An Act amending the act of November 21, 2016 (P.L.1318, No.169), known as the Pharmacy Audit Integrity and Transparency Act, in preliminary provisions, further providing for definitions; and, in pharmacy benefits manager contracts, providing for State pharmacy benefits manager.

PRINTER'S NO. 1500
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No. 1186
Session of
2026
INTRODUCED BY BOSCOLA, J. WARD, COLLETT, TARTAGLIONE, DUSH,
PISCIOTTANO, CAPPELLETTI, ARGALL AND KEARNEY, MARCH 12, 2026
REFERRED TO HEALTH AND HUMAN SERVICES, MARCH 12, 2026
AN ACT
Amending the act of November 21, 2016 (P.L.1318, No.169),
entitled, as amended, "An act providing for pharmacy audit
procedures, for registration of pharmacy benefits managers
and auditing entities, for maximum allowable cost
transparency, for prescription drugs reimbursed under the
PACE and PACENET program and for pharmacy benefit managers
contract requirements and prohibited activities; and making
related repeals," in preliminary provisions, further
providing for definitions; and, in pharmacy benefits manager
contracts, providing for State pharmacy benefits manager.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The definitions of "specialty drug" and "spread
pricing" in section 103 of the act of November 21, 2016
(P.L.1318, No.169), known as the Pharmacy Audit Integrity and
Transparency Act, added July 17, 2024 (P.L.852, No.77), are
amended to read:
Section 103. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
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"Specialty drug." [Either of the following:
(1) A prescription drug prescribed to a covered
individual with a cost that meets or exceeds the cost of a
drug on the specialty tier of Medicare Part D under 42 CFR
423.104(d)(2)(iv) (relating to requirements related to
qualified prescription drug coverage) and meets three or more
of the following criteria:
(i) The drug requires specialized product handling
or administration by the dispensing pharmacy.
(ii) The drug requires specialized clinical care,
including, but not limited to, frequent dosing
adjustments to the prescription drug, clinical monitoring
or expanded patient service, intensive patient counseling
and ongoing clinical support, such as individualized
disease or therapy management to support patient outcomes
for a covered individual.
(iii) The drug is prescribed for a covered
individual with a rare medical condition, complex or
chronic medical condition or life-threatening medical
condition.
(iv) The prescription drug has a limited or
exclusive distribution and is not typically stocked or
dispensed by a retail pharmacy.
(2) A prescription drug that is prescribed to a covered
individual and that is listed as a specialty drug on the
medical assistance fee-for-service specialty pharmacy drug
list.] Prescription medication used to treat complex or
chronic conditions that requires special handling, provider
coordination or patient education and monitoring for which a
retail community pharmacy is not reasonably equipped to
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handle, store, provide counseling regarding use and safely
distribute.
* * *
"Spread pricing." A model of prescription drug pricing in
which the PBM charges a health benefit plan or health insurer a
contracted price for prescription drugs and the contracted price
for the prescription drugs [differs from] is more than the
amount the PBM directly or indirectly pays the pharmacist or
pharmacy for prescription drugs and related pharmacist services.
Section 2. The act is amended by adding a section to read:
Section 605. State pharmacy benefits manager.
(a) Duty of Department of Human Services .-- The Department of
Human Services, by July 31, 2026, shall select and enter into a
master contract with a single third-party administrator to serve
as the State pharmacy benefits manager to administer all
pharmacy benefits for Medicaid recipients, including those
enrolled in a managed care organization by such date with whom
the Department of Human Services contracts for the delivery of
Medicaid services.
(b) Requirement .-- Each managed care contract entered into or
renewed by the Department of Human Services for the delivery of
Medicaid services by a managed care organization shall require
the managed care organization to contract with and utilize the
State pharmacy benefits manager for the purpose of administering
all pharmacy benefits for Medicaid recipients enrolled with the
managed care organization.
(c) Contractor compliance .--The State pharmacy benefits
manager shall comply with the provisions of this act unless
otherwise prohibited by Federal law.
(d) Procurement process.--
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(1) The Secretary of Human Services must, through a
competitive procurement process that is in compliance with
paragraph (2) , select a State pharmacy benefits manager to
comply with subsection (e).
(2) The competitive procurement process shall:
(i) accept applications for entities seeking to
become the State pharmacy benefits manager; and
(ii) establish eligibility criteria that an entity
must meet to become the State pharmacy benefits manager.
