II 118th CONGRESS 1st Session S. 1542 IN THE SENATE OF THE UNITED STATES May 10, 2023 Mr. Marshall (for himself, Mr. Tester , Mr. Braun , Mr. Kaine , and Mrs. Capito ) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions A BILL To improve services provided by pharmacy benefit managers.

1. Short title This Act may be cited as the Delinking Revenue from Unfair Gouging Act or the DRUG Act . 2. Improving pharmacy benefit manager services (a) Public Health Service Act Part D of title XXVII of the Public Health Service Act ( 42 U.S.C. 300gg–111 et seq. ) is amended by adding at the end the following: 2799A–11. Improving pharmacy benefit manager services (a) General For plan years beginning on or after January 1, 2026, except as provided in subsection (b), a pharmacy benefit manager shall not charge or receive fees from any entity for services provided to such entity. (b) Exception for flat service fees (1) In general A pharmacy benefit manager may charge an entity a flat service fee for the provision of services to such entity if such fee is set forth in an agreement between the pharmacy benefit manager and such entity. (2) Definitions In this section— (A) the term flat service fee means a flat dollar amount that is not directly or indirectly based on, or contingent upon, or otherwise related to— (i) a drug price (such as wholesale acquisition cost) or drug benchmark price (such as average wholesale price); (ii) discounts, rebates, fees, or other remuneration with respect to prescription drugs prescribed to the participants, beneficiaries, or enrollees in the group health plan or coverage involved; or (iii) any other amounts specified by the Secretary, the Secretary of Labor, and the Secretary of the Treasury; and (B) the term pharmacy benefit manager means any person, business, or other entity such as a third-party administrator, regardless of whether it identifies itself as a pharmacy benefit manager, that, either directly or through an intermediary (including an affiliate, subsidiary, or agent) or an arrangement with a third party— (i) acts as a price negotiator for prescription drugs on behalf of a group health plan or health insurance issuer offering group or individual health insurance coverage; or (ii) manages or administers the prescription drug benefits provided by a group health plan or health insurance issuer offering group or individual health insurance coverage, including the processing and payment of claims for prescription drugs, arranging alternative access to or funding for prescription drugs, the performance of drug utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to the prescription drug benefit, contracting with network pharmacies, controlling the cost of covered prescription drugs, or the provision of related services. (c) Accountability and conduct (1) In general A pharmacy benefit manager shall not— (A) charge a group health plan or health insurance issuer offering group or individual health insurance coverage a different amount for a prescription drug’s ingredient cost or dispensing fee as compared to the amount the pharmacy benefit manager reimburses a pharmacy for the prescription drug’s ingredient cost or dispensing fee; (B) reimburse a network pharmacy or pharmacist in an amount less than the amount the pharmacy benefit manager would reimburse a network pharmacy that is owned, controlled by, or affiliated with the pharmacy benefit manager for dispensing the same drug or for providing the same pharmacist services; or (C) directly or indirectly engage in steering (as defined in paragraph (2)) to a pharmacy that is owned, controlled by, or affiliated with the pharmacy benefit manager. (2) Steering In paragraph (1), the term steering with respect to a pharmacy benefit manager includes— (A) providing or implementing a benefit design that encourages a participant, beneficiary, or enrollee to utilize a pharmacy that is owned, controlled by, or affiliated with the pharmacy benefit manager, if such design increases costs for the plan or the a participant, beneficiary, or enrollee, including requiring a participant, beneficiary, or enrollee to pay higher out-of-pocket costs for a prescription if the participant, beneficiary, or enrollee chooses not to use a pharmacy owned, controlled by, or affiliated with the pharmacy benefit manager; (B) requiring a participant, beneficiary, or enrollee to use only a pharmacy that is owned, controlled by, or affiliated with the pharmacy benefit manager; (C) retaliating, making further attempts to influence a participant, beneficiary, or enrollee, or treating a participant, beneficiary, or enrollee or a participant, beneficiary, or enrollee’s claim any differently if a participant, beneficiary, or enrollee chooses to use a pharmacy that is not owned, controlled by, or affiliated with the pharmacy benefit manager; or (D) any other activities as defined by the Secretary, the Secretary of Labor, and the Secretary of the Treasury. (d) Enforcement (1) In general The Secretary, in consultation with the Secretary of Labor and the Secretary of the Treasury, shall enforce this section. (2) Penalties A pharmacy benefit manager that violates subsection (a), (b), or (c) shall be subject to a civil monetary penalty in the amount of $10,000 for each day during which such violation continues. (3) Procedure The provisions of section 1128A of the Social Security