Amended  IN  Senate  May 03, 2022
Amended  IN  Senate  April 20, 2022

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill
No. 1361

Introduced by Senator Kamlager
(Coauthor: Senator Gonzalez)

February 18, 2022

An act to amend Section 1385.004 of, to amend, repeal, and add Section 1367.243 of, and to add Section 1385.007 to, to add and repeal Section 1367.52 of, and to repeal and add Section 1385.001 of, the Health and Safety Code, and to amend, repeal and add Section 10123.205 of, and to add and repeal Section 10123.66 of, the Insurance Code, relating to prescription drugs.


LEGISLATIVE COUNSEL'S DIGEST


SB 1361, as amended, Kamlager. Prescription drugs: cost sharing: pharmacy benefit managers.
(1) Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care under authority of the Director of the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law provides for the regulation of health insurers by the Department of Insurance under the authority of the Insurance Commissioner. Existing law limits the maximum amount an enrollee or insured may be required to pay at the point of sale for a covered prescription drug to the lesser of the applicable cost-sharing amount or the retail price.
This bill bill, commencing no later than January 1, 2024, would require an enrollee’s or insured’s defined cost sharing for each prescription drug to be calculated at the point of sale based on a price that is reduced by an amount equal to 90% of all rebates received, or to be received, in connection with the dispensing or administration of the drug. The bill would require a health care service plan or health insurer to, among other things, pass through to each enrollee or insured at the point of sale a good faith estimate of the enrollee’s or insured’s decrease in cost sharing. The bill would require a health care service plan or health insurer to calculate an enrollee’s or insured’s defined cost sharing and provide that information to the dispensing pharmacy, as specified. The bill would require the department and the commissioner to submit an annual report on the impact of these provisions to the appropriate policy committees of the Legislature, as specified. The bill would make these provisions inoperative on January 1, 2025. 2026.

The bill would require the department and the commissioner, on or before March 1 each year, to provide a report on the impact of those provisions on drug prices and health care premium rates, as specified.

(2) Existing law requires a health care service plan or health insurer that files certain rate information to report to the appropriate department specified cost information regarding covered prescription drugs, including generic drugs, brand name drugs, and specialty drugs, dispensed as provided.
This bill, until January 1, 2025, would require a health care service plan or health insurer to report additional information on the above-described point of sale provision.

The bill would repeal those provisions January 1, 2026.

(3) Existing law defines a “pharmacy benefit manager” as a person, business, or other entity that, pursuant to a contract with a health care service plan, either directly or indirectly provides one or more pharmacy benefit management services on behalf of the health care service plan, as specified. Existing law requires a pharmacy benefit manager under contract with a health care service plan, among other things, to register with the Department of Managed Health Care, disclose specified uniform prescription drug information to contracting pharmacy providers, and exercise good faith and fair dealing in performing its contractual duties to the health care service plan.

This bill would further specify the duties of care owed by a pharmacy benefit manager to the health care service plan and its enrollees and providers. The bill would provide that, in the event of a conflict between these duties, the pharmacy benefit manager duty owed to an enrollee prevails over the duty owed to any other party, and the pharmacy benefit manager duty owed to a provider prevails over the duty owed to the health care service plan. The

This bill would prohibit a pharmacy benefit manager from deriving income from pharmacy benefit management services provided to a health care service plan in this state except for income derived from pharmacy benefit management fees, and also would prohibit a pharmacy benefit management fee charged by, or paid, to a pharmacy benefit manager by a health care service plan from being directly or indirectly based or contingent upon certain criteria, including the wholesale acquisition cost or list price of a drug, and the claim experience of the policies managed, or the claims processed, by the pharmacy benefit manager. The bill would authorize the department to impose a civil monetary penalty against a pharmacy benefit manager for a violation of those prohibitions. drug and denial of claims.
(4) Because a willful violation of these provisions by a health care service plan would be a crime, the 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 1367.52 is added to the Health and Safety Code, to read:

