Regular Session 2015-2016 House Bill 0946 P.N. 4111

SENATE AMENDED

PRIOR PRINTER'S NOS. 2120, 2371, 3693,

3707, 3933

PRINTER'S NO. 4111

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

946

Session of

2015

INTRODUCED BY BAKER, FABRIZIO, D. COSTA, STAATS, LONGIETTI,

DAVIS, GIBBONS, PICKETT, PASHINSKI, CRUZ, GROVE, McNEILL,

YOUNGBLOOD, M. K. KELLER, KILLION, P. COSTA, COHEN, THOMAS,

EVERETT, CARROLL, FARRY, SCHLOSSBERG, PHILLIPS-HILL,

M. DALEY, WARD, READSHAW, HARKINS, SAYLOR, GOODMAN, GALLOWAY,

BARRAR, BOYLE, MICCARELLI, DeLUCA, NEUMAN, MATZIE, TOEPEL,

WATSON, KNOWLES, O'BRIEN, SANTARSIERO, PETRI, M. QUINN,

D. PARKER, DEASY, CUTLER AND BARBIN, AUGUST 18, 2015

AS AMENDED ON SECOND CONSIDERATION, IN SENATE, OCTOBER 24, 2016

AN ACT

Providing for pharmacy audit procedures. PROVIDING FOR PHARMACY

AUDIT PROCEDURES, FOR REGISTRATION OF PHARMACY BENEFITS

MANAGERS AND AUDITING ENTITIES AND, FOR MAXIMUM ALLOWABLE

COST TRANSPARENCY AND FOR PRESCRIPTION DRUGS REIMBURSED UNDER

THE PACE AND PACENET PROGRAM; AND MAKING RELATED REPEALS.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Short title.

This act shall be known and may be cited as the Pharmacy

Audit Integrity Act.

Section 2. Scope of act.

This act covers any audit of the records of a pharmacy

conducted by a managed care company, third-party payer, pharmacy

benefits manager, a health program administered by a department

of the Commonwealth or any entity that represents a company,

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group or department.

Section 3. Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Auditing entity." A person, company or government entity

that performs a pharmacy audit, including a plan sponsor,

pharmacy benefit manager, managed care organization or third-

party administrator.

"Business day." Any day of the week excluding Saturday,

Sunday and any legal holiday.

"Department." The Insurance Department of the Commonwealth.

"Extrapolation." The practice of inferring a frequency of

dollar amount of overpayments, underpayments, nonvalid claims or

other errors on any portion of claims submitted, based on the

frequency of dollar amount of overpayments, underpayments,

nonvalid claims or other errors actually measured in a sample of

claims.

"Health care practitioner." As defined in section 103 of the

act of July 19, 1979 (P.L.130, No.48), known as the Health Care

Facilities Act.

"Nonproprietary drug." As defined in section 2(7.1) of the

act of September 27, 1961 (P.L.1700, No.699), known as the

Pharmacy Act.

"Pharmacist." As defined in section 2(10) of the Pharmacy

Act.

"Pharmacy." As defined in section 2(12) of the Pharmacy Act.

"Pharmacy audit." An audit, conducted on-site or remotely by

or on behalf of an auditing entity of any records of a pharmacy

for prescription or nonproprietary drugs dispensed by a pharmacy

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to beneficiaries of a health benefit plan. The term does not

include either of the following:

(1) A concurrent review or remote audit that is

initiated within seven business days of the pharmacy's

transmission of a claim to an auditing entity.

(2) A concurrent review or remote audit where no charge-

back or recoupment is demanded by the auditing entity.

"Pharmacy benefits management." Any entity that performs any

of the following:

(1) The procurement of prescription drugs at a

negotiated contracted rate for dispensation within this

Commonwealth to covered individuals.

(2) The administration or management of prescription

drug benefits provided by a covered entity for the benefit of

covered individuals.

(3) The provision of any of the following in conjunction

with the administration of pharmacy benefits:

(i) Mail-service pharmacy.

(ii) Claims processing.

(iii) Retail network management.

(iv) Payment of claims to pharmacies for

prescription drugs dispensed to covered individuals via

retail or mail-order pharmacy.

(v) Clinical formulary development and management

services, including, but not limited to, utilization

management and quality assurance programs.

(vi) Rebate contracting and administration.

(vii) Certain patient compliance, therapeutic

intervention and generic substitution programs.

(viii) Disease management programs.

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(ix) Setting pharmacy reimbursement pricing and

methodologies, including maximum allowable cost, and

determining single or multiple source drugs.

"Pharmacy benefits manager" or "PBM." A person, business or

other entity that performs pharmacy benefits management.

"Pharmacy record." Any record stored electronically or as a

hard copy by a pharmacy that relates to the provision of

prescription or nonproprietary drugs or pharmacy services or

other component of pharmacist care that is included in the

practice of pharmacy.

"Plan sponsor." Any of the following that pays for or

processes a claim for payment for prescription drugs or pharmacy

services:

(1) A health insuring corporation.

(2) A person authorized to engage in the business of

sickness and accident.

(3) A person or government entity providing coverage of

prescription or nonproprietary drugs or pharmacy services to

individuals on a self-insurance basis.

(4) A group health plan, as defined in 29 U.S.C. § 1167

(relating to definitions and special rules).

(5) A service benefit plan, as referenced in 42 U.S.C. §

1396a(a)(25) (relating to state plans for medical

assistance).

(6) A Medicaid managed care organization that has

entered into a contract with the Commonwealth.

(7) Any other person or government entity that is by

law, contract or agreement responsible for paying or

processing a claim for payment for the provision of

prescription or nonproprietary drugs or pharmacy services.

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Section 4. Procedures for conducting pharmacy audits.

(a) Procedure.--An entity conducting a pharmacy audit under

this act shall conform to the following rules:

(1) Except as otherwise provided by Federal or State

law, an auditing entity conducting a pharmacy audit may have

access to a pharmacy's previous audit report only if the

report was prepared by an auditing entity.

(2) Any information collected during a pharmacy audit

shall be confidential by law, except that the auditing entity

conducting the pharmacy audit may share the information with

the pharmacy benefits manager and the plan sponsor, for which

a pharmacy audit is being conducted.

(3) No auditing entity conducting a pharmacy audit shall

solely compensate any of its employees or any contractor with

which an auditing entity contracts to conduct a pharmacy

audit, based on the amount claimed or the actual amount

recouped by the pharmacy being audited.

(4) The entity shall provide the pharmacy being audited

with at least 10 business days' prior written notice before

conducting a pharmacy audit, unless both parties agree

otherwise. The audit may be delayed for a period of up to 30

days at the request of the pharmacy, one time per year, and

shall only be granted if there is good cause, including, but

not limited to, a planned medical procedure or planned

absence from work of a necessary pharmacist. If a delay is

requested by the pharmacy, the pharmacy shall provide notice

to the PBM at least five business days prior to the day the

audit is to commence.

(5) (Reserved).

(6) The entity may not initiate or schedule a pharmacy

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audit during the first five business days of any month for

any pharmacy that averages in excess of 600 prescriptions

filled per week, without the express consent of the pharmacy.

(7) The entity shall accept paper or electronic

signature logs that document the delivery of prescription or

nonproprietary drugs and pharmacist services to a health plan

beneficiary or the agent of the beneficiary.

(8) The entity shall provide to the representative of

the pharmacy, prior to leaving the pharmacy at the conclusion

of the on-site portion of the pharmacy audit, a complete list

of pharmacy records reviewed.

(9) Any pharmacy audit that involves clinical judgment

shall be conducted by or in consultation with a pharmacist.

