Bill Text - SB117 (2013)

Relative to pharmacy benefits managers.


Revision: Feb. 5, 2013, midnight

SB 117-FN – AS INTRODUCED

2013 SESSION

13-0957

01/09

SENATE BILL 117-FN

AN ACT relative to pharmacy benefits managers.

SPONSORS: Sen. Soucy, Dist 18

COMMITTEE: Commerce

ANALYSIS

This bill regulates the practice of pharmacy benefits management and contracts for pharmacy benefits management. Under this bill, pharmacy benefits managers shall be licensed by the 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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

13-0957

01/09

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Thirteen

AN ACT relative to pharmacy benefits managers.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 New Chapter; Pharmacy Benefits Managers. Amend RSA by inserting after chapter 420-N the following new chapter:

CHAPTER 420-O

PHARMACY BENEFITS MANAGERS

420-O:1 Definitions. In this chapter:

I. “Covered entity” means a hospital or medical service organization, insurer, health coverage plan, or health maintenance organization licensed by the state; a health program administered by the department of health and human services 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. “Covered entity” does not include 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.

II. “Covered individual” means a member, participant, enrollee, contract holder or policy holder or beneficiary of a covered entity who is provided health coverage by the covered entity. “Covered individual” includes a dependent or other person provided health coverage through a policy, contract, or plan for a covered individual.

III. “Generic drug” means a chemically equivalent copy of a brand-name drug with an expired patent or a drug for which the Food and Drug Administration has approved an Abbreviated New Drug Application (ANDA).

IV. “Labeler” means an entity or person that receives prescription drugs from a manufacturer or wholesaler and repackages those drugs for later retail sale and that has a labeler code from the federal Food and Drug Administration under 21 C.F.R. section 207.20.

V. “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 pharmacy benefits:

(a) Mail service 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.

(f) Disease management programs.

VI. “Pharmacy benefits manager” means an entity that performs pharmacy benefits management. “Pharmacy benefits manager” includes a person or entity acting for a pharmacy benefits manager in a contractual or employment relationship in the performance of pharmacy benefits management for a covered entity and includes a mail service pharmacy.

420-O:2 Required Practices.

I. A pharmacy benefits manager owes a fiduciary duty to a covered entity and shall discharge that duty in accordance with the provisions of state and federal law.

II. A pharmacy benefits manager shall perform its duties with care, skill, prudence, and diligence and in accordance with the standards of conduct applicable to a fiduciary in an enterprise of a like character and with like aims.

III. A pharmacy benefits manager shall notify the covered entity in writing of any activity, policy, or practice of the pharmacy benefits manager that directly or indirectly presents any conflict of interest with the duties imposed by this section.

IV. A pharmacy benefits manager 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 pharmacy benefits manager providing information under this paragraph may designate that material as confidential. Information designated as confidential by a pharmacy benefits manager and provided to a covered entity under this paragraph shall not be disclosed by the covered entity to any person without the consent of the pharmacy benefits manager, except that disclosure may be made in a court filing under or when authorized under RSA 417 or RSA 358-A, or as ordered by a court of this state for good cause shown or made in a court filing under seal unless or until otherwise ordered by a court. Nothing in this paragraph shall be construed to limit the department of justice or other law enforcement agencies from having access to any information they may seek to obtain through normal investigatory procedures.

V. With regard to the dispensation of a substitute prescription drug for a prescribed drug to a covered individual the following provisions apply:

(a) If a pharmacy benefits manager makes a substitution in which the substitute drug costs more than the prescribed drug, the pharmacy benefits manager shall disclose to the covered entity the cost of both drugs and any benefit or payment directly or indirectly accruing to the pharmacy benefits manager as a result of the substitution.

(b) The pharmacy benefits manager shall transfer in full to the covered entity any benefit or payment received in any form by the pharmacy benefits manager either as a result of a prescription drug substitution under subparagraph (a) or as a result of the pharmacy benefits manager substituting a lower priced generic and therapeutically equivalent drug for a higher priced prescribed drug.

VI. A pharmacy benefits manager that derives any payment or benefit for the dispensation of prescription drugs within the state based on volume of sales for certain prescription drugs or classes or brands of drugs within the state shall pass that payment or benefit on in full to the covered entity.

VII. A pharmacy benefits manager shall disclose to the covered entity all financial terms and arrangements for remuneration of any kind that apply between the pharmacy benefits manager and any prescription drug manufacturer or labeler, including, without limitation, formulary management and drug-switch programs, educational support, claims processing, and pharmacy network fees that are charged from retail pharmacies and data sales fees. A pharmacy benefits manager disclosing information under this paragraph may designate that material as confidential. Information designated as confidential by a pharmacy benefits manager and disclosed to a covered entity under this paragraph may not be disclosed by the covered entity to any person without the consent of the pharmacy benefits manager, except that disclosure may be made in a court filing under or when authorized under RSA 417 or RSA 358-A, or as ordered by a court of this state for good cause shown or made in a court filing under seal unless or until otherwise ordered by a court. Nothing in this paragraph limits the attorney general’s authority to investigate violations of this section.

420-O:3 Compliance. Compliance with the requirements of this chapter is required in all contracts for pharmacy benefits management entered into in this state or by a covered entity in this state.

420-O:4 Enforcement.

I. Any violation of this chapter by a person subject to RSA 417 shall be deemed an unfair insurance trade practice under RSA 417.

II. Any violation of this chapter shall be deemed an unfair or deceptive act or practice within the meaning of RSA 358-A:2 and may be enforced by the attorney general pursuant to RSA 358-A.

2 New Subparagraph; Enforcement; Attorney General; Consumer Protection and Antitrust. Amend RSA 21-M:9, II by inserting after subparagraph (u) the following new subparagraph:

(v) Administering and enforcing the provisions of RSA 420-O relative to pharmacy benefits managers.

