I 
113TH CONGRESS 
1ST SESSION H. R. 1367 
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 21, 2013 
Mr. LYNCH (for himself, Mr. CUMMINGS, Mr. MORAN, and Ms. NORTON) 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 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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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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‘‘(A) To the extent appropriate, the PBM 
consults the enrollee concerning such drug sub-
stitution. 
‘‘(B) The PBM discloses to the prescriber 
of the originally prescribed drug, the carrier, 
and the enrollee for whom such drug was pre-
scribed— 
‘‘(i) the reason why the PBM pro-
posed a drug substitution for such drug; 
and 
‘‘(ii) the financial impact of the drug 
substitution on the PBM, the carrier, and 
the enrollee. 
‘‘(C) In the case of a mail order pharmacy, 
the PBM ensures that, at the time the drug is 
dispensed, the enrollee receives a written notice 
that such drug substitution occurred and that 
such substitution occurred with the approval of 
the prescriber. 
‘‘(3) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) 
BRAND
NAME
PRESCRIPTION 
DRUG.—The term ‘brand name prescription 
drug’ means a drug approved pursuant to an 
application submitted under section 505(b) of 
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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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