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

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Date Published: 10/01/2018 09:00 PM
AB315:v91#DOCUMENT

Assembly Bill No. 315
CHAPTER 905

An act to add Sections 4079.5 and 4441 to the Business and Professions Code, and to add Article 6.1 (commencing with Section 1385.001) to Chapter 2.2 of Division 2 of, to add and repeal Section 1368.6 of, and to repeal Section 1385.007 of, the Health and Safety Code, relating to pharmacy benefit management.

[ Approved by Governor  September 29, 2018. Filed with Secretary of State  September 29, 2018. ]

LEGISLATIVE COUNSEL'S DIGEST


AB 315, 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.
This bill would require a pharmacy to inform a customer at the point of sale for a covered prescription drug whether the retail price is lower than the applicable cost-sharing amount for the prescription drug, unless the pharmacy automatically charges the customer the lower price. If the customer pays the retail price, the bill would require the pharmacy to submit the claim to the plan or insurer in the same manner as if the customer had purchased the prescription drug by paying the cost-sharing amount when submitted by the network pharmacy. The bill would provide that the payment rendered by an enrollee would constitute the applicable cost sharing, as specified. The bill would provide that a violation of those provisions would not be grounds for disciplinary or criminal action.
Existing law imposes specified requirements on an audit of pharmacy services provided to beneficiaries of a health benefit plan and defines a “pharmacy benefit manager” for those purposes as 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 3rd-party payer, either directly or through an intermediary, manages the prescription drug coverage provided by the carrier, plan sponsor, or other 3rd-party payer.
The bill would require pharmacy benefit managers to exercise good faith and fair dealing. Among other things, the bill would require a pharmacy benefit manager to notify a purchaser, as defined, 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. The bill would require a pharmacy benefit manager to disclose, on a quarterly basis, and upon the request of the purchaser, certain information with respect to prescription product benefits specific to the purchaser, including, but not limited to, the aggregate wholesale acquisition costs from a pharmaceutical manufacturer or labeler for certain therapeutic drugs and any administrative fees received from a pharmaceutical manufacturer or labeler. The bill would exempt from those requirements proprietary information, as defined, if the purchaser fails to agree, in writing, to maintain that information as confidential. The bill would impose additional requirements on pharmacy benefit managers to disclose to pharmacy network providers or their contracting agents of any material change to a contract provision that affects, among other things, the terms of reimbursement. The bill would prohibit a pharmacy benefit manager from including in a contract with a pharmacy network provider or its contracting agent a provision that prohibits the provider from informing a patient of a less costly alternative to a prescribed medication. The bill would exempt from the above provisions a health care service plan or health insurer, or its affiliate, subsidiary, related entity, or contracted medical group, if it offers, provides, or administers pharmacy benefit management services only to enrollees, subscribers, policyholders, or insureds, as specified, and certain contracts under the Labor Code.
On and after January 1, 2020, and until January 1, 2023, the bill would also establish a pilot project in the Counties of Riverside and Sonoma to assess the impact of health care service plan and pharmacy benefit manager prohibitions on the dispensing of certain amounts of prescription drugs by network retail pharmacies. In those counties, the bill would prohibit a health care service plan from prohibiting, or permitting any delegated pharmacy benefit manager to prohibit, a pharmacy provider from dispensing a particular amount of a prescribed medication if the plan or pharmacy benefit manager allows that amount to be dispensed through a pharmacy owned or controlled by the plan or pharmacy benefit manager, except as specified. The bill would require plans in those counties to report annually to the Department of Managed Health Care information and data relating to the pilot project. The bill would require the department to provide a summary of that data to the Governor and health policy committees of the Legislature.
This bill would make legislative findings and declarations as to the necessity of a special statute for the Counties of Riverside and Sonoma.
Existing law provides for the regulation of health care service plans by the Department of Managed Health Care. A willful violation of those provisions is a crime. Existing law requires health care service plans that cover prescription drug benefits and that issue cards to enrollees to issue to each of its enrollees a uniform prescription drug information card that, at a minimum, contains specified information, including information required by the benefit administrator or health care service plan that is necessary to commence processing a pharmacy claim and a telephone number that pharmacy providers may call for assistance.
On and after January 1, 2020, the bill would impose additional requirements on health care service plans with regard to contracted pharmacy providers and pharmacy benefit managers. Among other things, the bill would prohibit a health care service plan from including in a contract with a pharmacy provider or its contracting agent a provision that prohibits the provider from informing a patient of a less costly alternative to a prescribed medication. The bill would require a health care service plan that contracts with a pharmacy benefit manager for management of any or all of its prescription drug coverage to require the pharmacy benefit manager to comply with specified provisions, register with the department pursuant to these provisions, and exercise good faith and fair dealing in the performance of its contractual duties to a health care service plan. The bill would require the registration of those pharmacy benefit managers with the department, as specified, and would authorize the department to set a fee for registration, as specified. The bill would establish enforcement provisions. The bill would also establish a Task Force on Pharmacy Benefit Management Reporting, until February 1, 2020, to determine what information related to pharmaceutical costs, if any, the department should require to be reported by health care service plans or their contracted pharmacy benefit managers. The bill would require the department to submit a report of the task force to specified persons and entities within the Legislature.
Because a willful violation of these provisions by health care service plans would be a crime, this 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: YES   Local Program: YES  