(10) No pharmacy audit shall cover:

(i) a period of more than 24 months after the date a

claim was submitted by the pharmacy to the pharmacy

benefits manager or plan sponsor unless a longer period

is required by law; or

(ii) more than 250 prescriptions, provided that a

refill shall not constitute a separate prescription for

the purposes of this subparagraph.

(11) No auditing entity may use extrapolation to

calculate penalties or amounts to be charged back or recouped

unless otherwise required by Federal requirements or Federal

plans.

(12) No auditing entity shall include dispensing fees in

the calculation of overpayments unless a prescription is

considered a misfill. As used in this paragraph, "misfill"

means a prescription that was not dispensed, a prescription

error, a prescription where the prescriber denied the

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authorization request or a prescription where an extra

dispensing fee was charged.

(13) A pharmacy may do any of the following when a

pharmacy audit is performed:

(i) To validate the pharmacy record and delivery, a

pharmacy may use authentic and verifiable statements or

records, including, but not limited to, medication

administration records of a nursing home, assisted living

facility, hospital or health care practitioner with

prescriptive authority.

(ii) To validate claims in connection with

prescriptions or changes in prescriptions, or refills of

prescription or nonproprietary drugs, a pharmacy may use

any valid prescription, including, but not limited to,

medication administration records, facsimiles, electronic

prescriptions, electronically stored images of

prescriptions, electronically created annotations or

documented telephone calls from the prescribing health

care practitioner or practitioner's agent. Documentation

of an oral prescription order that has been verified by

the prescribing health care practitioner shall meet the

provisions of this subparagraph for the initial audit

review.

(b) Written report.--An auditing entity shall provide the

pharmacy with a written report of the pharmacy audit and comply

with the following requirements:

(1) The preliminary pharmacy audit report must be

delivered to the pharmacy or its corporate parent within 60

days after the completion of the pharmacy audit. The

preliminary report shall include contact information for the

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individual who conducted the pharmacy audit, including

telephone number, facsimile number, e-mail and auditing firm,

so that audit results, discrepancies and procedures can be

reviewed. The preliminary pharmacy audit report shall

include, but not be limited to, claim level information for

any discrepancy found and total dollar amount of claims

subject to recovery.

(2) A pharmacy shall be allowed 30 days following

receipt of the preliminary audit report to respond to the

findings of the preliminary report.

(3) A final audit report shall be delivered to the

pharmacy or its corporate parent not later than 60 calendar

days after any responses from the pharmacy or corporate

parent are received by the auditing entity. The auditing

entity shall issue a final pharmacy audit report that takes

into consideration any responses provided to the auditing

entity by the pharmacy or corporate parent.

(4) The final pharmacy audit report may be delivered

electronically.

(5) No pharmacy shall be subject to a charge-back or

recoupment for a clerical or recordkeeping error in a

required document or record, including a typographical error,

scrivener's error or computer error, unless the error

resulted in overpayment to the pharmacy.

(6) No auditing entity conducting a pharmacy audit or

person acting on behalf of the entity shall charge-back or

recoup or collect penalties from a pharmacy until the time

period to file an appeal of a final pharmacy audit report has

passed or the appeals process has been exhausted, whichever

is later.

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(7) If an identified discrepancy in a pharmacy audit

exceeds $25,000, future payments to the pharmacy in excess of

that amount may be withheld pending adjudication of an

appeal.

(8) No interest shall accrue for any party during the

audit period, beginning with the notice of the pharmacy audit

and ending with the conclusion of the appeals process.

Section 5. Appeals process.

(a) General rule.--An auditing entity shall establish a

written appeals process under which a pharmacy may appeal an

unfavorable final audit report to the entity.

(b) Adjudication.--The adjudication of a claim may not be

appealed through the audit process.

Section 6. Limitations.

(a) General rule.--The provisions of this act shall not

apply to an audit of pharmacy records when:

(1) fraud, waste, abuse or other intentional misconduct

is indicated by physical review or review of claims data or

statements; or

(2) other investigative methods indicate a pharmacy is

or has been engaged in criminal wrongdoing, fraud or other

intentional or willful misrepresentation.

(b) Federal law.--This act does not supersede any audit

requirements established by Federal law.

Section 7. Enforcement.

The department shall have enforcement authority and take

action or impose penalties to bring noncomplying entities into

full compliance with this act, including the promulgation of any

regulations necessary to carry out this act.

Section 8. Effective date.

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This act shall take effect in 90 days.

CHAPTER 1

PRELIMINARY PROVISIONS

SECTION 101. SHORT TITLE.

THIS ACT SHALL BE KNOWN AND MAY BE CITED AS THE PHARMACY

AUDIT INTEGRITY AND TRANSPARENCY ACT.

SECTION 102. SCOPE OF ACT.

THIS ACT COVERS ANY AUDIT OF THE RECORDS OF A PHARMACY

CONDUCTED BY A MANAGED CARE COMPANY, THIRD-PARTY PAYER, PHARMACY

BENEFITS MANAGER, A HEALTH PROGRAM ADMINISTERED BY A DEPARTMENT

OF THE COMMONWEALTH OR ANY OR AN ENTITY THAT REPRESENTS A

COMPANY, GROUP OR DEPARTMENT COVERED ENTITY.

SECTION 103. DEFINITIONS.

THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS ACT SHALL

HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION UNLESS THE

CONTEXT CLEARLY INDICATES OTHERWISE:

"AUDITING ENTITY." A PERSON, OR COMPANY OR GOVERNMENT ENTITY

THAT PERFORMS A PHARMACY AUDIT, INCLUDING A PLAN SPONSOR COVERED

ENTITY, PHARMACY BENEFIT MANAGER, MANAGED CARE ORGANIZATION OR

THIRD-PARTY ADMINISTRATOR.

"BUSINESS DAY." ANY DAY OF THE WEEK EXCLUDING SATURDAY,

SUNDAY AND ANY LEGAL HOLIDAY.

"COVERED ENTITY." A MEMBER, PARTICIPANT, ENROLLEE, CONTRACT

HOLDER OR POLICY HOLDER PROVIDING PHARMACY BENEFITS TO A COVERED

INDIVIDUAL UNDER A HEALTH COVERAGE PLAN INSURANCE POLICY

PURSUANT TO A CONTRACT ADMINISTERED BY A PHARMACY BENEFIT

MANAGER.

"COVERED INDIVIDUAL." A MEMBER, PARTICIPANT, ENROLLEE,

CONTRACT HOLDER OR POLICYHOLDER OR BENEFICIARY OF A COVERED

ENTITY WHO IS PROVIDED HEALTH COVERAGE BY THE COVERED ENTITY.

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THE TERM INCLUDES A DEPENDENT OR OTHER PERSON PROVIDED HEALTH

COVERAGE THROUGH THE POLICY, CONTRACT OR PLAN OR CONTRACT OF A

COVERED INDIVIDUAL.

"DEPARTMENT." THE INSURANCE DEPARTMENT OF THE COMMONWEALTH.

"EXTRAPOLATION." THE PRACTICE OF INFERRING A FREQUENCY OF

DOLLAR AMOUNT OF OVERPAYMENTS, UNDERPAYMENTS, NONVALID CLAIMS OR

OTHER ERRORS ON ANY PORTION OF CLAIMS SUBMITTED, BASED ON THE

FREQUENCY OF DOLLAR AMOUNT OF OVERPAYMENTS, UNDERPAYMENTS,

NONVALID CLAIMS OR OTHER ERRORS ACTUALLY MEASURED IN A SAMPLE OF

CLAIMS.

