Bill Text: CA AB913 | 2023-2024 | Regular Session | Amended
Bill Title: Pharmacy benefit managers.
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Failed) 2024-02-01 - From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB913 Detail]
Download: California-2023-AB913-Amended.html
|
Amended
IN
Assembly
March 16, 2023 |
CALIFORNIA LEGISLATURE—
2023–2024 REGULAR SESSION
Assembly Bill
No. 913
| Introduced by Assembly Member Petrie-Norris (Coauthor: Assembly Member Ward) (Coauthor: Senator Wiener) |
February 14, 2023 |
An act to amend Section 9 add Chapter 9.6 (commencing with Section 4445) to Division 2 of the Business and Professions Code, relating to professions and vocations.
LEGISLATIVE COUNSEL'S DIGEST
AB 913, as amended, Petrie-Norris.
Professions and vocations. Pharmacy benefit managers.
Existing law, the Pharmacy Law, establishes the California State Board of Pharmacy within the Department of Consumer Affairs to license and regulate pharmacists. Existing law provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and for the regulation of health insurers by the Department of Insurance. Existing law, the Knox-Keene Health Care Service Plan Act of 1975, requires a pharmacy benefit manager under contract with a health care service plan to, among other things, register with the Department of Managed Health Care.
This bill would require the California State Board of Pharmacy to license and regulate pharmacy benefit managers that manage the prescription drug coverage provided by a health care
service plan or health insurer, except as specified. The bill would set forth various duties of pharmacy benefit managers, including requirements to file a report with the board. The bill would prohibit a pharmacy benefit manager from, among other things, contracting after January 1, 2024, to prohibit or restrict a pharmacy or pharmacist from disclosing to an enrollee or insured health care information that the pharmacy or pharmacist considers appropriate.
This bill would require the board to promulgate necessary regulations and to prepare a report to the Legislature on or before August 1, 2025, and on or before each August 1 thereafter, with aggregate data received from pharmacy benefit managers, establish a data retention schedule, and protect proprietary and confidential information, as specified.
Existing constitutional provisions require that a statute that limits the right of access to the meetings of
public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.
This bill would make legislative findings to that effect.
Existing law provides that division, part, chapter, article, and section headings contained in the Business and Professions Code shall not be deemed to govern, limit, modify, or in any manner affect the scope, meaning, or intent of the provisions of that law.
This bill would make nonsubstantive changes to that provision.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee:Bill Text
The people of the State of California do enact as follows:
SECTION 1.
Chapter 9.6 (commencing with Section 4445) is added to Division 2 of the Business and Professions Code, to read:CHAPTER 9.6. Regulation of Pharmacy Benefit Managers
Article 1. General Provisions
4445.
For purposes of this chapter:(a) “Affiliated pharmacy” means a network pharmacy that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, a pharmacy benefit manager. “Affiliated pharmacy” does not include a pharmacy that controls, is controlled by, or is under common control with, a health facility as defined in Section 1250 of the Health and Safety Code.
(b) “Board” means the California State Board of Pharmacy.
(c) “Claim” means a request for payment for administering, filling, or refilling a drug or for providing a pharmacy service or a medical supply or device to
an enrollee or insured.
(d) “Claims processing services” means the administrative services performed in connection with the processing and adjudicating of claims relating to pharmacist services that include any of the following:
(1) Receiving payments for pharmacist services.
(2) Making payments to pharmacists or pharmacies for pharmacist services.
(3) Receiving and making the payments described in paragraphs (1) and (2).
(e) “Drug” has the same meaning as defined in Section 4025 of the Business and Professions Code.
(f) “Enrollee” means a person who is enrolled in a health care service plan and who is a recipient of services
from the plan.
(g) “Financially viable” means that one of the following conditions is met:
(1) The pharmacy benefit manager has received an unbiased opinion from an independent public accountant showing it is solvent based on generally accepted accounting principles.
