Senator Evan J. Vickers proposes the following substitute bill:


1     
PHARMACY BENEFIT MANAGER AMENDMENTS

2     
2019 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Paul Ray

5     
Senate Sponsor: Evan J. Vickers

6     Cosponsors:
7     Patrice M. Arent
8     Melissa G. Ballard
9     Stewart E. Barlow
10     Walt Brooks
11     Kay J. Christofferson
12     Brad M. Daw
13     Steve Eliason
14     Francis D. Gibson
15     Stephen G. Handy
16     Jon Hawkins
Sandra Hollins
Dan N. Johnson
Brian S. King
Karen Kwan
Kelly B. Miles
Carol Spackman Moss
Merrill F. Nelson
Lee B. Perry
Val K. Potter
Marie H. Poulson
Susan Pulsipher
Tim Quinn
Angela Romero
Douglas V. Sagers
Mike Schultz
Lawanna Shurtliff
Casey Snider
Norman K. Thurston
Christine F. Watkins
Elizabeth Weight
Mark A. Wheatley
Mike Winder
17     

18     LONG TITLE
19     General Description:
20          This bill amends and creates requirements for pharmacy benefit managers.
21     Highlighted Provisions:
22          This bill:
23          ▸     creates a pharmacy benefit manager license;
24          ▸     requires a person who acts as a pharmacy benefit manager in the state to be licensed
25     by the Insurance Department; and
26          ▸     creates certain operating and reporting requirements for pharmacy benefit managers.
27     Money Appropriated in this Bill:
28          None
29     Other Special Clauses:
30          This bill provides a special effective date.
31     Utah Code Sections Affected:
32     AMENDS:
33          31A-2-201.2, as last amended by Laws of Utah 2018, Chapter 319
34     ENACTS:
35          31A-46-101, Utah Code Annotated 1953
36          31A-46-102, Utah Code Annotated 1953
37          31A-46-201, Utah Code Annotated 1953
38          31A-46-202, Utah Code Annotated 1953
39          31A-46-301, Utah Code Annotated 1953
40          31A-46-304, Utah Code Annotated 1953
41          31A-46-401, Utah Code Annotated 1953
42          31A-46-402, Utah Code Annotated 1953
43     RENUMBERS AND AMENDS:
44          31A-46-302, (Renumbered from 58-17b-626, as enacted by Laws of Utah 2018,
45     Chapter 305)
46          31A-46-303, (Renumbered from 31A-22-640, as last amended by Laws of Utah 2015,
47     Chapter 258)
48     

49     Be it enacted by the Legislature of the state of Utah:
50          Section 1. Section 31A-2-201.2 is amended to read:
51          31A-2-201.2. Evaluation of health insurance market.
52          (1) Each year the commissioner shall:
53          (a) conduct an evaluation of the state's health insurance market;
54          (b) report the findings of the evaluation to the Health and Human Services Interim
55     Committee before December 1 of each year; and
56          (c) publish the findings of the evaluation on the department website.
57          (2) The evaluation required by this section shall:
58          (a) analyze the effectiveness of the insurance regulations and statutes in promoting a
59     healthy, competitive health insurance market that meets the needs of the state, and includes an
60     analysis of:
61          (i) the availability and marketing of individual and group products;
62          (ii) rate changes;
63          (iii) coverage and demographic changes;
64          (iv) benefit trends;
65          (v) market share changes; and
66          (vi) accessibility;
67          (b) assess complaint ratios and trends within the health insurance market, which
68     assessment shall include complaint data from the Office of Consumer Health Assistance within
69     the department;
70          (c) contain recommendations for action to improve the overall effectiveness of the
71     health insurance market, administrative rules, and statutes; [and]
72          (d) include claims loss ratio data for each health insurance company doing business in
73     the state[.]; and
74          (e) include information about pharmacy benefit managers collected under Section
75     31A-46-301.
76          (3) When preparing the evaluation and report required by this section, the
77     commissioner may seek the input of insurers, employers, insured persons, providers, and others
78     with an interest in the health insurance market.
79          (4) The commissioner may adopt administrative rules for the purpose of collecting the
80     data required by this section, taking into account the business confidentiality of the insurers.
81          (5) Records submitted to the commissioner under this section shall be maintained by
82     the commissioner as protected records under Title 63G, Chapter 2, Government Records
83     Access and Management Act.
84          Section 2. Section 31A-46-101 is enacted to read:
85     
CHAPTER 46. PHARMACY BENEFIT MANAGER LICENSING ACT