"GENERIC DRUG LIST." A LIST OF DRUGS, MEDICAL PRODUCTS OR

DEVICES, OR BOTH, FOR WHICH A MAXIMUM ALLOWABLE COST HAS BEEN

ESTABLISHED BY A PHARMACY BENEFITS MANAGER.

"HEALTH CARE PRACTITIONER." AS DEFINED IN SECTION 103 OF THE

ACT OF JULY 19, 1979 (P.L.130, NO.48), KNOWN AS THE HEALTH CARE

FACILITIES ACT.

"HEALTH INSURANCE POLICY." A POLICY, SUBSCRIBER CONTRACT,

CERTIFICATE OR PLAN THAT PROVIDES PRESCRIPTION DRUG COVERAGE.

THE TERM INCLUDES BOTH COMPREHENSIVE AND LIMITED BENEFIT HEALTH

POLICIES.

"HEALTH INSURER." AN ENTITY LICENSED BY THE DEPARTMENT WITH

AUTHORITY TO ISSUE A POLICY, SUBSCRIBER CONTRACT, CERTIFICATE OR

PLAN THAT PROVIDES PRESCRIPTION DRUG COVERAGE THAT IS OFFERED OR

GOVERNED UNDER ANY OF THE FOLLOWING:

(1) THE ACT OF MAY 17, 1921 (P.L.682, NO.284), KNOWN AS

THE INSURANCE COMPANY LAW OF 1921, INCLUDING SECTION 630 AND

ARTICLE XXIV THEREOF.

(2) THE ACT OF DECEMBER 29, 1972 (P.L.1701, NO.364),

KNOWN AS THE HEALTH MAINTENANCE ORGANIZATION ACT.

(3) 40 PA.C.S. CH. 61 (RELATING TO HOSPITAL PLAN

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CORPORATIONS) OR 63 (RELATING TO PROFESSIONAL HEALTH SERVICES

PLAN CORPORATIONS).

"MAXIMUM ALLOWABLE COST." THE MAXIMUM AMOUNT THAT A PHARMACY

BENEFITS MANAGER WILL REIMBURSE A PHARMACY FOR THE COST OF A

DRUG OR A MEDICAL PRODUCT OR DEVICE.

"MULTIPLE SOURCE DRUG." A COVERED OUTPATIENT DRUG FOR WHICH

THERE IS AT LEAST ONE OTHER DRUG PRODUCT THAT IS RATED AS

THERAPEUTICALLY EQUIVALENT UNDER THE FOOD AND DRUG

ADMINISTRATION'S MOST RECENT PUBLICATION OF "APPROVED DRUG

PRODUCTS WITH THERAPEUTIC EQUIVALENCE EVALUATIONS."

"MULTIPLE SOURCE GENERIC LIST." A LIST OF DRUGS, MEDICAL

PRODUCTS OR DEVICES, OR BOTH, FOR WHICH A MAXIMUM ALLOWABLE COST

HAS BEEN ESTABLISHED BY A PHARMACY BENEFITS MANAGER.

"NETWORK." A PHARMACY OR GROUP OF PHARMACIES THAT AGREE TO

PROVIDE PRESCRIPTION SERVICES TO COVERED INDIVIDUALS ON BEHALF

OF A COVERED ENTITY OR GROUP OF COVERED ENTITIES IN EXCHANGE FOR

PAYMENT FOR ITS SERVICES BY A PHARMACY BENEFITS MANAGER OR

PHARMACY SERVICES ADMINISTRATION ORGANIZATION. THE TERM INCLUDES

A PHARMACY THAT GENERALLY DISPENSES OUTPATIENT PRESCRIPTIONS TO

COVERED INDIVIDUALS OR DISPENSES PARTICULAR TYPES OF

PRESCRIPTIONS, PROVIDES PHARMACY SERVICES TO PARTICULAR TYPES OF

COVERED INDIVIDUALS OR DISPENSES PRESCRIPTIONS IN PARTICULAR

HEALTH CARE SETTINGS, INCLUDING NETWORKS OF SPECIALTY,

INSTITUTIONAL OR LONG-TERM CARE FACILITIES.

"NONPROPRIETARY DRUG." AS DEFINED IN SECTION 2(7.1) OF THE

ACT OF SEPTEMBER 27, 1961 (P.L.1700, NO.699), KNOWN AS THE

PHARMACY ACT.

"PHARMACIST." AS DEFINED IN SECTION 2(10) OF THE PHARMACY

ACT.

"PHARMACY." AS DEFINED IN SECTION 2(12) OF THE PHARMACY ACT.

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"PHARMACY AUDIT." AN AUDIT, CONDUCTED ON-SITE BY OR ON

BEHALF OF AN AUDITING ENTITY OF ANY RECORDS OF A PHARMACY FOR

PRESCRIPTION OR NONPROPRIETARY DRUGS DISPENSED BY A PHARMACY TO

BENEFICIARIES OF A HEALTH BENEFIT PLAN A COVERED INDIVIDUAL.

"PHARMACY BENEFITS MANAGEMENT." ANY ENTITY THAT PERFORMS THE

PERFORMANCE OF ANY OF THE FOLLOWING:

(1) THE PROCUREMENT OF PRESCRIPTION DRUGS AT A

NEGOTIATED CONTRACTED RATE FOR DISPENSATION WITHIN THIS

COMMONWEALTH TO COVERED INDIVIDUALS.

(2) THE ADMINISTRATION OR MANAGEMENT OF PRESCRIPTION

DRUG BENEFITS PROVIDED BY A COVERED ENTITY FOR THE BENEFIT OF

COVERED INDIVIDUALS.

(3) THE PROVISION OF ANY OF THE FOLLOWING IN CONJUNCTION

WITH THE ADMINISTRATION OF PHARMACY BENEFITS, INCLUDING:

(I) MAIL-SERVICE OPERATING A MAIL-SERVICE PHARMACY.

(II) CLAIMS PROCESSING.

(III) RETAIL MANAGING A RETAIL PHARMACY NETWORK

MANAGEMENT.

(IV) PAYMENT OF PAYING CLAIMS TO PHARMACIES A

PHARMACY FOR PRESCRIPTION DRUGS DISPENSED TO COVERED

INDIVIDUALS VIA RETAIL OR MAIL-ORDER PHARMACY.

(V) CLINICAL DEVELOPING AND MANAGING A CLINICAL

FORMULARY DEVELOPMENT AND MANAGEMENT SERVICES, INCLUDING,

BUT NOT LIMITED TO, UTILIZATION MANAGEMENT AND QUALITY

ASSURANCE PROGRAMS.

(VI) REBATE CONTRACTING AND ADMINISTRATION.

(VII) CERTAIN MANAGING A PATIENT COMPLIANCE,

THERAPEUTIC INTERVENTION AND GENERIC SUBSTITUTION

PROGRAMS PROGRAM.

(VIII) DISEASE OPERATING A DISEASE MANAGEMENT

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PROGRAMS PROGRAM.

(IX) SETTING PHARMACY REIMBURSEMENT PRICING AND

METHODOLOGIES, INCLUDING MAXIMUM ALLOWABLE COST, AND

DETERMINING SINGLE OR MULTIPLE SOURCE DRUGS.

"PHARMACY BENEFITS MANAGER" OR "PBM." A PERSON, BUSINESS OR

OTHER ENTITY THAT PERFORMS PHARMACY BENEFITS MANAGEMENT FOR

COVERED ENTITIES.

"PHARMACY RECORD." ANY RECORD STORED ELECTRONICALLY OR AS A

HARD COPY BY A PHARMACY THAT RELATES TO THE PROVISION OF

PRESCRIPTION OR NONPROPRIETARY DRUGS OR PHARMACY SERVICES OR

OTHER COMPONENT OF PHARMACIST CARE THAT IS INCLUDED IN THE

PRACTICE OF PHARMACY.