(2) If an independent public accountant opinion cannot be obtained, the pharmacy benefit manager remains solvent after adjusting for goodwill and intangible assets.
(h) “Health care service plan” means an entity licensed pursuant to the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code), including an entity that enters into a contract with the State Department of Health Care Services for the delivery of
health care services pursuant to Chapter 7 (commencing with Section 14000), Chapter 8 (commencing with Section 14200), Chapter 8.75 (commencing with Section 14591), or Chapter 8.9 (commencing with Section 14700) of Part 3 of Division 9 of the Welfare and Institutions Code.
(i) “Health insurer” means an admitted insurer writing health insurance, as defined in Section 106 of the Insurance Code.
(j) “Individual responsible for the conduct of affairs of the pharmacy benefit manager” means any of the following:
(1) A member of the board of directors, board of trustees, executive committee, or other governing board or committee.
(2) A principal officer for a corporation or a partner or member for a partnership, association, or limited liability company.
(3) A shareholder or member holding directly or indirectly 10 percent or more of the voting stock, voting securities, or voting interest of the pharmacy benefit manager.
(4) A person who exercises control over the affairs of the pharmacy benefit manager.
(k) “Insured” means an individual covered under a health insurance policy or self-insured employee benefit plan.
(l) “Manufacturer” has the same meaning as defined in Section 4033.
(m) “Maximum allowable cost” means the maximum amount that a pharmacy benefit manager will reimburse a network pharmacy for the ingredient cost for a generic drug.
(n) “Maximum allowable cost list”
means a listing of drugs used by a pharmacy benefit manager, directly or indirectly, to set the maximum allowable cost.
(o) “Multiple source drug” means a therapeutically equivalent drug that is available from either of the following:
(1) At least one brand name manufacturer and at least one generic manufacturer.
(2) Two or more generic manufacturers.
(p) “Network pharmacy” means a retail pharmacy or other pharmacy that contracts directly or through a pharmacy services administration organization with a pharmacy benefit manager.
(q) “Nonaffiliated pharmacy” means a network pharmacy that directly, or indirectly through one or more intermediaries, does not control, is not controlled by, and
is not under common control with, a pharmacy benefit manager.
(r) “Nonresident pharmacy” has the same meaning as described in Section 4112.
(s) “Person” has the same meaning as defined in Section 4035.
(t) “Personal representative” means an individual who has authority to make a health care decision on behalf of another individual pursuant to Division 4.7 (commencing with Section 4600) of the Probate Code.
(u) “Pharmacist” has the same meaning as defined in Section 4036.
(v) “Pharmacist services” means products, goods, and services, or any combination of products, goods, and services, provided as a part of the practice of pharmacy.
(w) “Pharmacy” has the same meaning as defined in Section 4037 of the Business and Professions Code.
(x) “Pharmacy benefit manager” has the same meaning as defined in Section 4430. “Pharmacy benefit manager” does not include any of 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 health care service plan that is part of a fully integrated delivery system in which enrollees primarily use pharmacies that are entirely owned and operated by the health care service plan, and the plan’s enrollees may use any pharmacy in the health care service plan’s network that has the ability to dispense the medication or provide the services.
(4) A contract authorized by Section 4600.2 of the Labor Code.
(y) “Pharmacy benefit manager network” means a network of pharmacists or pharmacies that agree or contract to provide pharmacist services.
(z) “Pharmacy services administration organization” means an entity that provides contracting and other administrative services relating to prescription drug benefits to pharmacies.
(aa) “Preferred pharmacy” means a network pharmacy that offers covered drugs to enrollees or insureds at lower out-of-pocket costs than what the enrollee or insured would pay at a nonpreferred network pharmacy.
(ab) “Rebate” means a formulary discount or remuneration attributable to the use of prescription drugs that is paid by a manufacturer or third party, directly or indirectly, to a pharmacy benefit manager after a claim has been adjudicated at a pharmacy. “Rebate” does not include a fee, including a bona fide service fee or administrative fee, that is not a formulary discount or remuneration.
