HB 1247-FN – AS INTRODUCED
2006 SESSION
10/03
HOUSE BILL 1247-FN
AN ACT relative to licensure of pharmacy benefit managers.
COMMITTEE: Executive Departments and Administration
This bill establishes the regulation of the practice of pharmacy benefit managers by the department of insurance and the state pharmacy board.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
06-2744
10/03
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Six
AN ACT relative to licensure of pharmacy benefit managers.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 New Chapter; Pharmacy Benefit Managers. Amend RSA by inserting after chapter 317-A the following new chapter:
CHAPTER 317-B
317-B:1 Definitions In this chapter:
I. “Board” means the pharmacy board established in RSA 318.
II. “Commissioner” means the insurance commissioner.
III. “Covered entity” means a nonprofit hospital or medical service corporation, health insurer, health benefit plan, or health maintenance organization; a health program administered by a department or the state in the capacity of provider of health coverage; or an employer, labor union, or other group of persons organized in the state that provides health coverage to covered individuals who are employed or reside in the state. The term does not include a self-funded plan that is exempt from state regulation pursuant to ERISA, a plan issued for coverage for federal employees, or a health plan that provides coverage only for accidental injury, specified disease, hospital indemnity, Medicare supplement, disability income, long-term care, or other limited benefit health insurance policies and contracts.
IV. “Covered person” means a member, policyholder, subscriber, enrollee, beneficiary, dependent, or other individual participating in a health benefit plan.
V. “Department” means insurance department.
VI. “Health benefit plan” means a policy, contract, certificate, or agreement offered or issued by a health carrier to provide, deliver, arrange for, pay for, or reimburse any of the cost of health care services including prescription drug benefits.
VII. “Maintenance drug” means a drug prescribed by a practitioner who is licensed to prescribe drugs and used to treat a medical condition for a period greater than 30 days.
VIII. “Multi-source drug” means a drug that is stocked and is available from 3 or more suppliers.
IX. “Pharmacist” means any individual licensed as a pharmacist by the board.
X. “Pharmacist services” means the interpretation, evaluation, and dispensing of prescription drug orders in the patient’s best interest; participation in drug and device selection, drug administration, prospective drug reviews, and drug or drug-related research; provision of patient counseling and the provision of those acts or services necessary to provide pharmacy care and drug therapy management; responsibility for compounding and labeling of drugs and devices (except labeling by a manufacturer, repackager, or distributor, of nonprescription drugs and commercially packaged legend drugs and devices), proper and safe storage of drugs and devices and maintenance of proper records for them; or the offering or performing of those acts, services, operations, or transactions necessary in the conduct, operation, education, management, and control of pharmacy.
XI. “Pharmacy” means a location for which a pharmacy permit is required and in which prescription drugs and devices are maintained, compounded, and dispensed for patients by a pharmacist. This definition includes a location where pharmacist services are provided by a pharmacist.
XII. “Pharmacy benefits management” means the procurement of prescription drugs at a negotiated rate for dispensation within this state to covered individuals, the administration or management of prescription drug benefits provided by a covered entity for the benefit of covered individuals, or any of the following services provided with regard to the administration of the following pharmacy benefits:
(a) Mail order pharmacy;
(b) Claims processing, retail network management, and payment of claims to pharmacies for prescription drugs dispensed to covered individuals;
(c) Clinical formulary development and management services;
(d) Rebate contracting and administration;
(e) Certain patient compliance, therapeutic intervention, and generic substitution programs; and
(f) Disease management programs involving prescription drug utilization.
XIII. “Pharmacy benefits manager” or “PBM” means a person, business, or other entity that performs pharmacy benefits management. The term includes a person or entity acting for a PBM in a contractual or employment relationship in the performance of pharmacy benefits management for a covered entity and includes mail-order pharmacy.
XIV. “Usual and customary price” means the price the pharmacist would have charged a cash-paying patient, not a patient where reimbursement rates are set by a contract, for the same services on the same date inclusive of any discounts applicable.
317-B:2 Applicability and Scope. This chapter applies to a PBM that provides claims processing services or other prescription drug or device services, or both, to covered persons who are residents of this state.
317-B:3 Certificate of Authority.