"PHARMACY SERVICES ADMINISTRATION ORGANIZATION" OR "PSAO."

ANY ENTITY THAT CONTRACTS WITH PHARMACIES A PHARMACY TO ASSIST

WITH THIRD-PARTY PAYER INTERACTIONS AND CAN THAT MAY PROVIDE A

VARIETY OF OTHER ADMINISTRATIVE SERVICES. THE ADMINISTRATIVE

SERVICES VARY BUT MAY INCLUDE, INCLUDING CONTRACTING WITH PBMS

ON BEHALF OF PHARMACIES AND MANAGING PHARMACIES' CLAIMS PAYMENTS

FROM THIRD-PARTY PAYERS.

"PLAN SPONSOR." ANY OF THE FOLLOWING THAT PAYS FOR OR

PROCESSES A CLAIM FOR PAYMENT FOR PRESCRIPTION DRUGS OR PHARMACY

SERVICES:

(1) A HEALTH INSURING CORPORATION.

(2) A PERSON AUTHORIZED TO ENGAGE IN THE BUSINESS OF

SICKNESS AND ACCIDENT.

(3) A PERSON OR GOVERNMENT ENTITY PROVIDING COVERAGE OF

PRESCRIPTION OR NONPROPRIETARY DRUGS OR PHARMACY SERVICES TO

INDIVIDUALS ON A SELF-INSURANCE BASIS.

(4) A GROUP HEALTH PLAN, AS DEFINED IN 29 U.S.C. § 1167

(RELATING TO DEFINITIONS AND SPECIAL RULES).

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(5) A SERVICE BENEFIT PLAN, AS REFERENCED IN 42 U.S.C. §

1396A(A)(25) (RELATING TO STATE PLANS FOR MEDICAL

ASSISTANCE).

(6) A MEDICAID MANAGED CARE ORGANIZATION THAT HAS

ENTERED INTO A CONTRACT WITH THE COMMONWEALTH.

(7) ANY OTHER PERSON OR GOVERNMENT ENTITY THAT IS BY

LAW, CONTRACT OR AGREEMENT RESPONSIBLE FOR PAYING OR

PROCESSING A CLAIM FOR PAYMENT FOR THE PROVISION OF

PRESCRIPTION OR NONPROPRIETARY DRUGS OR PHARMACY SERVICES.

CHAPTER 3

PHARMACY AUDITS

SECTION 301. PROCEDURES FOR CONDUCTING PHARMACY AUDITS.

(A) PROCEDURE.--AN ENTITY CONDUCTING A PHARMACY AUDIT UNDER

THIS CHAPTER SHALL CONFORM TO THE FOLLOWING RULES:

(1) EXCEPT AS OTHERWISE PROVIDED BY FEDERAL OR STATE

LAW, AN AUDITING ENTITY CONDUCTING A PHARMACY AUDIT MAY HAVE

ACCESS TO A PHARMACY'S PREVIOUS AUDIT REPORT ONLY IF THE

REPORT WAS PREPARED BY AN THAT AUDITING ENTITY.

(2) ANY INFORMATION INFORMATION COLLECTED DURING A

PHARMACY AUDIT SHALL BE CONFIDENTIAL BY LAW, EXCEPT THAT THE

AUDITING ENTITY CONDUCTING THE PHARMACY AUDIT MAY SHARE THE

INFORMATION WITH THE PHARMACY BENEFITS MANAGER AND THE PLAN

SPONSOR COVERED ENTITY, FOR WHICH A PHARMACY AUDIT IS BEING

CONDUCTED.

(3) NO THE AUDITING ENTITY CONDUCTING A PHARMACY AUDIT

SHALL MAY NOT SOLELY COMPENSATE ANY OF ITS EMPLOYEES AN

EMPLOYEE OR ANY CONTRACTOR WITH WHICH AN AUDITING ENTITY

CONTRACTS TO CONDUCT A PHARMACY AUDIT, SOLELY BASED ON THE

AMOUNT CLAIMED OR THE ACTUAL AMOUNT RECOUPED BY THE PHARMACY

BEING AUDITED.

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(4) THE AUDITING ENTITY SHALL PROVIDE THE PHARMACY BEING

AUDITED WITH AT LEAST 14 CALENDAR DAYS' PRIOR WRITTEN NOTICE

BEFORE CONDUCTING A PHARMACY AUDIT, UNLESS BOTH PARTIES AGREE

OTHERWISE. IF A DELAY IS REQUESTED BY THE PHARMACY, THE

PHARMACY SHALL PROVIDE NOTICE TO THE PBM WITHIN 72 HOURS OF

RECEIVING NOTICE OF THE AUDIT.

(5) (RESERVED).

(6) (5) THE AUDITING ENTITY MAY NOT INITIATE OR SCHEDULE

A PHARMACY AUDIT DURING THE FIRST FIVE BUSINESS DAYS OF ANY

MONTH FOR ANY A PHARMACY THAT AVERAGES IN EXCESS OF 600

PRESCRIPTIONS FILLED PER WEEK, WITHOUT THE EXPRESS CONSENT OF

THE PHARMACY.

(7) (6) THE AUDITING ENTITY SHALL ACCEPT PAPER OR

ELECTRONIC SIGNATURE LOGS THAT DOCUMENT THE DELIVERY OF

PRESCRIPTION OR NONPROPRIETARY DRUGS AND PHARMACIST SERVICES

TO A HEALTH PLAN BENEFICIARY OR THE BENEFICIARY'S CAREGIVER

OR GUARDIAN.

(8) (7) THE AUDITING ENTITY SHALL PROVIDE TO THE

REPRESENTATIVE OF THE PHARMACY, PRIOR TO LEAVING THE PHARMACY

AT THE CONCLUSION OF THE ON-SITE PORTION OF THE PHARMACY

AUDIT, A COMPLETE LIST OF PHARMACY RECORDS REVIEWED.

(9) ANY (8) A PHARMACY AUDIT THAT INVOLVES CLINICAL

JUDGMENT SHALL BE CONDUCTED BY OR IN CONSULTATION WITH A

PHARMACIST.

(10) NO (9) A PHARMACY AUDIT SHALL MAY NOT COVER:

(I) A PERIOD OF MORE THAN 24 MONTHS AFTER THE DATE A

CLAIM WAS SUBMITTED BY THE PHARMACY TO THE PHARMACY

BENEFITS MANAGER OR PLAN SPONSOR COVERED ENTITY UNLESS A

LONGER PERIOD IS REQUIRED BY LAW; OR

(II) MORE THAN 250 PRESCRIPTIONS, PROVIDED THAT A

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REFILL SHALL DOES NOT CONSTITUTE A SEPARATE PRESCRIPTION

FOR THE PURPOSES OF THIS SUBPARAGRAPH.

(11) NO (10) THE AUDITING ENTITY MAY NOT USE

EXTRAPOLATION TO CALCULATE PENALTIES OR AMOUNTS TO BE CHARGED

BACK OR RECOUPED UNLESS OTHERWISE REQUIRED BY FEDERAL

REQUIREMENTS OR FEDERAL PLANS.

(12) NO (11) THE AUDITING ENTITY SHALL MAY NOT INCLUDE

DISPENSING FEES IN THE CALCULATION OF OVERPAYMENTS UNLESS A

PRESCRIPTION IS CONSIDERED A MISFILL. AS USED IN THIS

PARAGRAPH, "MISFILL" MEANS A PRESCRIPTION THAT WAS NOT

DISPENSED, A PRESCRIPTION ERROR, A PRESCRIPTION WHERE THE

PRESCRIBER DENIED THE AUTHORIZATION REQUEST OR A PRESCRIPTION

WHERE AN EXTRA DISPENSING FEE WAS CHARGED.

