II
119THCONGRESS
1
STSESSION S. 927
To amend title XIX of the Social Security Act to ensure accurate payments
to pharmacies under Medicaid and to prevent the use of abusive spread
pricing practices under Medicaid.
IN THE SENATE OF THE UNITED STATES
MARCH11 (legislative day, MARCH10), 2025
Mr. W
ELCH(for himself, Mr. MARSHALL, Mr. WARNER, 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 ensure
accurate payments to pharmacies under Medicaid and
to prevent the use of abusive spread pricing practices
under Medicaid.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2
SECTION 1. SHORT TITLE. 3
This Act may be cited as the ‘‘Protecting Pharmacies 4
in Medicaid Act’’. 5
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SEC. 2. ENSURING ACCURATE PAYMENTS TO PHARMACIES 1
UNDER MEDICAID. 2
(a) I
NGENERAL.—Section 1927(f) of the Social Se-3
curity Act (42 U.S.C. 1396r–8(f)) is amended— 4
(1) in paragraph (1)(A)— 5
(A) by redesignating clause (ii) as clause 6
(iii); and 7
(B) by striking ‘‘and’’ after the semicolon 8
at the end of clause (i) and all that precedes it 9
through ‘‘(1)’’ and inserting the following: 10
‘‘(1) D
ETERMINING PHARMACY ACTUAL ACQUI -11
SITION COSTS.—The Secretary shall conduct a sur-12
vey of retail community pharmacy drug prices and 13
applicable non-retail pharmacy drug prices to deter-14
mine national average drug acquisition cost bench-15
marks (as such term is defined by the Secretary) as 16
follows: 17
‘‘(A) U
SE OF VENDOR .—The Secretary 18
may contract services for— 19
‘‘(i) with respect to retail community 20
pharmacies, the determination of retail 21
survey prices of the national average drug 22
acquisition cost for covered outpatient 23
drugs that represent a nationwide average 24
of consumer purchase prices for such 25
drugs, net of all discounts, rebates, and 26
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other price concessions (to the extent any 1
information with respect to such discounts, 2
rebates, and other price concessions is 3
available) based on a monthly survey of 4
such pharmacies; and 5
‘‘(ii) with respect to applicable non-re-6
tail pharmacies— 7
‘‘(I) the determination of survey 8
prices, separate from the survey prices 9
described in clause (i), of the non-re-10
tail national average drug acquisition 11
cost for covered outpatient drugs that 12
represent a nationwide average of con-13
sumer purchase prices for such drugs, 14
net of all discounts, rebates, and other 15
price concessions (to the extent any 16
information with respect to such dis-17
counts, rebates, and other price con-18
cessions is available) based on a 19
monthly survey of such pharmacies; 20
and 21
‘‘(II) at the discretion of the Sec-22
retary, for each type of applicable 23
non-retail pharmacy, the determina-24
tion of survey prices, separate from 25
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the survey prices described in clause 1
(i) or subclause (I) of this clause, of 2
the national average drug acquisition 3
cost for such type of pharmacy for 4
covered outpatient drugs that rep-5
resent a nationwide average of con-6
sumer purchase prices for such drugs, 7
net of all discounts, rebates, and other 8
price concessions (to the extent any 9
information with respect to such dis-10
counts, rebates, and other price con-11
cessions is available) based on a 12
monthly survey of such pharmacies; 13
and’’; 14
(2) in subparagraph (B) of paragraph (1), by 15
striking ‘‘subparagraph (A)(ii)’’ and inserting ‘‘sub-16
paragraph (A)(iii)’’; 17
(3) in subparagraph (D) of paragraph (1), by 18
striking clauses (ii) and (iii) and inserting the fol-19
lowing: 20
‘‘(ii) The vendor must update the Sec-21
retary no less often than monthly on the 22
survey prices for covered outpatient drugs. 23
‘‘(iii) The vendor must differentiate, 24
in collecting and reporting survey data, for 25
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all cost information collected, whether a 1
pharmacy is a retail community pharmacy 2
or an applicable non-retail pharmacy, in-3
cluding whether such pharmacy is an affil-4