1367.52.
 (a) An Commencing no later than January 1, 2024, an enrollee’s defined cost sharing for each prescription drug shall be calculated at the point of sale based on a price that is reduced by an amount equal to at least 90 percent of all rebates received, or to be received, in connection with the dispensing or administration of the drug.
(1) The health care service plan shall pass through to each enrollee at the point of sale a good faith estimate of the enrollee’s decrease in cost sharing required pursuant to this subdivision.
(2) In addition to the pass through at the point of sale described in paragraph (1), the health care service plan shall provide the enrollee with an end-of-calendar-year reconciliation for any cost-sharing reductions owed to the enrollee pursuant to this subdivision that were not passed on to the enrollee through the estimated amount at the point of sale. This paragraph does not authorize a health care service plan to recover from an enrollee any inaccurate estimate of cost-sharing reductions.
(b) Each health care service plan shall, either directly or indirectly through its agents, calculate the enrollee’s defined cost sharing and provide the dispensing pharmacy with the enrollee’s defined cost sharing for each prescription drug as required pursuant to subdivision (a).
(c) This section does not prohibit a health care service plan from decreasing an enrollee’s defined cost sharing by an amount greater than that required pursuant to subdivision (a).
(d) (1) This section shall not be interpreted or implemented in a manner inconsistent with federal law. The provisions of this section are severable. If a provision of this section or its application is held invalid or incapable of being enforced against a health care service plan due to a conflict with federal requirements, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.
(2) Cost sharing, including copayments, coinsurance, deductibles, and any other form of cost sharing shall be consistent with Section 1342.73 and other provisions of this article.
(e) For purposes of this section:
(1) “Defined cost sharing” means a deductible payment or coinsurance amount imposed on an enrollee for a covered prescription drug under the enrollee’s health care service plan contract.
(2) “Health care service plan” shall have the meaning set forth in Section 1345 and includes a specialized health care service plan.
(3) “Price protection rebate” means a negotiated price concession that accrues directly or indirectly to a health care service plan, or other party on behalf of the health care service plan, in the event of an increase in the wholesale acquisition cost of a drug above a specified threshold.
(4) “Rebate” means both of the following:
(A) Negotiated price concessions, including base price concessions, whether or not described as a “rebate,” and reasonable, good faith estimates of price protection rebates and performance-based price concessions from a manufacturer, dispensing pharmacy, or other party in connection with the dispensing or administration of a prescription drug that may accrue directly or indirectly to the health care service plan, or other party on behalf of the health care service plan, including, but not limited to, health care service plan-owned pharmacy benefit managers, during a calendar year.
(B) Reasonable, good faith estimates of negotiated price concessions, fees, and other administrative costs that are passed through, or are reasonably anticipated to be passed through, to the health care service plan and serve to reduce the health care service plan’s liabilities for a prescription drug.
(f) (1) On or before March 1 each year, the department shall provide a report on this section’s impact on drug prices and health care premium rates to the appropriate policy committees of the Legislature.
(2) The report required to be submitted pursuant to paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(g) Subdivisions (a) to (f), inclusive, shall become inoperative on January 1, 2025. 2026.
(h) This section shall remain in effect only until January 1, 2026, 2027, and as of that date is repealed.

SEC. 2.

 Section 1367.243 of the Health and Safety Code is amended to read:

