The Fair Pharmacies for Federal Employees Act of 2025 would stop the Office of Personnel Management (OPM) from awarding Federal Employee Health Benefits (FEHB) contracts to qualified carriers that directly or indirectly own, control, or operate pharmacies, or that are owned or controlled by pharmacy benefit managers (PBMs). It also forbids OPM or FEHB carriers from contracting with PBMs that themselves own or operate pharmacies.
The bill defines ‘‘pharmacy’’ broadly (including retail, mail-order, specialty, hospital, long-term care, and any entity with pharmacy NPI taxonomy codes) and sets an expansive definition of ‘‘pharmacy benefit manager’’ to capture negotiation, network design, claims processing, utilization management, and related services.
Why it matters: this is a targeted attempt to block vertical integration between PBMs and pharmacies within the FEHB program. The practical effect would be to disqualify vertically integrated carriers and PBMs from FEHB purchasing unless they divest or reorganize, forcing contract restructures, compliance reviews, and potential market shifts among firms that serve the federal workforce and its dependents.
At a Glance
What It Does
The bill makes it unlawful for OPM to contract with FEHB qualified carriers that own or are owned/controlled by pharmacies or PBMs, and separately forbids OPM or carriers from contracting with PBMs that own or operate pharmacies. The prohibition covers direct and indirect ownership or control.
Who It Affects
Primary targets are FEHB qualified carriers, PBMs (including third-party administrators), and any pharmacy entity captured by the broad statutory definition (mail-order, specialty, retail, hospital, nursing-home, infusion, and entities identified by pharmacy NPI taxonomy codes).
Why It Matters
It creates a procurement-based restriction on vertical integration specific to the FEHB market rather than a general antitrust rule, forcing firms that participate in FEHB to adopt governance or ownership structures that separate pharmacy ownership from PBM or carrier functions.
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What This Bill Actually Does
The bill instructs OPM to refuse FEHB contracts to any qualified carrier that has an ownership or control relationship with a pharmacy or with a pharmacy benefit manager that itself owns or controls pharmacies. That prohibition is written to sweep both direct and indirect relationships, which means equity stakes, affiliate control, or operational direction could trigger exclusion.
Separately, OPM and FEHB carriers may not contract or subcontract with a PBM that owns or operates any pharmacy.
A central drafting choice is breadth of definition. "Pharmacy" is defined to include virtually every delivery channel—retail, mail-order, specialty, hospital-based, long-term care, infusion, and any organization with a pharmacy-related NPI taxonomy code. "Pharmacy benefit manager" is likewise broad, covering anyone who negotiates drug prices or rebates for a plan, builds pharmacy networks, processes claims, handles prior authorizations, or performs utilization review. Those expansive definitions make the prohibition operational across the full range of modern PBM and pharmacy operations.The bill also contains a rule of construction preserving the authority of federal and state enforcers (FTC, DOJ, HHS OIG, state attorneys general) to act under other laws.
It does not, however, create a new enforcement unit, penalty schedule, or administrative appeal process tied to OPM contracting decisions. Practically, carriers and PBMs that currently rely on vertically integrated models to serve FEHB plans would need to consider divestiture, firewalls, or restructured subcontracting to remain eligible.
OPM would need to translate the statutory language into procurement rules, compliance review processes, and contract clauses to screen bidders for covered ownership or control relationships.
The Five Things You Need to Know
The bill forbids OPM from contracting with any FEHB qualified carrier that directly or indirectly owns, operates, controls, or directs the operation of any pharmacy.
The bill also forbids OPM or any FEHB qualified carrier from contracting or subcontracting with a PBM that directly or indirectly owns, operates, controls, or directs the operation of any pharmacy.
The statutory definition of "pharmacy" explicitly includes mail-order, specialty, retail, nursing-home, long-term care, hospital, infusion/outpatient treatment pharmacies, and any entity with a pharmacy NPI taxonomy code.
The definition of "pharmacy benefit manager" captures not only negotiated pricing and rebates but also network design, claims processing, prior authorization, utilization management, appeals/adjudication, and other prescription drug benefit administration functions.
The bill expressly preserves the investigative and enforcement authority of the FTC, DOJ, HHS Inspector General, and state attorneys general under other law (a rule of construction, not a grant of new enforcement powers).
Section-by-Section Breakdown
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Short title: Fair Pharmacies for Federal Employees Act of 2025
This is the formal short-title provision; no operative effect besides naming the act. It signals the bill's focus on pharmacy ownership within the FEHB program.