(ac) “Retail pharmacy” means a pharmacy that dispenses prescription drugs to the public at retail, primarily to individuals who reside in close proximity to the pharmacy, typically by face-to-face interaction with the individual or the individual’s caregiver.
(ad) “Specialty drug” means a drug that provides treatment for serious, chronic, or life-threatening diseases that is covered under a health care service plan contract or health insurance policy to which any of the following apply:
(1) The cost of the drug exceeds the drug cost threshold established by the federal Centers for Medicare and Medicaid Services under the Medicare Part D program.
(2) The drug requires special administration, including injection, infusion, or inhalation.
(3) The drug requires unique storage, handling, or distribution.
(4) The drug requires special oversight, intensive monitoring, complex education and support, or care coordination.
(ae) “Specialty pharmacy” means a pharmacy that dispenses specialty drugs to patients and that is nationally accredited by an independent third party.
(af) “Spread pricing” means the model of prescription drug pricing in which a pharmacy benefit manager charges a health care service plan or health insurer a contracted price for prescription drugs, and the contracted price for the prescription drugs differs from the amount the pharmacy benefit manager directly or indirectly pays the pharmacist or pharmacy for pharmacist services.
(ag) “Third party” means a person that is not an enrollee, insured, or pharmacy benefit manager.
(ah) “Wholesaler” has the same meaning as defined in Section 4043 of the Business and Professions Code.
4445.1.
(a) The department shall promulgate regulations that are necessary or required to implement this chapter.Article 2. Licensing
4445.2.
(a) The board shall license and regulate pharmacy benefit managers that manage the prescription drug coverage provided by a health care service plan or health insurer pursuant to this chapter.(b) A pharmacy benefit manager that provides services in this state shall apply for, obtain, and maintain a license to operate as a pharmacy benefit manager from the board.
(c) An application for a pharmacy benefit manager license shall be submitted in a form and manner determined by the board. The application shall include all of the following:
(1) The location, names, and titles of all of the following:
(A) The agent for service of process in this state.
(B) The principal corporate officers, if any.
(C) The general partners, if any.
(2) A copy of all basic organizational documents of the pharmacy benefit manager, including articles of incorporation, bylaws, articles of association, trade name certificate, and other similar documents and all amendments to those documents.
(3) A copy of recent financial statements showing the pharmacy benefit manager’s assets, liabilities, and sources of financial support that the board determines are sufficient to show that the pharmacy benefit manager is financially viable. If the pharmacy benefit manager’s financial statements are prepared by an independent
public accountant, a copy of the most recent regular financial statement satisfies the requirement to show financial viability unless the board determines that additional or more recent financial information is required for the proper administration of this chapter.
(4) A description of the pharmacy benefit manager, its services, facilities, and personnel.
(5) A document in which the pharmacy benefit manager confirms that its business practices and each ongoing contract comply with this chapter.
(6) The signature of an officer or individual responsible for the conduct or affairs of the pharmacy benefit manager verifying that the contents of the application form and attachments are correct.
(7) An application fee as determined by the board.
(d) Within 30 days after a significant modification of the information or documents submitted pursuant to subdivision (b), a pharmacy benefit manager shall file a notice of the modification with the board.
4445.3.
(a) A pharmacy benefit manager license shall be renewable once every two years and is nontransferable.(b) To renew a pharmacy benefit manager license, an applicant shall submit to the board all of the following:
(1) A renewal application in a form and manner determined by the board that is signed by an officer or individual responsible for the conduct or affairs of the pharmacy benefit manager verifying that the contents of the renewal form are correct.
(2) A renewal schedule and fee as determined by the board.
(c) A pharmacy benefit manager
license shall expire if a complete renewal filing and fee is not received by the due date established by the board.
Article 3. Licensee Duties
4445.4.
