1Amending the act of August 26, 1971 (P.L.351, No.91), entitled
2"An act providing for a State Lottery and administration
3thereof; authorizing the creation of a State Lottery
4Commission; prescribing its powers and duties; disposition of
5funds; violations and penalties therefor; exemption of prizes
6from State and local taxation and making an appropriation,"
7providing for a single pharmacy benefits manager for a Drug
8Utilization Review Committee and its duties and for rebate
9agreements governing reimbursement by certain public plans;
10and imposing powers and duties on the Department of Aging.

11The General Assembly of the Commonwealth of Pennsylvania
12hereby enacts as follows:

13Section 1. The act of August 26, 1971 (P.L.351, No.91),
14known as the State Lottery Law, is amended by adding a chapter
15to read:

16CHAPTER 11

17FAIR PRESCRIPTION DRUG PROVISIONS

18Section 1101. Short title of chapter.

19This chapter shall be known and may be cited as the Fair
20Prescription Drug Act.

21Section 1102. Definitions.

1The following words and phrases when used in this chapter
2shall have the meanings given to them in this section unless the
3context clearly indicates otherwise:

4"Best price." As defined under section 1927 of the Social
5Security Act (49 Stat. 620, 42 U.S.C. § 301 et seq.).

6"Committee." The Drug Utilization Review Committee formed in
7accordance with section 1105.

8"Department." The Department of Aging of the Commonwealth.

9"Medical Assistance Program." The program established
10pursuant to Article IV, subarticle (f) of the act of June 13,
111967 (P.L.31, No.21), known as the Public Welfare Code.

12"Medicare card." The identification card issued by the
13Federal Government to Medicare recipients.

14"Medicare recipient." An individual residing in this
15Commonwealth who receives benefits under Part A of Subchapter
16XVIII of Chapter 7 of the Social Security Act (49 Stat. 620, 42
17U.S.C. § 301 et seq.) or who is enrolled under Part B of such
18subchapter.

19"PACE." As defined under section 502.

20"PACENET." As established under section 519.

21"Pharmaceutical manufacturer." A manufacturer of
22prescription drugs, insulin, insulin needles or insulin
23syringes.

24"Pharmacy." A pharmacy licensed by the Commonwealth.

25"Pharmacy benefits manager" or "PBM." An entity under
26contract with the Secretary of Aging to administer any
27prescription program established by the Commonwealth or in which
28a contribution by the Commonwealth is required.

29"Pharmacy services." Medically necessary prescription drugs
30and other pharmacy services furnished directly to eligible

1recipients by pharmacies.

2"Prescription drug." A drug requiring a prescription in this
3Commonwealth, insulin, insulin syringes and insulin needles. The
4term does not include experimental drugs or drugs prescribed for
5wrinkle removal or hair growth.

6"Provider." A pharmacy or licensed prescriber who provides
7pharmacy services to a recipient of any prescription program
8established by the Commonwealth or in which a contribution by
9the Commonwealth is required.

10"Public plan." The PACE and PACENET programs, the Medical 
11Assistance Program, the State Employees' Benefit Trust Fund, the 
12State Employees' Retirement System, the Public School Employees' 
13Retirement System and any other State agency or designated 
14pharmaceutical program that purchases or arranges for the 
15purchase of prescription medications. The term does not include 
16pharmacy benefits provided by a health maintenance organization 
17through the Medical Assistance Program established under the act 
18of June 13, 1967 (P.L.31, No.21), known as the Public Welfare 
19Code.

20"Public School Employees' Retirement System." The retirement
21system established by 24 Pa.C.S. Part IV (relating to retirement
22for school employees).

23"Secretary." The Secretary of Aging of the Commonwealth.

24"State agency." Any agency under the jurisdiction of the
25Governor, the General Assembly or the unified judicial system
26that purchases or provides coverage for prescription
27medications.

28"State Employees' Benefit Trust Fund." The trust fund
29established to purchase health insurance coverage, including
30coverage for prescription medications, for State employees.

1"State Employees' Retirement System." The retirement system
2established under 71 Pa.C.S. Part XXV (relating to retirement
3for State employees and officers).

4Section 1103. Single pharmacy benefits manager.

