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AB-29 Pharmacy benefit managers. (2017-2018)

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Date Published: 05/11/2017 09:00 PM
AB29:v96#DOCUMENT

Amended  IN  Assembly  May 11, 2017
Amended  IN  Assembly  May 04, 2017
Amended  IN  Assembly  March 28, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 29


Introduced by Assembly Member Nazarian

December 05, 2016


An act to add Division 121 (commencing with Section 152000) to Article 11.10 (commencing with Section 1399.880) to Chapter 2.2 of Division 2 of the Health and Safety Code, relating to pharmacy benefit managers.


LEGISLATIVE COUNSEL'S DIGEST


AB 29, as amended, Nazarian. Pharmacy benefit managers.
Existing law requires a pharmacy benefit manager that reimburses a contracting pharmacy for a drug on a maximum allowable cost basis to provide the contracting pharmacy with specified information regarding the data used to determine the maximum allowable cost of a drug.
This bill would require, except as provided, a pharmacy benefit manager to disclose certain information to a purchaser, including, among other things, the aggregate amount of rebates, retrospective utilization discounts, and other income that the pharmacy benefit manager would receive from a pharmaceutical manufacturer or labeler in connection with drug benefits related to the purchaser. The bill would excuse a pharmacy benefit manager from making these disclosures unless the purchaser agrees to keep any proprietary information disclosed to it pursuant to these provisions confidential, as specified.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime.
This bill would require pharmacy benefit managers to be licensed by the department and would require a pharmacy benefit manager to report to the department, on a quarterly basis, regarding its compliance with the standards provided by the act. The bill would require the department to develop the application forms and standards for determining eligibility for a pharmacy benefit manager license and would require the department to set the licensing fee, as provided. The bill would also provide the department with the authority to enforce the provisions of the act and would make a willful violation of the bill’s provisions by a pharmacy benefit manager a crime. Because a willful violation of the bill’s provisions by a pharmacy benefit manager would be a crime, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NOYES  

The people of the State of California do enact as follows:


SECTION 1.

 Article 11.10 (commencing with Section 1399.880) is added to Chapter 2.2 of Division 2 of the Health and Safety Code, to read:
Article  11.10. Pharmacy Benefit Managers

1399.880.
 For the purposes of this article, the following definitions apply:
(a) “Department” means the Department of Managed Health Care.
(b) “Labeler” means a person who receives prescription drugs from a manufacturer or wholesaler and repackages those drugs for later retail sale and who has a labeler code from the federal Food and Drug Administration under Section 207.20 of Title 21 of the Code of Federal Regulations.
(c) “Pharmacy benefit management” means the administration or management of prescription drug benefits. Pharmacy benefit management shall include the procurement of prescription drugs at a negotiated rate for dispensation within this state, the processing of prescription drug claims, and the administration of payments related to prescription drug claims.
(d) “Pharmacy benefit manager” means a person, business, or other entity described in subdivision (j) of Section 4430 of the Business and Professions Code, except that it shall not include a health care service plan or health insurer if the health care service plan or health insurer offers or provides pharmacy benefit management services and if those services are offered or provided only to enrollees, subscribers, policyholders, or insureds who are also covered by health benefits offered or provided by that health care service plan or health insurer, nor shall it include an affiliate, subsidiary, or other related entity of the health care service plan or health insurer that would otherwise qualify as a pharmacy benefit manager as long as the services offered or provided by the related entity are offered or provided only to enrollees, subscribers, policyholders, or insureds who are also covered by the health benefits offered or provided by that health care service plan or health insurer.
(e) “Purchaser” means a person who enters into an agreement with a pharmacy benefit manager for the provision of pharmacy benefit management services.

1399.881.
 A pharmacy benefit manager shall disclose to a purchaser, in writing and no less frequently than on a quarterly basis, all of the following:
(a) The aggregate amount of all rebates and other retrospective utilization discounts that the pharmacy benefit manager receives, directly or indirectly, from a pharmaceutical manufacturer or labeler in connection with prescription drug benefits specific to the purchaser.
(b) The aggregate amount for each therapeutic class of all rebates and other retrospective utilization discounts that the pharmacy benefit manager receives, directly or indirectly, from a pharmaceutical manufacturer or labeler for each therapeutic class of drugs related to prescription drug benefits specific to the purchaser. A therapeutic class shall include at least two drugs.
(c) The nature, type, and amount of all other revenue that the pharmacy benefit manager receives, directly or indirectly, from a pharmaceutical manufacturer or labeler in connection with prescription drug benefits related to the purchaser.
(d) Prescription drug utilization information related to utilization by the purchaser’s enrollees or insureds or the aggregate utilization data that is not specific to an individual consumer, prescriber, or purchaser.
(e) Administrative or other fees charged by the pharmacy benefit manager to the purchaser.
(f) Arrangements with prescribing providers, medical groups, individual practice associations, pharmacists, or other entities that are associated with activities of the pharmacy benefit manager to encourage formulary compliance or otherwise manage prescription drug benefits.

