Chapter 176D of the General Laws is hereby amended by inserting after section 3B the following section:-

Section 3C. (a) As used in this section, the following terms shall, unless the context clearly requires otherwise, have the following meanings:

“Maximum allowable cost list” or “list”, a list of drugs used by a pharmacy benefits manager in setting the maximum allowable cost upon which reimbursement to a pharmacy or pharmacist may be based.

"Pharmaceutical wholesaler", a person or entity that sells and distributes prescription pharmaceutical products, including without limitation a full line of brand-name, generic and over-the-counter pharmaceuticals, and that offers regular and private delivery to a pharmacy.

“Pharmacist”, as defined in section 1 of chapter 94C.

“Pharmacist services”, products, goods or services provided as a part of the practice of pharmacy.

“Pharmacy”, as defined in section 1 of chapter 94C.

"Pharmacy acquisition cost", the amount that a pharmaceutical wholesaler charges for a pharmaceutical product as listed on the pharmacy's billing invoice.

“Pharmacy benefits manager”, as defined in section 226 of chapter 175.

"Pharmacy benefits manager affiliate", (i) a pharmacy or pharmacist that directly or indirectly, through 1 or more intermediaries, owns or controls a pharmacy with a pharmacy benefits manager; or (ii) a pharmacy that directly or indirectly, through 1 or more intermediaries, is owned or controlled by or is under common ownership or control with a pharmacy benefits manager.

“Pharmacy benefits plan or program”, a plan or program that pays for, reimburses, covers the cost of or otherwise provides for pharmacist services to individuals who reside in or are employed in the commonwealth.

(b) Before a pharmacy benefits manager places or continues to administer a particular drug on a maximum allowable cost list, the drug shall:  (i) be listed as therapeutically equivalent and pharmaceutically equivalent “A” or "B" rated in the United States Food and Drug Administration’s most recent version of the Orange Book or Green Book or have an NR or NA rating by Medi-span, Elsevier Gold Standard Drug Database or a similar rating by a nationally recognized reference; (ii) be available for purchase by each pharmacy in the commonwealth from national or regional wholesalers operating in the commonwealth; and (iii) not be obsolete.

(c) (1) A pharmacy benefits manager shall: (i) provide access to its maximum allowable cost list to each pharmacy subject to the list; (ii) update its maximum allowable cost list on a timely basis, but in no event later than 7 calendar days after an increase of 10 per cent or more in the pharmacy acquisition cost from 60 per cent or more of the pharmaceutical wholesalers doing business in the commonwealth or a change in the methodology upon which the list is based or in the value of a variable involved in the methodology; (iii) provide a process for each pharmacy subject to the maximum allowable cost list to receive prompt notification of an update to the list; and (iv) provide a reasonable administrative appeal procedure to allow pharmacies to challenge maximum allowable costs and reimbursements made under a maximum allowable cost for a specific drug or drugs as not meeting the requirements of this section or being below the pharmacy acquisition cost.

(2) The reasonable administrative appeal procedure shall include a dedicated telephone number and email address or website for the purpose of submitting administrative appeals. Pharmacies shall be able to submit an administrative appeal directly to the pharmacy benefits manager regarding the pharmacy benefits plan or program or through a pharmacy service administrative organization. Pharmacies shall have no less than 7 business days to file an administrative appeal.

(3) The pharmacy benefits manager shall respond to a challenge based on reimbursements made under a maximum allowable cost within 7 business days after receipt of the challenge.

(4) If a challenge is based on maximum allowable cost and the appeal is upheld, the pharmacy benefits manager shall, within 7 business days after receipt of the challenge: (i) make the change in the maximum allowable cost; (ii) permit the challenging pharmacy or pharmacist to reverse and rebill the claim in question; (iii) provide the National Drug Code for the drug that the increase or change is based upon to the pharmacy or pharmacist; and (iv) make the change in the maximum allowable cost effective for each similarly situated pharmacy as defined by the payor subject to the maximum allowable cost list.

(5) If a challenge is based on maximum allowable cost and the appeal is denied, the pharmacy benefits manager shall, within 7 business days after receipt of the challenge, provide the challenging pharmacy or pharmacist the National Drug Code for the drug and the name of the national or regional pharmaceutical wholesalers operating in the commonwealth that have the drug currently in stock at a price below the maximum allowable cost on the list.

(6) If the drug for which the National Drug Code provided by the pharmacy benefits manager is not available at a price below the pharmacy acquisition cost from the pharmaceutical wholesaler from which the pharmacy or pharmacist purchases the majority of prescription drugs for resale, then the pharmacy benefits manager shall adjust the price on the maximum allowable cost list to exceed the challenging pharmacy's pharmacy acquisition cost and permit the pharmacy to reverse and rebill each claim affected by the inability to procure the drug at a cost that is equal to or less than the previously challenged maximum allowable cost.

(d) A pharmacy benefits manager shall not reimburse a pharmacy or pharmacist in an amount less than the amount that the pharmacy benefits manager reimburses a pharmacy benefits manager affiliate for providing the same pharmacist services. The amount shall be calculated on a per unit basis based on the same generic product identifier or generic code number.

(e) A pharmacy or pharmacist may decline to provide pharmacist services to a patient or pharmacy benefits manager if, as a result of a maximum allowable cost list, a pharmacy or pharmacist would be paid less than the pharmacy acquisition cost of the pharmacy providing pharmacist services.

(f) This section shall apply to the pharmacy benefits manager employed by or under contract with MassHealth or the group insurance commission if, at any time, MassHealth or the group insurance commission engages the services of a pharmacy benefits manager to maintain a maximum allowable cost list.

(g)  A violation of this section shall be a deceptive and unfair trade practice as described in section 2 of chapter 93A of the General Laws.