I 
112TH CONGRESS 
1ST SESSION 
H. R. 979 
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 
MARCH 9, 2011 
Mr. LYNCH (for himself, Mr. CUMMINGS, Mr. CLAY, Ms. NORTON, Mr. 
CONNOLLY of Virginia, and Mr. MORAN) introduced the following bill; 
which was referred to the Committee on Oversight and Government Re-
form 
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 cited as the ‘‘FEHBP Prescription 
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 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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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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‘‘(1) The date the claim for such drug was 
made by the pharmacy. 
‘‘(2) The name of such drug and the strength 
and quantity dispensed to the enrollee. 
‘‘(3) The amount paid by the enrollee for such 
drug. 
‘‘(4) The total amount paid to the pharmacy by 
the PBM for such drug. Such amount shall include 
all amounts paid to the pharmacy with respect to 
dispensing such drug, including fees. 
‘‘(5) The amount paid by the carrier to the 
PBM for such drug. 
‘‘(g) NONDISCRIMINATORY CONTRACT.— 
‘‘(1) IN GENERAL.—Under a PBM carrier ar-
rangement, a PBM may not require that a phar-
macy participate in a pharmacy network managed 
by such PBM as a condition of the pharmacy par-
ticipating in another network managed by such 
PBM. 
‘‘(2) PHARMACY
NETWORK
DEFINED.—For 
purposes of this subsection, the term ‘pharmacy net-
work’ means a group of pharmacies that have 
agreed, through a contract with a PBM or carrier, 
to provide prescription medications to enrollees at 
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rates and with discounts that are specified in such 
contract. 
‘‘(h) ACCESS TO PBM CONTRACT INFORMATION.— 
‘‘(1) IN GENERAL.—Under a PBM carrier ar-
rangement, at the request of the Office of Personnel 
Management, a PBM shall provide to the Office and 
to the Inspector General of the Office of Personnel 
Management full access to information relating to 
contracts entered into by such PBM under such ar-
rangement (such as PBM manufacturer contracts 
and PBM contracts with pharmacies). Such informa-
tion shall include— 
‘‘(A) companywide rebate receipt aging re-
ports that cover all of the PBM’s lines of busi-
ness; 
‘‘(B) information and methodology used to 
calculate and allocate rebates between the 
PBM’s lines of business; 
‘‘(C) information on average wholesale 
prices, wholesale acquisition costs, and max-
imum allowable costs; 
‘‘(D) information on dispensing fees paid; 
and 
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‘‘(E) information and methodologies used 
to calculate additional administrative and serv-
ice fees charged to the carrier. 
‘‘(2) CONFIDENTIALITY.—Information provided 
by a PBM under this subsection is confidential and 
shall not be disclosed by the Office, except that 
nothing in this paragraph shall prevent— 
‘‘(A) a disclosure required under the In-
spector General Act of 1978; or 
‘‘(B) any disclosure which the Office, in its 
sole discretion, considers necessary in order to 
carry out this section, if such disclosure is made 
in a form which does not disclose the identity 
of a specific PBM or carrier or the price 
charged for a particular prescription drug. 
‘‘(3) EXEMPTION FROM FOIA.—Any information 
obtained under this subsection shall be exempt from 
disclosure under section 552. 
‘‘(4) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) GENERIC DRUG.—The term ‘generic 
drug’ means a drug approved pursuant to an 
abbreviated application submitted under section 
505(j) of the Federal Food, Drug, and Cos-
metic Act (21 U.S.C. 355(j)). 
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‘‘(B) MAXIMUM
ALLOWABLE
COST.—The 
term ‘maximum allowable cost’ means a cost 
that is set by a PBM as the upper payment 
limit on the ingredient costs for a generic drug. 
‘‘(C) WHOLESALE
ACQUISITION
COST.— 
The term ‘wholesale acquisition cost’ means a 
publicly available list price for sales of a drug 
by a manufacturer to a wholesaler. 