(a) A pharmacy benefit manager shall not directly or indirectly, including indirectly through a pharmacy services administrative organization, charge or hold a pharmacist or pharmacy responsible for a fee related to a claim or reduce the amount of the claim at the time of the claim’s adjudication or after the claim is adjudicated.(b) Subdivision (a) does not apply to an audit of a pharmacy’s records pursuant to Chapter 9.5 (commencing with Section 4430) if either of the following applies:
(1) The review of claims data or statements indicates criminal wrongdoing, willful misrepresentation, fraud, or abuse.
(2) An investigative method, other than a review described in paragraph (1), indicates that the pharmacy is or has committed criminal wrongdoing, willful misrepresentation, fraud, or abuse.
(c) A pharmacy benefit manager shall not charge a pharmacy or pharmacist a fee to process a claim electronically.
4445.5.
(a) A contract issued, amended, or renewed on or after January 1, 2024, between a pharmacy benefit manager and a pharmacist or a pharmacy that provides drugs for a health care service plan or health insurer shall not prohibit or restrict a pharmacy or pharmacist from, or penalize a pharmacy or pharmacist for, disclosing to an enrollee or insured health care information that the pharmacy or pharmacist considers appropriate regarding either of the following:(1) The nature of the treatment or the risks or the alternatives to the treatment.
(2) The availability of alternate therapies, consultations, or tests.
(b) A pharmacy benefit manager shall not prohibit a pharmacy or pharmacist from discussing information regarding the total cost for pharmacist services for a drug or from selling a more affordable alternative to the enrollee or insured if a more affordable alternative is available.
(c) A health care service plan, health insurer, or pharmacy benefit manager shall not require an enrollee or insured to make a payment for a prescription drug at the point of sale in an amount greater than the applicable copayment, coinsurance, and deductible.
4445.6.
(a) On or before April 1, 2025, and on or before each April 1 thereafter, a pharmacy benefit manager shall file with the board a report that contains all of the information required by subdivision (e) of Section 4441 from the preceding calendar year.(b) The report submitted pursuant to subdivision (a) shall be confidential and shall not be disclosed pursuant to any state law, including the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(c) On or before August 1, 2025, and on or before each August 1 thereafter, the board shall prepare a report based on the information received by the board pursuant to
subdivision (a) and submit the report to the Legislature in compliance with Section 9795 of the Government Code. The report shall contain aggregate data and shall exclude any information that the board determines would cause financial, competitive, or proprietary harm to a pharmacy benefit manager or health care service plan or health insurer that the pharmacy benefit manager services. The board shall post the report on the board’s internet website.
(d) This section does not apply to a contract between a pharmacy benefit manager and the United States Department of Health and Human Services under the federal Medicaid program under Title XIX (42 U.S.C. Sec. 1396 et seq.) of the federal Social Security Act.
4445.7.
(a) A pharmacy benefit manager shall not impose any requirements, conditions, or exclusions that discriminate against a nonaffiliated pharmacy in connection with dispensing drugs.(b) Discrimination prohibited pursuant to subdivision (a) includes all of the following:
(1) Terms or conditions applied to nonaffiliated pharmacies based on their status as a nonaffiliated pharmacy, including restrictions or requirements for participation in the pharmacy benefit manager network, or requirements related to the frequency or scope of audits.
(2) Refusing to contract with or terminating a contract with a nonaffiliated
pharmacy, or otherwise excluding a nonaffiliated pharmacy from a pharmacy benefit manager network, on the basis that the pharmacy is a nonaffiliated pharmacy or for reasons other than those that apply equally to pharmacies that are not nonaffiliated pharmacies.
(3) Retaliation against a nonaffiliated pharmacy based on its exercise of any right or remedy under this article.
(c) Before a prescription is dispensed, an affiliated pharmacy shall disclose to an enrollee or insured that the affiliated pharmacy is an affiliated pharmacy and that the enrollee or insured is not obligated to use the affiliated pharmacy.
(d) This section does not prohibit a health care service plan or health insurer from doing any of the following:
(1) Offering customized pharmacy
network options to its clients.