5The secretary shall administer a single pharmacy benefits
6manager program as described in this chapter. No later than 90
7days from the effective date of this chapter, the secretary
8shall issue a request for proposal for a three-year contract
9with a pharmacy benefits manager to administer pharmacy services
10as required under this chapter. The proposal shall require the
11PBM to educate providers and public plan recipients of pharmacy
12services. No person, partnership, corporation or entity which
13holds a 5% or greater interest in one or more pharmacies, a
14chain of pharmacies, a pharmacists association, an organization
15of pharmacies, a drug wholesaler or drug manufacturer and no
16person, partnership, corporation or entity in which one or more
17pharmacies, a chain of pharmacies, a pharmacists association, an
18organization of pharmacies, a drug wholesaler or drug
19manufacturer has a 5% or greater interest shall be considered
20eligible to bid. The contract shall be executed within six
21months from the effective date of this chapter.

22Section 1104. Pharmacy benefits manager functions.

23(a) Requirements.--The secretary shall require the PBM to:

24(1) Manage and implement the drug formulary for each
25public plan and at a later date make a recommendation to the
26secretary as to whether a uniform formulary for all public
27plans under this chapter should exist, along with a sample
28uniform formulary.

29(2) Ensure that any pharmacy licensed in this
30Commonwealth is eligible to provide pharmacy services

1according to any regulations in effect on the effective date
2of this chapter and that regulate pharmacy providers.

3(3) Negotiate drug rebates with manufacturers.

4(4) In accordance with the act of November 24, 1976
5(P.L.1163, No.259), referred to as the Generic Equivalent
6Drug Law, make provisions for generic substitutions and
7require pharmacists to disclose any affiliation with a
8generic manufacturer.

9(5) Provide for prospective drug utilization review
10which precludes overriding alerts without intervention.

11(6) Provide for prior authorization in accordance with
12regulations of the secretary.

13(7) Provide for prospective and concurrent and
14retrospective drug utilization review to ensure that
15prescriptions are appropriate, medically necessary and not
16likely to result in adverse medical results and to educate
17providers and recipients of pharmacy services through public
18plans and to correct and report misutilization and abuse by
19licensed prescribers and recipients and provide for fraud and
20abuse audits, coordinating its activities with the secretary
21to support compliance with applicable laws and regulations.

22(8) Educate providers on disease and care management.

23(9) Provide educational materials for public plan
24recipients of pharmacy services on disease and care
25management.

26(10) In accordance with the provisions of the Omnibus
27Budget Reconciliation Act of 1990 (Public Law 101-508, 104
28Stat. 1388), bill, recoup and relay to the secretary
29manufacturers' drug rebates and excessive consumer price
30inflation discounts and resolve disputes, as defined in the

1Omnibus Budget Reconciliation Act of 1990.

2(11) Adjudicate claims through a Statewide point-of-sale
3electronic verification and claims processing system which
4will allow for intervention upon receipt of a prospective
5drug utilization review alert and will allow for an emergency
6supply of prescribed medication in the event of equipment
7failures.

8(12) Create an audit and recoupment system for providers
9and recipients, and third-party medical resources.

10(13) Coordinate with all public plans the reimbursement
11to pharmacies on a fee-for-service basis.

12(b) Conflict of interest.--In implementing the formulary,
13the single PBM shall demonstrate how it will avoid a conflict of
14interest with any pharmaceutical manufacturer, wholesaler or
15drug store chain that holds a less-than-5% interest in the PBM
16or in which the PBM has a less-than-5% interest and shall
17indicate how it will prevent the sharing of nonpublic
18information concerning other drug manufacturers' bids,
19proposals, contracts, prices, rebates or discounts.

20(c) Considerations.--In preparing and managing the
21formulary, the PBM shall ensure that it will consider all
22discounts, rebates or other concessions offered by
23manufacturers, drug chains or wholesale drug companies.

24Section 1105. Drug Utilization Review Committee.

25(a) Formation.--The secretary shall require the PBM to form
26a drug utilization review committee.

