HR 2214119th CongressIn Committee

DRUG Act

Introduced: Mar 18, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

The DRUG Act (Delinking Revenue from Unfair Gouging Act) would fundamentally change how pharmacy benefit managers (PBMs) earn money for administering prescription drug benefits for group health plans and health insurance. Starting January 1, 2027, PBMs would be prohibited from deriving remuneration from plans or issuers for most services related to prescription-drug benefits. The law would require PBMs to charge only “bona fide service fees”—flat dollar amounts that are not tied to drug prices, rebates, or other price concessions. The act also creates a robust enforcement framework (including disgorgement of improper payments and daily civil penalties) and would implement these changes through interim final regulations across several federal statutes (Public Health Service Act, ERISA, and the Internal Revenue Code). Importantly, the bill clarifies that it does not bar reimbursement for ingredient costs or rebates that are fully passed through to reduce net costs.

Key Points

1Prohibition on most PBM revenue: Beginning January 1, 2027, PBMs may not derive remuneration from any entity for services related to prescription drug benefits under group health plans or health insurance, with limited exceptions.
2Bona fide service fees: The only allowed fees are flat-dollar, bona fide service fees set in a contract, based on fair market value for actual services performed, and not tied to drug prices, rebates, discounts, or other price-related variables.
3Broad PBM definition and covered activities: PBMs are defined very broadly to include entities that negotiate drug prices or that manage or administer prescription-drug benefits (e.g., formularies, claims processing, prior authorization, network contracts, cost control, etc.).
4Enforcement and penalties: Violations can lead to disgorgement of improper payments and civil penalties of $10,000 per day. Enforcement authority is shared among federal agencies (and ERISA-related mechanisms), with procedures modeled after existing penalty provisions.
5Multi-statute implementation and interim regulations: The act would be implemented through interim final regulations and would amend the Public Health Service Act (PHSA), ERISA, and the Internal Revenue Code to reflect these rules.

Impact Areas

Primary group/area affected- Pharmacy benefit managers (PBMs) and entities performing PBM-like functions.- Employers and health insurance issuers offering group or individual health coverage (including Medicare Part D-like arrangements within PHSA).- Group health plans and their beneficiaries, including employees and enrollees.Secondary group/area affected- Network pharmacies and those involved in drug pricing and formulary management.- Federal regulators (HHS, Labor, Treasury), and, via ERISA, plan fiduciaries and administrators.Additional impacts- Potential shift in PBM business models toward more service-oriented, flat-fee arrangements.- Possible changes in drug pricing dynamics, rebates, and discounts if rebates are required to be fully passed through to plans to lower net costs.- Administrative and compliance burden due to new reporting and enforcement mechanisms, plus a need to align contracts with the new “bona fide service fee” framework.The bill was introduced in the 119th Congress on March 18, 2025, by Mrs. Miller-Meeks and colleagues and referred to multiple committees for consideration.The text emphasizes that the purpose is to reduce “unfair gouging” by delinking PBM revenue from drug prices and rebates, while preserving legitimate reimbursement for ingredient costs and the fully pass-through of rebates to reduce net costs.

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