Rep. Norm Thurston — Voting Record

Bill

Number

H.B. 370 Third Substitute (2019GS)

Sponsor

Rep. Ray, P.

Final action

Governor Signed 3/25/2019

Outcome

Became law — signed by Gov. Gary R. Herbert

Summary

What it does

• This bill:
• creates a pharmacy benefit manager license;
• requires a person who acts as a pharmacy benefit manager in the state to be licensed by the Insurance Department; and
• creates certain operating and reporting requirements for pharmacy benefit managers.

Every vote on this bill

Bill text

PHARMACY BENEFIT MANAGER AMENDMENTS
GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Paul Ray
Senate Sponsor: 
Evan J. Vickers
Cosponsors:
Patrice M. Arent
Melissa G. Ballard
Stewart E. Barlow
Walt Brooks
Kay J. Christofferson
Brad M. Daw
Steve Eliason
Francis D. Gibson
Stephen G. Handy
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
LONG TITLE
General Description:
This bill amends and creates requirements for pharmacy benefit managers.
Highlighted Provisions:
This bill:
▸ creates a pharmacy benefit manager license;
▸ requires a person who acts as a pharmacy benefit manager in the state to be licensed
by the Insurance Department; and
▸ creates certain operating and reporting requirements for pharmacy benefit managers.
Money Appropriated in this Bill:
None
Other Special Clauses:
This bill provides a special effective date.
Utah Code Sections Affected:
AMENDS:
31A-2-201.2
, as last amended by Laws of Utah 2018, Chapter 319
ENACTS:
31A-46-101
, Utah Code Annotated 1953
31A-46-102
, Utah Code Annotated 1953
31A-46-201
, Utah Code Annotated 1953
31A-46-202
, Utah Code Annotated 1953
31A-46-301
, Utah Code Annotated 1953
31A-46-304
, Utah Code Annotated 1953
31A-46-401
, Utah Code Annotated 1953
31A-46-402
, Utah Code Annotated 1953
RENUMBERS AND AMENDS:
31A-46-302
, (Renumbered from 58-17b-626, as enacted by Laws of Utah 2018,
Chapter 305)
31A-46-303
, (Renumbered from 31A-22-640, as last amended by Laws of Utah 2015,
Chapter 258)
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 
31A-2-201.2
 is amended to read:
31A-2-201.2.
Evaluation of health insurance market.
(1) Each year the commissioner shall:
(a) conduct an evaluation of the state's health insurance market;
(b) report the findings of the evaluation to the Health and Human Services Interim
Committee before December 1 of each year; and
(c) publish the findings of the evaluation on the department website.
(2) The evaluation required by this section shall:
(a) analyze the effectiveness of the insurance regulations and statutes in promoting a
healthy, competitive health insurance market that meets the needs of the state, and includes an
analysis of:
(i) the availability and marketing of individual and group products;
(ii) rate changes;
(iii) coverage and demographic changes;
(iv) benefit trends;
(v) market share changes; and
(vi) accessibility;
(b) assess complaint ratios and trends within the health insurance market, which
assessment shall include complaint data from the Office of Consumer Health Assistance within
the department;
(c) contain recommendations for action to improve the overall effectiveness of the
health insurance market, administrative rules, and statutes; [
and
]
(d) include claims loss ratio data for each health insurance company doing business in
the state[
.
]
; and
(e) include information about pharmacy benefit managers collected under Section
31A-46-301
.
(3) When preparing the evaluation and report required by this section, the
commissioner may seek the input of insurers, employers, insured persons, providers, and others
with an interest in the health insurance market.
(4) The commissioner may adopt administrative rules for the purpose of collecting the
data required by this section, taking into account the business confidentiality of the insurers.
(5) Records submitted to the commissioner under this section shall be maintained by
the commissioner as protected records under Title 63G, Chapter 2, Government Records
Access and Management Act.
Section 2. Section 
31A-46-101
 is enacted to read:
CHAPTER 46. PHARMACY BENEFIT MANAGER LICENSING ACT
Part 1. General Provisions
 31A-46-101.
Title.
This chapter is known as the "Pharmacy Benefit Manager Licensing Act."
