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AB-315 Pharmacy benefit management.(2017-2018)

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Date Published: 05/30/2017 01:27 PM
AB315:v96#DOCUMENT

Amended  IN  Assembly  May 30, 2017
Amended  IN  Assembly  May 10, 2017
Amended  IN  Assembly  April 05, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 315


Introduced by Assembly Members Wood and Dahle

February 06, 2017


An act to add Division 121 (commencing with Section 152000) to the Health and Safety Code, relating to pharmacy benefits.


LEGISLATIVE COUNSEL'S DIGEST


AB 315, as amended, Wood. Pharmacy benefit management.
Existing law, the Pharmacy Law, provides for the licensure and regulation of pharmacists and pharmacies by the California State Board of Pharmacy. A violation of the Pharmacy Law is a crime. Existing law also imposes requirements on audits of pharmacy services provided to beneficiaries of a health benefit plan, as specified.
This bill would require pharmacy benefit managers, as defined, to be licensed by the Department of Managed Health Care, as prescribed. The bill would require the department to develop an application for new and renewed licenses, and would specify certain information to be provided in those applications. The bill would authorize the department to charge a license fee for a new or renewed license, as specified. The bill would authorize the director of the department to assess a civil penalty against a pharmacy benefit manager that conducts business in the state without a current license, and would authorize the director to revoke, suspend, or place on probational status the license of a pharmacy benefit manager under specified circumstances.
This bill would also require a pharmacy benefit manager to exercise a duty of good faith and fair dealing in the performance of its contractual duties to a purchaser, and would require a pharmacy benefit manager to disclose to a purchaser any conflict of interest that would interfere with the discharge of that duty. The bill would require a pharmacy benefit manager to periodically disclose to a purchaser, at the purchaser’s request, certain information such as drug acquisition cost, rebates received from pharmaceutical manufacturers, and rates negotiated with pharmacies. The bill would require a pharmacy benefit manager to notify a pharmacy network provider of certain material contract changes at least 30 days before those changes take effect. The bill would prohibit a pharmacy benefit manager from including in a contract with a pharmacy network provider provisions that prohibit the provider from informing consumers of alternative medication options or from dispensing a certain amount of prescribed medication, as specified. The bill would apply these provisions to a contract or contractual relationship between a pharmacy benefit manager and a purchaser or between a pharmacy benefit manager and a pharmacy network provider that is entered into, issued, amended, renewed, or delivered on or after January 1, 2018. The bill would provide that these provisions and those relating to licensing described above do not apply to a health care service plan, health insurer, or related entities that perform pharmacy benefit management services only for enrollees of the plan or insureds of the insurer.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Division 121 (commencing with Section 152000) is added to the Health and Safety Code, to read:

DIVISION 121. Pharmacy Benefit Management

PART 1. General Provisions

152000.
 For the purposes of this division, the following definitions shall apply:
(a) “Dangerous drug” or “dangerous device” means any drug or device unsafe for self-use in humans or animals, and includes the following:
(1) Any drug that bears the legend: “Caution: federal law prohibits dispensing without prescription,” “Rx only,” or words of similar import.
(2) Any device that bears the statement: “Caution: federal law restricts this device to sale by or on the order of a ____,” “Rx only,” or words of similar import, the blank to be filled in with the designation of the practitioner licensed to use or order use of the device.
(3) Any other drug or device that by federal or state law can be lawfully dispensed only on prescription or furnished pursuant to Section 4006 of the Business and Professions Code.
(b) “Department” means the Department of Managed Health Care.
(c) “Director” means the Director of the Department of Managed Health Care.
(d) “Labeler” means a person or entity that 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.
(e) “Person beneficially interested” with respect to an applicant for a pharmacy benefit manager license means and includes:
(1) If the applicant is a partnership or other unincorporated association, each partner or member.
(2) If the applicant is a corporation, each of its officers, directors, and stockholders, provided that a natural person shall not be deemed to be beneficially interested in a nonprofit corporation.
(3) If the applicant is a limited liability company, each officer, manager, or member.
(f) “Pharmacy benefit manager” means a person, business, or other entity that, pursuant to a contract or under an employment relationship with a carrier, health benefit plan sponsor, or other third-party payer, either directly or through an intermediary, manages the prescription drug coverage provided by the carrier, plan sponsor, or other third-party payer, including, but not limited to, the processing and payment of claims for prescription drugs, the performance of drug utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to prescription drug coverage, contracting with network pharmacies, and controlling the cost of covered prescription drugs.
(g) “Proprietary information” means trade secrets and information on pricing, costs, revenue, taxes, market share, negotiating strategies, customers, and personnel that is held by a private entity pharmacy benefit manager and used for that entity’s its business purposes.
(h) “Purchaser” means health benefit plan sponsor or other third-party payer with whom a pharmacy benefit manager contracts to provide the administration and management of prescription drug benefits.

