1Providing for regulation of pharmacy benefit managers; imposing
2duties on the Insurance Commissioner and the Insurance
3Department; providing for enforcement; and imposing
4penalties.

5TABLE OF CONTENTS

6Chapter 1. Preliminary Provisions

7Section 101. Short title.

8Section 102. Definitions.

9Chapter 3. Regulation of Pharmacy Benefit Managers

10Section 301. Certificate of authority.

11Section 302. Disclosure of ownership.

12Section 303. Prohibitions.

13Section 304. Required practices.

14Section 305. Personal health care information.

15Section 306. Maximum allowable cost list pricing disclosures.

16Section 307. Inclusion of products on maximum allowable cost
17list.

1Chapter 5. Enforcement

2Section 501. Enforcement.

3Chapter 21. Miscellaneous Provisions

4Section 2101. Applicability.

5Section 2102. Intent.

6Section 2103. Effective date.

7The General Assembly of the Commonwealth of Pennsylvania
8hereby enacts as follows:

9CHAPTER 1

10PRELIMINARY PROVISIONS

11Section 101. Short title.

12This act shall be known and may be cited as the Pharmacy
13Benefit Manager Act.

14Section 102. Definitions.

15The following words and phrases when used in this act shall
16have the meanings given to them in this section unless the
17context clearly indicates otherwise:

18"Board." The State Board of Pharmacy.

19"Commissioner." The Insurance Commissioner of the
20Commonwealth.

21"Covered entity."

22(1) Includes:

23(i) A hospital plan corporation, professional health
24services corporation, insurer, third-party payer, health
25coverage plan, health maintenance organization or PBM.

26(ii) A health program administered by the
27Commonwealth in the capacity of provider of health
28coverage.

29(iii) A managed care organization.

30(iv) An employer, labor union or other entity

1organized in this Commonwealth that provides group or
2individual health coverage to covered individuals who are
3employed or reside in this Commonwealth.

4(v) A Medicare Part D plan.

5(2) The term does not include a health plan that
6provides coverage only for accidental injury, specified
7disease, hospital indemnity, Medicare supplement, disability
8income, long-term care or other limited benefit health
9insurance policies and contracts.

10"Covered individual." A member, participant, enrollee,
11contract holder or policyholder or beneficiary of a covered
12entity who is provided health coverage by the covered entity.
13The term includes a dependent or other person provided health
14coverage through a policy, contract or plan for a covered
15individual.

16"Department." The Insurance Department of the Commonwealth.

17"Network." A pharmacy or group of pharmacies that agree to
18provide prescription services to covered individuals on behalf
19of a covered entity or group of covered entities in exchange for
20payment for its services by a PBM. The term includes a pharmacy
21which generally dispenses outpatient prescriptions to covered
22individuals or which dispenses particular types of
23prescriptions, provides pharmacy services to particular types of
24covered individuals or dispenses prescriptions in particular
25health care settings, including networks of specialty,
26institutional or long-term care facilities.

27"Pharmacy." As defined in section 2(12) of the act of
28September 27, 1961 (P.L.1700, No.699), known as the Pharmacy
29Act.

30"Pharmacy benefits management." Any of the following:

1(1) The procurement of prescription drugs at a
2negotiated contracted rate for dispensation within this
3Commonwealth to covered individuals.

4(2) The administration or management of prescription
5drug benefits provided by a covered entity for the benefit of
6covered individuals.

7(3) Any of the following services provided with regard
8to the administration of pharmacy benefits:

9(i) Mail service pharmacy.

10(ii) Claims processing.

11(iii) Retail network management.

12(iv) Payment of claims to pharmacies for
13prescription drugs dispensed to covered individuals via
14retail or mail order pharmacy.

15(v) Clinical formulary development and management
16services, including, but not limited to, utilization
17management and quality assurance programs.

18(vi) Rebate contracting and administration.

19(vii) Certain patient compliance, therapeutic
20intervention and generic substitution programs.

21(viii) Disease management programs.

22(ix) Setting pharmacy reimbursement pricing and
23methodologies, including maximum allowable cost, and
24determining single or multiple source drugs.

25(x) Retention of any spread or differential between
26what is received from health plans as reimbursement for
27prescription drugs and what is paid to pharmacies by the
28PBM for such drugs.

29"Pharmacy benefits manager" or "PBM." An individual,
30business or other entity that performs pharmacy benefits

1management. The term includes a person or entity acting for a
2PBM in a contractual or employment relationship in the
3performance of pharmacy benefits management and includes mail
4service pharmacy and specialty drug programs.