27(b) Composition and number.--The committee shall be
28comprised of 15 members, five of whom shall be actively
29practicing physicians licensed in this Commonwealth, five of
30whom shall be actively practicing pharmacists licensed in this

1Commonwealth and five of whom shall be consumers who reside in
2this Commonwealth. None of the members may hold a 5% or greater
3interest in the PBM, its parent company or companies, or in a
4company or companies owned by the PBM. The Governor, the
5President pro tempore of the Senate, the Speaker of the House of
6Representatives, the Minority Leader of the Senate and the
7Minority Leader of the House of Representatives shall each
8appoint one physician, pharmacist and consumer member. Of the
9original members, each appointing authority shall designate one
10member appointed by the authority to serve for an initial term
11of two years, one member to serve for an initial term of three
12years and one member to serve for an initial term of four years.
13Thereafter each appointment shall be for a term of four years. A
14member shall serve until a successor is appointed. Vacancies
15shall be filled in the same manner as the original appointments.

16(c) Quality of care.--

17(1) The committee shall develop a system that provides
18prospective, concurrent and retrospective review of drug
19utilization to ensure that pharmacy services provided are or
20were appropriate and medically necessary and not likely to
21result in adverse medical results. The review program shall
22be designed to educate licensed prescribers and pharmacists
23as provided in paragraph (4) on the proper utilization of
24drugs in disease and care management. In reviewing drug
25utilization, the committee shall assess data on drug use
26against predetermined standards consistent with the American
27Hospital Formulary Service Drug Information, the United
28States Pharmacopeia-Drug Information, American Medical
29Association Drug Evaluations or peer-reviewed medical
30literature.

1(2) The committee shall develop a system to utilize the
2compendia and literature referred to in paragraph (1) as its
3source of standards to screen for potential drug problems
4before a prescription is filled or delivered to a recipient.
5Prospective drug use review shall include consultation with
6recipients by pharmacists.

7(3) The secretary and the PBM shall provide data to the
8committee, through mechanized drug claims processing and
9retrieval systems, for the ongoing periodic examination of
10claims data and other records in order to identify patterns
11of fraud, abuse, gross overuse or inappropriate or medically
12unnecessary care among licensed prescribers, pharmacists and
13recipients or associated with specific drugs or groups of
14drugs. The committee shall, on an ongoing basis, assess data
15on drug use against explicit predetermined standards using
16the compendia and literature referred to in this subsection
17and to introduce, as necessary, remedial strategies to
18improve the quality of care and to conserve program funds or
19patient expenditures.

20(4) The committee shall, using drug use data on common
21therapy problems, develop active and ongoing educational
22outreach programs to disseminate information to providers on
23common drug therapy problems with the aim of improving
24prescribing or dispensing practices. The educational programs
25shall include interventions for providers targeting therapy
26problems or individuals identified in the course of
27retrospective drug reviews. The committee shall reevaluate
28interventions from time to time to determine if the
29interventions were successful in improving the quality of
30drug therapy and shall make modifications as necessary.

1Intervention programs shall include:

2(i) Information dissemination sufficient to ensure
3the ready availability to providers of information
4concerning the committee's duties, powers and basis for
5its standards.

6(ii) Written, oral or electronic reminders
7containing patient-specific and drug-specific information
8and suggested changes in prescribing or dispensing
9practices, communicated in a manner designed to ensure
10the privacy of patient-related information.

11(iii) Use of face-to-face discussions between health
12care professionals who are experts in rational drug
13therapy and selected prescribers and pharmacists who have
14been targeted for educational intervention, including
15discussion of optimal prescribing, dispensing or pharmacy
16care practices and follow-up face-to-face discussions.

17(iv) Intensified review or monitoring of selected
18prescribers or dispensers.

19(d) Corrective actions.--Should licensed prescribers or
20recipients continue to misutilize drugs or abuse the system, the
21committee shall provide information to the secretary for
22corrective action. In the case of prescribers, the committee
23shall submit a report and recommendations to the secretary for
24appropriate action. The secretary shall inform the PBM and the
25appropriate Commonwealth licensing body of any final
26administrative sanctions.

27(e) Nonliability.--Any person rendering service as a member
28of a utilization review committee for this program shall not be
29liable for any civil damages as a result of any acts or
30omissions in rendering the service as a member of any such

1committee except any acts or omissions intentionally designed to
2harm or any grossly negligent acts or omissions which result in
3harm to the person receiving such service.

4(f) Annual report.--The secretary shall require the
5committee to provide an annual report describing the committee's
6activities, including the nature and scope of the prospective,
7concurrent and retrospective drug reviews, a summary of
8interventions used, an assessment of the impact of these
9educational interventions on quality of care and an estimate of
10the cost savings generated as a result of the program.

