Bill Summary – FastDemocracy

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                                       H.233
    An act relating to licensure and regulation of pharmacy benefit managers
 It is hereby enacted by the General Assembly of the State of Vermont:
 Sec. 1. 18 V.S.A. chapter 77 is added to read:
             CHAPTER 77. PHARMACY BENEFIT MANAGERS
                        Subchapter 1. General Provisions
 § 3601. PURPOSE
    The purpose of this chapter is to establish standards and criteria for the
 licensure and regulation of pharmacy benefit managers providing claims
 processing services or other prescription drug or device services for health
 benefit plans by:
       (1) promoting, preserving, and protecting the public health, safety, and
 welfare through effective regulation and licensure of pharmacy benefit
 managers;
       (2) promoting the solvency of the commercial health insurance industry,
 the regulation of which is reserved to the states by the McCarran-Ferguson
 Act, 15 U.S.C. §§ 1011–1015, as well as providing for consumer savings and
 for fairness in prescription drug benefits;
       (3) providing for the powers and duties of the Commissioner of
 Financial Regulation; and
       (4) prescribing penalties and fines for violations of this chapter.
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 § 3602. DEFINITIONS
    As used in this chapter:
       (1) “Claims processing services” means the administrative services
 performed in connection with the processing and adjudicating of claims
 relating to pharmacist services that include receiving payments for pharmacist
 services or making payments to pharmacists or pharmacies for pharmacy
 services, or both.
       (2) “Commissioner” means the Commissioner of Financial Regulation.
       (3) “Covered person” means a member, policyholder, subscriber,
 enrollee, beneficiary, dependent, or other individual participating in a health
 benefit plan.
       (4) “Health benefit plan” means a policy, contract, certificate, or
 agreement entered into, offered, or issued by a health insurer to provide,
 deliver, arrange for, pay for, or reimburse any of the costs of physical, mental,
 or behavioral health care services.
       (5) “Health insurer” has the same meaning as in section 9402 of this title
 and includes:
          (A) health insurance companies, nonprofit hospital and medical
 service corporations, and health maintenance organizations;
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          (B) employers, labor unions, and other group of persons organized in
 Vermont that provide a health benefit plan to beneficiaries who are employed
 or reside in Vermont; and
          (C) the State of Vermont and any agent or instrumentality of the State
 that offers, administers, or provides financial support to State government.
       (6) “Maximum allowable cost” means the per unit drug product
 reimbursement amount, excluding dispensing fees, for a group of equivalent
 multisource prescription drugs.
       (7) “Other prescription drug or device services” means services other
 than claims processing services provided directly or indirectly, whether in
 connection with or separate from claims processing services, and may include:
          (A) negotiating rebates, price concessions, discounts, or other
 financial incentives and arrangements with drug companies;
          (B) disbursing or distributing rebates or price concessions, or both;
          (C) managing or participating in incentive programs or arrangements
 for pharmacist services;
          (D) negotiating or entering into contractual arrangements with
 pharmacists or pharmacies, or both;
          (E) developing and maintaining formularies;
          (F) designing prescription benefit programs; and
          (G) advertising or promoting services.
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       (8) “Pharmacist” means an individual licensed as a pharmacist pursuant
 to 26 V.S.A. chapter 36.
       (9) “Pharmacist services” means products, goods, and services, or a
 combination of these, provided as part of the practice of pharmacy.
       (10) “Pharmacy” means a place licensed by the Vermont Board of
 Pharmacy at which drugs, chemicals, medicines, prescriptions, and poisons are
 compounded, dispensed, or sold at retail.
       (11) “Pharmacy benefit management” means an arrangement for the
 procurement of prescription drugs at a negotiated rate for dispensation within
 this State to beneficiaries, the administration or management of prescription
 drug benefits provided by a health benefit plan for the benefit of beneficiaries,
 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 beneficiaries;
          (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 or chronic care management programs.
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       (12)(A) “Pharmacy benefit manager” means an individual, corporation,
 or other entity, including a wholly or partially owned or controlled subsidiary
 of a pharmacy benefit manager, that provides pharmacy benefit management
 services for health benefit plans.