1367.243.
 (a) (1) A health care service plan that reports rate information pursuant to Section 1385.03 or 1385.045 shall report the information described in paragraph (2) to the department no later than October 1 of each year, beginning October 1, 2018.
(2) (A) For all covered prescription drugs, including generic drugs, brand name drugs, and specialty drugs dispensed at a plan pharmacy, network pharmacy, or mail order pharmacy for outpatient use, all of the following shall be reported:
(i) The 25 most frequently prescribed drugs.
(ii) The 25 most costly drugs by total annual plan spending.
(iii) The 25 drugs with the highest year-over-year increase in total annual plan spending.
(iv) The 25 most frequently prescribed drugs with a point-of-sale rebate pursuant to Section 1367.52.
(v) The 25 most costly drugs by total annual plan spending with a point-of-sale rebate pursuant to Section 1367.52.
(B) For each plan with a prescription drug benefit that the health care service plan issued for delivery, renewed, amended, or continued during the immediately preceding calendar year, all of the following:
(i) The aggregate dollar amount of all rebates that the health care service plan or a designee of the health care service plan collected directly or indirectly from all pharmaceutical manufacturers in connection with the design and administration of the plan, which are attributable to health care service plan enrollee drug utilization during that calendar year.
(ii) The percentage of those rebates that the health care service plan made available to enrollees to reduce cost sharing for prescription drugs at the point of sale.
(iii) The percentage of those rebates that the health care service plan utilized to reduce the portion of premiums allocated to each of prescription drug expenditures, hospital expenditures, medical expenditures, administrative costs, and other expenditures.
(iv) The aggregate dollar amount of all health care service plan administrative service fees that the health care service plan or a designee of the health care service plan paid to a pharmacy benefit manager or its designee in connection with the pharmacy benefit manager’s managing or administering the pharmacy benefit and administering, invoicing, allocating and collecting rebates.
(b) The department shall compile the information reported pursuant to subdivision (a) into a report for the public and legislators that demonstrates the overall impact of drug costs and rebates on health care premiums, cost sharing, and payments to pharmacy benefit managers. The data in the report shall be aggregated and shall not reveal information specific to individual health care service plans, or the identity of a specific manufacturer, the prices charged for specific drugs or classes of drugs, or the amount of any rebates provided for specific drugs or classes of drugs, or otherwise have the potential to compromise the financial, competitive, or proprietary nature of any of that information.
(c) For the purposes of this section, a “specialty drug” is one that exceeds the threshold for a specialty drug under the Medicare Part D program (Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173)).
(d) By January 1 of each year, beginning January 1, 2019, the department shall publish on its internet website the report required pursuant to subdivision (b).
(e) After the report required in subdivision (b) is released, the department shall include the report as part of the public meeting required pursuant to subdivision (b) of Section 1385.045.
(f) Except for the report required pursuant to subdivision (b), the department shall keep confidential all of the information provided to the department pursuant to this section, and the information shall be protected from public disclosure.
(g) For purposes of this section, the following definitions shall apply:
(1) “Health care service plan” shall have the meaning set forth in Section 1345, and includes a specialized health care service plan.
(2) “Health care service plan administrative service fees” means fees or payments from a health care service plan to, or otherwise retained by, a pharmacy benefit manager or its designee pursuant to a contract between a pharmacy benefit manager or affiliate and the health care service plan in connection with the pharmacy benefit manager’s managing or administering the pharmacy benefit and administering, invoicing, allocating and collecting rebates.
(3) “Price protection rebate” means a negotiated price concession that accrues directly or indirectly to a health insurer, care service plan, or other party on behalf of the health insurer, care service plan, in the event of an increase in the wholesale acquisition cost of a drug above a specified threshold.
(4) “Rebate” means both of the following:
(A) Negotiated price concessions, including base price concessions, whether or not described as a “rebate,” and reasonable, good faith estimates of price protection rebates and performance-based price concessions from a manufacturer, dispensing pharmacy, or other party in connection with the dispensing or administration of a prescription drug that may accrue directly or indirectly to the health care service plan, or other party on behalf of the health care service plan, including, but not limited to, health care service plan-owned pharmacy benefit managers, during a calendar year.
(B) Reasonable, good faith estimates of negotiated price concessions, fees, and other administrative costs that are passed through, or are reasonably anticipated to be passed through, to the health care service plan and serve to reduce the health care service plan’s liabilities for a prescription drug.
(h) This section shall remain in effect only until January 1, 2025, and as of that date is repealed.

SEC. 3.

 Section 1367.243 is added to the Health and Safety Code, to read:

1367.243.
 (a) (1) A health care service plan that reports rate information pursuant to Section 1385.03 or 1385.045 shall report the information described in paragraph (2) to the department no later than October 1 of each year.
(2) For all covered prescription drugs, including generic drugs, brand name drugs, and specialty drugs dispensed at a plan pharmacy, network pharmacy, or mail order pharmacy for outpatient use, all of the following shall be reported:
(A) The 25 most frequently prescribed drugs.
(B) The 25 most costly drugs by total annual plan spending.
(C) The 25 drugs with the highest year-over-year increase in total annual plan spending.