(2) Offering mail order of specialty treatments.
(3) Establishing a tiered network.
4445.8.
A pharmacy benefit manager shall not do any of the following:(a) Require an enrollee or insured to use only an affiliated pharmacy that is a retail pharmacy, unless required by federal law or as required under the federal Medicaid program.
(b) Financially induce an enrollee, insured, or prescriber to transfer a prescription to a retail affiliated pharmacy.
(c) Require a retail nonaffiliated pharmacy to transfer a prescription to a retail affiliated pharmacy. This subdivision does not prevent a health care service plan or the agent of a health care service plan from offering and communicating to enrollees financial incentives to
use a particular pharmacy, including, but not limited to, reductions in copays or other financial incentives given to the enrollee when the prescription is dispensed.
(d) Unreasonably restrict an enrollee or insured from using a particular network retail pharmacy for the purposes of receiving pharmacist services covered by the enrollee’s or insured’s contract or policy.
(e) Communicate to an enrollee verbally, electronically, or in writing that the enrollee is required to have a prescription dispensed at, or pharmacy services provided by, a particular pharmacy or pharmacies if there are other pharmacies in the network that have the ability to dispense the medication or provide the services.
(f) Retain more than 20 percent of the aggregate amount of rebates from all
manufacturers.
4445.9.
(a) A contract issued, amended, or renewed on or after January 1, 2024, between a retail pharmacy and a pharmacy benefit manager shall not prohibit the retail pharmacy from offering either of the following as an ancillary service of the retail pharmacy:(1) The delivery of a prescription drug by mail or common carrier to a patient or personal representative on request of the patient or personal representative if the request is made before the drug is delivered.
(2) The delivery of a prescription to a patient or personal representative by an employee or contractor of the retail pharmacy.
(b) Except as otherwise
provided in a contract described in subdivision (a), the retail pharmacy shall not charge a pharmacy benefit manager for the delivery service described in subdivision (a).
(c) Except as otherwise provided in a contract between a nonresident pharmacy or specialty pharmacy and a health care service plan, health insurer, or pharmacy benefit manager, the pharmacy benefit manager shall not require pharmacist or pharmacy accreditation standards or recertification requirements inconsistent with, more stringent than, or in addition to federal and state requirements to obtain reimbursement for a covered drug.
(d) A pharmacy benefit manager shall not cause or knowingly permit the use of an advertisement, promotion, solicitation, representation, proposal, or offer that is untrue, deceptive, or misleading.
(e) A pharmacy benefit
manager shall not reverse and resubmit the claim of a network pharmacy:
(1) Without prior and proper notification to the network pharmacy.
(2) Without just cause or attempt to first reconcile the claim with the pharmacy.
(3) More than 90 days after the claim was first affirmatively adjudicated.
(f) The termination of a pharmacy from a pharmacy benefit manager network shall not release the pharmacy benefit manager from the obligation to make a payment due to the pharmacy for an affirmatively adjudicated claim unless payments are withheld because of an investigation relating to insurance fraud.
(g) A pharmacy benefit manager shall not retaliate against a pharmacist or pharmacy based on the
pharmacist’s or pharmacy’s exercise of a right or remedy under this chapter. Prohibited retaliation includes all of the following:
(1) Terminating or refusing to renew a contract with the pharmacist or pharmacy.
(2) Subjecting the pharmacist or pharmacy to increased audits.
(3) Failing to promptly pay the pharmacist or pharmacy money owed by the pharmacy benefit manager to the pharmacist or pharmacy.
(h) This section does not prohibit the use of remote pharmacies, secure locker systems, or other types of pickup stations if those services are otherwise permitted by law.
4446.
A pharmacy benefit manager shall not conduct spread pricing in this state. Upon enactment of this chapter, if a contract between a pharmacy benefit manager and a health care service plan or health insurer authorizes spread pricing, any subsequent amendment or renewal of that contract shall not contain that authorization.Article 4. Enforcement
4446.1.
