Chapter 175 of the General Laws, as appearing in the 2016 Official Edition, is hereby amended by inserting after Section 226, the following:-

Section 226A. (a) The following words, as used in this chapter, unless the context otherwise requires or a different meaning is specifically prescribed, shall have the following meanings:

“Pharmacy benefit manager”, a person, business, or other entity that, pursuant to a contract or under an employment relationship with a health carrier, a self-insurance plan, or other third-party payer, either directly or through an intermediary, manages the prescription drug coverage provided by the health carrier, self-insurance plan, or other third-party payer including, but not limited to, the processing and payment of claims for prescription drugs, the performance of drug utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to prescription drug coverage, contracting with network pharmacies, and controlling the cost of covered prescription drugs.

“Health carrier”, an entity subject to the insurance laws and regulations of Massachusetts, or subject to the jurisdiction of the commissioner, that contracts or offers to contract, or enters into an agreement to provide, deliver, arrange for, pay for, or reimburse any of the cost of health care services, including a health insurance company, a health maintenance organization, a hospital and health services corporation, or any other entity providing a plan of health insurance, health benefits, or health care services.

“Health benefit plan”, a policy, contract, certificate or agreement offered or issued by a health carrier to provide, deliver, arrange for, pay for or reimburse any of the costs of healthcare services.

“Covered person”, a policyholder, subscriber, enrollee or other individual participating in a health benefit plan. A covered person includes the authorized representative of the covered person.

“Pharmacy”, an established location, either physical or electronic that is licensed in Massachusetts and that has entered into a network contract with a pharmacy benefit manager and/or health carrier.

“Network pharmacy”, a retail or other licensed pharmacy provider that contracts with a pharmacy benefit manager.

“Retail pharmacy”, a chain pharmacy, a supermarket pharmacy, a mass merchandiser pharmacy, an independent pharmacy, or a network of independent pharmacies that is licensed as a pharmacy pursuant to MGL c. 112 and that dispenses medications to the public.

“Mail order pharmacy”, a pharmacy whose primary business is to receive prescriptions by mail, telefax or through electronic submissions and to dispense  medication to covered persons through the use of the United States mail or other common or contract carrier services and that provides any consultation with patients electronically rather than face to face.

“Aggregate retained rebate percentage”, the percentage of all rebates paid by a manufacturer or other entity to a pharmacy benefit manager which is not passed on to pharmacy benefit mangers’ health carrier clients. The percentage shall be calculated for each health carrier and includes rebates in the prior calendar years as follows: a) the sum total dollar amount of rebates received from all pharmaceutical manufacturers for covered persons of the health carrier that was not passed through to the health carrier; and b) divided by the sum total dollar amount of all rebates received from all pharmaceutical manufacturers for covered persons of the health carrier.

“Rebates”, all price concessions paid by a manufacturer to a pharmacy benefit manager or health carrier, including rebates, discounts, administrative fees and other price concessions. Rebates also include price concessions based on the effectiveness a drug as in a value-based or performance-based contract.

“Trade secrets”, anything tangible which constitutes, represents evidences or records a secret scientific, technical, merchandising, production or management information, design, process, procedure, formula, invention or improvement.

“Cost share/cost sharing”, the amount paid by or on behalf of a covered person as required under the covered person’s health benefit plan.

(b)(1) A pharmacy benefit manager shall not require pharmacy or other provider accreditation standards or certification requirements inconsistent with the requirements of the Massachusetts Board of Registration in Pharmacy or other state or federal entity.

(2) A health carrier or pharmacy benefit manager is prohibited from requiring a covered person to, or penalizing covered persons for not using specific retail, mail order pharmacy or other network pharmacy provider in which a pharmacy benefit manager has an ownership interest or that has an ownership interest in a pharmacy benefit manager.

(3) A health carrier or pharmacy benefit manager is prohibited from providing financial incentives, including variations in premiums, deductibles, copayments, or coinsurance, to covered persons as incentives to use specific retail, mail order pharmacy, or other network pharmacy provider in which a pharmacy benefit manager has an ownership interest or that has an ownership interest in a pharmacy benefit manager.

(4) A pharmacy benefit manager is prohibited from charging a health carrier or health benefit plan more than what was paid to the pharmacy that provided the service.

(5) Beginning June 1, 2022, and annually thereafter, each pharmacy benefit manager providing service to a health carrier located in the Commonwealth of Massachusetts shall submit a transparency report containing data from the prior calendar year to the division of insurance. The transparency report shall be the result of a financial audit by a certified public accounting firm.  The requirements of the financial audit will be developed by the health policy commission. The transparency report shall contain the following and additional information as deemed necessary by the commission:

i. The aggregate amount of all rebates that the pharmacy benefit manager received from all pharmaceutical manufacturers for all health carrier clients and for each health carrier client;

ii. The aggregate administrative fees that the pharmacy benefit manager received from all manufacturers for each health carrier;

iii. The aggregate retained rebates that the pharmacy benefit manager received from all pharmaceutical manufacturers and did not pass through to each health carrier;

iv. The aggregate retained rebate percentage for all health carriers; and

v. The highest, lowest, and mean aggregate retained rebate percentage for all health carrier clients.

(6) A pharmacy benefit manager providing information under this section may designate material as a trade secret.

(7) The attorney general of the Commonwealth of Massachusetts may impose civil fines and penalties of not more than $1,000 per day per violation of this section.

(8) The division of insurance shall collect these reports and make them available to the health policy commission.  Within 90 days of the receipt of the transparency reports the health policy commission shall publish a pharmacy benefit manager transparency report and make it available to the public.  The purpose of the report is to provide information on the total cost of pharmacy benefit management services and to allow insurers and others to negotiate cost-effective contracts. The health policy commission shall protect the identity of each pharmacy benefit manager.