5"Specialty drugs." A drug that meets at least one of the
6following criteria:

7(1) A high-cost medication used to treat and is
8prescribed for a person with a complex, chronic or rare
9medical condition.

10(2) The drug is not typically available at community
11retail pharmacies.

12(3) The drug requires special handling, storage or has
13distribution or inventory limitations.

14(4) The drug has a complex dosing regimen or requires
15special administration.

16(5) The drug is considered to have limited distribution
17by the FDA.

18(6) The drug requires complex and extended patient
19education or counseling, intensive monitoring or clinical
20oversight.

21(7) The drug has significant side effects or risk
22profile.

23CHAPTER 3

24REGULATION OF PHARMACY BENEFIT MANAGERS

25Section 301. Certificate of authority.

26(a) Authority to act as preferred provider organization.--A
27PBM that provides services to residents of this Commonwealth
28shall apply for, obtain and maintain a certificate of authority
29to operate as a preferred provider organization subject to
30section 630 of the act of May 17, 1921 (P.L.682, No.284), known

1as The Insurance Company Law of 1921. A PBM that obtains a
2certificate of authority under this subsection is authorized to
3operate as a PBM under this act.

4(b) Authority to act as risk-bearing preferred provider
5organization.--A PBM shall obtain a certificate of authority as
6a risk-bearing preferred provider organization if the PBM:

7(1) makes contractual commitments to a covered entity
8regarding the prices and terms and conditions under which
9prescriptions will be dispensed to covered individuals;

10(2) collects rebates, discounts, or allowances from drug
11manufacturers or distributors based on volume and types of
12prescriptions dispensed;

13(3) makes commitments regarding the return, payment or
14credit of all or any portion of such rebates, discounts or
15allowances to or for the benefit of covered entities; or

16(4) otherwise shares in the profits or losses of a
17covered entity.

18(c) Fee.--

19(1) The department shall establish the fees to cover the
20annual expenses and costs of administering this act. An
21initial fee for a preferred provider organization authorized
22to operate as a PBM shall be set by the department but shall
23not be less than $500 per year.

24(2) Each PBM shall renew its authorization annually as
25set by the department.

26(d) Penalty for failure to renew.--Any lapse in renewing
27authorization to act as a PBM shall be subject to penalties
28established by the department to bring noncomplying entities
29into full compliance with this act.

30(e) Form.--To obtain a certificate of authority, a PBM shall

1submit a form developed by the department. At a minimum the form
2must contain the following information and any additional
3requirements as may be established by the department:

4(1) A PBM that maintains a mail-order pharmacy that
5ships or mails prescription drugs to residents of this
6Commonwealth must provide license numbers of all mail-order
7pharmacies owned by the PBM and also be registered or
8licensed by the board.

9(2) Basic organizational documents of the PBM, such as
10the articles of incorporation, articles of association,
11bylaws, partnership agreements, trade name certificate, trust
12agreement, shareholder agreement and other applicable
13documents and all amendments to the documents as the
14department finds necessary.

15(3) A certificate of compliance issued by the board
16indicating the PBM's plan of operation is consistent with the
17act of September 27, 1961 (P.L.1700, No.699), known as the
18Pharmacy Act, and that the PBM's pharmacist in charge holds a
19current Pennsylvania pharmacist license and is in good
20standing with the board.

21(4) A detailed description of the claims processing
22services, pharmacy services, insurance services, other
23prescription drug or device services, audit procedures for
24network pharmacies or other administrative services to be
25provided.

26(5) All incentive arrangements or programs such as
27rebates, discounts, disbursements or any other similar
28financial program or arrangement relating to income or
29consideration received or negotiated, directly or indirectly,
30with any pharmaceutical company or insurer, that relates to

1prescription drug or device services, including educational
2grants.

3(6) A financial statement of income for the previous and
4current year prepared by an independent certified public
5accountant showing the assets, liabilities, direct or
6indirect income and any other sources of financial support
7sufficient as deemed by the commissioner to show financial
8stability and viability to meet its full obligations to
9participants and participating pharmacies.

10(f) Revocation, suspension, denial or restriction.--

11(1) The commissioner may revoke, suspend, deny or
12restrict a certificate of authority of a PBM for violation of
13this act or on other grounds or violations of Federal or
14State laws or regulations as determined necessary or
15appropriate by the commissioner.

