Code Section Group

Health and Safety Code - HSC

DIVISION 2. LICENSING PROVISIONS [1200 - 1797.8]

  ( Division 2 enacted by Stats. 1939, Ch. 60. )

CHAPTER 2.2. Health Care Service Plans [1340 - 1399.864]

  ( Chapter 2.2 added by Stats. 1975, Ch. 941. )

ARTICLE 6.1. Pharmacy Benefit Management Services [1385.001 - 1385.007]
  ( Article 6.1 added by Stats. 2018, Ch. 905, Sec. 4. )

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.

(Added by Stats. 2018, Ch. 905, Sec. 4. (AB 315) Effective January 1, 2019. Operative on January 1, 2020, pursuant to Section 1385.002.)

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.

(Added by Stats. 2018, Ch. 905, Sec. 4. (AB 315) Effective January 1, 2019.)

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.

(Added by Stats. 2018, Ch. 905, Sec. 4. (AB 315) Effective January 1, 2019. Operative on January 1, 2020, pursuant to Section 1385.002.)

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).

(Added by Stats. 2018, Ch. 905, Sec. 4. (AB 315) Effective January 1, 2019. Operative on January 1, 2020, pursuant to Section 1385.002.)

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.

(Added by Stats. 2018, Ch. 905, Sec. 4. (AB 315) Effective January 1, 2019. Operative on January 1, 2020, pursuant to Section 1385.002.)

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.

(Added by Stats. 2018, Ch. 905, Sec. 4. (AB 315) Effective January 1, 2019. Operative on January 1, 2020, pursuant to Section 1385.002.)

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.

(Added by Stats. 2018, Ch. 905, Sec. 4. (AB 315) Effective January 1, 2019. Section inoperative February 1, 2020. Repealed as of January 1, 2021, by its own provisions.)

HSCHealth and Safety Code - HSC6.1