II 118th CONGRESS 1st Session S. 3245 IN THE SENATE OF THE UNITED STATES November 7, 2023 Mr. Warner (for himself and Mr. Cassidy ) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend title XIX of the Social Security Act to require the Secretary of Health and Human Services to conduct surveys of non-retail pharmacy drug prices, and for other purposes.

1. Short title This Act may be cited as the Ensuring Accurate Payments to Specialty Pharmacies Act . 2. Ensuring accurate payments to pharmacies under Medicaid (a) In general Section 1927(f) of the Social Security Act ( 42 U.S.C. 1396r–8(f) ) is amended— (1) by redesignating paragraphs (2) through (4) as paragraphs (3), (4), and (6), respectively; (2) by inserting after paragraph (1) the following new paragraph: (2) Determining applicable non-retail pharmacy actual acquisition costs (A) In general The Secretary shall conduct a survey of applicable non-retail pharmacy drug prices to determine national average drug acquisition cost benchmarks. In conducting such survey, the Secretary may contract services for— (i) the determination of survey prices, separate from the survey prices described in paragraph (1)(A)(i), of the applicable non-retail national average drug acquisition cost for covered outpatient drugs that represent a nationwide average of consumer purchase prices for such drugs, net of all discounts and rebates (to the extent any information with respect to such discounts and rebates is available) based on a monthly survey of applicable non-retail pharmacies; and (ii) at the discretion of the Secretary, for each type of applicable non-retail pharmacy (as identified pursuant to the type indicators established by the Secretary under subsection (k)(12)(B)(ii)), the determination of survey prices, separate from the survey prices described in paragraph (1)(A)(i) or clause (i) of this subparagraph, of the national average drug acquisition cost for such type of pharmacy for covered outpatient drugs that represent a nationwide average of consumer purchase prices for such drugs, net of all discounts and rebates (to the extent any information with respect to such discounts and rebates is available) based on a monthly survey of such pharmacies. (B) Application of requirements Subparagraphs (C), (D), and (E) of paragraph (1) shall apply to surveys of non-retail pharmacy drug prices conducted under this paragraph in the same manner as such subparagraphs apply to surveys of retail pharmacy drug prices conducted under subparagraph (1). (C) Additional requirement In addition to the terms and conditions identified in paragraph (1)(D), and such other terms and conditions as the Secretary shall specify, a contract with a vendor under this paragraph shall require that the vendor must differentiate, in collecting and reporting survey data, the relevant pharmacy type indicator for all cost information collected, including whether a pharmacy is owned by, operated by, or otherwise affiliated with a pharmacy benefit manager and whether a pharmacy is an applicable non-retail pharmacy, and, in the case of an applicable non-retail pharmacy, which type of applicable non-retail pharmacy (as identified pursuant to the type indicators established by the Secretary under subsection (k)(12)(B)(ii)) it is. (D) Survey reporting In order to meet the requirement of section 1902(a)(54), a State shall require that any applicable non-retail pharmacy in the State that receives any payment, reimbursement, administrative fee, discount, or rebate related to the dispensing of covered outpatient drugs to individuals receiving benefits under this title, regardless of whether such payment, reimbursement, administrative fee, discount, or rebate is received from the State or a managed care entity or other specified entity (as such terms are defined in section 1903(m)(9)(D)) directly or from a pharmacy benefit manager or another entity that has a contract with the State or a managed care entity or other specified entity (as so defined), shall respond to surveys conducted under this paragraph. (E) Survey information Information on national drug acquisition prices obtained under this paragraph shall be made publicly available and shall include at least the following: (i) The monthly response rate to the survey including a list of applicable non-retail pharmacies not in compliance with subparagraph (D). (ii) The sampling frame and number of applicable non-retail pharmacies sampled monthly. (iii) Information on price concessions to applicable non-retail pharmacies, including discounts, rebates, and other price concessions, to the extent that such information may be publicly released and has been collected by the Secretary as part of the survey. (F) Penalties The Secretary, in consultation with the Office of the Inspector General of the Department of Health and Human Services, shall enforce the provisions of this paragraph with respect to an applicable non-retail pharmacy through the establishment of appropriate civil monetary penalties, which may be assessed with respect to each violation or survey non-response, and