16(2) In the event that a certificate is revoked,
17suspended or denied, the commissioner may permit further
18operation of the PBM for a limited time not to exceed a 60-
19day period under conditions and restrictions as determined by
20the commissioner for a period as necessary for the beneficial
21interests of the participants and pharmacy providers.

22(3) The commissioner shall provide written notice to a
23PBM of any revocation, denial, suspension or restriction
24including the specific reasons. The PBM shall have the same
25rights to notice, hearings and other provisions as provided
26to insurers or third-party administrators, respectively,
27under the laws of this Commonwealth.

28(4) The commissioner shall provide to the board, upon
29request, copies of applications, correspondence and any other
30documents provided by the PBM to the commissioner, and with

1notices, findings, determinations and other documents
2provided by the commissioner to the PBM.

3Section 302. Disclosure of ownership.

4(a) Disclosure.--A PBM also must disclose to the department
5any ownership interest of any kind with:

6(1) Any insurance company responsible for providing
7benefits directly or through any plan for which the PBM
8provides services.

9(2) Any parent company, subsidiary or other organization
10that is related to the provision of pharmacy services, the 
11provision of other prescription drug or device services or a 
12pharmaceutical manufacturer.

13(b) Notification.--A PBM shall notify the department in
14writing within five business days of any material change in
15ownership.

16Section 303. Prohibitions.

17(a) Prohibited conduct.--No pharmacy benefit manager may:

18(1) Mandate that a covered individual use a specific
19retail pharmacy, mail-order pharmacy, specialty pharmacy or
20other pharmacy if the PBM has an ownership interest in the
21pharmacy.

22(2) Intervene in the delivery or transmission of
23prescriptions from the prescriber to the pharmacist or
24pharmacy for the purpose of:

25(i) influencing the prescriber's choice of therapy;
26or

27(ii) altering the prescription information,
28including, but not limited to, switching the prescribed
29drug without the express authorization of the prescriber.

30(3) Mandate that a pharmacist or pharmacy change a

1covered person's prescription unless the prescribing
2physician and the covered person authorize the change to be
3made.

4(4) Transfer a health benefit plan to another payment
5network unless it receives written authorization from the
6insurer.

7(5) Require more stringent recordkeeping by a pharmacy
8than that required by Federal or State law.

9(6) Require a pharmacist or pharmacy to provide services
10to the covered individuals of one covered entity or
11participate in one network in order to provide services to
12covered individuals of another covered entity or participate
13in another network.

14(7) Exclude an otherwise qualified pharmacist or
15pharmacy from participation in a particular network,
16including a specialty network, if the pharmacist or pharmacy
17accepts the standard terms, conditions and reimbursement
18rates for ingredient costs, professional pharmacy services
19and the quality of dispensing established by the PBM, a
20government program or an employee benefit plan, which, except
21as provided by subsection (b) shall apply on an equal basis
22to all pharmacies in the provider network. As a condition for
23participating in one network or type of network, a PBM may
24not require a pharmacist or pharmacy to accept the terms and
25conditions of another network for prescriptions dispensed by
26the first network.

27(8) Automatically enroll a pharmacy or its agent in a
28contract or modify an existing contract without agreement
29from the pharmacy or pharmacist. The pharmacy or its agent
30shall sign a contract before assuming responsibility to fill

1prescriptions.

2(b) Special payment arrangements.--To the extent Federal law
3allows a Medicare Part D plan to provide covered individuals
4using pharmacists or pharmacies in a preferred provider network
5reduced coinsurance or copayments in exchange for lower payments
6for ingredient costs and professional pharmacy services, a PBM
7administering a Medicare Part D plan shall allow any otherwise
8qualified pharmacist or pharmacy willing to accept the reduced
9payments to enroll in the preferred provider network. A PBM
10administering a preferred provider network shall permit covered
11individuals to obtain pharmacy services from a pharmacist or
12pharmacy that is not a member of a preferred provider pursuant
13to its standard terms and conditions as provided by subsection
14(a)(7) with any differential in coinsurance or copayments paid
15by covered individuals.

16Section 304. Required practices.

17(a) Performance of duties.--A PBM shall perform its duties
18with care, skill, prudence and diligence and by exercising good
19faith and fair dealing toward the covered entity.

20(b) Claims related information.--A PBM shall provide, upon
21request by the department or any covered entity, all claims-
22related financial and utilization information requested relating
23to the provision of benefits to covered individuals through that
24covered entity and all financial and utilization information
25relating to services to that covered entity in a format that
26includes:

27(1) National Drug Code numbers used.

