Bill Summary – FastDemocracy

HOUSE BILL NO. 5338
     November 14, 2023, Introduced by Reps. McFall, Arbit, Price, Morgan, Rheingans, Hope, Hood,
       Weiss, Tsernoglou, Stone, Aiyash and Hoskins and referred to the Committee on Insurance and
       Financial Services.
          A bill to amend 2022 PA 11, entitled
    "Pharmacy benefit manager licensure and regulation act,"
    by amending sections 5, 7, and 9 (MCL 550.815, 550.817, and
819) and by adding section 10.
                     THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
       Sec. 5. As used in this act:
       (a) "Affiliated pharmacy" means, except as otherwise provided
 in this subdivision, a network pharmacy that directly, or
 indirectly through 1 or more intermediaries, controls, is
 controlled by, or is under common control with, a pharmacy benefit
    DAW                                                                                H03908'23
                                       2
 manager. As used in section 19, affiliated pharmacy does not
 include a pharmacy that controls, is controlled by, or is under
 common control with, a hospital as that term is defined in section
 20106 of the public health code, 1978 PA 368, MCL 333.20106.
       (b) "Aggregate retained rebate percentage" means the
 percentage of all rebates received by a pharmacy benefit manager
 from all manufacturers, that is not passed on to the pharmacy
 benefit manager's Michigan health plan or insurer clients.
 Aggregate retained rebate percentage must be expressed without
 disclosing any identifying information regarding any health plan,
 drug, or therapeutic class, and must be calculated as follows:
       (i) Calculate the aggregate dollar amount of all rebates that
 the pharmacy benefit manager received during the prior calendar
 year from all manufacturers and did not pass through to the
 pharmacy benefit manager's Michigan health plan or insurer clients.
       (ii) Divide the result of the calculation under subparagraph (i)
 by the aggregate dollar amount of all rebates that the pharmacy
 benefit manager received during the prior calendar year from all
 manufacturers.
       (c) "Carrier" means that term as defined in section 3701 of
 the insurance code of 1956, 1956 PA 218, MCL 500.3701.
       (d) "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.
       (e) "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:
       (i) Receiving payments for pharmacist services.
     DAW                                                          H03908'23
                                        3
       (ii) Making payments to pharmacists or pharmacies for
 pharmacist services.
       (iii) Receiving and making the payments described in
 subparagraphs (i) and (ii).
       (f) "Covered person" means a person that is insured in a
 health plan.
       (g) "Department" means the department of insurance and
 financial services.
       (h) "Defined cost sharing" means a deductible payment or
 coinsurance amount that an insurer imposes on an enrollee for a
 covered prescription drug under the enrollee's health plan.
       (i) (h) "Director" means the director of the department.
       (j) (i) "Enrollee" means that term as defined in section 116
 of the insurance code of 1956, 1956 PA 218, MCL 500.116.an
 individual entitled to coverage of health care items or services
 from an insurer.
       (k) (j) "Financially viable" means that 1 of the following
 conditions is met:
       (i) The pharmacy benefit manager has received an unqualified
 opinion from an independent public accountant showing it is solvent
 based on generally accepted accounting principles.
       (ii) If no independent public accountant opinion is obtained,
 the pharmacy benefit manager remains solvent after adjusting for
 goodwill and intangible assets.
       (l) (k) "Health plan" means a qualified health plan as that
 term is defined in section 1261 of the insurance code of 1956, 1956
 PA 218, MCL 500.1261.policy, contract, certificate, or agreement
 offered or issued by an insurer to provide, deliver, arrange for,
 pay for, or reimburse any of the costs of health care items or
     DAW                                                           H03908'23
                                          4
 services.
       (m) (l) "Individual responsible for the conduct of affairs of
 the pharmacy benefit manager" means any of the following:
       (i) A member of the board of directors, board of trustees,
 executive committee, or other governing board or committee.
       (ii) A principal officer for a corporation or a partner or
 member for a partnership, association, or limited liability
 company.
       (iii) A shareholder or member holding directly or indirectly 10%
 or more of the voting stock, voting securities, or voting interest
 of the pharmacy benefit manager.
       (iv) Any person who exercises control over the affairs of the
 pharmacy benefit manager.