I. A person or organization shall not act or operate as a PBM in this state without a valid certificate of authority issued by the department. The failure of a person to hold a certificate while acting as a PBM is subject to a fine of not less than $5,000 or more than $10,000 for each violation.
II. A person seeking a certificate of authority to act as a PBM shall file with the department an application for a certificate of authority upon a form to be furnished by the department and the application must include or attach the following:
(a) All basic organizational documents of the PBM including, but not limited to, the articles of incorporation, articles of association, bylaws, partnership agreement, trade name certificate, trust agreement, shareholder agreement, and other applicable documents and all amendments to those documents;
(b) The names, addresses, official positions, and professional qualifications of the individuals who are responsible for the conduct of the affairs of the PBM, including all members of the board of directors, board of trustees, executive committee, other governing board or committee, the principal officers in the case of a corporation, the partners or members in the case of a partnership or association, and any other person who exercises control or influence over the affairs of the PBM;
(c) A certificate of compliance issued by the pharmacy board indicating that the PBM’s, plan of operation is consistent with RSA 318 and any rules adopted by the board;
(d) Annual statements or reports for the 3 most recent years or such other information as the department may require in order to review the current financial condition of the applicant;
(e) If the applicant is not currently acting as a PBM, a statement of the amounts and sources of funds available for organization expenses and the proposed arrangements for reimbursement and compensation of incorporators or other principals;
(f) The name and address of the agent for service of process in this state;
(g) A detailed description of the claims processing services, pharmacy services, insurance services, other prescription drug or device services, audit procedures for network pharmacies, or other administrative services to be provided;
(h) All incentive arrangements or programs including, but not limited to, rebates, discounts, disbursements, or any other similar financial program or arrangement relating to income or consideration received or negotiated, directly or indirectly, with any pharmaceutical company, that relates to prescription drug or device services, including at a minimum information on the formula or other method for calculation and amount of the incentive arrangements, rebates, or other disbursements, the identity of the associated drug or device, and the dates and amounts of these disbursements;
(i) Other information as the department may require; and
(j) A filing fee of $5,000.
III. The applicant shall make available for inspection by the department copies of all contracts with insurers, pharmaceutical manufacturers, or other persons utilizing the services of the PBM for pharmacy benefit management services. Certain contracts are subject to prior approval as provided in RSA 317-B:8.
IV. The department shall not issue a certificate of authority if it determines that the PBM or any principal of the PBM is not competent, trustworthy, financially responsible, or of good personal and business reputation or has had an insurance license or pharmacy license denied for cause by any state.
V. A PBM shall maintain a fidelity bond equal to at least 10 percent of the amount of the funds handled or managed annually by the PBM. However, the department may require an amount in excess of $500,000 but not more than 10 percent of the amount of the funds handled or managed annually by the PBM. A copy shall be provided to the department.
317-B:4 Certificate of Compliance.
I. Each PBM seeking to become licensed in this state shall submit its plan of operation for review in a format to be furnished by the pharmacy board.
II. The board shall review the plan of operation in order to determine if it complies with applicable provisions of RSA 318. The board shall adopt rules concerning, but not limited to, the format required, the filing fee, the requirements for re-certification, and any other information that the board may require to complete its review. The fees collected shall be used for the purpose of regulating PBMs.
III. If the PBM’s plan of operation is approved by the board, the board shall issue the PBM a certificate of compliance. Subsequent material changes in the plan of operation shall be filed with the board.
317-B:5 Disclosure Required.
I. A PBM shall disclose to the department any ownership interest or affiliation of any kind with:
(a) Any insurance company responsible for providing benefits directly or through reinsurance to any plan for which the PBM provides services; or
(b) Any parent companies, subsidiaries, other entities or businesses relative to the provision of pharmacy services, other prescription drug, or device services, or a pharmaceutical manufacturer.