28(2) Quantity.

29(3) Day's supply.

30(4) Price paid to a pharmacy and price paid to a payer,

1separating any administrative fee.

2(c) Confidentiality.--A PBM providing information under this
3section may designate the material as confidential. Information
4designated as confidential by a PBM and provided to a covered
5entity under this section may not be disclosed by the covered
6entity to any person without the consent of the PBM, except that
7disclosure may be ordered by a court of this Commonwealth for
8good cause shown or made in a court filing under seal or until
9otherwise ordered by a court. Nothing in this section limits the
10Attorney General's use of civil investigative demand authority
11under the act of December 17, 1968 (P.L.1224, No.387), known as
12the Unfair Trade Practices and Consumer Protection Law, to
13investigate violations of this section. A payer must be offered
14this information for its internal auditing or outsourced
15auditing use.

16(d) Disclosure.--A PBM shall provide, upon request by the
17covered entity, information on the nature, type and amount of
18all other revenue received from a pharmaceutical manufacturer or
19any other entity associated with the dispensing or distribution
20of prescription medication for programs that the covered entity
21offers or performs to its enrollees.

22(e) Documentation required.--A PBM shall remit to the
23covered entity, in its monthly report or invoice detail,
24documentation of the amount paid to retail pharmacy or mail-
25order pharmacy and the amount billed to the covered entity for
26all claims at a detailed level such to disclose individual claim
27financial information, with personal health information redacted
28if necessary for privacy compliance under the Health Insurance
29Portability and Accountability Act of 1996 (Public Law 104-191,
30110 Stat. 1933).

1(f) Substitution.--If a PBM makes a substitution in which
2the substitute drug costs more than the prescribed drug, the
3pharmacy benefits manager shall disclose to the covered entity
4the cost of both drugs and any benefit or payment directly or
5indirectly accruing to the PBM as a result of the substitution.

6(g) Calculation.--When a patient's out-of-pocket cost or
7copay is percentage based, the PBM shall calculate the
8percentage owed or the amount of the copay based upon the amount
9actually paid to the pharmacy for the medication in question.

10(h) Listing of specialty drugs.--A PBM shall make a listing
11of any specialty drugs available to and approved by the plan
12sponsor.

13(i) Repackaged medications.--Repackaged medications must use
14the National Drug Code of the original manufacturer.

15Section 305. Personal health care information.

16A PBM shall:

17(1) Notify a plan sponsor if the PBM intends to sell
18utilization or claims data that the PBM possesses as a result
19of an arrangement described in this section.

20(2) Notify the plan sponsor in writing at least 30 days
21before selling, leasing or renting utilization or claims data
22and provide the plan sponsor with the name of the potential
23purchaser of the data and the expected use of the data by the
24purchaser.

25(3) Not sell utilization or claims data unless the sale
26complies with all Federal and State laws and the PBM has
27received written approval for the sale from the plan sponsor.

28(4) Not directly contact a covered individual by any
29means, including via electronic delivery, telephonic, source
30messaging service (SMS) text or direct e-mail, without the

1express written permission of the plan sponsor and the
2covered individual.

3(5) Not transmit any personally identifiable utilization
4of claims data to a pharmacy owned by the PBM if the patient
5has not voluntarily elected in writing to fill that
6particular prescription at the PBM-owned pharmacy.

7(6) Provide each covered individual with an opportunity
8to affirmatively opt out of the sale of the individual's data
9prior to entering into any arrangement for the lease, rental
10or sale of the information.

11Section 306. Maximum allowable cost list pricing disclosures.

12Beginning on January 1 of each calendar year, the PBM shall,
13with respect to a contract between a PBM and a pharmacy:

14(1) Provide or make readily available the applicable
15maximum allowable cost list to pharmacies.

16(2) Include in the contracts the basis of the
17methodology and sources utilized to determine the maximum
18allowable cost pricing of the PBM, update pricing information
19on the pricing within at least seven calendar days and
20establish a reasonable process for the prompt notification of
21pricing updates to network pharmacies.

22(3) Maintain a procedure to eliminate products from the
23list or modify maximum allowable cost rates within seven
24calendar days of a manufacturers price change in order to
25remain consistent with pricing changes in the marketplace.