86     
Part 1. General Provisions

87          31A-46-101. Title.
88          This chapter is known as the "Pharmacy Benefit Manager Licensing Act."
89          Section 3. Section 31A-46-102 is enacted to read:
90          31A-46-102. Definitions.
91          As used in this chapter:
92          (1) "Administrative fee" means any payment, other than a rebate, that a pharmaceutical
93     manufacturer makes directly or indirectly to a pharmacy benefit manager.
94          (2) "Contracting insurer" means an insurer as defined in Section 31A-22-636 with
95     whom a pharmacy benefit manager contracts to provide a pharmacy benefit management
96     service.
97          (3) "Pharmacist" means the same as that term is defined in Section 58-17b-102.
98          (4) "Pharmacy" means the same as that term is defined in Section 58-17b-102.
99          (5) "Pharmacy benefits management service" means any of the following services
100     provided to a health benefit plan, or to a participant of a health benefit plan:
101          (a) negotiating the amount to be paid by a health benefit plan for a prescription drug; or
102          (b) administering or managing a prescription drug benefit provided by the health
103     benefit plan for the benefit of a participant of the health benefit plan, including administering
104     or managing:
105          (i) a mail service pharmacy;
106          (ii) a specialty pharmacy;
107          (iii) claims processing;
108          (iv) payment of a claim;
109          (v) retail network management;
110          (vi) clinical formulary development;
111          (vii) clinical formulary management services;
112          (viii) rebate contracting;
113          (ix) rebate administration;
114          (x) a participant compliance program;
115          (xi) a therapeutic intervention program;
116          (xii) a disease management program; or
117          (xiii) a service that is similar to, or related to, a service described in Subsection (5)(a)
118     or (5)(b)(i) through (xii).
119          (6) "Pharmacy benefit manager" means a person licensed under this chapter to provide
120     a pharmacy benefit management service.
121          (7) "Pharmacy service" means a product, good, or service provided to an individual by
122     a pharmacy or pharmacist.
123          (8) (a) "Rebate" means a refund, discount, or other price concession that is paid by a
124     pharmaceutical manufacturer to a pharmacy benefit manager based on a prescription drug's
125     utilization or effectiveness.
126          (b) "Rebate" does not include an administrative fee.
127          Section 4. Section 31A-46-201 is enacted to read:
128     
Part 2. Licensure

129          31A-46-201. License required.
130          (1) A person may not perform, offer to perform, or advertise any pharmacy benefits
131     management service in the state unless the person is licensed as a pharmacy benefit manager
132     under this chapter.
133          (2) A person may not utilize the services of another person as a pharmacy benefit
134     manager if the person knows or has reason to know that the other person does not have a
135     license under this chapter.
136          Section 5. Section 31A-46-202 is enacted to read:
137          31A-46-202. Application for licensure.
138          (1) To obtain or renew a license as a pharmacy benefit manager, a person shall:
139          (a) submit an application to the commissioner on forms and in a manner established by
140     the commissioner by rule made in accordance with Title 63G, Chapter 3, Utah Administrative
141     Rulemaking Act; and
142          (b) pay a licensure fee established by the department in accordance with Section
143     31A-3-103.
144          (2) (a) The commissioner may require an applicant to submit information or
145     documentation regarding the management and ownership of the pharmacy benefit manager in
146     the application described in Subsection (1)(a).
147          (b) Any material change in the information submitted in an application described in
148     Subsection (1)(a) shall be reported to the department within 30 days after the day on which the
149     information changes.
150          (3) The term of a license issued under this section is one year.
151          Section 6. Section 31A-46-301 is enacted to read:
152     
Part 3. Operating Requirements

