SECTION 1. The purpose of this Act is to establish minimum and uniform standards and criteria for the audit of pharmacy records by or on behalf of certain entities.

SECTION 2. The General Laws are hereby amended by inserting after chapter  175K the following chapter:-

Chapter  175L

Regulation of Pharmacy Audits

Section 1. Definitions.

For purposes of this chapter the following terms shall have the following meanings:

"Pharmacy Benefits Manager", any person or entity that administers the prescription drug, prescription device, pharmacist services or prescription drug and device and pharmacist services portion of a health benefit plan on behalf of plan sponsors such as self-insured employers, insurance companies, and labor unions. A health benefit plan that does not contract with a pharmacy benefit manager shall be considered a pharmacy benefit manager for the purposes of this chapter unless specifically exempted. The provisions of this chapter shall not apply to a public health care payer as defined in section 1 of chapter 118G. 

"Commissioner", the commissioner of insurance or his designee.

Section 2. Certification of Pharmacy Benefits Managers

(a) Except as provided in subsection (d) of this section, no person shall act as a pharmacy benefits manager without first obtaining a certificate of registration from the commissioner.

(b) Any person seeking a certificate of registration shall apply to the commissioner, in writing, on a form provided by the commissioner. The application form shall state (1) the name, address, official position and professional qualifications of each individual responsible for the conduct of the affairs of the pharmacy benefits manager, including all members of the board of directors, board of trustees, executive committee, other governing board or committee, the principal officers in the case of a corporation, the partners or members in the case of a partnership or association and any other person who exercises control or influence over the affairs of the pharmacy benefits manager, and (2) the name and address of the applicant's agent for service of process in the Commonwealth.

(c) Each application for a certificate of registration shall be accompanied by a nonrefundable fee set by the Commissioner of no less than five hundred dollars.

(d) A health benefit plan that does not contract with a pharmacy benefit manager shall not be required to obtain a certificate of registration. Such health benefit plan shall notify the commissioner annually, in writing that it is affiliated with or operating a business as a pharmacy benefits manager.

(e) Any person acting as a pharmacy benefits manager on January 1, 2011, and required to obtain a certificate of registration under subsection (a) of this section, shall obtain a certificate of registration from the commissioner not later than April 1, 2011.

Section 3. Audit Scope and Procedures.

(a) Notwithstanding any general or special law to the contrary, an audit of the records of a pharmacy conducted by a pharmacy benefit manager shall follow these procedures:

    (1) The contract between a pharmacy and a pharmacy benefit manager  shall identify and describe in detail the audit procedures;

    (2) The auditor  shall give the pharmacy written notice at least  one week prior to conducting the initial on-site audit for each audit cycle;

    (3) The  auditor shall not interfere with the delivery of pharmacist services to a patient and shall  make reasonable effort to minimize inconvenience and disruption to pharmacy operations during the audit process;

    (4) Any audit which involves clinical or professional judgment shall be conducted by or in consultation with a licensed pharmacist from any state. ;

    (5) A pharmacy may use the records of a hospital, physician, or other authorized prescriber  to validate the  record with respect to orders or refills of prescription drugs or devices.

    (6) A finding of an overpayment or underpayment  shall be based on the actual overpayment or underpayment. A projection for overpayment or underpayment may be used to determine recoupment as part of a settlement as agreed to by the pharmacy. ;

    (10) Each pharmacy shall be audited under the same standards and parameters as other similarly situated pharmacies audited by the entity;

    (12) An audit may not be initiated or scheduled during the first  five calendar days of any month due to the high volume of prescriptions filled in the pharmacy during that time unless otherwise consented to by the pharmacy;

(b) The  auditor shall provide the pharmacy with a written report of the audit.

    (10) The audit report  shall be signed and shall include the signature of any pharmacist participating in the audit.

    (11) A pharmacy benefit manager shall not withhold payment to a pharmacy for reimbursement claims as a means to recoup money owed to the  pharmacy benefit manager by said pharmacy as a result of an audit unless an identified discrepancy for a preliminary audit exceeds $25,000.

    (12) The auditor shall provide a copy of the final audit report, after completion of any review process, to the plan sponsor.

Section 4. Appeal Process.

(a)  Each auditor shall establish an appeals process under which a pharmacy may appeal an unfavorable preliminary audit report to the entity.

(b) The National Council for Prescription Drug Programs ("NCPDP") or any other recognized national industry standard shall be used to evaluate claims submission and product size disputes.

(c) If, following the appeal, the  auditor finds that an unfavorable audit report or any portion thereof is unsubstantiated, the entity shall dismiss the audit report or said portion without the necessity of any further action.

Section 5. The provisions of this chapter shall not apply to any audit or investigation that involves potential fraud, willful misrepresentation, or abuse, including, but not limited to, investigative audits or any other statutory or regulatory provision that authorizes investigations relating to insurance fraud.

Section 6. The commissioner may promulgate regulations to enforce the provisions of this chapter including, but not limited to, oversight of the following audit practices:

(a) The number of days by which a preliminary audit report shall be delivered to the pharmacy after conclusion of the audit.

(b) The number of days by which a pharmacy shall be allowed to address any discrepancy found during the preliminary audit;

(c) The number of days by which a final audit report shall be delivered to the pharmacy after receipt of the preliminary audit report or final appeal, as provided for in section 4, whichever is later;

(d) The means by which a pharmacy benefit manager may request information from a pharmacy.

SECTION 3. The audit criteria set forth in this chapter shall apply only to audits of claims for services provided and claims submitted for payment after April 1, 2011.