S-4323-119
Read twice and referred to the Committee on Finance.
Sponsored by James Lankford (R-OK)
What it does
This bill would amend Medicare Part D to require prescription drug plan sponsors and Medicare Advantage drug plans to include all lower-cost generic drugs and at least one lower-cost biosimilar on their formularies whenever the brand-name equivalent is already covered. Starting January 1, 2028, plans would also be prohibited from imposing more restrictive access requirements (such as prior authorization or step therapy) on those generics and biosimilars than on their brand-name counterparts. The bill would additionally require plans that use tiered cost-sharing to place generics and biosimilars on a dedicated lower-cost tier, with copayments at least $20 below the lowest branded drug tier.
Who benefits
Medicare Part D enrollees — approximately 50 million seniors and people with disabilities — who would gain access to lower-cost generic and biosimilar options on their plan formularies. Patients currently subject to step therapy or prior authorization requirements that steer them toward brand-name drugs would face fewer administrative barriers. Generic drug manufacturers and biosimilar developers would gain guaranteed formulary placement when their products are cheaper than the reference drug. Taxpayers and the Medicare program could see reduced spending if lower-cost drugs are used more frequently. Pharmacies that dispense generics and biosimilars may see increased volume.
Who is hurt
Brand-name pharmaceutical manufacturers would lose formulary preference advantages and may see reduced sales volume as patients shift to generics and biosimilars. Pharmacy benefit managers (PBMs) that negotiate rebates with brand-name manufacturers — and retain a portion — could see reduced revenue if formulary composition shifts toward generics that carry smaller rebates. Medicare Part D plan sponsors would face new administrative and compliance costs to restructure formularies and tiering systems by 2028. Patients who have established treatment regimens on brand-name drugs and prefer them may face indirect pressure to switch. Biosimilar manufacturers not selected as the single required biosimilar per reference product would still be excluded from formularies.
Supporters argue
Supporters argue that Medicare Part D plans currently have financial incentives — through rebate arrangements with brand-name manufacturers — to favor higher-cost branded drugs over cheaper generics and biosimilars, even when clinically equivalent alternatives exist. They contend that prohibiting more restrictive access requirements on lower-cost drugs directly removes a structural barrier that forces patients to navigate prior authorization hurdles to access drugs that cost the program and enrollees less. With generic drugs typically costing 80–85% less than brand-name equivalents (per FDA data), and biosimilars averaging 15–35% less, mandatory formulary inclusion and favorable tiering could meaningfully reduce out-of-pocket costs for the roughly 50 million Part D enrollees.
Opponents argue
Opponents argue that mandating formulary inclusion and tiering structures removes plan flexibility that currently allows PBMs to negotiate deeper rebates from manufacturers — rebates that are passed through to lower premiums for all enrollees. They contend that if brand-name rebates shrink because plans lose leverage, overall Part D premiums could rise, potentially offsetting individual out-of-pocket savings. Critics also argue that the bill's requirement to cover all lower-cost generics (not just one, as with biosimilars) could significantly expand formulary size, increasing administrative complexity and plan costs, and that the Secretary's broad authority to define key terms like "cost threshold" and implementation timelines raises concerns about regulatory overreach under the post-Loper Bright heightened scrutiny standard.
Constitutional context
Congress has broad authority to structure Medicare under the Taxing and Spending Clause (Art. I, §8, cl. 1), and conditions placed on private plan sponsors participating in Part D are generally permissible as conditions of federal program participation. Post-Loper Bright (2024), however, courts will independently review whether the Secretary's delegated authority to define terms like "cost threshold" and set implementation timelines is clearly authorized by the statutory text, rather than deferring to agency interpretation.
Checks and balances
Congress gains authority by setting mandatory formulary and tiering rules; the Secretary of HHS gains implementation power through program instructions; courts retain independent review of agency interpretations post-Loper Bright, and plan sponsors may challenge specific regulatory definitions through administrative and judicial proceedings.
Historical precedent
The Inflation Reduction Act of 2022 similarly restructured Medicare Part D cost-sharing and drug pricing rules, including caps on out-of-pocket costs and manufacturer rebate requirements, representing the most recent direct precedent for congressional intervention in Part D formulary economics.