ENTITLED An Act to provide for transparency in the pricing of prescription drugs.

Be it enacted by the Legislature of the State of South Dakota:

Section 1. That   58-29E-1 be AMENDED:

58-29E-1. Terms used in this chapter mean:

(1) "Brand name," the same as set forth in   36-11-2;

(2) "Covered individual," a member, participant, enrollee, contract holder, policy holder, or beneficiary of a third-party payor who is provided health coverage by the third-party payor. The term includes a dependent or other individual provided health coverage through a policy, contract, or plan for a covered individual;

(3) "Generic drug," a chemically equivalent copy of a brand name drug with an expired patent;

(4) "Health benefit plan," the same as set forth in   58-17F-2;

(5) "Health carrier," the same as set forth in   58-17F-1;

(6) "Interchangeable biological product," the same as set forth in   36-11-2;

(7) "Maximum allowable cost," the maximum amount that a pharmacy may be reimbursed, as set by a pharmacy benefit manager or a third-party payor, for a brand name or a generic drug, an interchangeable biological product, or any other prescription drug and which may include:

(a) The average acquisition cost;

(b) The national average acquisition cost;

(c) The average manufacturer price;

(d) The average wholesale price;

(e) The brand effective rate;

(f) The generic effective rate;

(g) Discount indexing;

(h) Federal upper limits;

(i) The wholesale acquisition cost; and

(j) Any other term used by a pharmacy benefit manager or a health carrier to establish reimbursement rates for a pharmacy;

(8) "Maximum allowable cost list," a list of prescription drugs that:

(a) Includes the maximum allowable cost for each prescription drug; and

(b) Is used, directly or indirectly, by a pharmacy benefit manager;

(9) "Pharmaceutical manufacturer," any person engaged in the business of preparing, producing, converting, processing, packaging, labeling, or distributing a prescription drug, but not including a wholesale distributor or dispenser;

(10) "Pharmacist," the same as set forth in   36-11-2;

(11) "Pharmacy," the same as set forth in   36-11-2;

(12) "Pharmacy benefit management," the procurement of prescription drugs at a negotiated rate for dispensation within this state to covered individuals, the administration or management of prescription drug benefits provided by a third-party payor for the benefit of covered individuals, or any of the following services provided with regard to the administration of pharmacy benefits:

(a) Mail service pharmacy;

(b) Claims processing, retail network management, and payment of claims to pharmacies for prescription drugs dispensed to covered individuals;

(c) Clinical formulary development and management services;

(d) Rebate contracting and administration;

(e) Certain patient compliance, therapeutic intervention, and generic substitution programs; and

(f) Disease management programs involving prescription drug utilization;

(13) "Pharmacy benefit management fee," a fee that covers the cost of providing pharmacy benefit management, but does not exceed the value of the service performed by the pharmacy benefit manager;

(14) "Pharmacy benefit manager," a person that performs pharmacy benefit management, pursuant to a contract or other relationship with a third-party payor and includes:

(a) A person acting in a contractual or employment relationship for a pharmacy benefit manager while providing pharmacy benefit management for a third party payor; and

(b) A mail service pharmacy;

(15) "Pharmacy benefit manager affiliate," a pharmacy that, or a pharmacist who, directly or indirectly, through one or more intermediaries, owns or controls, is owned and controlled by, or is under common ownership or control of, a pharmacy benefit manager;

(16) "Pharmacy network," pharmacies that have contracted with a pharmacy benefit manager to dispense or sell prescription drugs to covered individuals under a health benefit plan for which the prescription drug benefit is managed by a pharmacy benefit manager;

(17) "Prescription drug," a drug classified by the United States Food and Drug Administration as requiring a prescription by a health care practitioner, prior to being administered or dispensed to a patient, and including interchangeable biological products, brand names, and generic drugs;

(18) "Prescription drug benefit,” a health benefit plan providing third-party payment or prepayment for prescription drugs;

(19) "Prescription drug order,” the same as set forth in   36-11-2;

(20) "Proprietary information," information on pricing, costs, revenue, taxes, market share, negotiating strategies, customers, and personnel held by a private entity and used for that private entity's business purposes;

(21) "Rebate," a discount or other negotiated price concession that is paid directly or indirectly to a pharmacy benefit manager by a pharmaceutical manufacturer or by an entity in the prescription drug supply chain, other than a covered individual, and which is:

(a) Based on a pharmaceutical manufacturer's list price for a prescription drug;

(b) Based on utilization;

(c) Designed to maintain, for the pharmacy benefit manager, a net price for a prescription drug, during a specified period of time, in the event the pharmaceutical manufacturer's list price increases; or

(d) Based on estimates regarding the quantity of a prescribed drug that will be dispensed by a pharmacy to covered individuals;

(22) "Spread pricing," an amount charged or claimed by a pharmacy benefit manager that is in excess of the ingredient cost for a dispensed prescription drug, plus a dispensing fee paid directly or indirectly to a pharmacy, pharmacist, or other provider, on behalf of the third-party payor, less a pharmacy benefit management fee;

(23) "Third-party payor," any entity, other than a covered individual, a covered individual's representative, or a healthcare provider, which is responsible for any amount of reimbursement for a prescription drug benefit, provided the term includes a health carrier and a health benefit plan;

(24) "Trade secret," the same as set forth in   37-29-1;

(25) "Unaffiliated pharmacy," a dispensing pharmacy that is not:

(a) Owned, in whole or in part, by a pharmacy benefit manager;

(b) A subsidiary of a pharmacy benefit manager; or

(c) An affiliate of a pharmacy benefit manager; and

(26) "Wholesale distributor," the same as set forth in   36-11A-25.

Section 2. That   58-29E-2 be AMENDED:

58-29E-2. A person may not act as a pharmacy benefit manager in this state without a license to operate as a third party administrator pursuant to chapter 58-29D. Sections 58-29D-26, 58-29D-27, and 58-29D-29 do not apply to pharmacy benefits managers.

Section 3. That   58-29E-3 be AMENDED:

58-29E-3. Each pharmacy benefit manager shall perform its duties in good faith and with fair dealing toward the third-party payor.

Section 4. That   58-29E-4 be AMENDED:

58-29E-4. A third-party payor may request that a pharmacy benefit manager, with which it has a pharmacy benefit management services contract, disclose to the third-party payor the amount of all rebate revenues and the nature, type, and amounts of all other