iate (as defined in subsection (k)(14)), 5
and, in the case of an applicable non-retail 6
pharmacy, which type of applicable non-re-7
tail pharmacy it is using the relevant phar-8
macy type indicators included in the guid-9
ance required by subsection (d)(2) of sec-10
tion 2 of the Protecting Pharmacies in 11
Medicaid Act.’’; 12
(4) by adding at the end of paragraph (1) the 13
following: 14
‘‘(F) S
URVEY REPORTING .—In order to 15
meet the requirement of section 1902(a)(54), a 16
State shall require that any retail community 17
pharmacy or applicable non-retail pharmacy in 18
the State that receives any payment, reimburse-19
ment, administrative fee, discount, rebate, or 20
other price concession related to the dispensing 21
of covered outpatient drugs to individuals re-22
ceiving benefits under this title, regardless of 23
whether such payment, reimbursement, admin-24
istrative fee, discount, rebate, or other price 25
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concession is received from the State or a man-1
aged care entity or other specified entity (as 2
such terms are defined in section 3
1903(m)(9)(D)) directly or from a pharmacy 4
benefit manager or another entity that has a 5
contract with the State or a managed care enti-6
ty or other specified entity (as so defined), shall 7
respond to surveys conducted under this para-8
graph. 9
‘‘(G) S
URVEY INFORMATION .—Information 10
on national drug acquisition prices obtained 11
under this paragraph shall be made publicly 12
available in a form and manner to be deter-13
mined by the Secretary and shall include at 14
least the following: 15
‘‘(i) The monthly response rate to the 16
survey including a list of pharmacies not in 17
compliance with subparagraph (F). 18
‘‘(ii) The sampling methodology and 19
number of pharmacies sampled monthly. 20
‘‘(iii) Information on price concessions 21
to pharmacies, including discounts, re-22
bates, and other price concessions, to the 23
extent that such information may be pub-24
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licly released and has been collected by the 1
Secretary as part of the survey. 2
‘‘(H) P
ENALTIES.— 3
‘‘(i) I
N GENERAL.—Subject to clauses 4
(ii), (iii), and (iv), the Secretary shall en-5
force the provisions of this paragraph with 6
respect to a pharmacy through the estab-7
lishment of civil money penalties applicable 8
to a retail community pharmacy or an ap-9
plicable non-retail pharmacy. 10
‘‘(ii) B
ASIS FOR PENALTIES .—The 11
Secretary shall impose a civil money pen-12
alty established under this subparagraph 13
on a retail community pharmacy or appli-14
cable non-retail pharmacy if— 15
‘‘(I) the retail pharmacy or appli-16
cable non-retail pharmacy refuses or 17
otherwise fails to respond to a request 18
for information about prices in con-19
nection with a survey under this sub-20
section; 21
‘‘(II) knowingly provides false in-22
formation in response to such a sur-23
vey; or 24
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‘‘(III) otherwise fails to comply 1
with the requirements established 2
under this paragraph. 3
‘‘(iii) P
ARAMETERS FOR PEN -4
ALTIES.— 5
‘‘(I) I
N GENERAL.—A civil money 6
penalty established under this sub-7
paragraph may be assessed with re-8
spect to each violation, and with re-9
spect to each non-compliant retail 10
community pharmacy (including a 11
pharmacy that is part of a chain) or 12
non-compliant applicable non-retail 13
pharmacy (including a pharmacy that 14
is part of a chain), in an amount not 15
to exceed $100,000 for each such vio-16
lation. 17
‘‘(II) C
ONSIDERATIONS.—In de-18
termining the amount of a civil money 19
penalty imposed under this subpara-20
graph, the Secretary may consider the 21
size, business structure, and type of 22
pharmacy involved, as well as the type 23
of violation and other relevant factors, 24
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as determined appropriate by the Sec-1
retary. 2
‘‘(iv) R
ULE OF APPLICATION .—The 3
provisions of section 1128A (other than 4
subsections (a) and (b)) shall apply to a 5
civil money penalty under this subpara-6