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


SECTION 1.

 Section 4079.5 is added to the Business and Professions Code, to read:

4079.5.
 (a) A pharmacy shall inform a customer at the point of sale for a covered prescription drug whether the retail price is lower than the applicable cost-sharing amount for the prescription drug, unless the pharmacy automatically charges the customer the lower price.
(b) If the customer pays the retail price, the pharmacy shall submit the claim to the health care service plan or health insurer in the same manner as if the customer had purchased the prescription drug by paying the cost-sharing amount when submitted by the network pharmacy.
(c) The payment rendered shall constitute the applicable cost sharing and shall apply to the deductible, if any, and also to the maximum out-of-pocket limit in the same manner as if the enrollee had purchased the prescription drug by paying the cost-sharing amount.
(d) A contract provision that is entered into on or after January 1, 2019, that is inconsistent with this section is void and unenforceable.
(e) The provisions of this section are severable. If any provision of this section or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.
(f) A violation of this provision shall not be grounds for disciplinary action or a criminal action.

SEC. 2.

 Section 4441 is added to the Business and Professions Code, to read:

4441.
 (a) For purposes of this section, the following definitions shall apply:
(1) “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 Part 207 of Title 21 of the Code of Federal Regulations.
(2) “Proprietary information” means information on pricing, costs, revenue, taxes, market share, negotiating strategies, customers, and personnel that is held by a pharmacy benefit manager and used for its business purposes.
(3) “Purchaser” means a 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, except for a health care service plan licensed pursuant to Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code.
(b) This section shall apply to pharmacy benefit manager contracts that are entered into, amended, or renewed on or after January 1, 2019.
(c) A pharmacy benefit manager shall exercise good faith and fair dealing.
(d) 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 pursuant to subdivision (c).
(e) 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 wholesale acquisition costs from a pharmaceutical manufacturer or labeler for each therapeutic category of drugs containing three or more drugs, as outlined in the state’s essential health benefits benchmark plan pursuant to Section 1367.005 of the Health and Safety Code.
(2) The aggregate amount of rebates received by the pharmacy benefit manager by therapeutic category of drugs containing three or more drugs, as outlined in the state’s essential health benefits benchmark plan pursuant to Section 1367.005 of the Health and Safety Code. 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 the pharmaceutical manufacturer or labeler.
(4) 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, insureds, or enrollees, and the application of all consideration or economic benefits collected or received pursuant to that arrangement.
(5) Prescription drug utilization information for the purchaser’s enrollees or insureds that is not specific to any individual enrollee or insured.
(6) The aggregate of payments, or the equivalent economic benefit, made by the pharmacy benefit manager to pharmacies owned or controlled by the pharmacy benefit manager.
(7) The aggregate of payments made by the pharmacy benefit manager to pharmacies not owned or collected by the pharmacy benefit manager.
(8) The aggregate amount of the fees imposed on, or collected from, network pharmacies or other assessments against network pharmacies, and the application of those amounts collected pursuant to the contract with the purchaser.
(f) The information disclosed pursuant to subdivision (e) shall apply to all retail, mail order, specialty, and compounded prescription products.
(g) Except for utilization information specified in paragraph (5) of subdivision (e), a pharmacy benefit manager is not required to make the disclosures required by subdivision (e) unless and until the purchaser agrees, in writing, to maintain as confidential any proprietary information.
(h) 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 (e).
(i) A pharmacy benefit manager shall disclose to a pharmacy network provider or its contracting agent 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.
(j) A pharmacy benefit manager shall not notify an individual receiving benefits through the pharmacy benefit manager that a pharmacy has been terminated from the pharmacy benefit manager’s network until the notification of termination has been provided to that pharmacy pursuant to subdivision (i).
(k) A pharmacy benefit manager shall not include in a contract with a pharmacy network provider or its contracting agent a provision that prohibits the provider from informing a patient of a less costly alternative to a prescribed medication.
(l) This section shall not apply to the following:
(1) A health care service plan or health insurer, if the health care service plan or health insurer offers, provides, or administers pharmacy benefit management services and if those services are offered, provided, or administered only to enrollees, subscribers, policyholders, or insureds who are also covered by health benefits offered, provided, or administered by that health care service plan or health insurer.
(2) An affiliate, subsidiary, related entity, or contracted medical group of a health care service plan or health insurer that would otherwise qualify as a pharmacy benefit manager, but offers, provides, or administers services only to enrollees, subscribers, policyholders, or insureds who are also covered by health benefits offered, provided, or administered by the health care service plan or health insurer.
(3) A contract authorized by Section 4600.2 of the Labor Code.
(m) The provisions of this section are severable. If any provision of this section or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