(13) (12) A PHARMACY MAY DO ANY OF THE FOLLOWING WHEN A

PHARMACY AUDIT IS PERFORMED:

(I) TO VALIDATE THE PHARMACY RECORD AND DELIVERY, A

PHARMACY MAY USE AUTHENTIC AND VERIFIABLE STATEMENTS OR

RECORDS, INCLUDING, BUT NOT LIMITED TO, MEDICATION

ADMINISTRATION RECORDS OF A NURSING HOME, ASSISTED LIVING

FACILITY, HOSPITAL OR HEALTH CARE PRACTITIONER WITH

PRESCRIPTIVE AUTHORITY.

(II) TO VALIDATE CLAIMS IN CONNECTION WITH

PRESCRIPTIONS OR CHANGES IN PRESCRIPTIONS, OR REFILLS OF

PRESCRIPTION OR NONPROPRIETARY DRUGS, A PHARMACY MAY USE

ANY VALID PRESCRIPTION, INCLUDING, BUT NOT LIMITED TO,

MEDICATION ADMINISTRATION RECORDS, FACSIMILES, ELECTRONIC

PRESCRIPTIONS, ELECTRONICALLY STORED IMAGES OF

PRESCRIPTIONS, ELECTRONICALLY CREATED ANNOTATIONS OR

DOCUMENTED TELEPHONE CALLS FROM THE PRESCRIBING HEALTH

CARE PRACTITIONER OR PRACTITIONER'S AGENT. DOCUMENTATION

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OF AN ORAL PRESCRIPTION ORDER THAT HAS BEEN VERIFIED BY

THE PRESCRIBING HEALTH CARE PRACTITIONER SHALL MEET THE

PROVISIONS OF THIS SUBPARAGRAPH FOR THE INITIAL AUDIT

REVIEW.

(B) WRITTEN REPORT.--AN AUDITING ENTITY SHALL PROVIDE THE

PHARMACY WITH A WRITTEN REPORT OF THE PHARMACY AUDIT AND COMPLY

WITH THE FOLLOWING REQUIREMENTS:

(1) THE A PRELIMINARY PHARMACY AUDIT REPORT MUST BE

DELIVERED TO THE PHARMACY OR ITS CORPORATE PARENT WITHIN 60

CALENDAR DAYS AFTER THE COMPLETION OF THE PHARMACY AUDIT. THE

PRELIMINARY REPORT SHALL INCLUDE CONTACT INFORMATION FOR THE

AUDITING ENTITY WHO CONDUCTED THE PHARMACY AUDIT AND AN

APPROPRIATE AND ACCESSIBLE POINT OF CONTACT, INCLUDING

TELEPHONE NUMBER, FACSIMILE NUMBER, E-MAIL, AND AUDITING

FIRM, SO THAT AUDIT RESULTS, DISCREPANCIES AND PROCEDURES CAN

BE REVIEWED. THE PRELIMINARY PHARMACY AUDIT REPORT SHALL

INCLUDE, BUT NOT BE LIMITED TO, CLAIM LEVEL INFORMATION FOR

ANY DISCREPANCY FOUND AND TOTAL DOLLAR AMOUNT OF CLAIMS

SUBJECT TO RECOVERY.

(2) A PHARMACY SHALL BE ALLOWED 30 CALENDAR DAYS

FOLLOWING RECEIPT OF THE PRELIMINARY AUDIT REPORT TO RESPOND

TO THE FINDINGS OF THE PRELIMINARY REPORT.

(3) A FINAL AUDIT REPORT SHALL BE DELIVERED TO THE

PHARMACY OR ITS CORPORATE PARENT NOT LATER THAN 60 CALENDAR

DAYS AFTER ANY RESPONSES FROM THE PHARMACY OR CORPORATE

PARENT ARE RECEIVED BY THE AUDITING ENTITY. THE AUDITING

ENTITY SHALL ISSUE A FINAL PHARMACY AUDIT REPORT THAT TAKES

INTO CONSIDERATION ANY RESPONSES PROVIDED TO THE AUDITING

ENTITY BY THE PHARMACY OR CORPORATE PARENT.

(4) THE FINAL PHARMACY AUDIT REPORT MAY BE DELIVERED

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ELECTRONICALLY.

(5) NO A PHARMACY SHALL MAY NOT BE SUBJECT TO A CHARGE-

BACK OR RECOUPMENT FOR A CLERICAL OR RECORDKEEPING ERROR IN A

REQUIRED DOCUMENT OR RECORD, INCLUDING A TYPOGRAPHICAL ERROR,

SCRIVENER'S ERROR OR COMPUTER ERROR, UNLESS THE ERROR

RESULTED IN OVERPAYMENT TO THE PHARMACY.

(6) NO AN AUDITING ENTITY CONDUCTING A PHARMACY AUDIT OR

PERSON ACTING ON BEHALF OF THE ENTITY SHALL MAY NOT CHARGE-

BACK OR RECOUP OR COLLECT PENALTIES FROM A PHARMACY UNTIL THE

TIME PERIOD TO FILE AN APPEAL OF A FINAL PHARMACY AUDIT

REPORT HAS PASSED OR THE APPEALS PROCESS HAS BEEN EXHAUSTED,

WHICHEVER IS LATER.

(7) IF AN IDENTIFIED DISCREPANCY IN A PHARMACY AUDIT

EXCEEDS $25,000, FUTURE PAYMENTS TO THE PHARMACY IN EXCESS OF

THAT AMOUNT MAY BE WITHHELD PENDING ADJUDICATION OF AN

APPEAL.

(8) NO INTEREST SHALL ACCRUE FOR ANY PARTY DURING THE

AUDIT PERIOD, BEGINNING WITH THE NOTICE OF THE PHARMACY AUDIT

AND ENDING WITH THE CONCLUSION OF THE APPEALS PROCESS.

SECTION 302. APPEALS PROCESS.

A PHARMACY MAY APPEAL A FINAL AUDIT REPORT IN ACCORDANCE WITH

THE PROCEDURES ESTABLISHED BY THE ENTITY CONDUCTING THE PHARMACY

AUDIT.

SECTION 303. LIMITATIONS.

(A) GENERAL RULE.--THE PROVISIONS OF THIS CHAPTER SHALL DO

NOT APPLY TO AN INVESTIGATIVE AUDIT OF PHARMACY RECORDS WHEN:

(1) FRAUD, WASTE, ABUSE OR OTHER INTENTIONAL MISCONDUCT

IS INDICATED BY PHYSICAL REVIEW OR REVIEW OF CLAIMS DATA OR

STATEMENTS; OR

(2) OTHER INVESTIGATIVE METHODS INDICATE A PHARMACY IS

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OR HAS BEEN ENGAGED IN CRIMINAL WRONGDOING, FRAUD OR OTHER

INTENTIONAL OR WILLFUL MISREPRESENTATION.

(B) FEDERAL LAW.--THIS CHAPTER DOES NOT SUPERSEDE ANY AUDIT

REQUIREMENTS ESTABLISHED BY FEDERAL LAW.

SECTION 304. ENFORCEMENT REGULATIONS.

THE DEPARTMENT SHALL HAVE ENFORCEMENT AUTHORITY AND TAKE

ACTION OR IMPOSE PENALTIES TO BRING NONCOMPLYING ENTITIES INTO

FULL COMPLIANCE WITH THIS CHAPTER, INCLUDING THE PROMULGATION OF

ANY MAY PROMULGATE REGULATIONS AS NECESSARY AND APPROPRIATE TO

CARRY OUT THIS CHAPTER.