Act, other than subsections (a) and (b) and the first sentence of subsection (c)(1) of such section shall apply to civil monetary penalties under this subsection in the same manner as such provisions apply to a penalty or proceeding under section 1128A of the Social Security Act. (e) Regulations Notwithstanding any other provision of law, the Secretary shall implement this section through interim final regulations. . (b) Employee Retirement Income Security Act of 1974 (1) In general Subpart B of part 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1185 et seq. ) is amended by inserting after section 725 the following: 726. Improving pharmacy benefit manager services (a) General For plan years beginning on or after January 1, 2026, except as provided in subsection (b), a pharmacy benefit manager shall not charge or receive fees from any entity for services provided to such entity. (b) Exception for flat service fees (1) In general A pharmacy benefit manager may charge an entity a flat service fee for the provision of services to such entity if such fee is set forth in an agreement between the pharmacy benefit manager and such entity. (2) Definitions In this section— (A) the term flat service fee means a flat dollar amount that is not directly or indirectly based on, or contingent upon, or otherwise related to— (i) a drug price (such as wholesale acquisition cost) or drug benchmark price (such as average wholesale price); (ii) discounts, rebates, fees, or other remuneration with respect to prescription drugs prescribed to participants or beneficiaries in the group health plan or coverage involved; or (iii) any other amounts specified by the Secretary, the Secretary of Health and Human Services, and the Secretary of the Treasury; and (B) the term pharmacy benefit manager means any person, business, or other entity such as a third-party administrator, regardless of whether it identifies itself as a pharmacy benefit manager, that, either directly or through an intermediary (including an affiliate, subsidiary, or agent) or an arrangement with a third party— (i) acts as a price negotiator for prescription drugs on behalf of a group health plan or health insurance issuer offering group health insurance coverage; or (ii) manages or administers the prescription drug benefits provided by a group health plan or health insurance issuer offering group health insurance coverage, including the processing and payment of claims for prescription drugs, arranging alternative access to or funding for prescription drugs, the performance of drug utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to the prescription drug benefit, contracting with network pharmacies, controlling the cost of covered prescription drugs, or the provision of related services. (c) Accountability and conduct (1) In general A pharmacy benefit manager shall not— (A) charge a group health plan or health insurance issuer offering group health insurance coverage a different amount for a prescription drug’s ingredient cost or dispensing fee as compared to the amount the pharmacy benefit manager reimburses a pharmacy for the prescription drug’s ingredient cost or dispensing fee; (B) reimburse a network pharmacy or pharmacist in an amount less than the amount the pharmacy benefit manager would reimburse a network pharmacy that is owned, controlled by, or affiliated with the pharmacy benefit manager for dispensing the same drug or for providing the same pharmacist services; or (C) directly or indirectly engage in steering (as defined in paragraph (2)) to a pharmacy that is owned, controlled by, or affiliated with the pharmacy benefit manager. (2) Steering In paragraph (1), the term steering with respect to a pharmacy benefit manager includes— (A) providing or implementing a benefit plan design that encourages a participant or beneficiary to utilize a pharmacy that is owned, controlled by, or affiliated with the pharmacy benefit manager, if such plan design increases costs for the plan or the participant or beneficiary, including requiring a participant or beneficiary to pay higher out-of-pocket costs for a prescription if the participant or beneficiary chooses not to use a pharmacy owned, controlled by, or affiliated with the pharmacy benefit manager; (B) requiring a participant or beneficiary to use only a pharmacy that is owned, controlled by, or affiliated with the pharmacy benefit manager; (C) retaliating, making further attempts to influence a participant or beneficiary, or treating a participant or beneficiary or a participant or beneficiary’s claim any differently if a participant or beneficiary chooses to use a pharmacy that is not owned, controlled by, or affiliated with the pharmacy benefit manager; or (D) any other activities as defined by the Secretary, the Secretary of Health and Human Services, and the Secretary of the Treasury. (d) Enforcement (1) In general The Secretary, in consultation with the Secretary of Health and Human Services and the Secretary of the Treasury, shall enforce this section. (2) Penalties A pharmacy benefit manager that violates subsection (a), (b), or (c) shall be subject to a civil monetary penalty in the amount of $10,000 for each day during which such violation continues. (3) Procedure The provisions of section 1128A of the Social Security Act, other than subsections (a) and (b) and the first sentence of subsection (c)(1) of such section shall apply to civil monetary penalties under this subsection in the same manner as such provisions apply to a penalty or proceeding under section 1128A of the Social Security Act. (e) Regulations Notwithstanding any other provision of law, the Secretary shall implement this section through interim final regulations. . (2) Clerical amendment The table of contents in section 1 of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1001 et seq. ) is amended by inserting after the item relating to section 725 the following new item: Sec. 726. Improving pharmacy benefit manager services. . (c) Internal Revenue Code of 1986 (1) In general Subchapter B of chapter 100 of the Internal Revenue Code of 1986 is amended by adding at the end the following: 9826. Improving pharmacy benefit manager services (a) General For plan years beginning on or after January 1, 2026, except as provided in subsection (b), a pharmacy benefit manager shall not charge or receive fees from any entity for services provided to such entity. (b) Exception for flat service fees (1) In general A pharmacy benefit manager may charge an entity a flat service fee for the provision of services to such entity if such fee is set forth in an agreement between the pharmacy benefit manager and such entity. (2) Definitions In this section— (A) the term flat service fee means a flat dollar amount that is not directly or indirectly based on, or contingent upon, or otherwise related to— (i) a drug price (such as wholesale acquisition cost) or drug benchmark price (such as average wholesale price); (ii) discounts, rebates, fees, or other remuneration with respect to prescription drugs prescribed to participants or beneficiaries in the group health plan or coverage involved; or (iii) any other amounts specified by the Secretary, the Secretary of Labor, and the Secretary of Health and Human Services; and (B) the term pharmacy benefit manager means any person, business, or other entity such as a third-party administrator, regardless of whether it identifies itself as a pharmacy benefit manager, that, either directly or through an intermediary (including an affiliate, or agent) or an arrangement with a third party— (i) acts as a price negotiator for prescription drugs on behalf of a group health plan; or (ii) manages or administers the prescription drug benefits provided by a group health plan, including the processing and payment of claims for prescription drugs, arranging alternative access to or funding for prescription drugs, the performance of drug utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to the prescription drug benefit, contracting with network pharmacies, controlling the cost of covered prescription drugs, or the provision of related services. (c) Accountability and conduct (1) In general A pharmacy benefit manager shall not— (A) charge a group health plan or health insurance issuer offering group health insurance coverage a different amount for a prescription drug’s ingredient cost or dispensing fee as compared to the amount the pharmacy benefit manager reimburses a pharmacy for the prescription drug’s ingredient cost or dispensing fee; (B) reimburse a network pharmacy or pharmacist in an amount less than the amount the pharmacy benefit manager would reimburse a network pharmacy that is owned, controlled by, or affiliated with the pharmacy benefit manager for dispensing the same drug or for providing the same pharmacist services; or (C) directly or indirectly engage in steering (as defined in paragraph (2)) to a pharmacy that is owned, controlled by, or affiliated with the pharmacy benefit manager. (2) Steering In paragraph (1), the term steering with respect to a pharmacy benefit manager includes— (A) providing or implementing a benefit design that encourages a participant or beneficiary to utilize a pharmacy that is owned, controlled by, or affiliated with the pharmacy benefit manager, if such benefit design increases costs for the plan or the participant or beneficiary, including requiring a participant or beneficiary to pay higher out-of-pocket costs for a prescription if the participant or beneficiary chooses not to use a pharmacy owned, controlled by, or affiliated with the pharmacy benefit manager; (B) requiring an enrollee to use only a pharmacy that is owned, controlled by, or affiliated with the pharmacy benefit manager; or (C) any other activities as defined by the Secretary, the Secretary of Labor, and the Secretary of Health and Human Service. (d) Enforcement (1) In general The Secretary, in consultation with the Secretary of Labor and the Secretary of Health and Human Services, shall enforce this section. (2) Penalties A pharmacy benefit manager that violates subsection (a), (b), or (c) shall be subject to a civil monetary penalty in the amount of $10,000 for each day during which such violation continues. (3) Procedure The provisions of section 1128A of the Social Security Act, other than subsections (a) and (b) and the first sentence of subsection (c)(1) of such section shall apply to civil monetary penalties under this subsection in the same manner as such provisions apply to a penalty or proceeding under section 1128A of the Social Security Act. (e) Regulations Notwithstanding any other provision of law, the Secretary shall implement the amendments made by this Act through interim final regulations. .