SEC. 3.

 Section 1368.6 is added to the Health and Safety Code, to read:

1368.6.
 (a) Effective January 1, 2020, there is established a pilot project to assess the impact of health care service plan and pharmacy benefit manager prohibitions on the dispensing of certain amounts of prescription drugs by network retail pharmacies. The provisions of subdivision (b) shall apply to pharmacy providers located in the Counties of Riverside and Sonoma.
(b) Pursuant to the pilot project, a health care service plan shall not prohibit, or permit any delegated pharmacy benefit manager to prohibit, a pharmacy provider from dispensing a particular amount of a prescribed medication if the plan or pharmacy benefit manager allows that amount to be dispensed through a pharmacy owned or controlled by the plan or pharmacy benefit manager, unless the prescription drug is subject to restricted distribution by the federal Food and Drug Administration or requires special handling, provider coordination, or patient education that cannot be provided by a retail pharmacy.
(c) This section shall not be construed to prohibit a health care service plan or pharmacy benefit manager from requiring the same reimbursement and terms and conditions for a pharmacy network provider as for a pharmacy owned or controlled by the health care service plan or pharmacy benefit manager.
(d) This section shall not be construed to prohibit differential cost sharing designed to encourage or discourage the use of mail-order pharmacy services or preferred pharmacies.
(e) On or before July 1, 2020, health care service plans subject to this section shall report annually to the Department of Managed Health Care information and data relating to changes, if any, to costs and utilization of prescription drugs attributable to the prohibition of contract terms in subdivision (b). The department shall solicit and receive any additional information relevant to changes in costs or utilization attributable to the pilot project from other interested stakeholders. The department shall summarize data received pursuant to this subdivision and provide the summary to the Governor and health policy committees of the Legislature on or before December 31, 2022.
(f) This section shall remain in effect only until January 1, 2023, and as of that date is repealed.

SEC. 4.

 Article 6.1 (commencing with Section 1385.001) is added to Chapter 2.2 of Division 2 of the Health and Safety Code, to read:
Article  6.1. Pharmacy Benefit Management Services

1385.001.
 For the purposes of this article, “pharmacy benefit manager” means a person, business, or other entity that, pursuant to a contract with a health care service plan, manages the prescription drug coverage provided by the health care service plan, 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. This definition shall not include a health care service plan licensed under this chapter or any individual employee of a health care service plan or its contracted provider, as defined in subdivision (i) of Section 1345, performing the services described in this section.

1385.002.
 (a) Except as specified in Section 1385.007, the requirements of this article shall become operative on January 1, 2020.
(b) Notwithstanding subdivision (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, including, but not limited to, the director’s enforcement authority under this chapter.
(c) Notwithstanding subdivision (a) and Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement, interpret, or make specific this article by means of all-plan letters or similar instructions to plans and pharmacy benefit managers, without taking regulatory action, until such time as regulations are adopted.
(d) The department may contract with a consultant or consultants with expertise in this subject area to assist the department in developing guidance or instructions described in subdivision (c), or the report required pursuant to Section 1385.007. The department’s contract with a consultant shall include conflict-of-interest provisions to prohibit a person from participating in any report in which the person knows or has reason to know he or she has a material financial interest, including, but not limited to, a person who has a consulting or other agreement with a person or organization that would be affected by the results of the report.
(e) Contracts entered into pursuant to the authority in this article shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, and Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and shall be exempt from the review or approval of any division of the Department of General Services.