CHAPTER 5

PBM REQUIREMENTS REGISTRATION

SECTION 501. PBM AND AUDITING ENTITY REGISTRATION.

(A) GENERAL RULE.--TO CONDUCT BUSINESS IN THIS COMMONWEALTH,

A PBM OR AUDITING ENTITY MUST REGISTER WITH THE DEPARTMENT. THE

DEPARTMENT SHALL PROMULGATE REGULATIONS TO IMPLEMENT THIS

SECTION. MAKE AN APPLICATION FORM AVAILABLE ON ITS PUBLICLY

ACCESSIBLE INTERNET WEBSITE THAT SHALL REQUIRE:

(1) THE IDENTITY, ADDRESS AND TELEPHONE NUMBER OF THE

APPLICANT.

(2) THE NAME, BUSINESS ADDRESS AND TELEPHONE NUMBER OF

THE CONTACT PERSON FOR THE APPLICANT.

(3) WHEN APPLICABLE, THE FEDERAL EMPLOYER IDENTIFICATION

NUMBER FOR THE APPLICANT.

(B) TERM AND FEE.--

(1) THE TERM OF REGISTRATION SHALL BE TWO YEARS FROM THE

DATE OF ISSUANCE.

(2) THE DEPARTMENT SHALL SET AN INITIAL APPLICATION FEE

AND A RENEWAL APPLICATION FEE, WHICH SHALL BE SUBMITTED WITH

AN APPLICATION FOR REGISTRATION. AN INITIAL APPLICATION FEE

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SHALL BE NONREFUNDABLE. A RENEWAL APPLICATION FEE SHALL BE

RETURNED IF THE RENEWAL OF THE REGISTRATION IS NOT GRANTED.

(3) THE AMOUNT OF THE INITIAL APPLICATION FEE AND

RENEWAL APPLICATION FEE SHALL BE SUFFICIENT TO FUND THE

DEPARTMENT'S DUTIES IN RELATION TO ITS RESPONSIBILITIES UNDER

THIS CHAPTER, BUT MAY NOT EXCEED $1,000.

(1) THE DEPARTMENT SHALL ISSUE A REGISTRATION, AS

APPROPRIATE, TO AN APPLICANT WHEN THE DEPARTMENT DETERMINES

THAT THE APPLICANT HAS SUBMITTED A COMPLETED APPLICATION AND

PAID THE REQUIRED REGISTRATION FEE.

(2) THE REGISTRATION MAY BE IN PAPER OR ELECTRONIC FORM,

SHALL BE NONTRANSFERABLE AND SHALL PROMINENTLY LIST THE

EXPIRATION DATE OF THE REGISTRATION.

(D) DUPLICATE REGISTRATION.--

(1) A LICENSED INSURER OR A MANGED CARE PLAN WITH A

CERTIFICATE OF AUTHORITY SHALL COMPLY WITH THE STANDARDS AND

PROCEDURES OF THIS ACT BUT SHALL NOT BE REQUIRED TO

SEPARATELY REGISTER AS EITHER A PBM OR AUDITING ENTITY.

(2) A PBM THAT IS REGISTERED UNDER THIS CHAPTER SHALL

COMPLY WITH THE STANDARDS AND PROCEDURES OF THIS ACT BUT

SHALL NOT BE REQUIRED TO REGISTER SEPARATELY AS AN AUDITING

ENTITY.

CHAPTER 7

PBM COST TRANSPARENCY

REQUIREMENTS

SECTION 502 701. GENERIC DRUG MULTIPLE SOURCE GENERIC LIST AND

REIMBURSEMENT.

(A) GENERAL RULE.--IN ORDER TO PLACE A PARTICULAR DRUG ON A

GENERIC DRUG MULTIPLE SOURCE GENERIC LIST, A PBM SHALL, AT A

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MINIMUM, ENSURE THAT:

(1) THE DRUG IS LISTED AS "A," "B," "NR" OR "NA" "A" OR

"B" RATED IN THE MOST RECENT VERSION OF THE FOOD AND DRUG

ADMINISTRATION'S "APPROVED DRUG PRODUCTS WITH THERAPEUTIC

EQUIVALENCE EVALUATIONS," COMMONLY KNOWN AS THE ORANGE BOOK;

AND, OR "NR" OR "NA" RATED, OR SIMILAR RATING, BY A

NATIONALLY RECOGNIZED REFERENCE;

(2) THERE ARE AT LEAST TWO THERAPEUTICALLY EQUIVALENT

MULTIPLE SOURCE DRUGS OR AT LEAST ONE GENERIC DRUG AVAILABLE

FROM ONLY ONE MANUFACTURER; AND

(2) (3) THE DRUG IS AVAILABLE FOR PURCHASE BY ALL

PHARMACIES IN THIS STATE COMMONWEALTH FROM NATIONAL OR

REGIONAL WHOLESALERS AND IS NOT OBSOLETE OR TEMPORARILY

UNAVAILABLE.

(B) REMOVAL FROM LISTING.--A PBM MUST MAINTAIN A PROCEDURE

TO ELIMINATE DRUGS FROM THE LIST OF DRUGS SUBJECT TO MULTIPLE

SOURCE DRUG PRICING OR MODIFY THE MAXIMUM ALLOWABLE COST IN A

TIMELY FASHION.

PHARMACY ON AUDIT IF THE PHARMACIST OR PHARMACY PERFORMS A

GENERIC SUBSTITUTION PURSUANT TO THE ACT OF NOVEMBER 24, 1976

(P.L.1163, NO.259), REFERRED TO AS THE GENERIC EQUIVALENT DRUG

LAW.

SECTION 503 702. AVAILABILITY OF GENERIC DRUG MULTIPLE SOURCE

GENERIC LIST.

(A) GENERAL RULE.--UPON EACH CONTRACT EXECUTION OR RENEWAL,

A PBM SHALL, WITH RESPECT TO CONTRACTS BETWEEN A PBM AND A

PHARMACY, OR ALTERNATIVELY, A PBM AND A PHARMACY'S CONTRACTING

REPRESENTATIVE OR AGENT SUCH AS ITS REPRESENTATIVE, INCLUDING

A PSAO:

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(1) INCLUDE IN THE CONTRACT THE SOURCES UTILIZED TO

DETERMINE MULTIPLE SOURCE DRUG PRICING, INCLUDING, IF

APPLICABLE, THE MAXIMUM ALLOWABLE COST OR ANY SUCCESSIVE

PRICING FORMULA OF THE PBM.

(2) UPDATE THE PRICING INFORMATION EVERY SEVEN CALENDAR

DAYS.

(3) ESTABLISH A REASONABLE PROCESS BY WHICH PHARMACIES

HAVE A METHOD TO ACCESS RELEVANT OR CURRENT MAXIMUM ALLOWABLE

COST PRICING LISTS IN EFFECT AND ANY SUCCESSIVE PRICING

FORMULAS IN A TIMELY FASHION.

(B) CONFIDENTIALITY PROVISION.--NOTHING IN THIS SECTION MAY

PROHIBIT A PBM FROM ESTABLISHING A REASONABLE CONFIDENTIALITY

PROVISION WITH A PHARMACY'S OR PHARMACIST'S CONTRACTING PHARMACY

OR ITS REPRESENTATIVE AGENT SUCH AS, INCLUDING A PSAO.

SECTION 504 703. MULTIPLE SOURCE DRUG PRICING APPEALS PROCESS.

