Bill Text: HI HB723 | 2014 | Regular Session | Introduced

---

Bill Title: Pharmacy Benefit Management Companies

Spectrum: Partisan Bill (Democrat 4-0)

Status: (Introduced - Dead) 2013-12-18 - Carried over to 2014 Regular Session. [HB723 Detail]

Download: Hawaii-2014-HB723-Introduced.html

---

HOUSE OF REPRESENTATIVES	H.B. NO.	723
TWENTY-SEVENTH LEGISLATURE, 2013
STATE OF HAWAII

A BILL FOR AN ACT

 

 

relating to health.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  The legislature finds that numerous states are proposing or considering legislation to regulate pharmacy benefit management companies.  Pharmacy benefit management companies provide prescription drug services on behalf of plan sponsors, including self-insured employers, insurers, unions, mutual benefit societies, and health maintenance organizations.  As part of these services, pharmacy benefit management companies are the intermediaries that negotiate services and costs with pharmacies and rebate earnings with pharmaceutical companies.  Through this Act, the legislature seeks to ensure financial reliability, regulate the licensing of pharmacy benefit management companies, prevent predatory pricing, and mandate disclosure of drug costs and financial contracts.

     The purpose of this Act is to require pharmacy benefit management companies to register with the insurance commissioner before administering pharmacy benefits of health insurers and implement regulations on pharmacy benefit management companies in the State.

     SECTION 2.  The Hawaii Revised Statutes, is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER

PHARMACY BENEFIT MANAGEMENT COMPANIES

     §   ‑1  Definitions.  As used in this chapter:

     "Auditing entity" means a managed care company, insurance company, third-party payor or the representative of the managed care company, insurance company, or third-party payor.

     "Commissioner" means the insurance commissioner.

     "Enrollee" means an individual who is enrolled in a pharmacy benefit management plan.

     "Extrapolation" means the accounting technique of using analysis of a validly-constructed limited sample to reach a conclusion about a larger system or universe.

     "Legend drug" means any drug falling within section 503(b)(1) of the federal Food, Drug and Cosmetic Act and which is required to be labeled with the statement "Rx only".

     "Narcotic drug" has the same meaning as set forth in section 329-1.

     "National drug code number" means the unique, three-segment number used as a universal product identifier for human drugs in the Drug Registration and Licensing System maintained by the federal Food and Drug Administration pursuant to the Food, Drug, and Cosmetic Act, title 21 United States Code section 360.

     "Pharmacist" has the same meaning as "registered pharmacist" as set forth in section 461-1.

     "Pharmacist services" includes drug therapy and other patient care services provided by a pharmacist or pharmacy registered under chapter 461 intended to achieve outcomes that relate to the cure or prevention of a disease, elimination or reduction of a patient's symptoms, or arresting or slowing of a disease process as defined in the regulations of the board of pharmacy.

     "Pharmacy" has the same meaning as set forth in section 461-1.

     "Pharmacy benefit management company" means a business that administers the prescription drug or device portion of health insurance plans on behalf of plan sponsors, including self-insured employers, insurers, unions, mutual benefit societies, and health maintenance organizations.

     "Pharmacy benefit management plan" means an arrangement for the delivery of pharmacist services in which a pharmacy benefit management company undertakes to provide, arrange for, pay for, or reimburse any of the costs of pharmacist services for an enrollee on a prepaid or insured basis.

     "Pharmacy benefit manager" means a person or entity that performs pharmacy benefit management services for a pharmacy benefit management company and includes a person or entity in a contractual or employment relationship with a person or entity performing pharmacy benefit management services for a health plan.

     §   ‑2  Registration.  (a)  Beginning on January 1, 2014, a person shall not establish or operate a pharmacy benefit management company to provide pharmacy benefit management plans in the State without first obtaining from the commissioner a license to do business in the State.  Pharmacy benefit management companies operating in the State as of the effective date of this Act shall register with the commissioner by January 1, 2014.

     (b)  Each pharmacy benefit management company that provides pharmacy benefit management plans in the State shall file an annual statement with the commissioner on the form required by the commissioner on or before March 1 of each year in accordance with this section.

     The annual statement shall:

     (1)  Be verified by at least two principal officers of the pharmacy benefit management company;

     (2)  Cover the preceding calendar year;

     (3)  Include a financial statement of the organization, including its balance sheet and income statement for the preceding year; and

     (4)  Include the number of Hawaii residents enrolled in each pharmacy benefit management plan during the year, the number of enrollees as of the end of the applicable calendar year, and the number of enrollments terminated during the applicable calendar year.