(b)

(b) (1) The department shall compile the information reported pursuant to subdivision (a) into a report for the public and legislators that demonstrates the overall impact of drug costs on health care premiums. The data in the report shall be aggregated and shall not reveal information specific to an individual health insurer.
(2) By January 1 of each year, the department shall publish on its internet website the report required pursuant to paragraph (1).
(3) After the report required pursuant to paragraph (2) is released, the department shall include the report as part of the public meeting required pursuant to subdivision (b) of Section 1385.045.
(c) Except for the report required pursuant to subdivision (b), the department shall keep confidential all of the information provided to the department pursuant to this section, and the information shall be protected from public disclosure.
(d) For the purposes of this section, a “specialty drug” is one that exceeds the threshold for a specialty drug under the Medicare Part D program (Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173)).
(e) This section shall become operative on January 1, 2025. 2026.

SEC. 4.

 Section 1385.001 of the Health and Safety Code is repealed.

SEC. 5.

 Section 1385.001 is added to the Health and Safety Code, to read:

1385.001.
 The following definitions apply for purposes of this article:
(a) “Department” means the Department of Managed Health Care.
(b) “Pharmacy benefit manager” means a person, business, or other entity that, pursuant to a contract with a health care service plan, either directly or indirectly provides one or more pharmacy benefit management services on behalf of the health care service plan, and any agent, contractor, intermediary, affiliate, subsidiary, or related entity of the person who facilitates, provides, directs, or oversees the provision of the pharmacy benefit management services. 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 any pharmacy benefit management service.
(c) “Pharmacy benefit management service” means either of the following:
(1) Negotiating the price of prescription drugs, including negotiating and contracting for direct or indirect rebates, discounts, or other price concessions.
(2) Managing any aspect of a prescription drug benefit, 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 the prescription drug benefit, contracting with network pharmacies, controlling the cost of covered prescription drugs, or the provision of related services.

(d)“Pharmacy benefit manager duty” means a duty and obligation to perform pharmacy benefit management services with care, skill, prudence, diligence, fairness, transparency, and professionalism, and for the best interests of the enrollee, the health care service plan, and the provider, as consistent with the requirements of this section and any regulations that may be adopted to implement this section.

(e)

(d) “Pharmacy benefit management fee” means a fee that covers the cost of providing one or more pharmacy benefit management services and that does not exceed the fair market value of the service or services actually performed by the pharmacy benefit manager.

(f)

(e) “Rebate” means both of the following:

(1)Negotiated price concessions, including, but not limited to, base price concessions, whether described as a “rebate” or otherwise, and reasonable estimates of any price protection rebates and performance-based price concessions that may accrue directly or indirectly to the health care service plan during the coverage year from a manufacturer, dispensing pharmacy, or other party in connection with the dispensing or administration of a prescription drug.

(1) Negotiated price concessions, including base price concessions, whether or not described as a “rebate,” and reasonable, good faith estimates of price protection rebates and performance-based price concessions from a manufacturer, dispensing pharmacy, or other party in connection with the dispensing or administration of a prescription drug that may accrue directly or indirectly to the health care service plan or other party on behalf of the health care service plan, including health care service plan-owned pharmacy benefit managers, during the calendar year.
(2) Reasonable Reasonable, good faith estimates of any negotiated price concessions, fees, and other administrative costs that are passed through, or are reasonably anticipated to be passed through, to the health care service plan and serve to reduce the health care service plan’s liabilities for a prescription drug.

(g)“Spread pricing” means any amount charged or claimed by a pharmacy benefit manager in excess of the amount directly or indirectly paid to a pharmacy, pharmacist, or other provider on behalf of the health plan, less a pharmacy benefit management fee.

SEC. 6.Section 1385.004 of the Health and Safety Code is amended to read:
1385.004.

