Amendment ID: S2499-4
Amendment 4
Pharmacy Benefit Manager Compensation Reform
Mr. O'Connor moves that the proposed new draft be amended by inserting after section X the following new section:-
SECTION X. The General Laws are hereby amended by inserting after Chapter 175M following new chapter:
CHAPTER 175N. Pharmacy Benefit Manager Compensation Reform Act of 2023
Section 1. Definitions
As used in this chapter, the following words shall, unless the context clearly requires otherwise, have the following meanings:—
“Carrier”, any health insurance issuer that is subject to state law regulating insurance and offers health insurance coverage, as defined in 42 U.S.C. § 300gg-91, or any state or local governmental employer plan.
“Commissioner”, the commissioner of insurance.
“Division”, the division of insurance.
“Enrollee”, any individual entitled to coverage of health care services from a carrier.
“Health benefit plan”, a policy, contract, certificate or agreement entered into, offered or issued by a carrier to provide, deliver, arrange for, pay for, or reimburse any of the costs of health care services.
“Person”, a natural person, corporation, mutual company, unincorporated association, partnership, joint venture, limited liability company, trust, estate, foundation, not-for-profit corporation, unincorporated organization, government or governmental subdivision or agency.
“Pharmacy benefit management fee”, a fee that covers the cost of providing one or more pharmacy benefit management services and that does not exceed the value of the service or services actually performed by the pharmacy benefit manager.
“Pharmacy benefit management service”:
(i) Negotiating the price of prescription drugs, including negotiating and contracting for direct or indirect rebates, discounts, or other price concessions.
(ii) Managing any aspect(s) of a prescription drug benefit, including but not limited to, the processing and payment of claims for prescription drugs, the performance of utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to the prescription drug benefit, contracting with network pharmacies, controlling the cost of covered prescription drugs, managing data relating to the prescription drug benefit, or the provision of services related thereto.
(iii) Performing any administrative, managerial, clinical, pricing, financial, reimbursement, data administration or reporting, or billing service; and
(vii) Such other services as the commissioner may define in regulation.
“Pharmacy benefit manager”, any person that, pursuant to a written agreement with a carrier or health benefit plan, either directly or indirectly, provides one or more pharmacy benefit management services on behalf of the carrier or health benefit plan, and any agent, contractor, intermediary, affiliate, subsidiary, or related entity of such person who facilitates, provides, directs, or oversees the provision of the pharmacy benefit management services.
“Pharmacy benefit manager duty”, a duty and obligation to perform pharmacy benefit management services with care, skill, prudence, diligence, fairness, transparency, and professionalism, and for the best interests of the enrollee, the health benefit plan, and the provider, as consistent with the requirements of this section and any regulations that may be adopted to implement this chapter.
“Price protection rebate”, a negotiated price concession that accrues directly or indirectly to the carrier or health benefit plan, or other party on behalf of the carrier or health benefit plan, including a pharmacy benefit manager, in the event of an increase in the wholesale acquisition cost of a drug above a specified threshold.
“Provider”, an individual or entity that provides, dispenses, or administers one or more units of a prescription drug.
“Related entity”:
(i) any entity, whether foreign or domestic, that is a member of any controlled group of corporations (as defined in section 1563(a) of the Internal Revenue Code, except that “50 percent” shall be substituted for “80 percent” wherever the latter percentage appears in such code) of which a pharmacy benefit manager is a member; or
(ii) any of the following persons or entities that are treated as a related entity to the extent provided in rules adopted by the commissioner:
(A) a person other than a corporation that is treated under such rules as a related entity of a pharmacy benefit manager, or
(B) a person or entity that is treated under such rules as affiliated with a pharmacy benefit manager in cases where the pharmacy benefit manager is a person other than a corporation.
“Rebate”:
(i) Negotiated price concessions including but not limited to base price concessions (whether described as a “rebate” or otherwise) and reasonable estimates of any price protection rebates and performance-based price concessions that may accrue directly or indirectly to the carrier or health benefit plan, or other party on behalf of the carrier or health benefit plan, including a pharmacy benefit manager, during the coverage year from a manufacturer, dispensing pharmacy, or other party in connection with the dispensing or administration of a prescription drug, and
(ii) Reasonable estimates of any negotiated price concessions, fees and other administrative costs that are passed through, or are reasonably anticipated to be passed through, to the carrier or health benefit plan, or other party on behalf of the carrier or health benefit plan, including a pharmacy benefit manager, and serve to reduce the carrier or health benefit plan’s liabilities for a prescription drug.
“Spread pricing”, any amount charged or claimed by a pharmacy benefit manager in excess of the ingredient cost for a dispensed prescription drug plus dispensing fee paid directly or indirectly to any pharmacy, pharmacist, or other provider on behalf of the health benefit plan, less a pharmacy benefit management fee.
“Unaffiliated pharmacy”, any dispensing pharmacy that is not fractionally or wholly owned by, or a subsidiary or an affiliate of, a pharmacy benefit manager.
Section 2. Compensation and Prohibition on Spread Pricing
(a) No pharmacy benefit manager may derive income from pharmacy benefit management services provided to a carrier or health benefit plan in this state except for income derived from a pharmacy benefit management fee. The amount of any pharmacy benefit management fees must be set forth in the agreement between the pharmacy benefit manager and the carrier or health benefit plan.
