This bill mandates that pharmacy benefit managers and health carriers utilize prescription drug rebates and other forms of compensation to directly benefit covered persons. Specifically, it requires that all compensation received from drug manufacturers related to prescription drug benefits be remitted to the covered person at the point of sale, thereby reducing their out-of-pocket costs. However, if the cost-sharing obligation for a drug is less than the out-of-pocket cost after applying the compensation, the pharmacy benefit manager or health carrier is not required to remit all compensation. Any retained compensation must be used to offset future premiums or costs for covered persons. Additionally, contracts with pharmacy benefit managers for state employee group insurance programs must ensure compliance with these requirements.

The bill also introduces definitions for key terms such as "compensation" and "cost-sharing obligation," and it establishes a reporting requirement for pharmacy benefit managers and health carriers. Starting March 1, 2024, these entities must submit annual reports to the commissioner detailing their compliance with the new regulations. The effective date for this section is set for January 1, 2024.