153          31A-46-301. Reporting requirements.
154          (1) Before April 1 of each year, a pharmacy benefit manager operating in the state shall
155     report to the department, for the previous calendar year:
156          (a) any insurer, pharmacy, or pharmacist in the state with which the pharmacy benefit
157     manager had a contract;
158          (b) the total value, in the aggregate, of all rebates and administrative fees that are
159     attributable to enrollees of a contracting insurer; and
160          (c) the percentage of aggregate rebates that the pharmacy benefit manager retained
161     under the pharmacy benefit manager's agreement to provide pharmacy benefits management
162     services to a contracting insurer.
163          (2) Records submitted to the commissioner under Subsections (1)(b) and (c) are a
164     protected record under Title 63G, Chapter 2, Government Records Access and Management
165     Act.
166          (3) (a) The department shall publish the information provided by a pharmacy benefit
167     manager under Subsection (1)(c) in the annual report described in Section 31A-2-201.2.
168          (b) The department may not publish information submitted under Subsection (1)(b) or
169     (c) in a manner that:
170          (i) makes a specific submission from a contracting insurer or pharmacy benefit
171     manager identifiable; or
172          (ii) is likely to disclose information that is a trade secret as defined in Section 13-24-2.
173          (c) At least 30 days before the day on which the department publishes the data, the
174     department shall provide a pharmacy benefit manager that submitted data under Subsection
175     (1)(b) or (c) with:
176          (i) a general description of the data that will be published by the department;
177          (ii) an opportunity to submit to the department, within a reasonable period of time and
178     in a manner established by the department by rule made in accordance with Title 63G, Chapter
179     3, Utah Administrative Rulemaking Act:
180          (A) any correction of errors, with supporting evidence and comments; and
181          (B) information that demonstrates that the publication of the data will violate
182     Subsection (3)(b), with supporting evidence and comments.
183          Section 7. Section 31A-46-302, which is renumbered from Section 58-17b-626 is
184     renumbered and amended to read:
185          [58-17b-626].      31A-46-302. Direct or indirect remuneration by pharmacy
186     benefit managers -- Disclosure of customer costs -- Limit on customer payment for
187     prescription drugs.
188          (1) As used in this section:
189          (a) "Allowable claim amount" means the amount paid by an insurer under the
190     customer's health benefit plan.
191          [(a)] (b) "Cost share" means the amount paid by an insured customer under the
192     customer's health benefit plan.
193          [(b)] (c) "Direct or indirect remuneration" means any adjustment in the total
194     compensation:
195          (i) received by a pharmacy from a pharmacy [benefits manager or coordinator] benefit
196     manager for the sale of a drug, device, or other product or service; and
197          (ii) that is determined after the sale of the product or service.
198          [(c)] (d) "Health benefit plan" means the same as that term is defined in Section
199     31A-1-301.
200          (e) "Pharmacy reimbursement" means the amount paid to a pharmacy by a pharmacy
201     benefit manager for a dispensed prescription drug.
202          [(d)] (f) "Pharmacy services administration organization" means an entity that contracts
203     with a pharmacy to assist with third-party payer interactions and administrative services related
204     to third-party payer interactions, including:
205          (i) contracting with a pharmacy [benefits manager or coordinator] benefit manager on
206     behalf of the pharmacy; and
207          (ii) managing a pharmacy's claims payments from third-party payers.
208          [(e)] (g) "Pharmacy service entity" means:
209          (i) a pharmacy services administration organization; or
210          (ii) a pharmacy [benefits manager or coordinator] benefit manager.
211          [(f)] (h) (i) "Reimbursement report" means a report on the adjustment in total
212     compensation for a claim.
213          (ii) "Reimbursement report" does not include a report on adjustments made pursuant to
214     a pharmacy audit or reprocessing.
215          [(g)] (i) "Sale" means a prescription drug claim covered by a health benefit plan.
216          (2) If a pharmacy service entity engages in direct or indirect remuneration with a
217     pharmacy, the pharmacy service entity shall make a reimbursement report available to the
218     pharmacy upon the pharmacy's request.
219          (3) For the reimbursement report described in Subsection (2), the pharmacy service
220     entity shall:
221          (a) include the adjusted compensation amount related to a claim and the reason for the
222     adjusted compensation; and