     If the pharmacy benefit management company is audited annually by an independent certified public accountant, a copy of the certified audit report shall be filed with the commissioner on or before June 30 of each year.

     (c)  The commissioner may grant a pharmacy benefit management company an extension for filing an annual statement or other reports or exhibits for good cause shown; provided that the extension shall not exceed sixty days beyond the initial March 1 due date.

     (d)  A pharmacy benefit management company that fails to file its annual statement within the time required by this section shall pay a fine of $50 for each day after the due date that the annual report has not been filed with the commissioner.  A pharmacy benefit management company may have its license revoked by the commissioner for failure to file its annual statement.

     §   ‑3  Audit of pharmacy records.  (a)  An auditing entity shall conduct an audit of the records of a pharmacy for claims submitted for payment after July 1, 2013, in accordance with the following criteria:

     (1)  The auditing entity conducting the initial on-site audit shall give the pharmacy notice at least two weeks prior to conducting the initial on-site audit for each audit cycle;

     (2)  An audit that involves clinical or professional judgment shall be conducted by or in consultation with a pharmacist;

     (3)  A clerical or record-keeping error regarding a required document or record that is discovered during an audit shall not necessarily constitute fraud, but such a claim:

         (A)  May be subject to recoupment; and

         (B)  Shall not be subject to criminal penalties without proof of intent to commit fraud;

     (4)  A pharmacy may use the records of a hospital, physician, or other authorized practitioner of the healing arts for drugs or medicinal supplies written or transmitted by any means of communication for purposes of validating the pharmacy record with respect to orders or refills of legend or narcotic drugs;

     (5)  A finding of an overpayment or underpayment shall not be based on a projection of the number of patients served having a similar diagnosis or on the number of similar orders or refills for similar drugs; rather, recoupment of claims shall be based on the actual overpayment or underpayment, unless the auditing entity demonstrates a statistically justifiable method of projection or the projection for overpayment or underpayment is part of a settlement as agreed to by the pharmacy;

     (6)  Each pharmacy shall be audited under the same standards and parameters as other similarly situated pharmacies audited by the auditing entity;

     (7)  Each pharmacy shall be allowed at least twenty-one business days, with reasonable extensions allowed,  following receipt of the preliminary audit report in which to produce documentation to address any discrepancy found during an audit;

     (8)  The period covered by an audit shall not exceed two years, unless otherwise provided by contractual agreement, from the date the claim was submitted to or adjudicated by an auditing entity or unless the period conflicts with state or federal law;

     (9)  An audit shall not be initiated or scheduled during the first five calendar days of a month, due to the high volume of prescriptions filled during that time, unless otherwise consented to by the pharmacy;

    (10)  The preliminary audit report shall be delivered to the pharmacy within one hundred twenty days, with reasonable extensions allowed, after conclusion of the audit, and the final report shall be delivered to the pharmacy within six months after the pharmacy's receipt of the preliminary audit report or final appeal, as provided for in subsection (c), whichever is later; and

    (11)  Notwithstanding any other provision in this subsection, the auditing entity conducting the audit shall not use the accounting practice of extrapolation in calculating recoupments or penalties for audits.

     (b)  Recoupment of any disputed funds shall occur after final internal disposition of the audit, including the appeals process set forth in subsection (c).  If the identified discrepancy for an individual audit exceeds $25,000, future payments to the pharmacy may be withheld pending finalization of the audit.

     (c)  Each auditing entity conducting an audit shall establish an appeals process under which a pharmacy may appeal an unfavorable preliminary audit report to the auditing entity.  If, following the appeal, the auditing entity finds that an unfavorable audit report or any portion of the audit is unsubstantiated, the auditing entity shall dismiss the audit report or the unsubstantiated portion of the report of the audit without the necessity of any further proceedings.

     (d)  This section shall not apply to any investigative audit that involves probable or potential fraud or wilful misrepresentation.

     §   ‑4  Reporting.  (a)  Notwithstanding any other provision of law to the contrary, a pharmacy benefit management company contracting with an auditing entity to provide prescription drug coverage in the State of Hawaii shall provide at least annually a report to each group health plan, including an accident and health or sickness insurance company under chapter 431, article 10A; a health maintenance organization under chapter 432D; a mutual benefit society or a nonprofit hospital and health service corporation under chapter 432; or any other entity providing a plan of health insurance, health benefits, or health services with which the pharmacy benefit management company has a contract.