‘‘(i) TREATMENT OF NON-COMPLIANCE.— 
‘‘(1) IN GENERAL.—Under a PBM carrier ar-
rangement, a PBM that knowingly provides false in-
formation to a carrier related to a claim made to 
such carrier by the PBM under such arrangement 
shall be treated, for purposes of chapter 37 of title 
31, in the same manner as a person that makes a 
false claim to the United States Government under 
section 3729 of such chapter. 
‘‘(2) USE
OF
COLLECTIONS.—Any monetary 
penalty collected under paragraph (1) shall be de-
posited into the Employees Health Benefits Fund 
under section 8909. 
‘‘(3) ADDITIONAL
PENALTIES.—Any penalties 
resulting from the application of paragraph (1) shall 
be in addition to any other penalties available to the 
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Office of Personnel Management under law or regu-
lation. 
‘‘(j) NO APPLICATION TO COMMUNITY RATED CAR-
RIERS.—The provisions of this section and section 
8902(p) of this title— 
‘‘(1) shall apply to experience-rated carriers; 
and 
‘‘(2) shall not apply to carriers that use rates 
based on a per member per month capitation 
amount. 
‘‘(k) LIMITATION OF APPLICATION TO PRESCRIPTION 
DRUGS.—The provisions of this section and section 
8902(p) of this title shall not be construed to apply to 
drugs that are not prescription drugs. 
‘‘(l) GENERAL DEFINITIONS.—For purposes of this 
section and section 8902(p) of this title: 
‘‘(1) DISPENSING FEE.—The term ‘dispensing 
fee’ means a fee paid to a pharmacy for the service 
of filling or dispensing prescriptions and excludes 
any payment for the cost of the drug dispensed. 
‘‘(2) DRUG
SUBSTITUTION.—The term ‘drug 
substitution’ 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. 
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‘‘(3) PBM CARRIER ARRANGEMENT.—The term 
‘PBM carrier arrangement’ means a contract be-
tween a PBM and a carrier for the provision or ad-
ministration of a program of prescription drug cov-
erage under a health benefits plan under this chap-
ter. Such a contract may provide, among other du-
ties, for the PBM to— 
‘‘(A) process and pay prescription drug 
claims; 
‘‘(B) provide programs and services de-
signed to— 
‘‘(i) maximize the effectiveness of pre-
scription drugs dispensed under such plan; 
or 
‘‘(ii) contain prescription drug ex-
penditures under such plan; and 
‘‘(C) engage in other activities related to 
the administration of such prescription drug 
coverage. 
‘‘(4) PBM MANUFACTURER
CONTRACT.—The 
term ‘PBM manufacturer contract’ means a contract 
between a PBM and a prescription drug manufac-
turer for the provision of prescription drugs to en-
rollees of health benefits plans with prescription 
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drug coverage that is administered or provided by 
the PBM. 
‘‘(5) PHARMACY
BENEFIT
MANAGER; PBM.— 
The terms ‘pharmacy benefit manager’ and ‘PBM’ 
mean an entity that contracts with a carrier to pro-
vide or administer prescription drug coverage under 
a health benefits plan under this chapter.’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for chapter 89 of title 5, United States Code, is amended 
by adding at the end the following: 
‘‘8915. Requirements for PBM arrangements.’’. 
(d) EFFECTIVE DATE; WAIVER; REGULATIONS.— 
(1) EFFECTIVE DATE.—The amendments made 
by this section shall apply to contract years begin-
ning on or after January 1, 2012. 
(2) WAIVER.—The Office of Personnel Manage-
ment may waive the application of 1 or more of the 
requirements of section 8915 of title 5, United 
States Code, but only for contract year 2012. 
(3) EXPEDITING IMPLEMENTATION OF REGULA-
TIONS.—Not later than 6 months after the date of 
the enactment of this Act, the Office of Personnel 
Management shall issue interim final regulations to 
carry out this section which may be effective and 
final immediately on an interim basis as of the date 
of publication of such regulations. If the Office pro-
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vides for an interim final regulation, the Office shall 
provide for a period of public comment on such reg-
ulation after the date of publication. The Office may 
change or revise such regulation after completion of 
the period of public comment. 
Æ 
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