223          (b) provide the reimbursement report:
224          (i) in accordance with the contract between the pharmacy and the pharmacy service
225     entity;
226          (ii) in an electronic format that is easily accessible; and
227          (iii) within 120 days after the day on which the pharmacy [benefits manager or
228     coordinator] benefit manager receives a report of a sale of a product or service by the
229     pharmacy.
230          (4) A pharmacy service entity shall, upon a pharmacy's request, provide the pharmacy
231     with:
232          (a) the reasons for any adjustments contained in a reimbursement report; and
233          (b) an explanation of the reasons provided in Subsection (4)(a).
234          (5) (a) A pharmacy [benefits manager or coordinator] benefit manager may not prohibit
235     or penalize the disclosure by a pharmacist of:
236          (i) an insured customer's cost share for a covered prescription drug;
237          (ii) the availability of any therapeutically equivalent alternative medications; or
238          (iii) alternative methods of paying for the prescription medication, including paying the
239     cash price, that are less expensive than the cost share of the prescription drug.
240          (b) Penalties that are prohibited under Subsection (5)(a) include increased utilization
241     review, reduced payments, and other financial disincentives.
242          (6) A pharmacy [benefits manager or coordinator] benefit manager may not require an
243     insured customer to pay, for a covered prescription drug, more than the lesser of:
244          (a) the applicable cost share of the prescription drug being dispensed; [or]
245          (b) the applicable allowable claim amount of the prescription drug being dispensed;
246          (c) the applicable pharmacy reimbursement of the prescription drug being dispensed; or
247          [(b)] (d) the retail price of the drug without prescription drug coverage.
248          Section 8. Section 31A-46-303, which is renumbered from Section 31A-22-640 is
249     renumbered and amended to read:
250          [31A-22-640].      31A-46-303. Insurer and pharmacy benefit management
251     services -- Registration -- Maximum allowable cost -- Audit restrictions.
252          (1) [For purposes of] As used in this section:
253          (a) "Maximum allowable cost" means:
254          (i) a maximum reimbursement amount for a group of pharmaceutically and
255     therapeutically equivalent drugs; or
256          (ii) any similar reimbursement amount that is used by a pharmacy benefit manager to
257     reimburse pharmacies for multiple source drugs.
258          (b) "Obsolete" means a product that may be listed in national drug pricing compendia
259     but is no longer available to be dispensed based on the expiration date of the last lot
260     manufactured.
261          (c) " Pharmacy benefit manager" means a person or entity that provides pharmacy
262     benefit management services as defined in Section 49-20-502 on behalf of an insurer as defined
263     in Subsection 31A-22-636(1).
264          (2) An insurer and an insurer's pharmacy benefit manager is subject to the pharmacy
265     audit provisions of Section 58-17b-622.
266          (3) A pharmacy benefit manager shall not use maximum allowable cost as a basis for
267     reimbursement to a pharmacy unless:
268          (a) the drug is listed as "A" or "B" rated in the most recent version of the United States
269     Food and Drug Administration's approved drug products with therapeutic equivalent
270     evaluations, also known as the "Orange Book," or has an "NR" or "NA" rating or similar rating
271     by a nationally recognized reference; and
272          (b) the drug is:
273          (i) generally available for purchase in this state from a national or regional wholesaler;
274     and
275          (ii) not obsolete.
276          (4) The maximum allowable cost may be determined using comparable and current
277     data on drug prices obtained from multiple nationally recognized, comprehensive data sources,
278     including wholesalers, drug file vendors, and pharmaceutical manufacturers for drugs that are
279     available for purchase by pharmacies in the state.
280          (5) For every drug for which the pharmacy benefit manager uses maximum allowable
281     cost to reimburse a contracted pharmacy, the pharmacy benefit manager shall:
282          (a) include in the contract with the pharmacy information identifying the national drug
283     pricing compendia and other data sources used to obtain the drug price data;
284          (b) review and make necessary adjustments to the maximum allowable cost, using the
285     most recent data sources identified in Subsection (5)(a), at least once per week;
286          (c) provide a process for the contracted pharmacy to appeal the maximum allowable
287     cost in accordance with Subsection (6); and
288          (d) include in each contract with a contracted pharmacy a process to obtain an update
289     to the pharmacy product pricing files used to reimburse the pharmacy in a format that is readily