graph in the same manner as such provi-7
sions apply to a civil money penalty or pro-8
ceeding under section 1128A(a). 9
‘‘(I) L
IMITATION ON USE OF APPLICABLE 10
NON-RETAIL PHARMACY PRICING INFORMA -11
TION.—No State shall use pricing information 12
reported by applicable non-retail pharmacies 13
under subparagraph (A)(ii) to develop or inform 14
payment methodologies for retail community 15
pharmacies.’’; 16
(5) in paragraph (2)— 17
(A) in subparagraph (A), by inserting ‘‘, 18
including payment rates and methodologies for 19
determining ingredient cost reimbursement 20
under managed care entities or other specified 21
entities (as such terms are defined in section 22
1903(m)(9)(D)),’’ after ‘‘under this title’’; and 23
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(B) in subparagraph (B), by inserting 1
‘‘and the basis for such dispensing fees’’ before 2
the semicolon; 3
(6) by redesignating paragraph (4) as para-4
graph (5); 5
(7) by inserting after paragraph (3) the fol-6
lowing new paragraph: 7
‘‘(4) O
VERSIGHT.— 8
‘‘(A) I
N GENERAL.—The Inspector General 9
of the Department of Health and Human Serv-10
ices shall conduct periodic studies of the survey 11
data reported under this subsection, as appro-12
priate, including with respect to substantial 13
variations in acquisition costs or other applica-14
ble costs, as well as with respect to how internal 15
transfer prices and related party transactions 16
may influence the costs reported by pharmacies 17
that are affiliates (as defined in subsection 18
(k)(14)) or are owned by, controlled by, or re-19
lated under a common ownership structure with 20
a wholesaler, distributor, or other entity that 21
acquires covered outpatient drugs relative to 22
costs reported by pharmacies not affiliated with 23
such entities. The Inspector General shall pro-24
vide periodic updates to Congress on the results 25
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of such studies, as appropriate, in a manner 1
that does not disclose trade secrets or other 2
proprietary information. 3
‘‘(B) A
PPROPRIATION.—There is appro-4
priated to the Inspector General of the Depart-5
ment of Health and Human Services, out of 6
any money in the Treasury not otherwise ap-7
propriated, $5,000,000 for fiscal year 2026, to 8
remain available until expended, to carry out 9
this paragraph.’’; and 10
(8) in paragraph (5), as so redesignated— 11
(A) by inserting ‘‘, and $9,000,000 for fis-12
cal year 2026 and each fiscal year thereafter,’’ 13
after ‘‘2010’’; and 14
(B) by inserting ‘‘Funds appropriated 15
under this paragraph for fiscal year 2026 and 16
any subsequent fiscal year shall remain avail-17
able until expended.’’ after the period. 18
(b) D
EFINITIONS.—Section 1927(k) of the Social Se-19
curity Act (42 U.S.C. 1396r–8(k)) is amended— 20
(1) in the matter preceding paragraph (1), by 21
striking ‘‘In the section’’ and inserting ‘‘In this sec-22
tion’’; and 23
(2) by adding at the end the following new 24
paragraphs: 25
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‘‘(12) APPLICABLE NON-RETAIL PHARMACY .— 1
The term ‘applicable non-retail pharmacy’ means a 2
pharmacy that is licensed as a pharmacy by the 3
State and that is not a retail community pharmacy, 4
including a pharmacy that dispenses prescription 5
medications to patients primarily through mail and 6
specialty pharmacies. Such term does not include 7
nursing home pharmacies, long-term care facility 8
pharmacies, hospital pharmacies, clinics, charitable 9
or not-for-profit pharmacies, government phar-10
macies, or low dispensing pharmacies (as defined by 11
the Secretary). 12
‘‘(13) A
FFILIATE.—The term ‘affiliate’ means 13
any entity that is owned by, controlled by, or related 14
under a common ownership structure with a phar-15
macy benefit manager or a managed care entity or 16
other specified entity (as such terms are defined in 17
section 1903(m)(9)(D)).’’. 18
(c) E
FFECTIVEDATE.— 19
(1) I
N GENERAL.—Subject to paragraph (2), 20
the amendments made by this section shall take ef-21
fect on the first day of the first quarter that begins 22