Section 3. Section 
31A-46-102
 is enacted to read:
 31A-46-102.
Definitions.
As used in this chapter:
(1) "Administrative fee" means any payment, other than a rebate, that a pharmaceutical
manufacturer makes directly or indirectly to a pharmacy benefit manager.
(2) "Contracting insurer" means an insurer as defined in Section 
31A-22-636
 with
whom a pharmacy benefit manager contracts to provide a pharmacy benefit management
service.
(3) "Pharmacist" means the same as that term is defined in Section 
58-17b-102
.
(4) "Pharmacy" means the same as that term is defined in Section 
58-17b-102
.
(5) "Pharmacy benefits management service" means any of the following services
provided to a health benefit plan, or to a participant of a health benefit plan:
(a) negotiating the amount to be paid by a health benefit plan for a prescription drug; or
(b) administering or managing a prescription drug benefit provided by the health
benefit plan for the benefit of a participant of the health benefit plan, including administering
or managing:
(i) a mail service pharmacy;
(ii) a specialty pharmacy;
(iii) claims processing;
(iv) payment of a claim;
(v) retail network management;
(vi) clinical formulary development;
(vii) clinical formulary management services;
(viii) rebate contracting;
(ix) rebate administration;
(x) a participant compliance program;
(xi) a therapeutic intervention program;
(xii) a disease management program; or
(xiii) a service that is similar to, or related to, a service described in Subsection (5)(a)
or (5)(b)(i) through (xii).
(6) "Pharmacy benefit manager" means a person licensed under this chapter to provide
a pharmacy benefits management service.
(7) "Pharmacy service" means a product, good, or service provided to an individual by
a pharmacy or pharmacist.
(8) (a) "Rebate" means a refund, discount, or other price concession that is paid by a
pharmaceutical manufacturer to a pharmacy benefit manager based on a prescription drug's
utilization or effectiveness.
(b) "Rebate" does not include an administrative fee.
Section 4. Section 
31A-46-201
 is enacted to read:
Part 2. Licensure
 31A-46-201.
License required.
(1) A person may not perform, offer to perform, or advertise any pharmacy benefits
management service in the state unless the person is licensed as a pharmacy benefit manager
under this chapter.
(2) A person may not utilize the services of another person as a pharmacy benefit
manager if the person knows or has reason to know that the other person does not have a
license under this chapter.
Section 5. Section 
31A-46-202
 is enacted to read:
 31A-46-202.
Application for licensure.
(1) To obtain or renew a license as a pharmacy benefit manager, a person shall:
(a) submit an application to the commissioner on forms and in a manner established by
the commissioner by rule made in accordance with Title 63G, Chapter 3, Utah Administrative
Rulemaking Act; and
(b) pay a licensure fee established by the department in accordance with Section
31A-3-103
.
(2) (a) The commissioner may require an applicant to submit information or
documentation regarding the management and ownership of the pharmacy benefit manager in
the application described in Subsection (1)(a).
(b) Any material change in the information submitted in an application described in
Subsection (1)(a) shall be reported to the department within 30 days after the day on which the
information changes.
(3) The term of a license issued under this section is one year.
Section 6. Section 
31A-46-301
 is enacted to read:
Part 3. Operating Requirements
 31A-46-301.
Reporting requirements.
(1) Before April 1 of each year, a pharmacy benefit manager operating in the state shall
report to the department, for the previous calendar year:
(a) any insurer, pharmacy, or pharmacist in the state with which the pharmacy benefit
manager had a contract;
(b) the total value, in the aggregate, of all rebates and administrative fees that are
attributable to enrollees of a contracting insurer; and
(c) the percentage of aggregate rebates that the pharmacy benefit manager retained
under the pharmacy benefit manager's agreement to provide pharmacy benefits management
services to a contracting insurer.