(a)(1)A pharmacy benefit manager shall owe the pharmacy benefit manager duty to any enrollee, health care service plan, or provider that receives pharmacy benefit management services from the pharmacy benefit manager or that furnishes, covers, receives, or is administered a unit of a prescription drug for which the pharmacy benefit manager has provided pharmacy benefit management services.

(A)The pharmacy benefit manager duty owed to enrollees shall include duties of care and good faith and fair dealing. The department shall adopt regulations defining the scope of the duties owed to enrollees, including by obligating pharmacy benefit managers to provide all pharmacy benefit management services related to formulary design, utilization management, and grievances and appeal in a transparent manner to enrollees that is consistent with the best interest of enrollees and to disclose all conflicts of interest to enrollees.

(B)The pharmacy benefit manager duty owed to health care service plans shall include duties of care and good faith and fair dealing. The department shall adopt regulations defining the scope of the duties owed to health care service plan, including by obligating pharmacy benefit managers to provide transparency to health care service plans about amounts charged or claimed by the pharmacy benefit manager in a manner that is adequate to identify all instances of spread pricing.

(C)The pharmacy benefit manager duty owed to providers shall include duties of care and good faith and fair dealing. The department shall adopt regulations defining the scope of the duties owed to providers, including by obligating pharmacy benefit managers to provide transparency to providers about amounts charged or claimed by the pharmacy benefit manager in a manner that is adequate to identify all instances of spread pricing and to disclose all conflicts of interest to providers.

(2)If there is a conflict between the pharmacy benefit manager duties owed under this section, the pharmacy benefit manager duty owed to an enrollee shall be primary over the duty owed to any other party, and the pharmacy benefit manager duty owed to a provider shall be primary over the duty owed to a health care service plan.

(b)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.

(c)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 (b).

SEC. 7.SEC. 6.

 Section 1385.007 is added to the Health and Safety Code, to read:

1385.007.
 (a) A pharmacy benefit manager may shall not derive income from pharmacy benefit management services provided to a health care service plan in this state except for income derived from pharmacy benefit management fees. The amount of any pharmacy benefit management fees shall be set forth in the agreement between the pharmacy benefit manager and the health care service plan.
(b) The pharmacy benefit management fee charged by, or paid to, a pharmacy benefit manager by a health care service plan shall not be directly or indirectly based or contingent upon any of the following:
(1) The wholesale acquisition cost or list price of a drug.
(2) The amount of savings, rebates, or other fees charged, realized, or collected by or generated based on the activity of the pharmacy benefit manager.

(3)The claim experience of the policies managed or the claims processed by the pharmacy benefit manager.

(3) Denial of claims.
(4) The amount of premiums, deductibles, or other cost-sharing or fees charged, realized, or collected by the pharmacy benefit manager from patients or other persons on behalf of a patient.

SEC. 8.SEC. 7.

 Section 10123.66 is added to the Insurance Code, to read:

