.—A pharmacy benefit manager 
that violates subparagraph (A), (B), or (C) of para-
graph (1) with respect to an individual and presents 
a claim for payment to the United States Govern-
ment as reimbursement for services to such indi-
vidual, shall be considered in violation of section 
3729 of title 31, United States Code. 
(c) DISCLOSURE OF COMPENSATION FROM DRUG 
MANUFACTURERS.— 
(1) QUARTERLY AND ANNUAL DISCLOSURES.— 
At the end of each fiscal year quarter, each phar-
macy benefit manager shall disclose— 
(A) to the client plans of such manager 
and to the Antitrust Division of the Depart-
ment of Justice, all compensation and remu-
neration that the pharmacy benefit manager re-
ceived during such fiscal year quarter from a 
pharmaceutical drug manufacturer, including, 
regardless of how categorized, market share in-
centives, commissions, mail service purchase 
discounts, and administrative or management 
fees; and
(B) to the client plans of such manager, 
any fees received for sales of utilization data to 
a pharmaceutical drug manufacturer. 
(2) DISCLOSURE
AT
CONTRACTING
STAGE.— 
Each pharmacy benefit manager shall disclose to 
each client plan and prospective client plan of such 
manager, in advance of executing an agreement with 
such plan, information relating to the pharmacy ben-
efit manager’s methodology of soliciting and receiv-
ing payments from pharmaceutical drug manufac-
turers. 
(d) DEFINITIONS.—For purposes of this section: 
(1) CLIENT
PLAN.—The term ‘‘client plan’’ 
means a pharmaceutical plan in which the entity 
that offers such plan to its beneficiaries contracts di-
rectly with a pharmacy benefit manager to provide 
or administer such plan. 
(2) DRUG
INTERCHANGE.—The term ‘‘drug 
interchange’’ means any change from one prescrip-
tion drug to another prescription drug that is in-
tended to address or treat the same illness or condi-
tion.
SEC. 4. COMMUNITY PHARMACY ACCESS STANDARDS 
UNDER THE MEDICARE OUTPATIENT PRE-
SCRIPTION DRUG PROGRAM. 
In establishing rules under subparagraph (C) of sec-
tion 1860D–4(b)(1) of the Social Security Act, as added 
by the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Public Law 108–173), for 
convenient access to non-mail-order pharmacies consistent 
with the application of standards under clause (ii) of such 
subparagraph, the Secretary of Health and Human Serv-
ices shall provide for application of the following stand-
ards: 
(1)(A) In each urban area, at least 90 percent 
of Medicare beneficiaries in a plan’s service area, on 
average, live within 2 miles of a retail pharmacy par-
ticipation in the prescription drug plan’s or MA–PD 
plan’s network. 
(B) In each suburban area, at least 90 percent 
of Medicare beneficiaries in a plan’s service area, on 
average, live within 5 miles of a retail pharmacy par-
ticipation in the prescription drug plan’s or MA–PD 
plan’s network. 
(C) In each rural area, at least 70 percent of 
Medicare beneficiaries in a plan’s service area, on 
average, live within 15 miles of a retail pharmacy
participation in the prescription drug plan’s or MA– 
PD plan’s network. 
(D) There shall be no averaging of such dis-
tances across or among urban, suburban, and rural 
areas. 
(2) The rules shall require plans to measure 
traveling distances from beneficiaries’ homes to com-
munity pharmacies based on commonly traveled 
routes. 
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