(2) Records submitted to the commissioner under Subsections (1)(b) and (c) are a
protected record under Title 63G, Chapter 2, Government Records Access and Management
Act.
(3) (a) The department shall publish the information provided by a pharmacy benefit
manager under Subsection (1)(c) in the annual report described in Section 
31A-2-201.2
.
(b) The department may not publish information submitted under Subsection (1)(b) or
(c) in a manner that:
(i) makes a specific submission from a contracting insurer or pharmacy benefit
manager identifiable; or
(ii) is likely to disclose information that is a trade secret as defined in Section 
13-24-2
.
(c) At least 30 days before the day on which the department publishes the data, the
department shall provide a pharmacy benefit manager that submitted data under Subsection
(1)(b) or (c) with:
(i) a general description of the data that will be published by the department;
(ii) an opportunity to submit to the department, within a reasonable period of time and
in a manner established by the department by rule made in accordance with Title 63G, Chapter
3, Utah Administrative Rulemaking Act:
(A) any correction of errors, with supporting evidence and comments; and
(B) information that demonstrates that the publication of the data will violate
Subsection (3)(b), with supporting evidence and comments.
Section 7. Section 
31A-46-302
, which is renumbered from Section 58-17b-626 is
renumbered and amended to read:
[
58-17b-626
].
 31A-46-302.
Direct or indirect remuneration by pharmacy
benefit managers -- Disclosure of customer costs -- Limit on customer payment for
prescription drugs.
(1) As used in this section:
(a) "Allowable claim amount" means the amount paid by an insurer under the
customer's health benefit plan.
[
(a)
] 
(b)
 "Cost share" means the amount paid by an insured customer under the
customer's health benefit plan.
[
(b)
] 
(c)
 "Direct or indirect remuneration" means any adjustment in the total
compensation:
(i) received by a pharmacy from a pharmacy [
benefits manager or coordinator
] 
benefit
manager
 for the sale of a drug, device, or other product or service; and
(ii) that is determined after the sale of the product or service.
[
(c)
] 
(d)
 "Health benefit plan" means the same as that term is defined in Section
31A-1-301
.
(e) "Pharmacy reimbursement" means the amount paid to a pharmacy by a pharmacy
benefit manager for a dispensed prescription drug.
[
(d)
] 
(f)
 "Pharmacy services administration organization" means an entity that contracts
with a pharmacy to assist with third-party payer interactions and administrative services related
to third-party payer interactions, including:
(i) contracting with a pharmacy [
benefits manager or coordinator
] 
benefit manager
 on
behalf of the pharmacy; and
(ii) managing a pharmacy's claims payments from third-party payers.
[
(e)
] 
(g)
 "Pharmacy service entity" means:
(i) a pharmacy services administration organization; or
(ii) a pharmacy [
benefits manager or coordinator
] 
benefit manager
.
[
(f)
] 
(h)
 (i) "Reimbursement report" means a report on the adjustment in total
compensation for a claim.
(ii) "Reimbursement report" does not include a report on adjustments made pursuant to
a pharmacy audit or reprocessing.
[
(g)
] 
(i)
 "Sale" means a prescription drug claim covered by a health benefit plan.
(2) If a pharmacy service entity engages in direct or indirect remuneration with a
pharmacy, the pharmacy service entity shall make a reimbursement report available to the
pharmacy upon the pharmacy's request.
(3) For the reimbursement report described in Subsection (2), the pharmacy service
entity shall:
(a) include the adjusted compensation amount related to a claim and the reason for the
adjusted compensation; and
(b) provide the reimbursement report:
(i) in accordance with the contract between the pharmacy and the pharmacy service
entity;
(ii) in an electronic format that is easily accessible; and
(iii) within 120 days after the day on which the pharmacy [
benefits manager or
coordinator
] 
benefit manager
 receives a report of a sale of a product or service by the
pharmacy.
(4) A pharmacy service entity shall, upon a pharmacy's request, provide the pharmacy
