S 927119th CongressIn Committee

Protecting Pharmacies in Medicaid Act

Introduced: Mar 11, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Protecting Pharmacies in Medicaid Act would tighten how Medicaid pays pharmacies and curb abusive spread pricing by pharmacy benefit managers (PBMs) and other entities. It creates nationwide, monthly surveys of drug acquisition costs for both retail and certain non-retail pharmacies to establish transparent benchmarks for payments. It also requires contracts between States and PBMs or other entities that handle prescription drug benefits to follow a transparent pass-through pricing model, meaning the amount paid to pharmacies must flow through with limited allowances and full cost disclosure. The bill adds stronger oversight, penalties for noncompliance, and public reporting of pricing data, while also delaying certain provisions for non-retail pharmacies. Overall, the act aims to improve payment accuracy, increase transparency, and reduce inflated costs driven by middlemen in Medicaid drug pricing.

Key Points

1Establishes a system to determine national average drug acquisition cost benchmarks via monthly surveys of both retail and applicable non-retail pharmacies; the Secretary may contract vendors to perform these surveys and must update pricing data at least monthly.
2Requires States to collect and report price-concession data (discounts, rebates, etc.) from all pharmacies receiving Medicaid payments, make aggregated data public (without disclosing identities), and imposes civil penalties (up to $100,000 per violation) for nonresponse or misreporting.
3Defines "applicable non-retail pharmacies" (e.g., mail-order and certain specialty pharmacies) and "affiliate" (entities owned or controlled by a common owner with a pharmacy or PBM), with specific guidance on how these should be treated in the survey data.
4Adds a new Section 1927(e)(6) that requires transparent pass-through pricing: payments to PBMs or other entities must be limited to ingredient cost plus a professional dispensing fee, must be fully passed through to the dispensing pharmacy (with allowed reductions for waste/fraud/abuse), and must be documented with cost breakdowns and posted data.
5Prohibits spread pricing for federal Medicaid matching: any amount charged by the entity that exceeds what is paid to the dispensing pharmacy cannot be used for federal matching payments.
6Requires annual publication of pricing data by state and by category of covered entity (including 340B and other designated categories), and requires cost disclosures to the Secretary on request.
7Makes conforming amendments to the state contracting framework (1903(m)) to ensure contracts with PBMs or other entities comply with the new 1927(e)(6) requirements; adds a new provision that no payment may be made for services by certain entities unless the contract meets these standards.
8Effective dates: most amendments take effect 6 months after enactment; however, retail pharmacies (under the survey provisions) begin on that date, while applicable non-retail pharmacies begin on the first day of the first quarter 18 months after enactment.
9Oversight funding: authorizes $5 million for fiscal year 2026 for the Inspector General to study survey data and related party transactions, with ongoing $9 million funded annually for 2026 and beyond; funds are discretionary and remain available as specified.

Impact Areas

Primary group/area affected:- Retail and applicable non-retail pharmacies serving Medicaid beneficiariesSecondary groups/areas affected:- States administering Medicaid programs- Pharmacy Benefit Managers (PBMs) and other entities that manage prescription drug benefits or services for Medicaid- Managed care entities and entities that contract with States to cover outpatient drugs (including those under 340B programs)Additional impacts:- Patients/Beneficiaries: potential for more accurate and transparent pricing, which could influence out-of-pocket costs and access- Manufacturers and wholesalers: increased reporting requirements and new disclosure of pricing data- Taxpayer and federal budgeting: changes in how federal Medicaid matching payments are calculated and potential shifts in total Medicaid drug costs- Administrative burden: greater data collection, reporting, and compliance obligations for States, pharmacies, and PBMs- Federal oversight: enhanced role for the Inspector General and new transparency measuresActual Acquisition Cost: the net cost to acquire a drug, after discounts and rebates, used to determine reimbursement benchmarks.Spread pricing: when the amount charged to the payer (e.g., Medicaid) exceeds what is paid to the pharmacy or provider; the bill prohibits this as a basis for federal payments.Pharmacy Benefit Manager (PBM): an intermediary that negotiates prices, manages claims, and provides other services for prescription drug benefits.Applicable non-retail pharmacy: non-retail drug dispensing outlets (like mail-order or specialty pharmacies) defined for the purpose of the survey and pricing provisions.340B: a federal program that provides discounted drug prices for certain eligible entities; the bill contains provisions around how 340B-related pricing interacts with payment methods and reporting.

Generated by gpt-5-nano on Nov 19, 2025