152002.
 This division shall not apply to the following:
(a) 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.
(b) An affiliate, subsidiary, related entity, or contracted medical groups of a health care service plan or health insurer that would otherwise qualify as a pharmacy benefit manager but offers or provides services only to enrollees, subscribers, policyholders, or insureds who are also covered by health benefits offered or provided by the health care service plan or health insurer.

152004.
 The department has the authority to enforce the provisions of this division, 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 division.

PART 2. Pharmacy Benefit Manager Licensing

152100.
 A pharmacy benefit manager shall obtain a license from the department before conducting business, including, but not limited to, acting as a pharmacy benefit manager for any dangerous drug or dangerous device, in the state.

152102.
 (a) A pharmacy benefit manager shall obtain a license by completing and submitting an application for a license and paying a license fee to the department.
(b) A pharmacy benefit manager shall renew its license on an annual basis by completing and submitting an application for a renewed license and paying a renewed license fee to the department.

152104.
 (a) Upon receipt of a completed application and license fee for a new pharmacy benefit manager license from a pharmacy benefit manager, the department shall issue a new pharmacy benefit manager license to the applicant.
(b) Upon receipt of a completed application and license fee for a renewed license from a pharmacy benefit manager, the department shall issue a renewed license to the applicant.
(c) A new or renewed pharmacy benefit manager license shall be effective for a period of one year from the date of issuance of the license.
(d) A pharmacy benefit manager license issued pursuant to this section is not transferable.

152106.
 (a) The department shall develop application forms for new and renewed pharmacy benefit manager licenses.
(b) The application form for a new pharmacy benefit manager license shall require the pharmacy benefit manager to submit the following information to the department:
(1) The name of the pharmacy benefit manager.
(2) The address and contact telephone number for the pharmacy benefit manager.
(3) The name and address of the pharmacy benefit manager’s agent for service of process in the state.
(4) The name and address of each person beneficially interested in the pharmacy benefit manager.
(5) The name and address of each person with management or control over the license.
(6) The location, name, and title of all pharmacists of the pharmacy benefit manager who are dispensing controlled substances, dangerous drugs, or dangerous devices to residents of the state.
(c) If the applicant is a partnership or other unincorporated association, a limited liability company, or a corporation, and the number of partners, members, or stockholders, as the case may be, exceeds five, the application shall so state, and shall further state the name, address, usual occupation, and professional qualifications of each of the five partners, members, or stockholders who own the five largest interests in the applicant entity. Upon request by the department, the applicant shall furnish the department with the name, address, usual occupation, and professional qualifications of partners, members, or stockholders not named in the application, or shall refer the department to an appropriate source of that information.
(d) The application shall contain a statement to the effect that the applicant has not been convicted of a felony and has not violated any of the provisions of this division. If the applicant cannot make this statement, the application shall contain a statement of the violation, if any, or reasons which will prevent the applicant from being able to comply with the requirements with respect to the statement.

152108.
 The department may set a fee for a new or renewed license required by this part. The license fee shall not exceed the actual costs incurred by the department in carrying out its duties under this division.

152110.
 Within 30 days of a change in any of the information disclosed to the department on an application for a new or renewed license, the pharmacy benefit manager shall notify the department of that change in writing.

152112.
 The director may assess a civil penalty of ____ dollars ($____) against a pharmacy benefit manager who conducts business, including, but not limited to, acting as a pharmacy benefit manager for a dangerous drug or dangerous device, in the state, without a current license.