       (n) (m) "Insurer" means an insurer that delivers, issues for
 delivery, or renews in this state a health plan that provides drug
 coverage under the insurance code of 1956, 1956 PA 218, MCL 500.100
 to 500.8302.offers health insurance coverage, as defined in 42 USC
 300gg-91, and is subject to the insurance laws of this state,
 including any entity issuing medical coverage through a group
 policy, or any state or local governmental employer plan.
       Sec. 7. As used in this act:
       (a) "Mail-order pharmacy" means a pharmacy whose primary
 business is to receive prescriptions by mail, fax, or through
 electronic submissions, dispense drugs to enrollees through the use
 of the United States Postal Service or other common carrier
 services, and provide consultation with patients electronically
 rather than face-to-face.
       (b) "Manufacturer" means that term as defined in section 17706
 of the public health code, 1978 PA 368, MCL 333.17706.
     DAW                                                         H03908'23
                                         5
       (c) "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.
       (d) "Maximum allowable cost list" means a listing of drugs
 used by a pharmacy benefit manager, directly or indirectly, to set
 the maximum allowable cost.
       (e) "Multiple source drug" means a therapeutically equivalent
 drug that is available from 1 or more of the following:
       (i) At least 1 brand-named manufacturer and at least 1 generic
 manufacturer.
       (ii) Two or more generic manufacturers.
       (f) "Network pharmacy" means a retail pharmacy or other
 pharmacy that contracts directly or through a pharmacy services
 administration organization with a pharmacy benefit manager.
       (g) "Nonaffiliated pharmacy" means a network pharmacy that
 directly, or indirectly through 1 or more intermediaries, does not
 control, is not controlled by, and is not under common control
 with, a pharmacy benefit manager.
       (h) "Person" means an individual, partnership, corporation,
 unincorporated association, joint venture, limited liability
 company, trust, estate, foundation, not-for-profit corporation,
 unincorporated organization, governmental entity, or any other
 legal entity.
       (i) "Pharmacist" means that term as defined in section 17707
 of the public health code, 1978 PA 368, MCL 333.17707.
       (j) "Pharmacist services" means products, goods, and services,
 or any combination of products, goods, and services, provided as a
 part of the practice of pharmacy.
       (k) "Pharmacy" means that term as defined in section 17707 of
     DAW                                                         H03908'23
                                        6
 the public health code, 1978 PA 368, MCL 333.17707.
       (l) Except as otherwise provided in subdivision (m), "pharmacy
 "Pharmacy benefit management service" means any of the following:
       (i) Negotiating the price of prescription drugs, including
 negotiating and contracting for direct or indirect rebates,
 discounts, or other price concessions.
       (ii) 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, managing or providing data
 relating to the prescription drug benefit, or providing related
 services.
       (iii) Performance of any administrative, managerial, clinical,
 pricing, financial, reimbursement, data administration or
 reporting, or billing service.
       (iv) Services the director prescribes by rule.
       (m) "Pharmacy benefit manager" means an entity that contracts
 with a pharmacy or a pharmacy services administration organization
 on behalf of a health plan or carrier to provide pharmacy health
 services to individuals covered by the health plan or carrier or
 administration that includes, but is not limited to, any of the
 following:
       (i) Contracting directly or indirectly with pharmacies to
 provide drugs to enrollees or other covered persons.
       (ii) Administering a drug benefit.
       (iii) Processing or paying pharmacy claims.
     DAW                                                          H03908'23
                                        7
       (iv) Creating or updating drug formularies.
       (v) Making or assisting in making prior authorization
 determinations on drugs.
       (vi) Administering rebates on drugs.
       (vii) Establishing a pharmacy network.
       (m) "Pharmacy benefit manager" does not include the department
 of health and human services, a carrier, or an insurer.a person
 that, under a written agreement with an insurer or health plan,
 either directly or indirectly, provides 1 or more pharmacy benefit
 management services on behalf of the insurer or health plan, and
 any agent, contractor, intermediary, affiliate, subsidiary, or
 related entity of the person that facilitates, provides, directs,
 or oversees the provision of the pharmacy benefit management
 services. Pharmacy benefit manager does not include the department
 of health and human services, a carrier, or an insurer.
       (n) "Pharmacy benefit manager network" means a network of
 pharmacists or pharmacies that are offered by an agreement or
 contract to provide pharmacist services.
       (o) "Pharmacy services administration organization" means an
 entity that provides contracting and other administrative services
 relating to prescription drug benefits to pharmacies.
       (p) "Plan sponsor" means that term as defined in section 7705
 of the insurance code of 1956, 1956 PA 218, MCL 500.7705.