10123.66.
 (a) An Commencing no later than January 1, 2024, an insured’s defined cost sharing for each prescription drug shall be calculated at the point of sale based on a price that is reduced by an amount equal to at least 90 percent of all rebates received, or to be received, in connection with the dispensing or administration of the drug.
(1) The health insurer shall pass through to each insured at the point of sale a good faith estimate of the insured’s decrease in cost sharing required pursuant to this subdivision.
(2) In addition to the pass through at the point of sale described in paragraph (1), the health insurer shall provide the insured with an end-of-calendar-year reconciliation for any cost-sharing reductions owed to the insured pursuant to this subdivision that were not passed on to the insured through the estimated amount at the point of sale. This paragraph does not authorize a health insurer to recover from an insured any inaccurate estimate of cost-sharing reductions.
(b) Each health insurer shall, either directly or indirectly through its agents, calculate the insured’s defined cost sharing and provide the dispensing pharmacy with the insured’s defined cost sharing for each prescription drug as required pursuant to subdivision (a).
(c) This section does not prohibit a health insurer from decreasing an insured’s defined cost sharing by an amount greater than that required pursuant to subdivision (a).
(d) (1) This section shall not be interpreted or implemented in a manner inconsistent with federal law. The provisions of this section are severable. If a provision of this section or its application is held invalid or incapable of being enforced against a health insurer due to a conflict with federal requirements, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.
(2) Cost sharing, including copayments, coinsurance, deductibles, and any other form of cost sharing shall be consistent with Section 10123.1932 and other provisions of this chapter.
(e) For purposes of this section:
(1) “Defined cost sharing” means a deductible payment or coinsurance amount imposed on an insured for a covered prescription drug under the insured’s health insurance policy.
(2) “Health insurer” includes any health insurer holding a certificate of authority pursuant to Article 3 (commencing with Section 699) of Chapter 1 of Part 2 of Division 1.
(3) “Price protection rebate” means a negotiated price concession that accrues directly or indirectly to a health insurer, or other party on behalf of the health insurer, in the event of an increase in the wholesale acquisition cost of a drug above a specified threshold.
(4) “Rebate” means both of the following:
(A) Negotiated price concessions, including base price concessions, whether or not described as a “rebate,” and reasonable, good faith estimates of price protection rebates and performance-based price concessions from a manufacturer, dispensing pharmacy, or other party in connection with the dispensing or administration of a prescription drug that may accrue directly or indirectly to the health insurer, or other party on behalf of the health insurer, including, but not limited to, health insurer-owned pharmacy benefit managers, during a calendar year.
(B) Reasonable, good faith estimates of negotiated price concessions, fees, and other administrative costs that are passed through, or are reasonably anticipated to be passed through, to the health insurer and serve to reduce the health insurer’s liabilities for a prescription drug.
(f) (1) On or before March 1 of each year, the commissioner shall provide a report on this section’s impact on drug prices and health care premium rates to the appropriate policy committees of the Legislature.
(2) The report required to be submitted pursuant to paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(g) Subdivisions (a) to (f), inclusive, of this section shall become inoperative on January 1, 2025. 2026.
(h) This section shall remain in effect only until January 1, 2026, 2027, and as of that date is repealed.

SEC. 9.SEC. 8.

 Section 10123.205 of the Insurance Code is amended to read:

