(a) In general

Section 408(b)(2)(B) of the Employee Retirement Income Security Act (29 U.S.C. 1108(b)(2)(B)) is amended by adding at the end the following:

(xi)

(I)

In the case of a contract or arrangement between a covered plan and a covered service provider for pharmacy benefit management services, no amount of compensation (whether direct compensation or indirect compensation) may be paid by such service provider to any individual or entity for—

(aa)

the referral, recommendation, placement, retention, or renewal of, or access to, the business of the covered plan or the health insurance issuer offering health insurance coverage for the covered plan;

(bb)

inclusion in, participation in, or the design of—

(AA)

a request for proposal;

(BB)

a market check;

(CC)

an evaluation;

(DD)

the volume, value, or use of covered plan business; or

(EE)

any other contracting process.

(II)

For the purposes of this clause, the characterization of compensation shall be based on the economic substance and practical operation of the contract or arrangement, without regard to the characterization or labeling of the compensation by the covered service provider.

(III)

Any compensation paid by a covered service provider to a brokerage firm, broker, consultant, advisor, or related entity shall be presumed to be related to an activity described in item (aa) or (bb) of subclause (I) unless the parties demonstrate through contemporaneous written documentation that such compensation—

(aa)

reflects fair market value for bona fide services actually rendered; and

(bb)

is not related, directly or indirectly, to any activity described in such items.

(b) Effective date

The amendment made by this section shall apply for plan years beginning after the date of enactment of this Act.