(b) The pharmacy benefit management fee charged by or paid to a pharmacy benefit manager from a carrier or health benefit plan shall not be directly or indirectly based or contingent upon:
(1) the acquisition cost or any other price metric of a drug;
(2) the amount of savings, rebates, or other fees charged, realized, or collected by or generated based on the activity of the pharmacy benefit manager; or
(3) the amount of premiums, deductibles, or other cost sharing or fees charged, realized, or collected by the pharmacy benefit manager from patients or other persons on behalf of a patient.
(c) Annually by December 31, each pharmacy benefit manager operating in the state must certify to the commissioner that it has fully and completely complied with the requirements of this section throughout the prior calendar year. Such certification must be signed by the chief executive officer or chief financial officer of the pharmacy benefit manager.
(d) No pharmacy benefit manager, carrier, or health benefit plan may, either directly or through an intermediary, agent, or affiliate engage in, facilitate, or enter into a contract with another person involving spread pricing in this state.
(e) A pharmacy benefit manager contract with a carrier or health benefit plan entered into, renewed, or amended on or after the effective date this act must:
(1) Specify all forms of revenue, including pharmacy benefit management fees, to be paid by the carrier or health benefit plan to the pharmacy benefit manager; and
(2) Acknowledge that spread pricing is not permitted in accordance with this section.
Section 3. Audits of Pharmacy Benefit Managers
(a) The commissioner and any carrier or health benefit plan contracted with a pharmacy benefit manager holding a license issued by the division may audit the pharmacy benefit manager once per calendar year. This audit right is in addition to, and shall not be construed to limit, any other audit rights authorized by law or contract. As part of any such audit, the commissioner, carrier, or health benefit plan may request information including but not limited to the following:
(1) All reimbursement paid to retail pharmacies, on a claim level, for all customers of the pharmacy benefit manager in the state, including drug-specific reimbursement, dispensing fees, all rebates, other fees, ancillary charges, clawbacks, or adjustments to reimbursement;
(2) Any difference in reimbursement paid to affiliated pharmacies and unaffiliated pharmacies, including differences in reimbursed ingredient costs and dispensing fees;
(3) Historical claims data including ingredient cost, quantity, dispensing fee, sales tax, usual & customary price, channel (mail/retail), carrier or health benefit plan paid amount, days’ supply, the amount paid by the covered individual, formulary tier, acquisition cost, and any administrative fee associated with the claim, as applicable; and
(4) Aggregate rebate amounts received directly or indirectly from manufacturers (including from any other entity affiliated with or related to the pharmacy benefit manager that negotiates or contracts with manufacturers, such as group purchasing organizations and rebate aggregators) by calendar quarter.
(b) The pharmacy benefit manager shall provide information referenced in subsection (a) within thirty (30) days of its receipt of any request from the commissioner, carrier, or health benefit plan.
(c) The commissioner may dictate the form in which the pharmacy benefit manager will provide information in response to an audit under subsection (a).
(d) The pharmacy benefit manager must certify that all information submitted to the commissioner, or any carrier or health benefit plan in accordance with this section is accurate and complete in all material respects. Such certification must be signed by the chief executive officer or chief financial officer of the pharmacy benefit manager.
(e) The commissioner and any carrier or health benefit plan contracted with a pharmacy benefit manager holding a license issued by the division shall not directly or indirectly publish or otherwise disclose any confidential, proprietary information, including but not limited to any information that would reveal the identity of a specific health benefit plan or manufacturer, the price(s) charged for a specific drug or class of drugs, the amount of any rebates provided for a specific drug or class of drugs, or that would otherwise have the potential to compromise the financial, competitive, or proprietary nature of the information. Such information shall be considered to be a trade secret and confidential commercial information, shall not be considered a public record, within the meaning of chapter sixty-six of the General Laws, and shall not be disclosed directly or indirectly, or in a manner that would allow for the identification of an individual product, therapeutic class of products, or manufacturer, or in a manner that would have the potential to compromise the financial, competitive, or proprietary nature of the information. The commissioner and any carrier or health benefit plan contracted with a pharmacy benefit manager holding a license issued by the division shall impose the confidentiality protections of this subsection on any vendor or downstream third party that may receive or have access to this information.
Section 4. Savings Clause
(a) In implementing the requirements of this Act, the state shall only regulate a pharmacy benefit manager, carrier, or health benefit plan to the extent permissible under applicable law.
(b) If any section, provision, or portion of this Act, including any condition or prerequisite to any action or determination thereunder, is for any reason held to be illegal or invalid, this illegality or invalidity shall not affect the remainder thereof or any other section, provision, or portion of this Act, including any condition or prerequisite to any action or determination thereunder, which shall be construed and enforced and applied as if such illegal or invalid portion were not contained therein.
Section 5. Penalties
(a) If the commissioner determines that a pharmacy benefit manager is in violation of this chapter or any rule or regulation promulgated under this chapter, the commissioner shall issue a monetary penalty, suspend or revoke the pharmacy benefit manager’s license or take other action that the commissioner deems necessary.
(b) The commissioner shall issue rules and regulations to establish a process for administrative appeal of any penalty, suspension or revocation imposed in accordance with this section.
Section 6. Rules
(a) The commissioner shall adopt any written policies, procedures or regulations the commissioner determines necessary to implement this section.