on or after the date that is 6 months after the date 23
of enactment of this Act. 24
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(2) DELAYED APPLICATION TO APPLICABLE 1
NON-RETAIL PHARMACIES .—The pharmacy survey 2
requirements established by the amendments to sec-3
tion 1927(f) of the Social Security Act (42 U.S.C. 4
1396r–8(f)) made by this section shall apply to re-5
tail community pharmacies beginning on the effec-6
tive date described in paragraph (1), but shall not 7
apply to applicable non-retail pharmacies until the 8
first day of the first quarter that begins on or after 9
the date that is 18 months after the date of enact-10
ment of this Act. 11
(d) I
DENTIFICATION OF APPLICABLENON-RETAIL 12
P
HARMACIES.— 13
(1) I
N GENERAL.—Not later than January 1, 14
2027, the Secretary of Health and Human Services 15
shall, in consultation with stakeholders as appro-16
priate, publish guidance specifying pharmacies that 17
meet the definition of applicable non-retail phar-18
macies (as such term is defined in subsection 19
(k)(12) of section 1927 of the Social Security Act 20
(42 U.S.C. 1396r–8), as added by subsection (b)), 21
and that will be subject to the survey requirements 22
under subsection (f)(1) of such section, as amended 23
by subsection (a). 24
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(2) INCLUSION OF PHARMACY TYPE INDICA -1
TORS.—The guidance published under paragraph (1) 2
shall include pharmacy type indicators to distinguish 3
between different types of applicable non-retail phar-4
macies, such as pharmacies that dispense prescrip-5
tions primarily through the mail and pharmacies 6
that dispense prescriptions that require special han-7
dling or distribution. An applicable non-retail phar-8
macy may be identified through multiple pharmacy 9
type indicators. 10
(e) I
MPLEMENTATION.— 11
(1) I
N GENERAL.—Notwithstanding any other 12
provision of law, the Secretary of Health and 13
Human Services may implement the amendments 14
made by this section by program instruction or oth-15
erwise. 16
(2) N
ONAPPLICATION OF ADMINISTRATIVE PRO -17
CEDURE ACT.—Implementation of the amendments 18
made by this section shall be exempt from the re-19
quirements of section 553 of title 5, United States 20
Code. 21
(f) N
ONAPPLICATION OF PAPERWORKREDUCTION 22
A
CT.—Chapter 35 of title 44, United States Code, shall 23
not apply to any data collection undertaken by the Sec-24
retary of Health and Human Services under section 25
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1927(f) of the Social Security Act (42 U.S.C. 1396r–8(f)), 1
as amended by this section. 2
SEC. 3. PREVENTING THE USE OF ABUSIVE SPREAD PRIC-3
ING IN MEDICAID. 4
(a) I
NGENERAL.—Section 1927 of the Social Secu-5
rity Act (42 U.S.C. 1396r–8) is amended— 6
(1) in subsection (e), by adding at the end the 7
following new paragraph: 8
‘‘(6) T
RANSPARENT PRESCRIPTION DRUG PASS - 9
THROUGH PRICING REQUIRED .— 10
‘‘(A) I
N GENERAL.—A contract between 11
the State and a pharmacy benefit manager (re-12
ferred to in this paragraph as a ‘PBM’), or a 13
contract between the State and a managed care 14
entity or other specified entity (as such terms 15
are defined in section 1903(m)(9)(D) and col-16
lectively referred to in this paragraph as the 17
‘entity’) that includes provisions making the en-18
tity responsible for coverage of covered out-19
patient drugs dispensed to individuals enrolled 20
with the entity, shall require that payment for 21
such drugs and related administrative services 22
(as applicable), including payments made by a 23
PBM on behalf of the State or entity, is based 24
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on a transparent prescription drug pass- 1
through pricing model under which— 2
‘‘(i) any payment made by the entity 3
or the PBM (as applicable) for such a 4
drug— 5
‘‘(I) is limited to— 6
‘‘(aa) ingredient cost; and 7
‘‘(bb) a professional dis-8
pensing fee that is not less than 9
the professional dispensing fee 10
that the State would pay if the 11
State were making the payment 12