II. The PBM shall notify the department in writing within 5 calendar days of any material change in its ownership.
III. Every PBM shall disclose the following agreements:
(a) An agreement with a pharmaceutical manufacturer to favor the manufacturer’s products over a competitor’s products, to place the manufacturer’s drug on the PBM’s preferred list or formulary, or to switch the drug prescribed by the patient’s health care provider with a drug agreed to by the PBM and the manufacturer;
(b) An agreement with a pharmaceutical manufacturer to share manufacturer rebates and discounts with the PBM or to pay money or other economic benefits to the PBM;
(c) An agreement or practice to bill the health plan for prescription drugs at a cost higher than the PBM pays the pharmacy;
(d) An agreement to share revenue with a mail order or Internet pharmacy company; and
(e) An agreement to sell prescription drug data including data concerning the prescribing practices of the health care providers in this state.
317-B:6 Records.
I. A PBM shall maintain for the duration of any written agreement and for 2 years thereafter, books and records of all transactions between the PBM, insurers, covered persons, pharmacists, and pharmacies.
II. The department shall have access to books and records maintained by the PBM for the purposes of examination, audit, and inspection. The information contained in these books and records is confidential. However, the department may use this information in any proceeding instituted against the PBM or insurer.
III. The commissioner shall conduct periodic financial examinations of every PBM in this state. The PBM shall pay the cost of the examination. The examination fee shall be used to offset expenses for the regulation, supervision, and examination of all entities subject to regulation under this chapter.
317-B:7 Annual Statement; Fee.
I. An authorized PBM shall file with the department an annual statement and filing fee on or before March 1. The statement must be in the form and contain such information as the department prescribes, including the total number of persons subject to management by the PBM during the year, the number of persons terminated during the year, the number of persons covered at the end of the year, and the dollar value of claims processed.
II. The annual statement shall disclose all incentive arrangements or programs including, but not limited to, rebates, discounts, disbursements, or any other similar financial program or arrangement relating to income or consideration received or negotiated, directly or indirectly, with any pharmaceutical company, that relates to prescription drug or device services, including at a minimum, information on the formula or other method for calculation and the amount of the incentive arrangements, rebates, or other disbursements, the identity of the associated drug or device, and the dates and amounts of these disbursements.
317-B:8 Contracts; Prohibited Provisions.
I. A person shall not act as a PBM without a written agreement between the person and the PBM.
II. A PBM shall not require a pharmacist or pharmacy to participate in one contract in order to participate in another contract. The PBM shall not exclude an otherwise qualified pharmacist or pharmacy from participation in a particular network solely because the pharmacist or pharmacy declined to participate in another plan or network managed by the PBM.
III. The PBM shall file a copy with the department of all contracts and agreements with pharmacies for approval not less than 30 days before the execution of the contract or agreement. The department shall consult with the board on the criteria for contracts and agreements before adopting rules concerning the criteria. The contract is deemed approved unless the department disapproves it within 30 days after it is filed.
IV. The written agreement between the insurer and the PBM shall not provide that the pharmacist or pharmacy is responsible for the actions of the insurer or the PBM.
V. All agreements shall provide that when the PBM receives payment for the services of the pharmacist or pharmacy the PBM acts as a fiduciary of the pharmacy or pharmacist who provided the services. The PBM shall distribute the funds in accordance with the time frames provided in this chapter.
317-B:9 Prohibited Practices.
I. A PBM shall not intervene in the delivery or transmission of prescriptions from the prescriber to the pharmacist or pharmacy for the purpose of:
(a) Influencing the prescriber’s choice of therapy;
(b) Influencing the patient’s choice of pharmacist or pharmacy; or
(c) Altering the prescription information including, but not limited to, switching the prescribed drug without the express authorization of the prescriber.
II. An agreement shall not mandate that a pharmacist or pharmacy change a covered person’s prescription unless the prescribing physician and the covered person authorize the pharmacist to make the change.
III. The insurer and the PBM may not discriminate with respect to participation in the network or reimbursement as to any pharmacist or pharmacy that is acting within the scope of his or her license or certification.
IV. The PBM may not transfer a health benefit plan to another payment network unless it receives written authorization from the insurer.
V. A PBM may not discriminate when contracting with pharmacies on the basis of copayments or days of supply. A contract shall apply the same coinsurance, copayment, and deductible to covered drug prescriptions filled by any pharmacy, including a mail-order pharmacy or pharmacist who participates in the network.
VI. A PBM may not discriminate when advertising which pharmacies are participating pharmacies. Any list of participating pharmacies shall be complete and all-inclusive.