       (q) "Practice of pharmacy" means that term as defined in
 section 17707 of the public health code, 1978 PA 368, MCL
 333.17707.
       (r) "Preferred pharmacy" means a network pharmacy that offers
 covered drugs to health plan members at lower out-of-pocket costs
 than what the member would pay at a nonpreferred network pharmacy.
     DAW                                                           H03908'23
                                          8
       (s) "Price protection rebate" means a negotiated price
 concession that accrues directly or indirectly to the insurer, or
 other party on behalf of the insurer, including a pharmacy benefit
 manager, in the event of an increase in the wholesale acquisition
 cost of a drug above a specified threshold.
       Sec. 9. As used in this act:
       (a) "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, but not limited to, a
 bona fide service fee or administrative fee, that is not a
 formulary discount or remuneration described in this
 subdivision.either of the following:
       (i) Negotiated price concessions, including, but not limited
 to, base price concessions and reasonable estimates of any price
 protection rebates and performance-based price concessions that may
 accrue directly or indirectly to the insurer, or other party on
 behalf of the insurer, including a pharmacy benefit manager, during
 the coverage year from a manufacturer, dispensing pharmacy, or
 other party in connection with the dispensing or administration of
 a prescription drug.
       (ii) Reasonable 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 insurer, or
 other party on behalf of the insurer, including a pharmacy benefit
 manager, and serve to reduce the insurer's liabilities for a
 prescription drug.
       (b) "Retail pharmacy" means a pharmacy that dispenses
     DAW                                                           H03908'23
                                        9
 prescription drugs to the public at retail primarily to individuals
 that reside in close proximity to the pharmacy, typically by face-
 to-face interaction with the individual or the individual's
 caregiver.
       (c) "Rule" means a rule promulgated under the administrative
 procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328.
       (d) "Specialty drug" means a drug that provides treatment for
 serious, chronic, or life-threatening diseases that is covered
 under a patient's health plan or by a patient's carrier to which
 any of the following apply:
       (i) The cost of the drug exceeds the drug cost threshold
 established by the Centers for Medicare and Medicaid Services under
 the Medicare Part D program.
       (ii) The drug requires special administration, including, but
 not limited to, injection, infusion, or inhalation.
       (iii) The drug requires unique storage, handling, or
 distribution.
       (iv) The drug requires special oversight, intensive monitoring,
 complex education and support, or care coordination with a person
 licensed under article 15 of the public health code, 1978 PA 368,
 MCL 333.16101 to 333.18838.
       (e) "Specialty pharmacy" means a pharmacy that dispenses
 specialty drugs to patients and that is nationally accredited by an
 independent third party.
       (f) "Spread pricing" means the either of the following:
       (i) Any amount charged or claimed by a pharmacy benefit manager
 in excess of the ingredient cost for a dispensed prescription drug
 plus dispensing fee paid directly or indirectly to any pharmacy,
 pharmacist, or other provider on behalf of the health plan, less a
     DAW                                                          H03908'23
                                        10
 pharmacy benefit management fee.
       (ii) The model of prescription drug pricing in which a pharmacy
 benefit manager charges a health plan 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.
       (g) Except as otherwise provided in subdivision (h), "third
 party" means a person that is not an enrollee or insured in a
 health plan.
       (h) "Third party" does not include a pharmacy benefit manager.
       (i) "Wholesale distributor" means that term as defined in
 section 17709 of the public health code, 1978 PA 368, MCL
 333.17709.
       Sec. 10. (1) An enrollee's defined cost sharing for each
 prescription drug must be calculated at the point of sale based on
 a price that is reduced by an amount equal to 100% of all rebates
 received, or to be received, in connection with the dispensing or
 administration of the prescription drug.
       (2) In complying with this section, a pharmacy benefit manager
 or its agents shall not publish, or directly or indirectly disclose
 any of the following:
       (a) Information regarding the amount of rebates an insurer
 receives on a product or therapeutic class of products,
 manufacturer, or pharmacy-specific basis.
       (b) Information that reveals the identification of an
 individual product or therapeutic class of products.
       (3) The information described in subsection (2) is considered
 a trade secret and is exempt from disclosure under the freedom of
     DAW                                                           H03908'23
                                      11
 information act, 1976 PA 442, MCL 15.231 to 15.246.
       (4) This section does not prevent a pharmacy benefit