PBM Reform Act of 2025

Bill Number: H.R. 4317
Origin Chamber: House
Congress: 119th Congress, Session 1
Policy Area: Health
Status: Introduced
Latest Action: 2025-07-10: Referred to the Committee on Energy and Commerce, and in addition to the Committees on Education and Workforce, and Ways and Means, 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: 2026-04-17T08:07:15Z

AI-Generated Summary

Purpose of the Legislation

The Pharmacy Benefit Manager Reform Act of 2025 aims to improve access to pharmacies for Medicare beneficiaries, increase transparency and accountability for pharmacy benefit managers (PBMs)—intermediaries that negotiate drug prices and manage pharmacy networks—and prevent abusive pricing practices in Medicaid. It seeks to ensure fair payments to pharmacies, limit PBM profits from hidden fees or rebates, and provide better data on drug costs to plans, states, and beneficiaries. The bill applies primarily to Medicare Part D (prescription drug plans), Medicaid, and group health plans.

Key Provisions

Pharmacy Access in Medicare Part D (Section 2):
Starting in 2029, prescription drug plan (PDP) sponsors must allow "any willing pharmacy" to join their networks if it agrees to standard contract terms set by the Secretary of Health and Human Services (HHS).
By April 2028, HHS must establish "reasonable and relevant" standards for these contracts, informed by a 2027 request for information on trends like reimbursement fees, quality measures, audits, and restrictions on drug dispensing.
Defines "essential retail pharmacies" as those in underserved, rural, suburban, or urban areas with limited nearby options (e.g., no other pharmacy within 10 miles in rural areas). Starting in 2028, HHS will publish lists of these pharmacies and biennial reports (until 2034, then periodic) comparing trends in payments, participation, cost-sharing, and dispensing volumes for essential vs. non-essential pharmacies.
Creates an enforcement process: Pharmacies can submit allegations of contract violations starting in 2028 (limited to once per year per contract, except for modifications); HHS investigates and can impose civil monetary penalties (CMPs) up to those under existing Medicare rules. PBMs must reimburse sponsors for penalties tied to their actions.
Requires biennial HHS reports on enforcement activities (starting 2 years post-enactment), without disclosing personal or trade secret info.
Provides $188 million for fiscal year (FY) 2025 to implement.

PBM Accountability in Medicare (Section 3):
For plan years starting January 1, 2028, PBM contracts with PDP sponsors (and Medicare Advantage-Prescription Drug plans) must limit PBM income to "bona fide service fees"—flat-dollar amounts at fair market value for actual services, not tied to drug volume, prices, or rebates. Incentive payments qualify if flat and performance-related. Rebates/discounts from manufacturers are allowed if fully passed through.
PBMs must disgorge (return) improper remuneration to sponsors and attest to agreements with affiliates doing the same.
Requires transparent definitions (e.g., for "generic drug," "specialty drug") and annual reports (starting July 2028) to sponsors and HHS on drug utilization, costs (e.g., wholesale acquisition cost, out-of-pocket spending), rebates, affiliated pharmacy dispensing, formulary decisions favoring brand over generic/biosimilar drugs, and broker compensation. Includes justifications for excluding generics/biosimilars.
Sponsors get annual audit rights; HHS can review arrangements for fair market value.
Enforcement: Sponsors must disgorge improper funds to HHS, require PBM reimbursement for penalties, and report violations confidentially. Annual compliance certifications required. Info is confidential but shareable with oversight bodies (e.g., Inspector General).
Directs a Government Accountability Office (GAO) study (report in 2 years) on price-related compensation in the drug supply chain, including conflicts of interest and effects on costs/beneficiaries.
Requires Medicare Payment Advisory Commission (MedPAC) reports (initial in 2 years post-data availability, final 2 years later) on PBM agreements' impacts.
Funding: $113 million for Centers for Medicare & Medicaid Services (CMS) and $20 million for HHS Inspector General (OIG) in FY2025; $1 million for MedPAC.