290     available and accessible.
291          (6) (a) The right to appeal in Subsection (5)(c) shall be:
292          (i) limited to 21 days following the initial claim adjudication; and
293          (ii) investigated and resolved by the pharmacy benefit manager within 14 business
294     days.
295          (b) If an appeal is denied, the pharmacy benefit manager shall provide the contracted
296     pharmacy with the reason for the denial and the identification of the national drug code of the
297     drug that may be purchased by the pharmacy at a price at or below the price determined by the
298     pharmacy benefit manager.
299          (7) The contract with each pharmacy shall contain a dispute resolution mechanism in
300     the event either party breaches the terms or conditions of the contract.
301          [(8) (a) To conduct business in the state, a pharmacy benefit manager shall register
302     with the Division of Corporations and Commercial Code within the Department of Commerce
303     and annually renew the registration. To register under this section, the pharmacy benefit
304     manager shall submit an application which shall contain only the following information:]
305          [(i) the name of the pharmacy benefit manager;]
306          [(ii) the name and contact information for the registered agent for the pharmacy benefit
307     manager; and]
308          [(iii) if applicable, the federal employer identification number for the pharmacy benefit
309     manager.]
310          [(b) The Department of Commerce may establish a fee in accordance with Title 63J,
311     Chapter 1, Budgetary Procedures Act, for the initial registration and the annual renewal of the
312     registration, which may not exceed $100 per year.]
313          [(c) The following entities do not have to register as a pharmacy benefit manager under
314     Subsection (8)(a) when the entity is providing formulary services to its own patients,
315     employees, members, or beneficiaries:]
316          [(i) a health care facility licensed under Title 26, Chapter 21, Health Care Facility
317     Licensing and Inspection Act;]
318          [(ii) a pharmacy licensed under Title 58, Chapter 17b, Pharmacy Practice Act;]
319          [(iii) a health care professional licensed under Title 58, Occupations and Professions;]
320          [(iv) a health insurer; and]
321          [(v) a labor union.]
322          [(9)] (8) This section does not apply to a pharmacy benefit manager when the
323     pharmacy benefit manager is providing pharmacy benefit management services on behalf of the
324     state Medicaid program.
325          Section 9. Section 31A-46-304 is enacted to read:
326          31A-46-304. Claims practices.
327          (1) A pharmacy benefit manager shall permit a pharmacy to collect the amount of a
328     customer's cost share from any source.
329          (2) A pharmacy benefit manager may not deny or reduce a reimbursement to a
330     pharmacy or a pharmacist after the adjudication of the claim, unless:
331          (a) the pharmacy or pharmacist submitted the original claim fraudulently;
332          (b) the original reimbursement was incorrect because:
333          (i) the pharmacy or pharmacist had already been paid for the pharmacy service; or
334          (ii) an unintentional error resulted in an incorrect reimbursement; or
335          (c) the pharmacy service was not rendered by the pharmacy or pharmacist.
336          (3) Subsection (2) does not apply if:
337          (a) an investigative audit of pharmacy records for fraud, waste, abuse, or other
338     intentional misrepresentation indicates that the pharmacy or pharmacist engaged in criminal
339     wrongdoing, fraud, or other intentional misrepresentation; or
340          (b) the reimbursement is reduced as the result of the reconciliation of a reimbursement
341     amount under a performance contract if:
342          (i) the performance contract lays out clear performance standards under which the
343     reimbursement for a specific drug may be increased or decreased; and
344          (ii) the agreement between the pharmacy benefit manager and the pharmacy or
345     pharmacist explicitly states, in a separate document that is signed by the pharmacy benefit
346     manager and the pharmacy or pharmacist, that the provisions of Subsection (2) do not apply.
347          Section 10. Section 31A-46-401 is enacted to read:
348     
Part 4. Miscellaneous

349          31A-46-401. Penalties.
350          A person that violates a provision of this chapter is subject to the penalties described in
351     Section 31A-2-308.
352          Section 11. Section 31A-46-402 is enacted to read:
353          31A-46-402. Severability.
354          If any provision of this chapter or the application of any provision of this chapter is
355     found invalid, the remainder of this chapter shall be given effect without the invalid provision
356     or application.
357          Section 12. Effective date.
358          This bill takes effect on July 1, 2019.