DRUG Act

Bill Number: H.R. 2214
Origin Chamber: House
Congress: 119th Congress, Session 1
Policy Area: Health
Status: Introduced
Latest Action: 2025-03-18: Referred to the Committee on Energy and Commerce, and in addition to the Committees on Ways and Means, and Education and Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Last Updated: 2025-11-05T09:05:46Z

AI-Generated Summary

Purpose of the Legislation

The "Delinking Revenue from Unfair Gouging Act" (DRUG Act), H.R. 2214, aims to reform how pharmacy benefit managers (PBMs)—middlemen companies that negotiate drug prices and manage prescription benefits for health plans—earn money. It seeks to prevent PBMs from profiting through hidden markups or ties to drug prices, ensuring that savings from drug discounts and rebates fully benefit health plans and their enrollees, ultimately lowering prescription drug costs.

Key Provisions

Prohibition on Certain Remuneration (Effective January 1, 2027): PBMs are barred from receiving any payment or compensation from any entity for services related to prescription drug benefits under group health plans or group/individual health insurance coverage. This includes benefit administration, claims processing, and other activities.
Exception for Bona Fide Service Fees: PBMs can charge flat-dollar fees for actual services (e.g., formulary management or claims processing) only if:
The fee is specified in a written agreement.
It reflects fair market value for itemized, necessary services that the client would otherwise handle themselves.
It is not linked to drug prices (like wholesale acquisition cost), rebates, discounts, or similar factors.
Broad Definition of PBM: Covers any person or entity (including third-party administrators) that negotiates drug prices, creates drug lists (formularies), processes claims, reviews drug use, handles prior authorizations, or contracts with pharmacies on behalf of health plans—whether directly or through affiliates.
Enforcement Mechanisms:
PBMs must return (disgorge) any improper payments to the affected health plan or insurer.
Violations trigger civil penalties of $10,000 per day.
Enforcement by the Secretaries of Health and Human Services (HHS), Labor, and Treasury, using procedures similar to those for Medicare penalties under the Social Security Act.
Implementation: Rules will be issued as interim final regulations (rules that take effect immediately while allowing public comment), bypassing standard notice-and-comment processes.
Rules of Construction: The law does not block payments for actual drug ingredient costs or pharmacy dispensing fees, nor does it prevent rebates or discounts from being passed directly to health plans to reduce net drug costs.
Application Across Laws: Amendments to:
The Public Health Service Act (for general health insurance).
The Employee Retirement Income Security Act (ERISA) (for employer-sponsored plans).
The Internal Revenue Code (for tax-qualified plans).

Significant Changes to Existing Law

Bans Tied Remuneration: Introduces a nationwide ban on "spread pricing" (where PBMs charge plans more than they pay pharmacies and keep the difference) and other profit models based on drug volume, prices, or rebates—previously unregulated at the federal level for most private plans.
Uniform Standards: Harmonizes PBM rules across federal health laws (Public Health Service Act, ERISA, and tax code), filling gaps where PBM practices varied by plan type and often lacked transparency.
Enhanced Penalties and Oversight: Adds specific disgorgement and daily fines not previously applied uniformly to PBMs, while mandating quick regulatory action via interim rules.
Transparency Focus: Shifts PBM compensation to transparent, flat fees, contrasting with current opaque rebate-sharing arrangements.

Potential Impacts

On Citizens (Patients and Enrollees): Could lower out-of-pocket costs, premiums, or copays by ensuring drug rebates and discounts flow directly to plans rather than being retained by PBMs, potentially making prescriptions more affordable for millions in employer or individual coverage.
On Government Agencies: HHS, Labor, and Treasury gain new enforcement roles, including issuing regulations and imposing penalties, which may increase administrative workload but strengthen oversight of drug pricing in private markets.
On Health Plans and Employers: Insurers and employers sponsoring plans may see reduced costs and more predictable budgeting, as PBM fees become fixed and savings from negotiations are retained.
No Direct International Relations Impact: The bill focuses on domestic U.S. health plans and does not address global drug supply chains or foreign entities.

Main Stakeholders Affected

Pharmacy Benefit Managers (PBMs): Major companies like CVS Caremark, Express Scripts, and OptumRx face the biggest changes, as their revenue models (tied to ~80% of U.S. prescriptions) must shift to service-based fees, potentially reducing profits.
Health Insurers and Group Health Plans: Benefit from direct pass-through of savings but must negotiate new fee agreements and monitor compliance.
Pharmacies (Retail and Mail-Order): May see fairer reimbursements without PBM spreads, though network contracting could evolve.
Patients, Beneficiaries, and Enrollees: Indirectly gain through lower drug costs in private insurance.
Employers and Plan Sponsors: Affected via ERISA plans, with potential savings on employee health benefits.

Notable Legal, Constitutional, or Political Implications

Legal Implications: Increases federal regulation of private PBM contracts, potentially leading to lawsuits over enforcement procedures or the broad PBM definition (e.g., whether it overreaches into state-regulated insurance). The use of interim final rules could face challenges for lacking full public input, but aligns with existing authorities under health laws.
Constitutional Implications: Falls within Congress's power to regulate interstate commerce in health insurance and employment benefits; no apparent free speech or due process issues, as it targets commercial practices rather than protected rights.
Political Implications: Bipartisan support (introduced by Republicans and Democrats) reflects growing consensus on curbing drug costs amid public frustration with pricing, but may spark industry lobbying against revenue restrictions. If enacted, it could set a precedent for further PBM reforms in Medicare or state laws.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Miller-Meeks, Mariannette [R-IA-1]

Cosponsors (6)

Rep. Barragán, Nanette Diaz [D-CA-44], Rep. Malliotakis, Nicole [R-NY-11], Rep. Schneider, Bradley Scott [D-IL-10], Rep. Allen, Rick W. [R-GA-12], Rep. Norcross, Donald [D-NJ-1], Rep. Thanedar, Shri [D-MI-13]

Recent Actions

2025-03-18: Referred to the Committee on Energy and Commerce, and in addition to the Committees on Ways and Means, and Education and Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
2025-03-18: Referred to the Committee on Energy and Commerce, and in addition to the Committees on Ways and Means, and Education and Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
2025-03-18: Referred to the Committee on Energy and Commerce, and in addition to the Committees on Ways and Means, and Education and Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
2025-03-18: Introduced in House
2025-03-18: Introduced in House

Bill Versions

Delinking Revenue from Unfair Gouging Act — issued 2025-03-18 — PDF (16 pages)