     (b)  With respect to the contract described under subsection (a), the report under subsection (a) shall include:

     (1)  Information on the number and total amount paid to pharmacies for prescriptions filled under the contract, reported by the following types of pharmacies:  mail order pharmacies, specialty pharmacies, and retail pharmacies;

     (2)  The total amount that the pharmacy benefit manager was paid by the plan or issuer for prescriptions filled under the contract, reported by the following types of pharmacies:  mail order pharmacies, specialty pharmacies, and retail pharmacies;

     (3)  The total payment under the contract received from pharmaceutical manufacturers, including all rebates; market share rebates; disease management fees; data selling fees; sales target fees; discounts, including prompt payment discounts; price concessions; or administrative and other payments from pharmaceutical manufacturers;

     (4)  The total amount that the plan or issuer was paid by the pharmacy benefit manager for rebates received from pharmaceutical manufacturers under the contract; and

     (5)  Information on the overall percentage of generic drugs dispensed under the contract, separately at retail and mail order pharmacies, and the percentage of cases in which a generic drug was dispensed when available.

     §   ‑5  Information for pharmacies.  A pharmacy benefit management company shall provide to pharmacies that contract with the pharmacy benefit management company:

     (1)  The methodology that the pharmacy benefit management company uses to determine reimbursement;

     (2)  The frequency with which the pharmacy benefit management company provides updates to pharmacy product reimbursement benchmarks used to calculate prescription reimbursement to pharmacies; and

     (3)  Prompt payment to pharmacies for clean claims as required by state law.

     §   ‑6  Information for pharmacy benefit management enrollees.  (a)  Each pharmacy benefit management company shall make available to its enrollees the information contained in subsection (b).  This information shall be made available to enrollees upon request or at least updated annually on the pharmacy benefit management company's website.

     (b)  The information required to be provided to enrollees includes:

     (1)  A list of the names and locations of all affiliated providers;

     (2)  A description of the method of resolving complaints of covered persons; and

     (3)  Notice that the pharmacy benefit management company is required to be registered in the State by the commissioner.

     §   ‑7 Prohibited activities.  (a)  A pharmacy benefit management company shall not exclude any willing provider from any contract offered within the State, including the Hawaii employer-union health benefits trust fund, public assistance programs, and commercial entities.

     (b)  A pharmacy benefit management plan shall take no action that would restrict a patient's choice of pharmacy from which to receive prescription medications, nor shall a pharmacy benefit management plan require patients to receive prescription medications from mail-order pharmacies located outside the State.  

     (c)  A pharmacy benefit management company shall not manipulate the amounts of drug co-payments that it charges in a manner that would encourage patients to receive prescription medications from a mail-order pharmacy located outside the State.

     (d)  A pharmacy benefit management company shall not offer different dispensing reimbursement amounts among willing providers for the same prescription medications.

     (e)  A pharmacy benefit management company shall not establish reimbursement amounts for providers that are less than a provider's acquisition cost plus a professional dispensing fee.

     (f)  A pharmacy benefit management company shall not charge or receive reimbursement for rebranded pharmaceutical products or pharmaceutical products with an altered national drug code number.

     (g)  A pharmacy benefit management company shall not ship, mail, or deliver drugs or devices to a person in the State through a non-resident pharmacy unless that non-resident pharmacy is registered with or has a permit issued by the board of pharmacy.

     §   ‑8  Violations; penalties.  (a)  The commissioner may assess a pharmacy benefit management company in violation of this chapter a fine of up to $10,000 for each violation.  In addition, the commissioner may direct the pharmacy benefit management company to cease and desist prohibited activity, take specific affirmative corrective action, or make restitution of money, property, or other assets.

     (b)  A pharmacy benefit management company may appeal any decision made by the commissioner under this section, whereupon the opportunity for an administrative hearing under chapter 91 shall be afforded.  Any pharmacy benefit management company aggrieved by the final decision and order shall be entitled to judicial review in accordance with chapter 91 or may submit the matter to binding arbitration.

     §   ‑9  Rules.  (a)  The commissioner shall adopt rules pursuant to chapter 91 for the purposes of implementing this chapter.

     (b)  No later than twenty days prior to the convening of each legislative session, the commissioner shall provide an annual aggregated report on pharmacy benefit management companies operating in the State.  The commissioner shall establish rules to ensure that confidential and proprietary information is protected."

     SECTION 3.  This Act shall take effect upon its approval.

 

INTRODUCED BY:	_____________________________

 

 

Report Title:

Pharmacy Benefit Management Companies

 

Description:

Requires registration of and regulates practices of pharmacy benefit management companies.  Authorizes periodic audits of pharmacies that submit claims to pharmacy benefit management companies.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.