PBM Oversight in Group Health Plans (Section 4):
Amends the Public Health Service Act, Employee Retirement Income Security Act (ERISA), and Internal Revenue Code to require, starting 30 months post-enactment, PBMs in group health plans (including those offered by insurers) to submit semi-annual reports (or quarterly if requested by large plans) on drug spending.
Reports (in plain, machine-readable format) cover: claims details (e.g., compensation to PBMs/pharmacies, out-of-pocket costs, dispensing channels); therapeutic class spending (gross/net); high-spend drugs ($10,000+ or top 50); affiliated pharmacy incentives (e.g., mail-order programs); and broker fees.
Large plans/employers (100+ participants/employees) get more detailed info; opt-in for insured large plans. Summary versions for participants/beneficiaries upon request; annual notices required.
Contracts must ensure PBMs/applicable entities (e.g., manufacturers, wholesalers) provide data without delay. Aligns with HIPAA privacy rules; limited reports for supply-chain affiliates to prevent anti-competitive issues.
Enforcement: CMPs of $10,000 per day for non-reporting/non-disclosure; $100,000 per false item. Waivers for good-faith efforts. HHS rulemaking for formats/regulations within 18 months.

Accurate Pharmacy Payments in Medicaid (Section 5):
Enhances the National Average Drug Acquisition Cost (NADAC) survey to include "applicable non-retail pharmacies" (e.g., mail-order, specialty; excludes long-term care/hospital). Separate benchmarks for retail vs. non-retail; monthly updates.
Pharmacies must respond to surveys if they receive Medicaid-related payments; non-response incurs CMPs up to $100,000 per violation (considering pharmacy size/type).
Publicly reports response rates, methodology, and price concessions. States cannot use non-retail data for retail payments.
OIG periodic studies on cost variations, especially affiliates (e.g., owned by wholesalers).
Effective 6 months post-enactment for retail pharmacies, 18 months for non-retail. HHS guidance by January 2027 on identifying non-retail types. Exempt from Administrative Procedure Act/Paperwork Reduction Act.
Funding: $9 million annually starting FY2025; $5 million for OIG.

Banning Spread Pricing in Medicaid (Section 6):
Requires "transparent pass-through pricing" in state contracts with PBMs/managed care entities (effective 18 months post-enactment): Payments limited to ingredient cost + state-level dispensing fee; admin fees at fair market value only.
Bans "spread pricing" (PBM charging plans more than paid to pharmacies, keeping the difference) for federal matching funds. Requires detailed cost breakdowns; 340B drugs allow limited excess payments with annual reporting.
HHS annual public reports on 340B excesses by entity type/state (no identities disclosed).
Exempt from Administrative Procedure Act/Paperwork Reduction Act.

Significant Changes to Existing Law

Introduces mandatory "any willing pharmacy" access in Medicare Part D with standardized terms, replacing discretionary networks.
Expands PBM regulations: Bans non-fee income sources, mandates detailed annual reporting (previously limited), and adds audit/enforcement tools—extending to affiliates and Medicare Advantage plans.
Prohibits spread pricing in Medicaid managed care (previously allowed in some cases), requiring full pass-through except for defined fees.
Strengthens Medicaid's NADAC survey: Adds non-retail coverage, mandatory responses with penalties, and OIG oversight on affiliates—previously voluntary and retail-focused.
Imposes new semi-annual PBM reporting in group health plans (no prior federal requirement), with privacy safeguards and participant access.
Provides implementation funding and exemptions from routine procedural hurdles to speed rollout.

Potential Impacts

Government Agencies: CMS/HHS faces higher workload for standards, surveys, reports, and enforcement; offset by $336+ million in new funding. States gain tools for Medicaid oversight but must update contracts. OIG/GAO/MedPAC get study/report mandates to inform policy.
Citizens/Beneficiaries: Medicare enrollees may see more pharmacy choices, especially in rural/underserved areas, potentially stabilizing access amid closures. Group plan participants get spending transparency and request rights, aiding cost understanding. Medicaid beneficiaries could benefit from fairer pharmacy payments, reducing program waste.
International Relations: No direct impact; focuses on domestic health programs.
Broader: Could lower drug costs in public/private plans by curbing PBM spreads/rebate retention (estimated billions annually), but may raise admin fees or shift costs to manufacturers/pharmacies.

Main Stakeholders Affected

Medicare Beneficiaries/Enrollees: Gain pharmacy choice and potential cost savings.
Pharmacies: Retail/essential ones benefit from network access and fair reimbursements; non-retail (mail/specialty) face new surveys but protections against misuse of data. Affiliates (e.g., PBM-owned) under closer scrutiny.
PBMs: Major constraints on revenue (e.g., no spread pricing, fee limits, reporting); must adapt contracts and face audits/penalties (e.g., CVS Caremark, OptumRx).
Plan Sponsors/Insurers: PDP/Medicare Advantage organizations and group plans get transparency tools but enforcement responsibilities; states/managed care entities must revise Medicaid contracts.
Drug Manufacturers: Increased reporting on rebates/340B; potential pressure to lower prices amid pass-through rules.
Taxpayers/Federal Programs: Reduced waste in Medicare/Medicaid via accountability, with new funding for oversight.