VII. A PBM may not mandate basic record keeping by any pharmacist or pharmacy that is more stringent than required by state or federal laws or regulations.
317-B:10 Termination of Agreements.
I. A pharmacist or pharmacy may not be terminated or penalized by a PBM solely because of filing a complaint, grievance, or appeal as permitted under this chapter.
II. A pharmacist or pharmacy may not be terminated or penalized because it expresses disagreement with the PBM’s decision to deny or limit benefits to a covered person or because the pharmacist or pharmacy assists the covered person to seek reconsideration of the PBM’s decision or because the pharmacist or pharmacy discusses alternative medications.
III. Before terminating a pharmacy or pharmacist from the network, the PBM shall give the pharmacy or pharmacist a written explanation of the reason for the termination at least 30 days before the termination date unless the termination is based on the:
(a) Loss of the pharmacy’s license to practice pharmacy or cancellation of professional liability insurance; or
(b) Conviction of fraud.
IV. Termination of a contract between a PBM and a pharmacy or pharmacist, or termination of a pharmacy or pharmacist from a PBM’s provider network does not release the PBM from the obligation to make any payment due to the pharmacy or pharmacist for pharmacist services rendered.
317-B:11 Medication Reimbursement Costs. A PBM shall use a current and nationally-recognized benchmark to base the reimbursement paid to network pharmacies for medications and products. The reimbursement shall be determined as follows:
I. For brand (single source) products, the average wholesale price, as listed in First Data Bank, or Facts & Comparisons, correct and current on the date of service provided, shall be used.
II. For generic drug (multi-source) products, maximum allowable cost (MAC) must be established by referencing First Data Bank or Facts & Comparisons Baseline Price (BLP). Only products that are compliant with pharmacy laws as equivalent and generically interchangeable with a Federal FDA Orange Book rating of ‘A-B’ will be reimbursed from a MAC price methodology. If a multi-source product has no BLP price, then it shall be treated as a single source branded drug for the purpose of determining reimbursement.
317-B:12 Timely Payments; Audits.
I. If a PBM processes claims via electronic review, the PBM shall electronically transmit payment to the pharmacist or pharmacy within 7 calendar days of the claims transmission. Specific time limits for the PBM to pay the pharmacist for all other services rendered shall be set forth in the agreement.
II. Within 24 hours of a price increase notification by a manufacturer or supplier, the PBM shall adjust its payments to the pharmacist or pharmacy consistent with the price increase.
III. Claims paid by the PBM shall not be retroactively denied or adjusted after 7 days from adjudication of the claims except as provided in paragraph IV. In no case may an acknowledgement of eligibility be retroactively reversed.
IV. The PBM may retroactively deny or adjust a claim if:
(a) The original claim was submitted fraudulently;
(b) The original claim payment was incorrect because the provider was already paid for services rendered; or
(c) The services were not rendered by the pharmacist or pharmacy.
V. The PBM may not require extrapolation audits as a condition of participating in the contract, network, or program.
VI. The PBM may not recoup any monies that the PBM believes are due as a result of the audit by setoff until the pharmacist or pharmacy has the opportunity to review the PBM’s findings and concurs with the results. If the parties cannot agree then the audit is subject to review by the board.
317-B:13 Disclosures to Covered Persons; Authorization for Substitutions.
I. When the services of a PBM are utilized, the PBM shall provide a written notice approved by the insurer to covered persons advising them of the identity of, and relationship between, the PBM, the insured, and the covered person.
II. The notice shall contain a statement advising the covered person that the PBM is regulated by the department and has the right to file a complaint, appeal, or grievance with the department concerning the PBM. The notice shall include the toll-free telephone number, mailing address, and electronic mail address of the department.
III. The notice shall be written in plain English, using terms that are generally understood by the prudent layperson and a copy shall be provided to the department and each pharmacist or pharmacy participating in the network.
IV. When a PBM requests a substitute prescription for a prescribed drug to a covered individual the following provisions apply:
(a) The PBM may substitute a lower-priced generic and therapeutically equivalent drug for a higher-priced prescribed drug.