          (B) The term “pharmacy benefit manager” does not include:
             (i) a health care facility licensed in this State;
             (ii) a health care professional licensed in this State;
             (iii) a consultant who only provides advice as to the selection or
 performance of a pharmacy benefit manager;
             (iv) a health insurer to the extent that it performs any claims
 processing and other prescription drug or device services exclusively for its
 enrollees; or
             (v) an entity that provides pharmacy benefit management services
 for Vermont Medicaid.
       (13) “Pharmacy benefit manager affiliate” means a pharmacy or
 pharmacist that, directly or indirectly, through one or more intermediaries, is
 owned or controlled by, or is under common ownership or control with, a
 pharmacy benefit manager.
 § 3603. RULEMAKING
    The Commissioner of Financial Regulation shall adopt rules in accordance
 with 3 V.S.A. chapter 25 to carry out the provisions of this chapter. The rules VT LEG #375577 v.1
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 shall include, as appropriate, requirements that health insurers maintain the
 confidentiality of proprietary information and that pharmacy benefit managers
 file their advertising and solicitation materials with the Commissioner for
 approval prior to sending any such materials to patients or consumers.
 § 3604. REPORTING
    Annually on or before January 15, the Department of Financial Regulation
 shall report to the House Committee on Health Care and the Senate
 Committees on Health and Welfare and on Finance regarding pharmacy
 benefit managers’ compliance with the provisions of this chapter.
      Subchapter 2. Pharmacy Benefit Manager Licensure and Regulation
 § 3611. LICENSURE
    (a) A person shall not establish or operate as a pharmacy benefit manager
 for health benefit plans in this State without first obtaining a license from the
 Commissioner of Financial Regulation.
    (b) A person applying for a pharmacy benefit manager license shall submit
 an application for licensure in the form and manner prescribed by the
 Commissioner and shall include with the application a nonrefundable
 application fee of $1,600.00 and an initial licensure fee of $10,000.00.
    (c) The Commissioner may refuse to issue or renew a pharmacy benefit
 manager license if the Commissioner determines that the applicant or any
 individual responsible for the conduct of the applicant’s affairs is not VT LEG #375577 v.1
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 competent, trustworthy, financially responsible, or of good personal and
 business reputation, or has been found to have violated the insurance laws of
 this State or any other jurisdiction, or has had an insurance or other certificate
 of authority or license denied or revoked for cause by any jurisdiction.
    (d) Unless surrendered, suspended, or revoked by the Commissioner, a
 license issued under this section shall remain valid, provided the pharmacy
 benefit manager does all of the following:
          (1) Continues to do business in this State.
          (2) Complies with the provisions of this chapter and any applicable
 rules.
          (3) Submits a renewal application in the form and manner prescribed by
 the Commissioner and pays the annual license renewal fee of $12,000.00. The
 renewal application and renewal fee shall be due to the Commissioner on or
 before 90 days prior to the anniversary of the effective date of the pharmacy
 benefit manager’s initial or most recent license.
    (e) The Commissioner shall adopt rules pursuant to 3 V.S.A. chapter 25 to
 establish the licensing application, financial, and reporting requirements for
 pharmacy benefit managers in accordance with this section.
 § 3612. PROHIBITED PRACTICES
    (a) A participation contract between a pharmacy benefit manager and a
 pharmacist shall not prohibit, restrict, or penalize a pharmacy or pharmacist in
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 any way from disclosing to any covered person any health care information
 that the pharmacy or pharmacist deems appropriate, including:
        (1) the nature of treatment, risks, or alternatives to treatment;
        (2) the availability of alternate therapies, consultations, or tests;
        (3) the decision of utilization reviewers or similar persons to authorize
 or deny services;
        (4) the process that is used to authorize or deny health care services; or
        (5) information on financial incentives and structures used by the health
 insurer.
