S. 927 — Protecting Pharmacies in Medicaid Act

This section revises the survey requirements under the Medicaid Drug Rebate Program for determining national average drug acquisition cost benchmarks for covered outpatient drugs used in state reimbursement payments to pharmacies. Specifically, it requires the Secretary to conduct monthly surveys of retail community pharmacies and applicable non-retail pharmacies (separate from each other and optionally by non-retail type) for acquisition costs net of discounts, rebates, and price concessions; requires survey vendors to provide monthly updates and differentiate data by pharmacy type (including affiliates); requires states to mandate survey responses from pharmacies receiving Medicaid-related payments, reimbursements, or concessions from states, managed care entities, pharmacy benefit managers, or other entities; requires public release of survey data including monthly response rates, lists of non-compliant pharmacies, sampling methodology, and price concessions; and authorizes civil money penalties up to $100,000 per violation per pharmacy (including chains) for refusal to respond, providing false information, or other non-compliance. (Thus, the changes expand the existing retail-focused survey—used by states to set accurate pharmacy reimbursement rates—from retail community pharmacies only to also cover non-retail pharmacies such as long-term care, specialty, and others.)

This section amends the Medicaid drug rebate requirements (SSA §1927) to prohibit spread pricing (i.e., a pharmacy benefit manager [PBM] charging a state or managed care entity more than the amount paid to pharmacies) by requiring state contracts with PBMs and certain managed care entities to use a transparent prescription drug pass-through pricing model under which (1) payments for covered outpatient drugs are limited to ingredient cost plus a professional dispensing fee (not less than the fee the state pays directly) and passed through entirely to pharmacies (except for waste, fraud, or abuse reductions), consistent with specified Medicaid regulations (with limited exceptions for 340B drugs); (2) PBM or entity administrative fees are capped at fair market value; (3) all related costs and payments must be reported to the state and Secretary, broken down by drug; and (4) spread pricing amounts are unallowable for federal matching payments. It further directs the Secretary to publish annual aggregate data on 340B drug payments exceeding actual acquisition costs, by state and covered entity type (e.g., disproportionate share hospitals, children's hospitals) without identifying specific entities. (Thus, this ensures Medicaid pays only verified pharmacy costs and fees, curbing PBM profits from spreads.) The section also defines "pharmacy benefit manager" to include entities that negotiate prices, manage prescription benefits, process claims, or contract with pharmacies on behalf of states or managed care plans.