(a) The board may refuse to issue a pharmacy benefit manager license if the board determines that the pharmacy benefit manager is not financially viable or that the pharmacy benefit manager or an individual responsible for the conduct of affairs of the pharmacy benefit manager has had a pharmacy benefit manager certificate of authority or license denied or revoked for cause in another state.(b) The board may deny, suspend, or revoke the license of a pharmacy benefit manager, or may issue a cease and desist order if the pharmacy benefit manager is not licensed, if the board finds, after notice and opportunity for hearing, that any of the following is true:
(1) The pharmacy
benefit manager has violated a statute or regulation applicable to the pharmacy benefit manager.
(2) The pharmacy benefit manager has refused to be examined or to produce its accounts, records, and files for examination by the board, or an individual responsible for the conduct of affairs of the pharmacy benefit manager has refused to give information with respect to its affairs or has refused to perform any other legal obligation as to an examination required by the board.
(3) The pharmacy benefit manager has, without just cause, exhibited a pattern or practice of refusing to pay proper claims or perform services arising under its contracts or has, without just cause, caused enrollees or insureds to accept less than the amount due them.
(4) The pharmacy benefit manager is required under this chapter to have a
license and fails to continue to meet the qualifications for licensure during its active licensure, unless the board issued a license with knowledge of the failure to qualify and waived the relevant requirement.
(5) An individual responsible for the conduct of affairs of the pharmacy benefit manager has been convicted of, or has entered a plea of guilty or nolo contendere to, a felony without regard to whether adjudication was withheld.
(6) The pharmacy benefit manager’s license or registration has been suspended or revoked in another state.
(7) The pharmacy benefit manager failed to file a timely report as required by Section 4445.6.
(c) If a pharmacy benefit manager’s license is suspended or restricted, the board may permit the operation of the
pharmacy benefit manager for a limited time not to exceed 60 days. However, the board may permit a pharmacy benefit manager whose license has been suspended or restricted to operate for a period that exceeds 60 days if the board determines that the continued operation of the pharmacy benefit manager is in the beneficial interests of enrollees and insureds by ensuring minimal disruptions to the continuity of care.
(d) A pharmacy benefit manager whose license has been suspended or restricted is subject to a fine each month, as determined by the board, not to exceed twenty thousand dollars ($20,000) per month, until the pharmacy benefit manager has remedied the violation leading to the suspension or restriction.
(e) The board may revoke the license of a pharmacy benefit manager if the pharmacy benefit manager has been operating under a suspended license for a period of more than 60
days.
(f) For purposes of this section, a pharmacy benefit manager has the right to appropriate notice and opportunity for hearing in accordance with the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code).
4446.2.
(a) The board may examine or audit the relevant books and records of a pharmacy benefit manager providing claims processing services or other drug or device services for a health care service plan or health insurer to determine if the pharmacy benefit manager is in compliance with this chapter.(b) Information or data acquired during an examination pursuant to subdivision (a), or otherwise acquired under this chapter is proprietary and confidential, shall not be disclosed pursuant to any state law, including the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code), and is to be used only to ensure a pharmacy benefit manager’s compliance with this chapter.
(c) (1) The board shall establish a retention schedule for all records, books, papers, and other data on file with the department related to the enforcement of this chapter.
(2) The board shall not order the destruction or other disposal of a record, book, paper, or other data that is either of the following:
(A) Required by law to be filed or kept on file with the board.
(B) Filed during the board’s administration or administrations.
SEC. 2.
The Legislature finds and declares that Section 1 of this act, which adds Sections 4445.6 and 4446.2 to the Business and Professions Code, imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:To protect
proprietary and confidential information of pharmacy benefit managers, it is necessary that this act limit access to that information.
Division, part, chapter, article, and section headings contained in this code shall not be deemed to govern, limit, modify, or in any manner affect the scope, meaning, or intent of this code.