with:
(a) the reasons for any adjustments contained in a reimbursement report; and
(b) an explanation of the reasons provided in Subsection (4)(a).
(5) (a) A pharmacy [
benefits manager or coordinator
] 
benefit manager
 may not prohibit
or penalize the disclosure by a pharmacist of:
(i) an insured customer's cost share for a covered prescription drug;
(ii) the availability of any therapeutically equivalent alternative medications; or
(iii) alternative methods of paying for the prescription medication, including paying the
cash price, that are less expensive than the cost share of the prescription drug.
(b) Penalties that are prohibited under Subsection (5)(a) include increased utilization
review, reduced payments, and other financial disincentives.
(6) A pharmacy [
benefits manager or coordinator
] 
benefit manager
 may not require an
insured customer to pay, for a covered prescription drug, more than the lesser of:
(a) the applicable cost share of the prescription drug being dispensed; [
or
]
(b) the applicable allowable claim amount of the prescription drug being dispensed;
(c) the applicable pharmacy reimbursement of the prescription drug being dispensed; or
[
(b)
] 
(d)
 the retail price of the drug without prescription drug coverage.
Section 8. Section 
31A-46-303
, which is renumbered from Section 31A-22-640 is
renumbered and amended to read:
[
31A-22-640
].
 31A-46-303.
Insurer and pharmacy benefit management
services -- Registration -- Maximum allowable cost -- Audit restrictions.
(1) [
For purposes of
] 
As used in
 this section:
(a) "Maximum allowable cost" means:
(i) a maximum reimbursement amount for a group of pharmaceutically and
therapeutically equivalent drugs; or
(ii) any similar reimbursement amount that is used by a pharmacy benefit manager to
reimburse pharmacies for multiple source drugs.
(b) "Obsolete" means a product that may be listed in national drug pricing compendia
but is no longer available to be dispensed based on the expiration date of the last lot
manufactured.
(c) " Pharmacy benefit manager" means a person or entity that provides pharmacy
benefit management services as defined in Section 
49-20-502
 on behalf of an insurer as defined
in Subsection 
31A-22-636
(1).
(2) An insurer and an insurer's pharmacy benefit manager is subject to the pharmacy
audit provisions of Section 
58-17b-622
.
(3) A pharmacy benefit manager shall not use maximum allowable cost as a basis for
reimbursement to a pharmacy unless:
(a) the drug is listed as "A" or "B" rated in the most recent version of the United States
Food and Drug Administration's approved drug products with therapeutic equivalent
evaluations, also known as the "Orange Book," or has an "NR" or "NA" rating or similar rating
by a nationally recognized reference; and
(b) the drug is:
(i) generally available for purchase in this state from a national or regional wholesaler;
and
(ii) not obsolete.
(4) The maximum allowable cost may be determined using comparable and current
data on drug prices obtained from multiple nationally recognized, comprehensive data sources,
including wholesalers, drug file vendors, and pharmaceutical manufacturers for drugs that are
available for purchase by pharmacies in the state.
(5) For every drug for which the pharmacy benefit manager uses maximum allowable
cost to reimburse a contracted pharmacy, the pharmacy benefit manager shall:
(a) include in the contract with the pharmacy information identifying the national drug
pricing compendia and other data sources used to obtain the drug price data;
(b) review and make necessary adjustments to the maximum allowable cost, using the
most recent data sources identified in Subsection (5)(a), at least once per week;
(c) provide a process for the contracted pharmacy to appeal the maximum allowable
cost in accordance with Subsection (6); and
(d) include in each contract with a contracted pharmacy a process to obtain an update
to the pharmacy product pricing files used to reimburse the pharmacy in a format that is readily
available and accessible.
(6) (a) The right to appeal in Subsection (5)(c) shall be:
(i) limited to 21 days following the initial claim adjudication; and