11Section 1106. Reimbursement.

12Each public plan shall reimburse pharmacies on a fee-for-
13service basis, using formulas established by the plan.
14Pharmacies reimbursed under this chapter shall be paid at fee-
15for-service rates no less than the rates in effect on the
16effective date of this chapter.

17Section 1107. Rebate agreement.

18(a) Required agreements.--A public plan shall not reimburse
19participating pharmacies for any prescription drug unless the
20department and the pharmaceutical manufacturer have entered into
21a rebate agreement covering that prescription drug.

22(b) Exceptions.--Subsection (a) shall not apply if the
23availability of the drug is essential to the health of members
24of the public plan as determined by the department.

25(c) Contracts.--Pharmaceutical manufacturers must enter into
26a rebate agreement with the department to obtain reimbursement
27for prescription drugs included under this chapter. The rebate
28agreement shall require the pharmaceutical manufacturer to
29provide to the department a rebate each calendar quarter in an
30amount to be determined. The PBM shall use its best efforts to

1obtain the best price for prescription drugs under this rebate
2plan. The rebate shall be paid by the manufacturer not later
3than 30 days after the date of receipt of the information
4necessary to calculate the amount of the rebate.

5(d) Disposition of funds.--Moneys received under this
6chapter in connection with public plans other than those
7identified in section 709 and the medical assistance program
8shall be deposited in the Pharmaceutical Assistance Contract for
9the Elderly Fund for purposes of expanding eligibility in the
10PACE program.

11Section 1108. Pharmacies and dispensing physicians.

12(a) General rule.--Pharmacies and dispensing physicians
13participating in the PACE program shall, as a condition of
14participation in that program, agree to the conditions set forth
15in this section.

16(b) Medicare recipients.--Any pharmacy or dispensing
17physician participating in the PACE program shall, as a
18condition of participation in that program, agree to sell
19prescription drugs to Medicare recipients at the PACE program
20price. In no case shall a Medicare recipient be charged more
21than the price of the drug at the particular pharmacy on the
22date of the sale.

23(c) Limitation on participation.--Any pharmacist, pharmacy
24or dispensing physician that is precluded or excluded for cause
25from the Medical Assistance Program shall be precluded or
26excluded from participation under this chapter.

27Section 1109. Medicare recipients.

28(a) General rule.--Medicare recipients shall be eligible to
29purchase prescription drugs at the PACE price established
30pursuant to Chapter 5.

1(b) Procedure.--In order to receive the PACE price under
2subsection (a), a Medicare recipient shall present the
3recipient's Medicare card to the participating provider at the
4time of purchase of the recipient's prescription drugs.

5(c) Information to be made available.--A pharmacist,
6pharmacy or dispensing physician shall inform the Medicare
7recipient whether using the Medicare card will result in the
8Medicare recipient receiving the prescription drug at the lowest
9price available to the Medicare recipient.

10Section 1110. Expansion of PACE program.

11Within 18 months of the effective date of this chapter, the
12pharmacy benefits manager, in conjunction with the Drug
13Utilization Review Committee established under section 1105,
14shall provide to the secretary recommendations concerning the
15expansion of the PACE program. The recommendations shall also be
16submitted to the President pro tempore of the Senate and the
17Speaker of the House of Representatives.

18Section 1111. Administration of contract.

19The secretary shall administer the contract with the PBM and
20shall promulgate rules and regulations, as necessary, to carry
21out the provisions of this chapter.

22Section 1112. Applicability.

23This chapter shall apply to the provision of all pharmacy
24services under:

25(1) Any prescription program established by the
26Commonwealth or in which a contribution by the Commonwealth
27is required by any managed health care plan, pharmaceutical
28manufacturer, licensed pharmacy, chain of pharmacies or
29wholesaler, except pharmacy benefits provided by a health
30maintenance organization through the Medical Assistance

1Program.

2(2) The Medical Assistance Program unless the secretary,
3in consultation with the Department of Public Welfare,
4determines that such inclusion is a violation of Federal law
5or any existing contractual agreement.

6Section 1113. Prohibited activities.

7It shall be unlawful for any individual, partnership or
8corporation to solicit, receive, offer or pay any kickback,
9bribe or rebate in cash or in kind from or to any person in
10connection with the furnishing of services under this chapter.

11Section 2. This act shall take effect in 60 days.