1385.003.
 (a) A health care service plan shall disclose to a contracted pharmacy provider or its contracting agent the prescription drug information contained in subdivision (a) of Section 1363.03, including, but not limited to, the telephone number pharmacy providers may call for assistance and information necessary to process a pharmacy claim.
(b) A health care service plan shall not include in a contract with a pharmacy provider or its contracting agent a provision that prohibits the provider from informing a patient of a less costly alternative to a prescribed medication.

1385.004.
 (a) A health care service plan that contracts with a pharmacy benefit manager for management of any or all of its prescription drug coverage shall require the pharmacy benefit manager to do all of the following:
(1) Comply with the provisions of Section 1385.003.
(2) Register with the department pursuant to the requirements of this article.
(3) Exercise good faith and fair dealing in the performance of its contractual duties to a health care service plan.
(4) Comply with the requirements of Chapter 9.5 (commencing with Section 4430) of Division 2 of the Business and Professions Code, as applicable.
(5) Inform all pharmacists under contract with or subject to contracts with the pharmacy benefit manager of the pharmacist’s rights to submit complaints to the department under Section 1371.39 and of the pharmacist’s rights as a provider under Section 1375.7.
(b) A pharmacy benefit manager shall notify a health care service plan 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 health care service plan to exercise good faith and fair dealing in the performance of its contractual duties pursuant to subdivision (a).

1385.005.
 (a) A pharmacy benefit manager required to register with the department pursuant to Section 1385.004 shall complete an application for registration with the department that shall include, but not be limited to, all of the information required by subdivision (c).
(b) A pharmacy benefit manager registration obtained pursuant to this section is not transferable.
(c) The department shall develop an application form for pharmacy benefit manager registration. The application form for a pharmacy benefit manager registration 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 pharmacy benefit manager.
(d) 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 for that information.
(e) 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 article. If the applicant cannot make this statement, the application shall contain a statement of the violation, if any, or shall describe the reasons that prevent the applicant from being able to comply with the requirements with respect to the statement.
(f) The department may set a fee for a registration required by this article. The application fee shall not exceed the reasonable costs of the department in carrying out its duties under this article.
(g) Within 30 days of a change in any of the information disclosed to the department on an application for a registration, the pharmacy benefit manager shall notify the department of that change in writing.
(h) For purposes of this section, “person beneficially interested” with respect to a pharmacy benefit manager means and includes the following:
(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.

1385.006.
 The failure by a health care service plan to comply with the contractual requirements pursuant to this article shall constitute grounds for disciplinary action. The director shall, as appropriate, investigate and take enforcement action against a health care service plan that fails to comply with these requirements and shall periodically evaluate contracts between health care service plans and pharmacy benefit managers to determine if any audit, evaluation, or enforcement actions should be undertaken by the department.

1385.007.
 (a) By July 1, 2019, the department, in collaboration with other agencies, departments, advocates, experts, health care service plan representatives, and other entities and stakeholders that it deems appropriate, shall convene a Task Force on Pharmacy Benefit Management Reporting to determine what information related to pharmaceutical costs, if any, the department should require to be reported by health care service plans or their contracted pharmacy benefit managers, in addition to reporting required by Section 1367.243. The task force shall consider inclusion of information including, but not limited to, the following:
(1) Wholesale acquisition costs of pharmaceuticals.
(2) Rebates obtained by the health care service plan or the pharmacy benefit manager from pharmaceutical manufacturers.
(3) Payments to network pharmacies.
(4) Exclusivity arrangements between health care service plans or contracted pharmacy benefit managers with pharmaceutical manufacturers.
(b) The task force shall consider the results of information reporting pursuant to Section 1367.243 and Chapter 9 (commencing with Section 127675) of Part 2 of Division 107 in determining what information should be reported pursuant to subdivision (a).
(c) The department shall submit a report of the Task Force on Pharmacy Benefit Management Reporting to the President pro Tempore of the Senate, the Speaker of the Assembly, and the Senate and Assembly Committees on Health, with the recommendations of the task force no later than February 1, 2020, on which date the task force shall cease to exist.
(d) This section shall become inoperative on February 1, 2020, and, as of January 1, 2021, is repealed.

SEC. 5.

 The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution for purposes of implementing Section 3 in different geographic regions for data comparison purposes.

SEC. 6.

 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.