(ii) investigated and resolved by the pharmacy benefit manager within 14 business
days.
(b) If an appeal is denied, the pharmacy benefit manager shall provide the contracted
pharmacy with the reason for the denial and the identification of the national drug code of the
drug that may be purchased by the pharmacy at a price at or below the price determined by the
pharmacy benefit manager.
(7) The contract with each pharmacy shall contain a dispute resolution mechanism in
the event either party breaches the terms or conditions of the contract.
[
(8) (a) To conduct business in the state, a pharmacy benefit manager shall register
with the Division of Corporations and Commercial Code within the Department of Commerce
and annually renew the registration. To register under this section, the pharmacy benefit
manager shall submit an application which shall contain only the following information:
]
[
(i) the name of the pharmacy benefit manager;
]
[
(ii) the name and contact information for the registered agent for the pharmacy benefit
manager; and
]
[
(iii) if applicable, the federal employer identification number for the pharmacy benefit
manager.
]
[
(b) The Department of Commerce may establish a fee in accordance with Title 63J,
Chapter 1, Budgetary Procedures Act, for the initial registration and the annual renewal of the
registration, which may not exceed $100 per year.
]
[
(c) The following entities do not have to register as a pharmacy benefit manager under
Subsection (8)(a) when the entity is providing formulary services to its own patients,
employees, members, or beneficiaries:
]
[
(i) a health care facility licensed under Title 26, Chapter 21, Health Care Facility
Licensing and Inspection Act;
]
[
(ii) a pharmacy licensed under Title 58, Chapter 17b, Pharmacy Practice Act;
]
[
(iii) a health care professional licensed under Title 58, Occupations and Professions;
]
[
(iv) a health insurer; and
]
[
(v) a labor union.
]
[
(9)
] 
(8)
 This section does not apply to a pharmacy benefit manager when the
pharmacy benefit manager is providing pharmacy benefit management services on behalf of the
state Medicaid program.
Section 9. Section 
31A-46-304
 is enacted to read:
 31A-46-304.
Claims practices.
(1) A pharmacy benefit manager shall permit a pharmacy to collect the amount of a
customer's cost share from any source.
(2) A pharmacy benefit manager may not deny or reduce a reimbursement to a
pharmacy or a pharmacist after the adjudication of the claim, unless:
(a) the pharmacy or pharmacist submitted the original claim fraudulently;
(b) the original reimbursement was incorrect because:
(i) the pharmacy or pharmacist had already been paid for the pharmacy service; or
(ii) an unintentional error resulted in an incorrect reimbursement; or
(c) the pharmacy service was not rendered by the pharmacy or pharmacist.
(3) Subsection (2) does not apply if:
(a) an investigative audit of pharmacy records for fraud, waste, abuse, or other
intentional misrepresentation indicates that the pharmacy or pharmacist engaged in criminal
wrongdoing, fraud, or other intentional misrepresentation; or
(b) the reimbursement is reduced as the result of the reconciliation of a reimbursement
amount under a performance contract if:
(i) the performance contract lays out clear performance standards under which the
reimbursement for a specific drug may be increased or decreased; and
(ii) the agreement between the pharmacy benefit manager and the pharmacy or
pharmacist explicitly states, in a separate document that is signed by the pharmacy benefit
manager and the pharmacy or pharmacist, that the provisions of Subsection (2) do not apply.
Section 10. Section 
31A-46-401
 is enacted to read:
Part 4. Miscellaneous
 31A-46-401.
Penalties.
A person that violates a provision of this chapter is subject to the penalties described in
Section 
31A-2-308
.
Section 11. Section 
31A-46-402
 is enacted to read:
 31A-46-402.
Severability.
If any provision of this chapter or the application of any provision of this chapter is
found invalid, the remainder of this chapter shall be given effect without the invalid provision
or application.
Section 12. 
Effective date.
This bill takes effect on July 1, 2019.