Notable Legal, Constitutional, or Political Implications

Legal: Bolsters enforcement with CMPs tied to existing Medicare fraud statutes (e.g., section 1128A); ensures HIPAA-compliant privacy for reports. Exempts implementation from notice-and-comment rulemaking and Paperwork Reduction Act to enable quick action. Allows other remedies (e.g., state lawsuits) alongside federal processes. Anti-retaliation rules protect reporters/pharmacies.
Constitutional: Promotes equal protection by prioritizing "essential" pharmacies in underserved areas, without infringing speech/commerce rights. No takings clause issues, as it regulates contracts/pricing in federal programs.
Political: Bipartisan (12 cosponsors from both parties); builds on prior PBM reform efforts amid public frustration with drug costs. May invite industry lawsuits over transparency mandates or fee restrictions, but funding/exemptions signal intent for swift, low-burden rollout. Could influence 2026 midterms by highlighting cost controls in entitlements.

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

Sponsor

Rep. Carter, Earl L. "Buddy" [R-GA-1]

Cosponsors (70)

Rep. Dingell, Debbie [D-MI-6], Rep. Murphy, Gregory F. [R-NC-3], Rep. Ross, Deborah K. [D-NC-2], Rep. Arrington, Jodey C. [R-TX-19], Rep. Harshbarger, Diana [R-TN-1], Rep. Gonzalez, Vicente [D-TX-34], Rep. Allen, Rick W. [R-GA-12], Rep. Krishnamoorthi, Raja [D-IL-8], Rep. Rose, John W. [R-TN-6], Rep. Tran, Derek [D-CA-45], Rep. Malliotakis, Nicole [R-NY-11], Rep. Khanna, Ro [D-CA-17], Rep. Landsman, Greg [D-OH-1], Rep. Correa, J. Luis [D-CA-46], Rep. Fleischmann, Charles J. "Chuck" [R-TN-3], Rep. Auchincloss, Jake [D-MA-4], Rep. Bishop, Sanford D. [D-GA-2], Rep. Harris, Andy [R-MD-1], Rep. Norman, Ralph [R-SC-5], Rep. Subramanyam, Suhas [D-VA-10], Rep. McCormick, Richard [R-GA-7], Rep. Weber, Randy K. Sr. [R-TX-14], Rep. Miller-Meeks, Mariannette [R-IA-1], Rep. Tokuda, Jill N. [D-HI-2], Rep. Budzinski, Nikki [D-IL-13], Rep. Perez, Marie Gluesenkamp [D-WA-3], Rep. Flood, Mike [R-NE-1], Rep. Moore, Tim [R-NC-14], Rep. Mann, Tracey [R-KS-1], Rep. Bresnahan, Robert P. [R-PA-8], Rep. Comer, James [R-KY-1], Rep. McBride, Sarah [D-DE-At Large], Rep. Langworthy, Nicholas A. [R-NY-23], Rep. Franklin, Scott [R-FL-18], Rep. Goldman, Craig A. [R-TX-12], Rep. Johnson, Julie [D-TX-32], Rep. Cammack, Kat [R-FL-3], Rep. Tlaib, Rashida [D-MI-12], Rep. Craig, Angie [D-MN-2], Rep. Cloud, Michael [R-TX-27], Rep. Calvert, Ken [R-CA-41], Rep. Harder, Josh [D-CA-9], Rep. Mfume, Kweisi [D-MD-7], Rep. Owens, Burgess [R-UT-4], Rep. Kiggans, Jennifer A. [R-VA-2], Rep. Houlahan, Chrissy [D-PA-6], Rep. Peters, Scott H. [D-CA-50], Rep. Sessions, Pete [R-TX-17], Rep. Messmer, Mark B. [R-IN-8], Rep. Scholten, Hillary J. [D-MI-3] and 20 more

Recent Actions

2025-07-10: Referred to the Committee on Energy and Commerce, and in addition to the Committees on Education and Workforce, and Ways and Means, 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.
2025-07-10: Referred to the Committee on Energy and Commerce, and in addition to the Committees on Education and Workforce, and Ways and Means, 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.
2025-07-10: Referred to the Committee on Energy and Commerce, and in addition to the Committees on Education and Workforce, and Ways and Means, 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.
2025-07-10: Introduced in House
2025-07-10: Introduced in House

Bill Versions

Pharmacy Benefit Manager Reform Act of 2025 — issued 2025-07-10 — PDF (162 pages)