directly in accordance with the 13
State plan; 14
‘‘(II) is passed through in its en-15
tirety (except as reduced under Fed-16
eral or State laws and regulations in 17
response to instances of waste, fraud, 18
or abuse) by the entity or PBM to the 19
pharmacy or provider that dispenses 20
the drug; and 21
‘‘(III) is made in a manner that 22
is consistent with sections 447.502, 23
447.512, 447.514, and 447.518 of 24
title 42, Code of Federal Regulations 25
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(or any successor regulation) as if 1
such requirements applied directly to 2
the entity or the PBM, except that 3
any payment by the entity or the 4
PBM for the ingredient cost of such 5
drug purchased by a covered entity 6
(as defined in subsection (a)(5)(B)) 7
may exceed the actual acquisition cost 8
(as defined in 447.502 of title 42, 9
Code of Federal Regulations, or any 10
successor regulation) for such drug 11
if— 12
‘‘(aa) such drug was subject 13
to an agreement under section 14
340B of the Public Health Serv-15
ice Act; 16
‘‘(bb) such payment for the 17
ingredient cost of such drug does 18
not exceed the maximum pay-19
ment that would have been made 20
by the entity or the PBM for the 21
ingredient cost of such drug if 22
such drug had not been pur-23
chased by such covered entity; 24
and 25
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‘‘(cc) such covered entity re-1
ports to the Secretary (in a form 2
and manner specified by the Sec-3
retary), on an annual basis and 4
with respect to payments for the 5
ingredient costs of such drugs so 6
purchased by such covered entity 7
that are in excess of the actual 8
acquisition costs for such drugs, 9
the aggregate amount of such ex-10
cess; 11
‘‘(ii) payment to the entity or the 12
PBM (as applicable) for administrative 13
services performed by the entity or PBM is 14
limited to an administrative fee that re-15
flects the fair market value (as defined by 16
the Secretary) of such services; 17
‘‘(iii) the entity or the PBM (as appli-18
cable) makes available to the State, and 19
the Secretary upon request in a form and 20
manner specified by the Secretary, all costs 21
and payments related to covered outpatient 22
drugs and accompanying administrative 23
services (as described in clause (ii)) in-24
curred, received, or made by the entity or 25
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the PBM, broken down (as specified by the 1
Secretary), to the extent such costs and 2
payments are attributable to an individual 3
covered outpatient drug, by each such 4
drug, including any ingredient costs, pro-5
fessional dispensing fees, administrative 6
fees (as described in clause (ii)), post-sale 7
and post-invoice fees, discounts, or related 8
adjustments such as direct and indirect re-9
muneration fees, and any and all other re-10
muneration, as defined by the Secretary; 11
and 12
‘‘(iv) any form of spread pricing 13
whereby any amount charged or claimed by 14
the entity or the PBM (as applicable) that 15
exceeds the amount paid to the pharmacies 16
or providers on behalf of the State or enti-17
ty, including any post-sale or post-invoice 18
fees, discounts, or related adjustments 19
such as direct and indirect remuneration 20
fees or assessments, as defined by the Sec-21
retary, (after allowing for an administra-22
tive fee as described in clause (ii)) is not 23
allowable for purposes of claiming Federal 24
matching payments under this title. 25
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‘‘(B) PUBLICATION OF INFORMATION .— 1
The Secretary shall publish, not less frequently 2
than on an annual basis and in a manner that 3
does not disclose the identity of a particular 4
covered entity or organization, information re-5
ceived by the Secretary pursuant to subpara-6
graph (A)(iii)(III) that is broken out by State 7
and by each of the following categories of cov-8
ered entity within each such State: 9
‘‘(i) Covered entities described in sub-10
paragraph (A) of section 340B(a)(4) of the 11
Public Health Service Act. 12
‘‘(ii) Covered entities described in sub-13