26(4) Provide a reasonable administrative appeals
27procedure to allow a pharmacy to contest a listed maximum
28allowable cost rate. The PBM must respond to a pharmacy or
29its agent, who has contested a maximum allowable cost rate
30through this procedure within 15 calendar days. If an update

1is warranted, the PBM shall make the change retroactive to
2the date of dispensing and make the adjustment effective for
3all pharmacy providers in the network.

4(5) Disclose whether a PBM utilizes a maximum allowable
5cost list for drugs dispensed at retail, but does not utilize
6a maximum allowable cost list for drugs dispensed by mail-
7order to a plan sponsor in writing or in the contract no
8later than 21 business days from the implementation of the
9practice.

10(6) Disclose to the plan sponsor whether or not it is
11using the identical maximum allowable cost list with respect
12to billing the plan sponsor as it does when reimbursing all
13network pharmacies. If multiple maximum allowable cost lists
14are used, the PBM must disclose to the plan sponsor any
15difference between the amount paid to any pharmacy and the
16amount charged to the plan sponsor.

17(7) Not require a pharmacy to dispense a medication if
18the reimbursement for the medication falls below pharmacy
19acquisition cost. A special process shall be created to
20handle situations that do not work under the terms of a
21contract.

22Section 307. Inclusion of products on maximum allowable cost
23list.

24(a) Requirements.--In order to place a particular generic
25prescription drug on a maximum allowable cost list, the PBM
26must, at a minimum, ensure that:

27(1) The drug must have at least three or more nationally
28available, therapeutically equivalent, multiple source drugs
29with a significant cost difference, excluding outliers.

30(2) The products must be listed as therapeutically and

1pharmaceutically equivalent or A rated in the FDA's most
2recent version of the Orange Book.

3(3) The product must be available for purchase without
4limitations by all pharmacies in this Commonwealth from
5national or regional wholesalers and not be an obsolete,
6discontinued product, or temporarily unavailable. Significant
7outliers shall not be used in calculation of a drug for
8placement on the maximum allowable cost list.

9(4) Single source generic drugs will be paid as a
10branded product.

11(b) Exception.--Specialty drugs shall not be eligible for
12inclusion on a maximum allowable cost list.

13CHAPTER 5

14ENFORCEMENT

15Section 501. Enforcement.

16(a) Action by commissioner.--The commissioner shall enforce
17the provisions of this act and shall take action or impose
18penalties to bring noncomplying entities into full compliance
19with this act.

20(b) Additional relief.--Regardless of whether any
21enforcement action is taken by the commissioner, a covered
22individual, pharmacy or pharmacist aggrieved by a violation of
23this act may seek relief to remedy the alleged violations
24involving at least one level of internal review and
25investigation as provided under section 2161(b) of the act of
26May 17, 1921 (P.L.682, No.284), known as The Insurance Company
27Law of 1921, and an opportunity to appeal to the department in
28the manner provided under section 2142 of The Insurance Company
29Law of 1921 unless, with respect to a pharmacy or pharmacist, an
30agreement with the insurance company or pharmacy benefit manager

1establishes an alternative dispute resolution process as
2provided under section 2162(f) of The Insurance Company Law of
31921.

4(c) Violation of Unfair Trade Practices and Consumer 
5Protection Law.--A violation of this act shall constitute a 
6violation of the act of December 17, 1968 (P.L.1224, No.387), 
7known as the Unfair Trade Practices and Consumer Protection Law.

8CHAPTER 21

9MISCELLANEOUS PROVISIONS

10Section 2101. Applicability.

11The requirements of this act shall apply to all PBMs
12notwithstanding any provision of the act of May 17, 1921
13(P.L.682, No.284), known as The Insurance Company Law of 1921,
14or other law except to the extent an express exemption is
15provided from all of any portion of the requirements this act.

16Section 2102. Intent.

17It is the intent of the General Assembly that this act shall
18constitute a law regulating the business of insurance and shall
19apply to the fullest extent permitted by Federal law. In the
20event that any portions of this act are found to be preempted by
21Federal law either entirely or with respect to any type of
22covered entities, any provisions of this act not preempted by
23Federal law, either entirely or with respect to any type of
24covered entity, shall remain in effect. A certificate filed with
25the commissioner claiming that a PBM is governed and regulated
26under the provisions of the Employee Retirement Income Security
27Act of 1974 (Public Law 93-406, 88 Stat. 829) shall not exempt a
28PBM from application of all or any portion of this act, either
29entirely or with respect to any type of covered entity, except
30to the extent such an exemption is required by Federal law.

1Section 2103. Effective date.

2This act shall take effect in 90 days.