(b) With regard to substitutions in which the substitute drug costs more than the prescribed drug, the substitution must be made for medical reasons that benefit the covered individual. If a substitution is being made under this subparagraph, the PBM shall obtain the approval of the prescribing health professional or that person’s authorized representative after disclosing to the covered individual the cost of both drugs and any benefit or payment directly or indirectly accruing to the PBM as a result of the substitution and any potential effects on a patient’s health and safety including side effects.
(c) The PBM shall transfer in full to the covered entity any benefit or payment received in any form by the PBM as a result of a prescription drug substitution under subparagraphs (a) or (b).
317-B:14 Complaints.
I. The department and the board shall each adopt procedures for formal investigation of complaints concerning the failure of a pharmacy benefits manager to comply with this chapter.
II. The department shall refer a complaint received under this chapter to the board if the complaint involves a professional or patient health or safety issue.
III. The board shall refer a complaint received under this chapter to the department if the complaint involves a business or financial issue.
317-B:15 Settlement of Claims. Compensation to a PBM for any claims that the PBM adjusts or settles on behalf of an insurer shall not be contingent in any way on claims experience. This section shall not prohibit the compensation of a PBM based on total number of claims paid or processed.
317-B:16 Responsibilities to the Covered Entity.
I. A PBM shall provide to a covered entity all financial and utilization information requested by the covered entity relating to the provision of benefits to covered individuals through that covered entity and all financial and utilization information relating to services to that covered entity. A PBM providing information under this section may designate that information as confidential. Information designated as confidential by a PBM and provided to a covered entity under this section may not be disclosed by the covered entity to any person without the consent of the PBM, except that disclosure may be made when authorized by a court.
II. A PBM shall disclose to the covered entity all financial terms and arrangements for remuneration of any kind that apply between the PBM and any prescription drug manufacturer or labeler including, but not limited to, rebates, formulary management and drug-switch (substitution) programs, educational support, claims processing, and pharmacy network fees that are charged from retail pharmacies and data sales fees.
III. A PBM shall disclose to the covered entity whether there is a difference between the price paid to the retail pharmacy and the amount billed to the covered entity for the purchase.
IV. The covered entity may audit the PBM’s books and records related to the rebates or other information provided in paragraphs I, II, and III.
V. A PBM shall perform its duties exercising good faith and fair dealing toward the covered entity.
317-B:17 Rulemaking. The director and the board may adopt rules under RSA 541-A on definition of terms, use of prescribed forms, reporting requirements, prohibited practices, and enforcement procedures to carry out the provisions of this chapter.
2 New Paragraph; Pharmacy Board; Rulemaking. Amend RSA 318:5-a by inserting after paragraph XVI the following new paragraph:
XVII. The regulation of pharmacy benefit managers under RSA 317-B.
3 New Paragraph; Insurance Department; Rulemaking. Amend RSA 400-A:15 by inserting after paragraph III the following new paragraph:
IV. The commissioner shall adopt rules pursuant to RSA 541-A relative to regulation of pharmacy benefit managers under RSA 317-B.
4 Effective Date. This act shall take effect July 1, 2006.
LBAO
06-2744
11/21/05
HB 1247-FN - FISCAL NOTE
AN ACT relative to licensure of pharmacy benefit managers.
FISCAL IMPACT:
The Insurance Department and Pharmacy Board state this bill will increase state revenue and state, county and local expenditures by indeterminable amounts in FY 2007 and each year thereafter. There will be no fiscal impact on county or local revenue.
METHODOLOGY:
The Insurance Department indicated this bill will generate additional general fund revenue from fees paid by Pharmacy Benefit Managers (PBMs) to obtain their certificate of authority and for annual filings but cannot estimate the amounts. The Department expects additional costs will be incurred to review the PBMs financial statements and ownership structure, review contracts between PBMs and pharmacies, and to perform periodic examinations of PBMs records. The Department assumes the additional costs for oversight would be included in the assessment and passed on to consumers through higher premiums. As a result, state tax revenue from the premium tax would increase. The Department further assumed county and local expenditures for employee insurance plans and insurance benefit administrators for self-insured plans would also increase.
The Pharmacy Board is not able to project the costs of issuing certificates of compliance or determine what procedures will be established to investigate complaints. The Board does not know if it will be able to establish fees to cover the cost of these services.