(A) PROCESS TO BE ESTABLISHED.--ALL CONTRACTS BETWEEN A PBM

OR A PHARMACY, OR ALTERNATIVELY, A PHARMACY'S CONTRACTING AGENT,

SUCH A PSAO, SHALL INCLUDE A PROCESS TO APPEAL, INVESTIGATE AND

RESOLVE DISPUTES REGARDING MULTIPLE SOURCE DRUG PRICING. THE

CONTRACT PROVISION ESTABLISHING THE PROCESS SHALL INCLUDE THE

FOLLOWING:

(1) THE RIGHT TO APPEAL SHALL BE LIMITED TO 14 CALENDAR

DAYS FOLLOWING THE INITIAL CLAIM.

(2) THE APPEAL SHALL BE INVESTIGATED AND RESOLVED BY THE

PBM THROUGH AN INTERNAL PROCESS WITHIN 14 CALENDAR DAYS OF

RECEIPT OF THE APPEAL BY THE PBM.

(3) A TELEPHONE NUMBER AT WHICH A PHARMACY MAY CONTACT

THE PBM AND SPEAK WITH AN INDIVIDUAL WHO IS INVOLVED IN THE

APPEALS PROCESS.

(B) DENIAL.--IF A PBM DENIES AN APPEAL, THE PBM SHALL

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PROVIDE THE REASON FOR THE DENIAL AND IDENTIFY THE NATIONAL DRUG

CODE OF AN EQUIVALENT DRUG THAT IS AVAILABLE FOR PURCHASE BY

NETWORK RETAIL PHARMACIES IN THIS COMMONWEALTH FROM WHOLESALERS

AT A PRICE THAT IS EQUAL TO OR LESS THAN THE MAXIMUM ALLOWABLE

COST FOR THE APPEALED DRUG AS DETERMINED BY THE PBM.

THE PRICE CORRECTION, PERMIT THE REPORTING PHARMACY TO REVERSE

AND REBILL THE APPEALED CLAIM AND MAKE THE PRICE CORRECTION

EFFECTIVE FOR ALL SIMILARLY SITUATED PHARMACIES FROM THE DATE OF

THE APPROVED APPEAL.

SECTION 505. ENFORCEMENT. 704. REGULATIONS.

THE DEPARTMENT SHALL ENFORCE THE PROVISIONS OF THIS CHAPTER

AND SHALL TAKE ACTION OR IMPOSE PENALTIES TO BRING NONCOMPLYING

ENTITIES INTO FULL COMPLIANCE WITH THIS CHAPTER.

SECTION 506. DEPARTMENT AUTHORITY.

THE DEPARTMENT SHALL MAY PROMULGATE REGULATIONS AS NECESSARY

AND APPROPRIATE TO IMPLEMENT THE PROVISIONS OF THIS CHAPTER.

SECTION 507 705. APPLICABILITY.

THIS CHAPTER SHALL APPLY TO ALL CONTRACTS AND AGREEMENTS FOR

PHARMACY BENEFITS MANAGEMENT SERVICES EXECUTED OR RENEWED ON OR

AFTER THE EFFECTIVE DATE OF THIS SECTION.

CHAPTER 8

PACE AND PACENET PROGRAM PAYMENTS

SECTION 801. DEFINITIONS.

THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS CHAPTER

SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION UNLESS THE

CONTEXT CLEARLY INDICATES OTHERWISE:

"A-RATED GENERIC THERAPEUTICALLY EQUIVALENT DRUG." A DRUG

PRODUCT THAT THE COMMISSIONER OF FOOD AND DRUGS OF THE UNITED

STATES FOOD AND DRUG ADMINISTRATION HAS APPROVED AS SAFE AND

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EFFECTIVE AND HAS DETERMINED TO BE THERAPEUTICALLY EQUIVALENT,

AS LISTED IN "THE APPROVED DRUG PRODUCTS WITH THERAPEUTIC

EQUIVALENCE EVALUATIONS" (FOOD AND DRUG ADMINISTRATION "ORANGE

BOOK"), WITH A SPECIFIC "A" CODE DESIGNATION ONLY.

"CLAIMANT." AN ELIGIBLE PERSON WHO IS ENROLLED IN THE

PROGRAM.

"DEPARTMENT." THE DEPARTMENT OF AGING OF THE COMMONWEALTH.

"LESS EXPENSIVE." THE LOWEST NET COST TO THE PROGRAM. THE

NET COST SHALL INCLUDE THE AMOUNT PAID BY THE COMMONWEALTH TO A

PHARMACY FOR A DRUG UNDER A CURRENT RETAIL PHARMACY

REIMBURSEMENT FORMULA LESS ANY DISCOUNT OR REBATES, INCLUDING

THOSE PAID DURING THE PREVIOUS CALENDAR QUARTER AND INCLUSIVE OF

ALL DISPENSING FEES.

"NADAC PER UNIT." THE CURRENT NATIONAL AVERAGE DRUG

ACQUISITION COST PER UNIT.

"PRESCRIPTION DRUG." ALL DRUGS REQUIRING A PRESCRIPTION IN

THIS COMMONWEALTH, INSULIN, INSULIN SYRINGES AND INSULIN

NEEDLES. EXPERIMENTAL DRUGS OR DRUGS PRESCRIBED FOR WRINKLE

REMOVAL OR HAIR GROWTH ARE PROHIBITED.

"PROGRAM." THE PHARMACEUTICAL ASSISTANCE CONTRACT FOR THE

ELDERLY (PACE) AND THE PHARMACEUTICAL ASSISTANCE CONTRACT FOR

THE ELDERLY NEEDS ENHANCEMENT TIER (PACENET) AS ESTABLISHED BY

THE ACT OF AUGUST 26, 1971 (P.L.351, NO.91), KNOWN AS THE STATE

LOTTERY LAW.

"PROVIDER." A PHARMACY, DISPENSING PHYSICIAN OR CERTIFIED

REGISTERED NURSE PRACTITIONER ENROLLED AS A PROVIDER IN THE

PROGRAM.

"WHOLESALE ACQUISITION COST." THE COST OF A DISPENSED DRUG

BASED UPON THE PRICE PUBLISHED IN A NATIONAL DRUG PRICING SYSTEM

IN CURRENT USE BY THE DEPARTMENT OF AGING AS THE WHOLESALE

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ACQUISITION COST OF A PRESCRIPTION DRUG IN THE MOST COMMON

PACKAGE SIZE.

SECTION 802. PROGRAM PAYMENT.

IN ADDITION TO THE REQUIREMENTS UNDER SECTION 509 OF THE ACT

OF AUGUST 26, 1971 (P.L.351, NO.91), KNOWN AS THE STATE LOTTERY

LAW, THE DEPARTMENT SHALL ADMINISTER THE PROGRAM IN ACCORDANCE

WITH THE FOLLOWING:

(1) IF THE NADAC PER UNIT IS AVAILABLE, THE PROGRAM

PAYMENT SHALL BE THE LOWER OF THE FOLLOWING AMOUNTS:

(I) THE NADAC PER UNIT:

(A) WITH THE ADDITION OF A PROFESSIONAL

DISPENSING FEE OF $13 PER PRESCRIPTION; AND

(B) THE SUBTRACTION OF THE COPAYMENT; OR

(II) THE PHARMACY'S USUAL AND CUSTOMARY CHARGE FOR

THE DRUG DISPENSED WITH THE SUBTRACTION OF THE COPAYMENT.