with respect to each non-compliant applicable non-retail pharmacy (including a pharmacy that is part of a chain), until compliance with this paragraph has been completed. The provisions of section 1128A (other than subsections (a) and (b)) shall apply to a civil money penalty under the preceding sentence in the same manner as such provisions apply to a civil money penalty or proceeding under section 1128A(a). (G) Limitation on use of applicable non-retail pharmacy pricing information No State shall use pricing information reported by applicable non-retail pharmacies under subparagraph (A) to develop or inform reimbursement rates for retail community pharmacies. ; (3) in paragraph (3), as so redesignated— (A) in subparagraph (A), by inserting , including payment rates under managed care entities or other specified entities (as such terms are defined in section 1903(m)(9)(D)), after under this title ; and (B) in subparagraph (B), by inserting and the basis for such dispensing fees before the semicolon; (4) by inserting after paragraph (4), as so redesignated, the following new paragraph: (5) Oversight (A) In general The Inspector General of the Department of Health and Human Services shall conduct periodic studies of the survey data reported under this subsection, as appropriate, including with respect to substantial variations in acquisition costs or other applicable costs, as well as with respect to how internal transfer prices and related party transactions may influence the costs reported by pharmacies affiliated with pharmacy benefit managers, wholesalers, distributors, and other entities that acquire covered outpatient drugs relative to costs reported by pharmacies not affiliated with such entities. The Inspector General shall provide periodic updates to Congress on the results of such studies, as appropriate, in a manner that does not disclose trade secrets or other proprietary information. (B) Appropriation There is appropriated to the Inspector General of the Department of Health and Human Services, out of any money in the Treasury not otherwise appropriated, $5,000,000 for fiscal year 2024, to remain available until expended, to carry out this paragraph. ; and (5) in paragraph (6), as so redesignated, by inserting , and $9,000,000 for fiscal year 2024 and each fiscal year thereafter, after 2010 . (b) Definitions Section 1927(k) of the Social Security Act ( 42 U.S.C. 1396r–8(k) ) is amended by adding the following— (12) Applicable non-retail pharmacy (A) In general The term applicable non-retail pharmacy means a pharmacy that is licensed as a pharmacy by the State and that is not a retail community pharmacy, including a pharmacy that dispenses prescription medications to patients primarily through mail and specialty pharmacies. Such term does not include nursing home pharmacies, long-term care facility pharmacies, hospital pharmacies, clinics, charitable or not-for-profit pharmacies, government pharmacies, or low dispensing pharmacies (as defined by the Secretary). (B) Identification of applicable non-retail pharmacies (i) In general For purposes of subsection (f), the Secretary shall, not later than January 1, 2026, in consultation with stakeholders as appropriate, issue guidance specifying pharmacies that meet the definition of applicable non-retail pharmacies and that will, beginning January 1, 2027, be subject to the survey requirements under subsection (f)(2). (ii) Inclusion of pharmacy type indicators The guidance promulgated under clause (i) shall include pharmacy type indicators to distinguish between different types of applicable non-retail pharmacies, such as pharmacies that dispense prescriptions primarily through the mail and pharmacies that dispense prescriptions that require special handling or distribution. An applicable non-retail pharmacy may be identified through multiple pharmacy type indicators. (13) Pharmacy benefit manager The term pharmacy benefit manager means any person or entity that, either directly or through an intermediary, acts as a price negotiator or group purchaser on behalf of a State, managed care entity or other specified entity (as such terms are defined in section 1903(m)(9)(D)), or manages the prescription drug benefits provided by such State, managed care entity, or other specified entity, including the processing and payment of claims for prescription drugs, the performance of drug utilization review, the processing of drug prior authorization requests, the managing of appeals or grievances related to the prescription drug benefits, contracting with pharmacies, controlling the cost of covered outpatient drugs, or the provision of services related thereto. Such term includes any person or entity that carries out 1 or more of the activities described in the preceding sentence, irrespective of whether such person or entity calls itself a pharmacy benefit manager . . (c) Effective date The amendments made by this section take effect on the first day of the first quarter that begins on or after the date that is 18 months after the date of enactment of this Act.