      (b) A pharmacy benefit manager shall not prohibit a pharmacy or
 pharmacist from:
        (1) discussing information regarding the total cost for pharmacist
 services for a prescription drug;
        (2) providing information to a covered person regarding the covered
 person’s cost-sharing amount for a prescription drug;
        (3) disclosing to a covered person the cash price for a prescription drug;
 or
        (4) selling a more affordable alternative to the covered person if a more
 affordable alternative is available.
      (c) A pharmacy benefit manager contract with a participating pharmacist or
 pharmacy shall not prohibit, restrict, or limit disclosure of information to the VT LEG #375577 v.1
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 Commissioner, law enforcement, or State and federal government officials,
 provided that:
       (1) the recipient of the information represents that the recipient has the
 authority, to the extent provided by State or federal law, to maintain
 proprietary information as confidential; and
       (2) prior to disclosure of information designated as confidential, the
 pharmacist or pharmacy:
          (A) marks as confidential any document in which the information
 appears; and
          (B) requests confidential treatment for any oral communication of the
 information.
    (d) A pharmacy benefit manager shall not terminate a contract with or
 penalize a pharmacist or pharmacy due to the pharmacist or pharmacy:
       (1) disclosing information about pharmacy benefit manager practices,
 except for information determined to be a trade secret under State law or by the
 Commissioner, when disclosed in a manner other than in accordance with
 subsection (c) of this section; or
       (2) sharing any portion of the pharmacy benefit manager contract with
 the Commissioner pursuant to a complaint or query regarding the contract’s
 compliance with the provisions of this chapter.
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       (e)(1) A pharmacy benefit manager shall not require a covered person
 purchasing a covered prescription drug to pay an amount greater than the lesser
 of:
            (A) the cost-sharing amount under the terms of the health benefit
 plan, as determined in accordance with subdivision (2) of this subsection (e);
            (B) the maximum allowable cost for the drug; or
            (C) the amount the covered person would pay for the drug, after
 application of any known discounts, if the covered person were paying the cash
 price.
          (2)(A) A pharmacy benefit manager shall attribute any amount paid by
 or on behalf of a covered person under subdivision (1) of this subsection (e),
 including any third-party payment, financial assistance, discount, coupon, or
 any other reduction in out-of-pocket expenses made by or on behalf of a
 covered person for prescription drugs, toward:
               (i) the out-of-pocket limits for prescription drug costs under 8
 V.S.A. § 4089i;
               (ii) the covered person’s deductible, if any; and
               (iii) to the extent not inconsistent with Sec. 2707 of the Public
 Health Service Act, 42 U.S.C. § 300gg-6, the annual out-of-pocket maximums
 applicable to the covered person’s health benefit plan.
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          (B) The provisions of subdivision (A) of this subdivision (2) relating
 to a third-party payment, financial assistance, discount, coupon, or other
 reduction in out-of-pocket expenses made on behalf of a covered person shall
 only apply to a prescription drug:
             (i) for which there is no generic drug or interchangeable biological
 product, as those terms are defined in section 4601 of this title; or
             (ii) for which there is a generic drug or interchangeable biological
 product, as those terms are defined in section 4601 of this title, but for which
 the covered person has obtained access through prior authorization, a step
 therapy protocol, or the pharmacy benefit manager’s or health benefit plan’s
 exceptions and appeals process.
          (C) The provisions of subdivision (A) of this subdivision (2) shall
 apply to a high-deductible health plan only to the extent that it would not
 disqualify the plan from eligibility for a health savings account pursuant to 26
 U.S.C. § 223.
    (f) A pharmacy benefit manager shall not conduct or participate in spread
 pricing in this State, which means that a pharmacy benefit manager must
 ensure that the total amount required to be paid by a health benefit plan and a
 covered person for a prescription drug covered under the plan does not exceed
 the amount paid to the pharmacy for dispensing the drug.
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 § 3613. ENFORCEMENT; RIGHT OF ACTION
    (a) The Commissioner of Financial Regulation shall enforce compliance
 with the provisions of this chapter.
    (b)(1) The Commissioner may examine or audit the books and records of a
 pharmacy benefit manager providing claims processing services or other
 prescription drug or device services for a healt