II 116th CONGRESS 1st Session S. 640 IN THE SENATE OF THE UNITED STATES March 4, 2019 Mr. Kennedy introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend title XVIII of the Social Security Act to require pharmacy-negotiated price concessions to be included in negotiated prices at the point-of-sale under part D of the Medicare program, and for other purposes.

1. Short title This Act may be cited as the Phair Pricing Act of 2019 . 2. Requiring pharmacy-negotiated price concessions and pharmacy incentive payments and adjustments to be included in negotiated prices at the point-of-sale under part D of the Medicare program Section 1860D–2(d)(1)(B) of the Social Security Act ( 42 U.S.C. 1395w–102(d)(1)(B) ) is amended— (1) by striking prices .—For purposes and inserting “ prices .— (i) In general For purposes ; and (2) by adding at the end the following new clauses: (ii) Prices negotiated with pharmacy at point-of-sale (I) In general Subject to subclause (III), for plan years beginning on or after January 1, 2020, negotiated prices for covered part D drugs described in clause (i) provided under a prescription drug plan, including all contingent and noncontingent concessions, adjustments, payments, and fees (including dispensing fees) negotiated with the pharmacy dispensing such drug, shall be provided at the point-of-sale of such drug. Such negotiated price shall not include any incentive payments and adjustments or any other contingent concessions, adjustments, payments, or fees that increase the amount of such negotiated price. (II) Application of pharmacy incentive payments and adjustments (aa) In general For plan years beginning on or after January 1, 2020, a PDP sponsor— (AA) shall apply a system under which incentive payments and adjustments using only quality measures established by the Secretary under item (bb) are made to a pharmacy with respect to payment for covered part D drugs dispensed by such pharmacy; and (BB) may not apply any other incentive payments and adjustments with respect to such payment outside of such system. Application of such system may not result in a decrease in reimbursement to such pharmacy for such drug after the point-of-sale of such drug. (bb) Standard pharmacy quality measures The Secretary shall establish standard quality measures that may be used in a system described in item (aa). Such measures shall be— (AA) focused on improving patient health outcomes; (BB) standardized across PDP sponsors; (CC) pharmacy-specific in application; (DD) relevant to the type of pharmacy concerned (such as specialty pharmacies), taking into account the items and services furnished by the pharmacy and the patient population served by the pharmacy; (EE) applied only when relevant to the specific drug (or drug class of such drug) being furnished by the pharmacy or when relevant to management of the condition for which such drug has been prescribed; and (FF) based on achievable and proven criteria measuring pharmacy performance over which the pharmacy has meaningful control and ability to influence. In establishing such standards, the Secretary shall consult with stakeholders, including PDP sponsors and MA organizations, pharmacies across pharmacy practice types, pharmacy benefit managers, patient advocacy organizations, drug manufacturers, appropriate standard-setting organizations, and other entities determined appropriate by the Secretary. (III) No increase in cost sharing Subclause (I) shall not apply in the case where application of such subclause would increase the amount owed by an individual in cost sharing above the amount such individual would have owed in cost sharing without application of such subclause. (IV) Discrepancies between negotiated prices and actual reimbursement In the case that the Secretary determines that the negotiated price of a PDP sponsor applied at the point-of-sale with respect to a covered part D drug for a year dispensed by a pharmacy was greater than the total reimbursement made to such pharmacy for such drug for such year, such sponsor shall, not later than 90 days after receiving notice of such determination, furnish to the pharmacy that dispensed such drug and to the Secretary a written explanation of why such negotiated price was greater than such reimbursement. (V) Specialty pharmacy For purposes of carrying out this clause (including subclause (II)(bb)(DD)), the Secretary shall, not later than December 31, 2019, define the term specialty pharmacy in consultation with relevant stakeholders. (VI) Definitions In this clause: (aa) Incentive payments and adjustments The term incentive payments and adjustments means, with respect to payment to a pharmacy by a PDP sponsor for a covered part D drug, any prospective or retrospective price concessions, rebates, discounts, fees, reconciliation adjustments, bonuses, performance payments, incentives, and any other adjustment to such payment determined through the use of a quality measure, regardless of when such payments and adjustments are applied. Such term does not include any manufacturer rebates or concessions made with respect to such drug. (bb) Quality measure The term quality measure means performance criteria used by a PDP sponsor (including an entity that contracts with such sponsor, such as a pharmacy benefit manager) to determine the amount or applicability of incentive payments and adjustments. (cc) PDP sponsor The term PDP sponsor includes an MA organization offering an MA–PD plan under part C and an entity that contracts with such sponsor or organization, such as a pharmacy benefit manager. (iii) Reasonable reimbursement requirement In no case may a negotiated price (as described in clause (ii)(I)) for a covered part D drug furnished by a pharmacy during a plan year beginning on or after January 1, 2020, be less than such pharmacy’s cost of purchasing and dispensing such drug and providing such other services associated with furnishing such drug as may be specified by the Secretary. (iv) Claim reimbursement disclosure requirements With respect to payment made by a PDP sponsor to a pharmacy for a covered part D drug furnished by such pharmacy during a plan year beginning on or after January 1, 2020, such sponsor shall promptly furnish all pricing components including the Network Reimbursement ID used to price the claim, any fees, pharmacy price concessions, discounts, incentives or any other forms of remuneration that affect payment and pricing of the claim as part of the claim adjudication response at the point-of-sale. All aforementioned items, including Network Reimbursement ID, fees, pharmacy price concessions, discounts, incentives, or any other forms of remuneration that affect payment and pricing of the claim shall each be identified in a predetermined line item in the remittance advice that is standard across the industry. The Part D sponsor shall include suitable claim-level detail on the electronic remittance advice that accompanies each payment. This claim-level detail shall include, in an industry standardized format, all fields needed to properly identify the claim, including the Claim Authorization Number, date of service, date of payment remittance, ingredient cost reimbursed, dispensing fee reimbursed, payment amounts including the Network ID used to price the claim, the specific dollar amounts and the appropriate qualifier codes for each payment adjustment including fees, pharmacy price concessions, or incentives. (v) Violation process A PDP sponsor shall participate in any process established by the Secretary for purposes of determining whether such sponsor has violated a provision of clauses (ii) through (iv). . 3. Pharmacy benefit manager provision of information (a) In general Section 1150A(b)(2) of the Social Security Act ( 42 U.S.C. 1320b–23(b)(2) ) is amended by striking excluding and inserting including . (b) Effective date The amendment made by subsection (a) shall apply with respect to contract years beginning on or after January 1, 2020.