1399.882.
 (a) Except for utilization information, a pharmacy benefit manager need not make the disclosures required in Section 1399.881 unless and until the purchaser agrees, in writing, to maintain as confidential any proprietary information. That agreement may provide for equitable and legal remedies in the event of a violation of the agreement. That agreement may also include persons or entities with whom the purchaser contracts to provide consultation regarding pharmacy services. Proprietary information includes trade secrets, and information on pricing, costs, revenues, taxes, market share, negotiating strategies, customers, and personnel held by a pharmacy benefit manager and used for its business purposes.
(b) All disclosures made pursuant to this article shall comply with the privacy standards of the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191)(HIPAA).

1399.883.
 A pharmacy benefit manager shall report to the department, on a quarterly basis, regarding its compliance with the standards set forth in this article in a manner to be determined by the department.

1399.884.
 (a) The department has the authority to enforce the provisions of this article, including the authority to adopt, amend, or repeal any rules and regulations, not inconsistent with the laws of this state, as may be necessary for the protection of the public and to implement this article.
(b) The penalties set forth in Section 1390 apply to this article.

1399.885.
 (a) A pharmacy benefit manager shall obtain a license from the department in order to conduct business as a pharmacy benefit manager in this state.
(b) The department shall develop the application forms and standards for determining eligibility for a pharmacy benefit manager license.
(c) The department shall set a fee for the license required by this article. The license fee shall not exceed the actual costs incurred by the department in carrying out its duties under this article.
(d) The department may deny, suspend, revoke, or place on probational status a pharmacy benefit manager’s license if the applicant or licensee does not comply with the eligibility standards or the provisions of this article.

SEC. 2.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.
SECTION 1.Division 121 (commencing with Section 152000) is added to the Health and Safety Code, to read:
121.Pharmacy Benefit Management
152000.

For the purposes of this division, the following definitions shall apply:

(a)“Labeler” means a person who receives prescription drugs from a manufacturer or wholesaler and repackages those drugs for later retail sale and who has a labeler code from the federal Food and Drug Administration under Section 207.20 of Title 21 of the Code of Federal Regulations.

(b)“Pharmacy benefit management” means the administration or management of prescription drug benefits. Pharmacy benefit management shall include the procurement of prescription drugs at a negotiated rate for dispensation within this state, the processing of prescription drug claims, and the administration of payments related to prescription drug claims.

(c)“Pharmacy benefit manager” means a person, business, or other entity described in subdivision (j) of Section 4430 of the Business and Professions Code, except that it shall not include a health care service plan or health insurer if the health care service plan or health insurer offers or provides pharmacy benefit management services and if those services are offered or provided only to enrollees, subscribers, policyholders, or insureds who are also covered by health benefits offered or provided by that health care service plan or health insurer, nor shall it include an affiliate, subsidiary, or other related entity of the health care service plan or health insurer that would otherwise qualify as a pharmacy benefit manager as long as the services offered or provided by the related entity are offered or provided only to enrollees, subscribers, policyholders, or insureds who are also covered by the health benefits offered or provided by that health care service plan or health insurer.

(d)“Purchaser” means a person who enters into an agreement with a pharmacy benefit manager for the provision of pharmacy benefit management services.

152001.

A pharmacy benefit manager shall disclose to a purchaser, in writing and no less frequently than on a quarterly basis, all of the following:

(a)The aggregate amount of all rebates and other retrospective utilization discounts that the pharmacy benefit manager receives, directly or indirectly, from a pharmaceutical manufacturer or labeler in connection with prescription drug benefits specific to the purchaser.

(b)The aggregate amount for each therapeutic class of all rebates and other retrospective utilization discounts that the pharmacy benefit manager receives, directly or indirectly, from a pharmaceutical manufacturer or labeler for each therapeutic class of drugs related to prescription drug benefits specific to the purchaser. A therapeutic class shall include at least two drugs.

(c)The nature, type, and amount of all other revenue that the pharmacy benefit manager receives, directly or indirectly, from a pharmaceutical manufacturer or labeler in connection with prescription drug benefits related to the purchaser.

(d)Prescription drug utilization information related to utilization by the purchaser’s enrollees or insureds or the aggregate utilization data that is not specific to an individual consumer, prescriber, or purchaser.

(e)Administrative or other fees charged by the pharmacy benefit manager to the purchaser.

(f)Arrangements with prescribing providers, medical groups, individual practice associations, pharmacists, or other entities that are associated with activities of the pharmacy benefit manager to encourage formulary compliance or otherwise manage prescription drug benefits.

152003.

Except for utilization information, a pharmacy benefit manager need not make the disclosures required in Section 152001 unless and until the purchaser agrees, in writing, to maintain as confidential any proprietary information. That agreement may provide for equitable and legal remedies in the event of a violation of the agreement. That agreement may also include persons or entities with whom the purchaser contracts to provide consultation regarding pharmacy services. Proprietary information includes trade secrets, and information on pricing, costs, revenues, taxes, market share, negotiating strategies, customers, and personnel held by a pharmacy benefit manager and used for its business purposes.

152004.

All disclosures made pursuant to this division shall comply with the privacy standards of the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191)(HIPAA).