3 New Subdivision; Licensing of Pharmacy Benefits Managers. Amend RSA 318 by inserting after section 60 the following new subdivision:

Licensing of Pharmacy Benefits Managers

318:61 Licensing of Pharmacy Benefits Managers Required.

I. No person shall operate as a pharmacy benefits manager, as defined in RSA 420-O:1, V, without first having obtained a license to do so from the board. Such license shall expire annually on June 30. An application together with a reasonable fee as established by the board shall be filed annually on or before July 1.

II. No license shall be issued under this section unless the applicant has furnished proof satisfactory to the board that:

(a) The applicant is of good moral character or, if that applicant is an association or corporation, that the managing officers are of good moral character.

(b) The applicant has complied with all requirements established by the board under RSA 318:5-a, XIX for licensure.

III. No license shall be granted to any person who has within 5 years been convicted of a violation of any law of the United States, or of any state, relating to drugs, as defined in this chapter or RSA 318-B, or to any person who is a drug-dependent person.

IV. Any person licensed pursuant to this section is subject to the provisions of RSA 318:29.

4 New Paragraph; Pharmacy Benefits Managers; Rulemaking Added. Amend RSA 318:5-a by inserting after paragraph XVIII the following new paragraph:

XIX. Requirements for licensure of pharmacy benefits managers pursuant to RSA 318:61.

5 Effective Date. This act shall take effect January 1, 2014.

LBAO

13-0957

Revised 02/05/13

SB 117 FISCAL NOTE

AN ACT relative to pharmacy benefits managers.

FISCAL IMPACT:

    The Board of Pharmacy states this bill, as introduced, will increase state revenue by $21,000 in FY 2014, $31,000 in FY 2015, $41,000 in FY 2016, and $50,000 in FY 2017. The Board of Pharmacy, Department of Justice, Judicial Branch, and Department of Health and Human Services state this bill may increase state expenditures by an indeterminable amount in FY 2014 and each fiscal year thereafter. The Insurance Department states this bill may increase state revenues by an indeterminable amount in FY 2014 and each year thereafter. There will be no fiscal impact on county and local revenues or expenditures.

METHODOLOGY:

    The Board of Pharmacy states this bill regulates the practice of pharmacy benefits management and establishes pharmacy benefits managers shall be licensed by the Board. Although the Board is unsure of the exact number of pharmacy benefits managers in the state, the Board notes the state of Mississippi has registered 42 pharmacy benefits managers and Forbes Magazine has estimated there are 100 pharmacy benefits managers. For the purposes of this estimate, the Board assumes they will license 42 pharmacy benefits managers in the first year of the enactment of the proposed legislation and an additional 20 pharmacy benefits managers in each subsequent year until 100 have been licensed. The Board also notes the proposed legislation requires the licenses to expire and requires renewal on an annual basis.

    Accordingly, the Board estimates the proposed legislation will increase state revenues as follows:

Fiscal Year

Estimated No. of Licenses Issued/Renewed

Fee Revenue per license

Increase in State Revenue

2014

42

$ 500

$ 21,000

2015

62

$ 500

$ 31,000

2016

82

$ 500

$ 41,000

2017

100

$ 500

$ 50,000

    Although the proposed legislation does not contain an appropriation, or authorize any additional positions; the Board notes the effective administration of the proposed legislation would require between 30 and 45 minutes of administrative personnel time and between 2 and 3 hours of investigative personnel time per application to administer the licenses and verify the information within each application. Additionally, the Board states there would be an additional annual cost of approximately $2,000 for travel associated with pharmacy benefits management conventions, personnel time for on-site inspections made in response to complaints, and personnel time for specialized training. The Board states the costs associated with the inspections and the specialized training could be absorbed within the Board’s current budget. The Board estimates the associated costs of implementation as follows:

Fiscal Year

Estimated No. of Licenses Issued/Renewed

Administrative Personnel Costs (37.5 min. avg. at $15 p/hr)

Investigative Personnel Costs (150 min. avg. at $44 p/hr)

Travel Costs

Total Costs

2014

42

$ 394

$ 4,620

$ 2,000

$ 7,014

2015

62

$ 581

$ 6,820

$ 2,000

$ 9,401

2016

82

$ 769

$ 9,020

$ 2,000

$ 11,789

2017

100

$ 938

$ 11,000

$ 2,000

$ 13,938

    The Department of Justice states a violation of the proposed legislation would be considered an unfair or deceptive act or practice under the Consumer Protection Act (RSA 358:A). The enforcement of such a violation could include injunctive relief as well as the imposition of civil or criminal penalties. The Department also notes they are required to provide administrative prosecution services to the Board. The Department is unable to determine the number of enforcement actions that would be required under the proposed legislation and states a significant number of actions would require additional resources within the Department.

    The Judicial Branch states the proposed legislation has the potential to generate complex equity cases, Supreme Court appeals of rulings made under the Consumer Protection Act, and administrative appeals of disciplinary actions taken by the Board of Pharmacy. The Branch is unable to determine the number of complex equity cases or appeals that may result from the proposed legislation and states even a small number of cases or appeals could result in an increase of state expenditures greater than $10,000.

    The Department of Health and Human Services notes pharmacy benefits management contracts are utilized in the administration of the Medicaid program. The Department notes the associated costs of those contracts would increase to the extent the proposed legislation increases the administrative costs of pharmacy benefits managers, which would in turn be passed on to the state.

    The Insurance Department states to the extent the proposed legislation increases insurance premiums, the resulting revenue derived from the insurance premium tax will increase. The Department is unable to estimate the proposed legislation’s impact on insurance premium tax revenues.

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