(2) IF THE NADAC PER UNIT IS UNAVAILABLE, THE PROGRAM

PAYMENT SHALL BE THE LOWER OF THE FOLLOWING AMOUNTS:

(I) THE WHOLESALE ACQUISITION COST PLUS 3.2%:

(A) WITH THE ADDITION OF A PROFESSIONAL

DISPENSING FEE OF $13 PER PRESCRIPTION; AND

(B) THE SUBTRACTION OF THE COPAYMENT; OR

(II) THE PHARMACY'S USUAL AND CUSTOMARY CHARGE FOR

THE DRUG DISPENSED WITH THE SUBTRACTION OF THE COPAYMENT.

SECTION 803. GENERIC DRUGS.

(A) GENERAL RULE.--NOTWITHSTANDING ANY OTHER STATUTE OR

REGULATION, A BRAND NAME PRODUCT SHALL BE DISPENSED AND NOT

SUBSTITUTED WITH AN A-RATED GENERIC THERAPEUTICALLY EQUIVALENT

DRUG IF IT IS LESS EXPENSIVE TO THE PROGRAM. IF A LESS EXPENSIVE

A-RATED GENERIC THERAPEUTICALLY EQUIVALENT DRUG IS AVAILABLE FOR

DISPENSING TO A CLAIMANT, THE PROVIDER SHALL DISPENSE THE A-

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RATED GENERIC THERAPEUTICALLY EQUIVALENT DRUG TO THE CLAIMANT.

THE DEPARTMENT SHALL REIMBURSE PROVIDERS BASED UPON THE MOST

CURRENT LISTING OF THE NADAC PER UNIT PLUS A PROFESSIONAL

DISPENSING FEE OF $13 PER PRESCRIPTION. THE DEPARTMENT SHALL NOT

REIMBURSE PROVIDERS FOR BRAND NAME PRODUCTS EXCEPT IN THE

FOLLOWING CIRCUMSTANCES:

(1) THERE IS NO A-RATED GENERIC THERAPEUTICALLY

EQUIVALENT DRUG AVAILABLE ON THE MARKET. THIS PARAGRAPH DOES

NOT APPLY TO THE LACK OF AVAILABILITY OF AN A-RATED GENERIC

THERAPEUTICALLY EQUIVALENT DRUG IN THE PROVIDING PHARMACY

UNLESS IT CAN BE SHOWN TO THE DEPARTMENT THAT THE PROVIDER

MADE REASONABLE ATTEMPTS TO OBTAIN THE A-RATED GENERIC

THERAPEUTICALLY EQUIVALENT DRUG OR THAT THERE WAS AN

UNFORESEEABLE DEMAND AND DEPLETION OF THE SUPPLY OF THE A-

RATED GENERIC THERAPEUTICALLY EQUIVALENT DRUG. IN EITHER

CASE, THE DEPARTMENT SHALL REIMBURSE THE PROVIDER FOR THE

NADAC PER UNIT PLUS A PROFESSIONAL DISPENSING FEE OF $13 PER

PRESCRIPTION.

(2) AN A-RATED GENERIC THERAPEUTICALLY EQUIVALENT DRUG

IS DEEMED BY THE DEPARTMENT, IN CONSULTATION WITH A

UTILIZATION REVIEW COMMITTEE, TO HAVE TOO NARROW A

THERAPEUTIC INDEX FOR SAFE AND EFFECTIVE DISPENSING IN THE

COMMUNITY SETTING. THE DEPARTMENT SHALL NOTIFY PROVIDING

PHARMACIES OF A-RATED GENERIC THERAPEUTICALLY EQUIVALENT

DRUGS THAT ARE IDENTIFIED PURSUANT TO THIS PARAGRAPH ON A

REGULAR BASIS.

(3) THE DEPARTMENT OF HEALTH HAS DETERMINED THAT A DRUG

SHALL NOT BE RECOGNIZED AS AN A-RATED GENERIC THERAPEUTICALLY

EQUIVALENT DRUG FOR PURPOSE OF SUBSTITUTION UNDER SECTION

5(B) OF THE ACT OF NOVEMBER 24, 1976 (P.L.1163, NO.259),

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REFERRED TO AS THE GENERIC EQUIVALENT DRUG LAW.

(4) AT THE TIME OF DISPENSING, THE PROVIDER HAS A

PRESCRIPTION ON WHICH THE BRAND NAME DRUG DISPENSED IS BILLED

TO THE PROGRAM BY THE PROVIDER AT A USUAL AND CUSTOMARY

CHARGE WHICH IS EQUAL TO OR LESS THAN THE LEAST EXPENSIVE

USUAL AND CUSTOMARY CHARGE OF ANY A-RATED GENERIC

THERAPEUTICALLY EQUIVALENT DRUG REASONABLY AVAILABLE ON THE

MARKET TO THE PROVIDER.

(5) THE BRAND NAME DRUG IS LESS EXPENSIVE TO THE

PROGRAM.

(B) GENERIC NOT ACCEPTED.--IF A CLAIMANT CHOOSES NOT TO

ACCEPT THE A-RATED GENERIC THERAPEUTICALLY EQUIVALENT DRUG

REQUIRED BY SUBSECTION (A), THE CLAIMANT SHALL BE LIABLE FOR THE

COPAYMENT AND THE NADAC PER UNIT.

CHAPTER 9

ENFORCEMENTS

SECTION 901. SCOPE OF ENFORCEMENT AUTHORITY.

(A) SCOPE.--THE DEPARTMENT MAY INVESTIGATE AND ENFORCE THE

PROVISIONS OF THIS ACT ONLY INSOFAR AS THE ACTIONS OR INACTIONS

BEING INVESTIGATED RELATE TO PRESCRIPTION DRUG COVERAGE UNDER A

HEALTH INSURANCE POLICY.

(B) REMEDY.--ACTIONS OR INACTIONS WITHIN THE SCOPE OF THE

DEPARTMENT'S INVESTIGATIVE AND ENFORCEMENT AUTHORITY UNDER

SUBSECTION (A) FOUND TO VIOLATE THIS ACT CONSTITUTE "UNFAIR

METHODS OF COMPETITION" AND "UNFAIR OR DECEPTIVE ACTS OR

PRACTICES" WITHIN THE MEANING OF SECTION 5 OF THE ACT OF JULY

22, 1974 (P.L.589, NO.205), KNOWN AS THE UNFAIR INSURANCE

PRACTICES ACT. A PROCEEDING UNDER THIS SECTION SHALL BE

CONDUCTED IN ACCORDANCE WITH 2 PA.C.S. CH. 5 SUBCH. A (RELATING

TO PRACTICE AND PROCEDURE OF COMMONWEALTH AGENCIES).

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CHAPTER 11

MISCELLANEOUS PROVISIONS

SECTION 1101. REPEALS.

REPEALS ARE AS FOLLOWS:

(1) THE GENERAL ASSEMBLY DECLARES THAT THE REPEALS UNDER

PARAGRAPH (2) ARE NECESSARY TO EFFECTUATE CHAPTER 8.

(2) SECTIONS 509(6) AND 510(A) AND (B) OF THE ACT OF

AUGUST 26, 1971 (P.L.351, NO.91), KNOWN AS THE STATE LOTTERY

LAW, ARE REPEALED.

SECTION 1101 1102. EFFECTIVE DATE.

THIS ACT SHALL TAKE EFFECT AS FOLLOWS:

(1) THE FOLLOWING PROVISIONS SHALL TAKE EFFECT

IMMEDIATELY:

(I) THIS CHAPTER.

(II) CHAPTER 8.

(1) THE ADDITION OF CHAPTER (2) CHAPTERS 5 AND 9 SHALL

TAKE EFFECT IN 90 DAYS.

(2) (3) THE REMAINDER OF THIS ACT SHALL TAKE EFFECT IN

60 180 DAYS.

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