(3) An applicant for the State pharmacy benefits manager
must disclose to the Secretary of Human Services the
following during the procurement process:
(i) any activity, policy, practice, contract or
arrangement of the applicant that may present a conflict
of interest with performing as the State pharmacy
benefits manager or a managed care organization;
(ii) all common ownership, members of a board of
directors, managers or other control of the applicant or
any of the applicant's affiliated companies with:
(A) a managed care organization administering
medical assistance, Pennsylvania Medical Assistance
program benefits in Pennsylvania or an affiliate of
the managed care organization;
(B) an entity that contracts on behalf of a
pharmacy or any pharmacy services administration
organization and its affiliates;
(C) a drug wholesaler or distributor and its
affiliates;
(D) a third-party payer and its affiliates; or
(E) a pharmacy and its affiliates;
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(iii) any direct or indirect fees, charges or any
kind of assessments imposed by the pharmacy benefits
manager on pharmacies licensed in this Commonwealth with
which the applicant shares common ownership, management
or control or that are owned, managed or controlled by
any of the applicant's affiliated companies; and
(iv) any financial terms and arrangements between
the applicant and a prescription drug manufacturer or
labeler, including formulary management, drug
substitution programs, educational support claims
processing or data sales fees.
(e) Contract requirements.--
(1) The master contract shall prohibit the State
pharmacy benefits manager from:
(i) requiring, enticing or coercing an enrollee to
obtain pharmacy services, including filling a
prescription drug, from a pharmacy owned, specialty
pharmacy owned or otherwise affiliated with the State
pharmacy benefits manager;
(ii) communicating to an enrollee that the enrollee
is required to obtain a pharmacy service or have a
prescription dispensed at, or pharmacy services provided
by, a particular pharmacy owned by or affiliated with the
State pharmacy benefits manager if there are other
nonaffiliated pharmacies in network that have the ability
to dispense medication or provide services;
(iii) requiring an enrollee to obtain pharmacy
services, including filling a prescription drug,
exclusively through a mail order pharmacy;
(iv) requiring an enrollee to obtain pharmacy
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services, including filling a prescription drug,
exclusively through a mail order pharmacy or specialty
pharmacy unless the service or drug can only reasonably
be performed or dispensed at a specialty pharmacy;
(v) requiring a pharmacy to maintain or provide
documentation that differs from requirements based on
Federal or State law or State Board of Pharmacy
regulations to demonstrate that a prescription is valid
and intended to treat an enrollee's underlying condition;
(vi) directly or indirectly retroactively denying or
reducing a claim or aggregate of claims:
(A) for prescription drugs when the prescription
is facially valid and consistent with Federal or
State law or State B oard of Pharmacy regulations; or
(B) for pharmacy services, including
prescription drugs, after adjudication of the claim
or aggregation of claims;
(vii) engaging in the use of spread pricing; and
(viii) charging or recouping direct or indirect
remuneration fees, multiple network reconciliation
offsets, adjudication transaction fees or other fees to a
pharmacy.
(2) The master contract required under subsection (d)
shall include provisions that require the State pharmacy
benefits manager to:
(i) pay a rate for pharmacy services, including
filling a prescription drug, that is no less than the
National Average Drug Acquisition Cost guidelines for the
prescription drug or, if the National Average Drug
Acquisition Cost guidelines are unavailable, the
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wholesale acquisition cost, plus the professional
dispensing fee, as defined in 42 CFR 447.502 (relating to
definitions), for outpatient drugs by pharmacies in the
Medicaid program. The professional dispensing fee shall
be set at 100% of the Medicaid fee-for-service dispensing
fee determined in accordance with an in-State cost-of-
dispensing survey conducted no more than every three
years;
(ii) establish the State pharmacy benefits manager's
fiduciary duty owed to the Department of Human Services
as well as any pharmacy or pharmacist who provides
pharmacy services to an enrollee; and
(iii) require the use of pass-through pricing.
(f) Definitions.- -As used in this section, the following
words and phrases shall have the meanings given to them in this
subsection unless the context clearly indicates otherwise:
"Pass-through pricing." The model of prescription drug
pricing wherein a pharmacy benefits manager charges the health
benefit plan the same price for a prescription drug that it pays
the pharmacy for the same prescription drug.
"State pharmacy benefits manager." The pharmacy benefits
manager contracted by the Department of Human Services pursuant
to the procurement process provided in subsection (d) to
administer pharmacy benefits for all Medicaid recipients in this
Commonwealth.
Section 3. This act shall take effect in 60 days.
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