OPM contracting prohibition for carriers with pharmacy/PBM ownership
Makes it unlawful for OPM to contract with a qualified carrier that directly or indirectly owns, operates, controls, or directs any pharmacy, or that owns/controls a PBM or is owned/controlled by a PBM. Operationally, this requires OPM to exclude carriers with covered ownership ties from FEHB solicitations and awards unless carriers alter ownership or control structures prior to contracting. The wording covers indirect relationships, so OPM will need to identify and operationalize thresholds for equity interests, affiliate control, and managerial direction in procurement rules.
Prohibition on contracting with PBMs that own pharmacies
Prohibits OPM or FEHB carriers from executing contracts or subcontracts with PBMs that directly or indirectly own or control pharmacies. This provision targets PBMs that vertically integrate pharmacy operations and would force plans or OPM to exclude such PBMs from servicing FEHB benefits unless they divest pharmacy ownership or otherwise sever covered ties.
Rule of construction preserving other enforcement authorities
Clarifies that the statute does not limit action by the FTC, DOJ Inspector General, HHS, or state attorneys general under other law. Practically, this avoids preemption claims that the statute displaces antitrust or health-care enforcement, but it also creates parallel enforcement pathways—procurement exclusion by OPM and regulatory or antitrust action by other agencies.
Definitions: health plan, person, pharmacy, PBM, qualified carrier
Provides operational definitions that determine scope. "Pharmacy" is explicitly broad and inclusive; "pharmacy benefit manager" lists a wide range of functions (negotiation, network creation, claims payment, utilization management, prior authorization, appeals). "Qualified carrier" ties the prohibition specifically to entities that provide group health coverage under FEHB-like arrangements. These definitions will drive compliance reviews and require OPM to check NPI taxonomy codes and ownership structures when vetting bidders.
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Explore Healthcare in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Independent community pharmacies — by excluding PBM-owned pharmacy competitors from FEHB networks, the bill reduces a vertical-competition advantage and could improve contracting opportunities for stand-alone pharmacies with FEHB carriers.
- Non-vertically integrated PBMs and third-party administrators — gain competitive advantage in bidding for FEHB-related contracts because the bill disqualifies vertically integrated PBMs that also own pharmacies.
- FEHB plan sponsors and benefits procurement officials — receive a clearer purchasing rule aimed at eliminating perceived conflicts of interest between PBM incentives and pharmacy ownership, simplifying procurement criteria around ownership and control.
Who Bears the Cost
- Vertically integrated carriers and PBMs that own pharmacies — face potential loss of access to the FEHB market unless they divest pharmacy assets or reconfigure corporate governance; divestiture carries transaction costs and may reduce integrated efficiencies.
- OPM and FEHB carriers — will need to develop compliance protocols, due-diligence processes, and contract language to detect indirect ownership/control relationships, imposing administrative and legal costs.
- Federal employees and dependents (short-term) — could experience network disruptions or reduced access to specific PBM-owned mail-order or specialty pharmacies if carriers and PBMs must restructure quickly to comply, particularly for drugs supplied through proprietary channels.
Key Issues
The Core Tension
The bill strikes at conflicts-of-interest created by vertical integration—seeking to separate PBM/payment functions from pharmacy ownership for FEHB—yet does so by excluding integrated firms from a major purchaser; that approach reduces one source of misaligned incentives but risks sacrificing contract scale, efficiency, and continuity of access that vertically integrated firms currently provide.
The bill's operational challenge is proving and policing "direct or indirect" ownership, control, or direction. The language can encompass minority equity stakes, complex affiliate chains, private-equity ownership vehicles, and management contracts.
OPM will need to set thresholds and standards for when an investment or affiliation crosses the statutory line, or else litigation and bid protests are likely. The statute does not define ownership thresholds (percentage of equity, board control, management agreements) nor provide an administrative pathway for remediation, waiver, or phased compliance.
Second, the policy trade-offs are real: excluding vertically integrated PBMs from FEHB could remove entities that deliver scale, integrated data, and negotiated discounts across pharmacy and clinical services. That loss of scale may reduce OPM's bargaining leverage or increase administrative costs.
The bill preserves other enforcement avenues (FTC, DOJ, HHS, state AGs), which creates parallel oversight but also uncertainty about which authority will drive remedies. Finally, the bill lacks a transition or grandfathering clause, so existing contracts that rely on integrated supply chains could face abrupt restructuring needs, raising immediate implementation and beneficiary-access risks.
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