152114.
 (a) The director may suspend, revoke, or place on probational status a pharmacy benefit manager’s license under the following circumstances:
(1) The pharmacy benefit manager has engaged in fraudulent activity that constitutes a violation of state or federal law.
(2) The department has received consumer complaints that justify an action under this subdivision in order to protect the safety and interests of consumers.
(3) The pharmacy benefit manager fails to pay a civil penalty assessed pursuant to Section 152112.
(4) The pharmacy benefit manager fails to pay an application fee for a new or renewed license.
(5) The pharmacy benefit manager fails to comply with a requirement set forth in Part 3 (commencing with Section 152200).
(b) The department shall develop procedures that provide a pharmacy benefit manager subject to an action described in subdivision (a) with reasonable notice of and an opportunity to respond to the department prior to taking that action.

PART 3. Duties of Pharmacy Benefit Managers

152200.
 This part shall apply to a contract or a contractual relationship between a pharmacy benefit manager and a purchaser or a pharmacy benefit manager and a pharmacy network provider that is entered into, issued, amended, renewed, or delivered on or after January 1, 2018.

152202.
 A pharmacy benefit manager shall exercise good faith and fair dealing in the performance of its contractual duties to a purchaser.

152204.
 A pharmacy benefit manager shall notify a purchaser in writing of any activity, policy, or practice of the pharmacy benefit manager that directly or indirectly presents a conflict of interest that interferes with the discharge of the pharmacy benefit manager’s duty to the purchaser to exercise good faith and fair dealing in the performance of its contractual duties pursuant to Section 152202.

152206.
 (a) Beginning in the second fiscal quarter after the effective date of a contract between a pharmacy benefit manager and a purchaser, the pharmacy benefit manager shall, on a quarterly basis, disclose, upon the request of the purchaser, the following information with respect to prescription product benefits specific to the purchaser:
(1) The aggregate acquisition cost from a pharmaceutical manufacturer or labeler for each therapeutic class of drugs.
(2) The aggregate amount of rebates received by the pharmacy benefit manager for each therapeutic class of drugs. The aggregate amount of rebates shall include any utilization discounts the pharmacy benefit manager receives from a pharmaceutical manufacturer or labeler.
(3) Any administrative fees received from a pharmaceutical manufacturer or labeler.
(4) The aggregate of rates negotiated by the pharmacy benefit manager with pharmacies with respect to each therapeutic class of drug. drugs.
(5) Prescription drug utilization information for the purchaser’s enrollees or insureds that is not specific to any individual enrollee or insured.
(6) Whether the pharmacy benefit manager has a contract, agreement, or other arrangement with a pharmaceutical manufacturer to exclusively dispense or provide a drug to a purchaser’s employees or enrollees, and the application of all consideration or economic benefits collected or received pursuant to that arrangement.
(b) The information disclosed pursuant to subdivision (a) shall include all retail, mail order, specialty, and compounded prescription products.
(c) For the purposes of subdivision (a), a therapeutic class shall include at least two three drugs. If there are fewer than two three drugs in a therapeutic class, the information required by subdivision (a) shall be reported by therapeutic category.
(d) A pharmacy benefit manager shall not impose a penalty or offer an inducement to a purchaser for the purpose of deterring the purchaser from requesting the information set forth in subdivision (a).

152208.
 Except for utilization information, a pharmacy benefit manager does not need to make the disclosures required by Section 152206 unless and until the purchaser agrees, in writing, to maintain as confidential any proprietary information. information as defined in this division.

152210.
 A pharmacy benefit manager shall disclose to a pharmacy network provider contracting with the pharmacy benefit manager of any material change to a contract provision that affects the terms of reimbursement, the process for verifying benefits and eligibility, dispute resolution, procedures for verifying drugs included on the formulary, and contract termination at least 30 days before the date of the change to the provision.

152212.
 A pharmacy benefit manager shall not include in a contract with a pharmacy network provider any of the following provisions:
(a) A provision that prohibits the provider from informing a patient of a less costly alternative to a prescribed medication.
(b) A provision that prohibits the provider from dispensing a particular amount of a prescribed medication, if the pharmacy benefit manager allows that amount to be dispensed through a pharmacy owned or controlled by the pharmacy benefit manager.
(c) This section shall not be construed to prohibit differential cost sharing designed to encourage or discourage the use of mail-order pharmacy services.

152214.
 A pharmacy network provider may report to the department, through the toll-free provider line (877-525-1295) or by submitting a complaint to the department’s provider complaint unit, instances in which the pharmacy network provider believes a pharmacy benefit manager is engaging in a violation of Section 152210 or 15212. 152212.