This legislation, titled the Prescription Drug Transparency and Affordability Act, seeks to significantly enhance transparency and oversight of pharmacy benefit management services. It achieves this by amending key federal statutes: the Public Health Service Act, the Employee Retirement Income Security Act of 1974 (ERISA), and the Internal Revenue Code of 1986. The core purpose is to compel Pharmacy Benefit Managers (PBMs) to disclose comprehensive financial and operational data to group health plans and health insurance issuers.

Effective for plan years beginning 30 months after enactment, the bill requires PBMs to enter into contracts that do not limit or delay the disclosure of necessary information. These PBMs must then submit detailed reports to group health plans at least every six months, or quarterly if requested by the plan. These reports must be in plain language and a machine-readable format, providing crucial insights into drug pricing and PBM practices.

For large employers and plans, the reports must include extensive drug-specific data. This includes the contracted compensation paid by the plan to the PBM, the compensation paid to the pharmacy, and the difference between these amounts for each drug. PBMs must also report the proprietary name, National Drug Code, dispensing channel (retail, mail order, specialty), and whether the drug is brand or generic, along with its wholesale acquisition cost or average wholesale price.

Further detailed information required for large plans encompasses the net price per course of treatment after all rebates and discounts, total out-of-pocket spending by participants, and the total net spending on each drug. Critically, PBMs must disclose the total amount of rebates, fees, and other remuneration received by both the plan and the PBM from applicable entities, linking this to drug utilization and spending.

The bill also mandates reporting on each therapeutic class of drugs, detailing gross and net spending, PBM remuneration, average net spending per supply, and the number of participants using drugs in that class. For high-spending drugs, PBMs must provide a list of other drugs in the same therapeutic class, the rationale for formulary placement, and any changes from the prior year.

A significant provision addresses PBMs with affiliated pharmacies. These PBMs must explain benefit design parameters that encourage or require participants to use affiliated pharmacies. They must also report the percentage of prescriptions dispensed by these pharmacies and, for each drug, the amount charged to the plan and beneficiaries, the median and interquartile range of costs from non-affiliated pharmacies, and the lowest available cost from any network pharmacy.

Beyond drug-specific data, all group health plans will receive a summary document useful for selecting PBM services, including estimated net price, cost per claim, and fee structure. Participants and beneficiaries can request a summary document with aggregate information, and specific claim-level information regarding the difference between plan payments to PBMs and PBM payments to pharmacies.

All reporting must adhere strictly to HIPAA privacy regulations, ensuring that only summary health information is provided to plans and aggregate information to beneficiaries, protecting individual patient data. The Secretary is tasked with defining a standard reporting format and promulgating necessary regulations within 18 months of enactment, including a limited report form for plans affiliated with drug manufacturers to prevent anti-competitive behavior.

To ensure compliance, the bill establishes robust enforcement mechanisms. Failure to provide required information or limiting disclosure can result in a civil monetary penalty of $10,000 per day. Knowingly providing false information carries a penalty of up to $100,000 per item of false information. However, the Secretary may waive penalties or extend compliance periods for entities demonstrating good-faith efforts.