paragraphs (B) through (K) of such sec-14
tion. 15
‘‘(iii) Covered entities described in 16
subparagraph (L) of such section. 17
‘‘(iv) Covered entities described in 18
subparagraph (M) of such section. 19
‘‘(v) Covered entities described in sub-20
paragraph (N) of such section. 21
‘‘(vi) Covered entities described in 22
subparagraph (O) of such section.’’; and 23
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(2) in subsection (k), as amended by section 1
2(b), by adding at the end the following new para-2
graph: 3
‘‘(14) P
HARMACY BENEFIT MANAGER .—The 4
term ‘pharmacy benefit manager’ means any person 5
or entity that, either directly or through an inter-6
mediary, acts as a price negotiator or group pur-7
chaser on behalf of a State, managed care entity (as 8
defined in section 1903(m)(9)(D)), or other specified 9
entity (as so defined), or manages the prescription 10
drug benefits provided by a State, managed care en-11
tity, or other specified entity, including the proc-12
essing and payment of claims for prescription drugs, 13
the performance of drug utilization review, the proc-14
essing of drug prior authorization requests, the man-15
aging of appeals or grievances related to the pre-16
scription drug benefits, contracting with pharmacies, 17
controlling the cost of covered outpatient drugs, or 18
the provision of services related thereto. Such term 19
includes any person or entity that acts as a price ne-20
gotiator (with regard to payment amounts to phar-21
macies and providers for a covered outpatient drug 22
or the net cost of the drug) or group purchaser on 23
behalf of a State, managed care entity, or other 24
specified entity or that carries out 1 or more of the 25
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other activities described in the preceding sentence, 1
irrespective of whether such person or entity calls 2
itself a pharmacy benefit manager.’’. 3
(b) C
ONFORMINGAMENDMENTS.—Section 1903(m) 4
of such Act (42 U.S.C. 1396b(m)) is amended— 5
(1) in paragraph (2)(A)(xiii)— 6
(A) by striking ‘‘and (III)’’ and inserting 7
‘‘(III)’’; 8
(B) by inserting before the period at the 9
end the following: ‘‘, and (IV) if the contract in-10
cludes provisions making the entity responsible 11
for coverage of covered outpatient drugs, the 12
entity shall comply with the requirements of 13
section 1927(e)(6)’’; and 14
(C) by moving the margin 2 ems to the 15
left; and 16
(2) by adding at the end the following new 17
paragraph: 18
‘‘(10) No payment shall be made under this 19
title to a State with respect to expenditures incurred 20
by the State for payment for services provided by an 21
other specified entity (as defined in paragraph 22
(9)(D)(iii)) unless such services are provided in ac-23
cordance with a contract between the State and such 24
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•S 927 IS
entity which satisfies the requirements of paragraph 1
(2)(A)(xiii).’’. 2
(c) E
FFECTIVEDATE.—The amendments made by 3
this section shall apply to contracts between States and 4
managed care entities, other specified entities, or phar-5
macy benefit managers that have an effective date begin-6
ning on or after the date that is 18 months after the date 7
of enactment of this Act. 8
(d) I
MPLEMENTATION.— 9
(1) I
N GENERAL.—Notwithstanding any other 10
provision of law, the Secretary of Health and 11
Human Services may implement the amendments 12
made by this section by program instruction or oth-13
erwise. 14
(2) N
ONAPPLICATION OF ADMINISTRATIVE PRO -15
CEDURE ACT.—Implementation of the amendments 16
made by this section shall be exempt from the re-17
quirements of section 553 of title 5, United States 18
Code. 19
(e) N
ONAPPLICATION OF PAPERWORKREDUCTION 20
A
CT.—Chapter 35 of title 44, United States Code, shall 21
not apply to any data collection undertaken by the Sec-22
retary of Health and Human Services under section 23
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1927(e) of the Social Security Act (42 U.S.C. 1396r– 1
8(e)), as amended by this section. 2
Æ
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