10123.205.
 (a) (1) A health insurer that reports rate information pursuant to Section 10181.3 or 10181.45 shall report the information described in paragraph (2) to the department no later than October 1 of each year, beginning October 1, 2018.
(2) (A) For all covered prescription drugs, including generic drugs, brand name drugs, and specialty drugs dispensed at a plan pharmacy, network pharmacy, or mail order pharmacy for outpatient use, all of the following shall be reported:
(i) The 25 most frequently prescribed drugs.
(ii) The 25 most costly drugs by total annual plan spending.
(iii) The 25 drugs with the highest year-over-year increase in total annual plan spending.
(iv) The 25 most frequently prescribed drugs with a point-of-sale rebate pursuant to Section 10123.66.
(v) The 25 most costly drugs by total annual health insurer spending with a point-of-sale rebate pursuant to Section 10123.66.
(B) For each plan with a prescription drug benefit that the health insurer issued for delivery, renewed, amended, or continued during the immediately preceding calendar year:
(i) The aggregate dollar amount of all rebates that the health insurer or a designee of the health insurer collected directly or indirectly from all pharmaceutical manufacturers in connection with the design and administration of the plan, which are attributable to insured drug utilization during that calendar year.
(ii) The percentage of those rebates that the health insurer made available to insureds to reduce cost sharing for prescription drugs at the point of sale.
(iii) The percentage of those rebates that the health insurer utilized to reduce the portion of premiums allocated to each of prescription drug expenditures, hospital expenditures, medical expenditures, administrative costs, and other expenditures.
(iv) The aggregate dollar amount of all health insurer administrative service fees that the health insurer or a designee of the health insurer paid to a pharmacy benefit manager or its designee in connection with the pharmacy benefit manager’s managing or administering the pharmacy benefit and administering, invoicing, allocating and collecting rebates.
(b) The department shall compile the information reported pursuant to subdivision (a) into a report for the public and legislators that demonstrates the overall impact of drug costs and rebates on health care premiums, cost sharing, and payments to pharmacy benefit managers. The data in the report shall be aggregated and shall not reveal information specific to individual health insurers, or the identity of a specific manufacturer, the prices charged for specific drugs or classes of drugs, or the amount of any rebates provided for specific drugs or classes of drugs, or otherwise have the potential to compromise the financial, competitive, or proprietary nature of any of that information.
(c) For the purposes of this section, a “specialty drug” is one that exceeds the threshold for a specialty drug under the Medicare Part D program (Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173)).
(d) By January 1 of each year, beginning January 1, 2018, the department shall publish on its internet website the report required pursuant to subdivision (b).
(e) After the report required in subdivision (b) is released, the department shall include the report as part of the public meeting required pursuant to subdivision (b) of Section 10181.45.
(f) Except for the report required pursuant to subdivision (b), the department shall keep confidential all of the information provided to the department pursuant to this section, and the information shall be protected from public disclosure.
(g) The following definitions shall apply for purposes of this section:
(1) “Health insurer” includes any entity licensed by the department or holding a valid certificate of authority pursuant to Article 3 (commencing with Section 699) of Chapter 1 of Part 2 of Division 1.
(2) “Health insurer administrative service fees” means fees or payments from a health insurer to, or otherwise retained by, a pharmacy benefit manager or its designee pursuant to a contract between a pharmacy benefit manager or affiliate and the health insurer in connection with the pharmacy benefit manager’s managing or administering the pharmacy benefit and administering, invoicing, allocating and collecting rebates.
(3) “Price protection rebate” means a negotiated price concession that accrues directly or indirectly to a health insurer, or other party on behalf of the health insurer, in the event of an increase in the wholesale acquisition cost of a drug above a specified threshold.
(4) “Rebate” means both of the following:
(A) Negotiated price concessions, including base price concessions, whether or not described as a “rebate,” and reasonable, good faith estimates of price protection rebates and performance-based price concessions from a manufacturer, dispensing pharmacy, or other party in connection with the dispensing or administration of a prescription drug that may accrue directly or indirectly to the health insurer, or other party on behalf of the health insurer, including, but not limited to, health insurer-owned pharmacy benefit managers, during a calendar year.
(B) Reasonable, good faith estimates of negotiated price concessions, fees, and other administrative costs that are passed through, or are reasonably anticipated to be passed through, to the health insurer and serve to reduce the health insurer’s liabilities for a prescription drug.
(h) This section shall remain in effect only until January 1, 2026, and as of that date is repealed.

SEC. 10.SEC. 9.

 Section 10123.205 is added to the Insurance Code, to read:

10123.205.
 (a) (1) A health insurer that reports rate information pursuant to Section 10181.3 or 10181.45 shall report the information described in paragraph (2) to the department no later than October 1 of each year.
(2) For all covered prescription drugs, including generic drugs, brand name drugs, and specialty drugs dispensed at a plan pharmacy, network pharmacy, or mail order pharmacy for outpatient use, all of the following shall be reported:
(A) The 25 most frequently prescribed drugs.
(B) The 25 most costly drugs by total annual plan spending.
(C) The 25 drugs with the highest year-over-year increase in total annual plan spending.
(b) (1) The department shall compile the information reported pursuant to subdivision (a) into a report for the public and legislators that demonstrates the overall impact of drug costs on health care premiums. The data in the report shall be aggregated and shall not reveal information specific to an individual health insurer.
(2) By January 1 of each year, the department shall publish on its internet website the report required pursuant to paragraph (1).
(3) After the report required pursuant to paragraph (2) is released, the department shall include the report as part of the public meeting required pursuant to subdivision (b) of Section 10181.45.
(c) Except for the report required pursuant to subdivision (b), the department shall keep confidential all of the information provided to the department pursuant to this section, and the information shall be protected from public disclosure.
(d) For the purposes of this section, a “specialty drug” is one that exceeds the threshold for a specialty drug under the Medicare Part D program (Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173)).

(a)

(e) This section shall become operative on January 1, 2025. 2026.

SEC. 11.SEC. 10.

 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.