LRB-0448/1

TJD:amn

2019 - 2020 LEGISLATURE

2019 Assembly BILL 114

March 25, 2019 - Introduced by Representatives Schraa, Kolste, Riemer, Anderson, Born, Bowen, Brooks, Brostoff, Considine, Dittrich, Duchow, Edming, Emerson, Felzkowski, Fields, Goyke, Gundrum, Hebl, Hesselbein, Horlacher, Hutton, James, Kitchens, Knodl, Krug, Kuglitsch, Kulp, Meyers, Murphy, Mursau, Novak, Ohnstad, Oldenburg, Petersen, Plumer, Quinn, Ramthun, Rodriguez, Rohrkaste, Sargent, Sortwell, Sinicki, Skowronski, Spiros, Snyder, Spreitzer, Stafsholt, Stubbs, Stuck, Subeck, Summerfield, Swearingen, Tauchen, C. Taylor, Thiesfeldt, Tittl, Tranel, VanderMeer, Vorpagel, Vruwink, Shankland, Myers, Tusler, Billings and Zimmerman, cosponsored by Senators Erpenbach, Roth, Bernier, Darling, Feyen, Hansen, Johnson, Larson, Marklein, Olsen, Ringhand, Smith, L. Taylor, Tiffany, Wanggaard and Wirch. Referred to Committee on Health.

AB114,1,6 An Act to repeal 40.51 (15m), 632.86 and 632.865 (title) and (1); to renumber 632.865 (2); to amend 40.51 (8), 40.51 (8m), 66.0137 (4), 120.13 (2) (g), 185.983 (1) (intro.), 601.43 (1) (a), 609.83, 616.09 (1) (a) 2. and 628.36 (2m) (e) 1.; and to create 628.36 (2m) (a) 2s., 632.861 and chapter 649 of the statutes; relating to: registration and regulation of pharmacy benefit managers, drug pricing transparency, granting rule-making authority, and providing a penalty.

Analysis by the Legislative Reference Bureau

This bill generally allows the commissioner of insurance to regulate pharmacy benefit managers by requiring them to register. The bill also establishes certain price transparency requirements and requirements on contracts the pharmacy benefit manager enters into with pharmacies, pharmacists, or health benefit plan sponsors among other requirements.

Registration of pharmacy benefit managers

The bill prohibits a person, except an insurer already regulated by the commissioner, from performing any activities of a pharmacy benefit manager in this state without first registering with the commissioner. Certain pharmacy benefit managers must be licensed by the Pharmacy Examining Board and registered as a pharmacy benefit manager. If the Pharmacy Examining Board revokes the pharmacy or distributor license for such a pharmacy benefit manager, the commissioner must revoke the pharmacy benefit manager's registration. An applicant for registration as a pharmacy benefit manager must file an appropriate application and pay any registration fee set by the commissioner. A registration is valid for one year. The commissioner may refuse to register a pharmacy benefit manager for which a previous registration was suspended or revoked.

Under the bill, the commissioner, after a hearing, may suspend or revoke a registration of a pharmacy benefit manager if the registered pharmacy benefit manager, or an officer, director, or employee of a registered pharmacy benefit manager, does any of the actions specified in the bill. The commissioner may promulgate rules necessary to carry out the intent of pharmacy benefit manager registration. The bill also allows the commissioner to use his or her authority that is granted to regulate insurers to similarly regulate pharmacy benefit managers, including the authority to require reports, conduct examinations, and issue orders. The commissioner is required to promulgate certain rules, including rules regarding formulary development, required disclosures, and a standardized medical exceptions approval process, among others.

The bill requires pharmacy benefit managers to provide a reasonably adequate and accessible network of pharmacies. Pharmacy benefit managers are not allowed to include mail-order pharmacies in their calculation of network adequacy. The bill requires pharmacy benefit managers to submit a network adequacy report to the commissioner. The bill also imposes on pharmacy benefit managers a current law requirement on health maintenance organizations, limited service health organizations, and preferred provider plans that provide coverage of pharmaceutical services when performed by one or more selected pharmacists to provide an annual period of at least 30 days during which any pharmacist may elect to participate in the organization or plan under its terms as a selected provider for at least one year.

Pharmacy benefit manager regulation

The bill requires pharmacy benefit managers to refrain from certain actions in their interactions with pharmacists or pharmacies including charging a pharmacist or pharmacy a fee related to the adjudication of a claim, requiring pharmacist or pharmacy accreditation or certification requirements in addition to, more stringent than, or inconsistent with requirements of the pharmacy examining board, reimbursing a pharmacist or pharmacy less than the amount reimbursed to an affiliate of the pharmacy benefit manager for the same services, failing to make payments for services properly provided by a pharmacist or pharmacy before the termination of the pharmacist or pharmacy from the network, and restricting or limiting a pharmacy or pharmacist from disclosing information to a governmental official or law enforcement that is investigating a complaint or conducting a review. The bill requires a pharmacy benefit manager to disclose to a health benefit plan sponsor any activity, policy, or practice that presents a conflict of interest and, if the pharmacy benefit manager makes a formulary substitution to a higher cost drug, the cost of the drug and any benefit that accrues to the pharmacy benefit manager related to the substitution. A pharmacy benefit manager is prohibited in the bill from retroactively denying a pharmacist's or pharmacy's claim unless the original claim was fraudulent, the payment of the original claim was incorrect because it had already been paid, or the pharmacy services were not rendered by the pharmacist or pharmacy. The bill requires every pharmacy benefit manager to submit annual transparency reports containing information specified in the bill to the commissioner and to certain committees of the legislature.

Current law requires pharmacy benefit managers to agree in their contracts to make certain disclosures regarding prescription drug reimbursement, including updating maximum allowable cost pricing information for prescribed drugs or devices at least every seven business days, reimbursing pharmacies or pharmacists subject to the updated maximum allowable cost pricing, and modifying information in the maximum allowable cost information in a timely fashion. Pharmacy benefit managers currently must also include in each contract with a pharmacy a process to appeal, investigate, and resolve pricing disputes in accordance with the specifics in current law. These current law requirements are unchanged by the bill.

Audits of pharmacists or pharmacies

The bill sets requirements on a pharmacy benefit manager, insurer, defined network plan, such as a health maintenance organization, or a third-party payer that is conducting an audit of pharmacist or pharmacy records, including requiring at least two weeks' notice of an audit that is on the premises of a pharmacist or pharmacy, refraining from conducting the audit within the first seven days of the month unless the pharmacist or pharmacy consents, limiting the audit to claims submitted no more than two years before the date of the audit, establishing a written appeals process allowing for appeals of preliminary and final reports and mediation by either party, and allowing a pharmacist or pharmacy to use health care provider records to validate records and any prescription that complies with the pharmacy examining board requirements to validate claims. The bill requires an entity that has conducted an audit of a pharmacist or pharmacy to comply with certain timing requirements for delivery of the preliminary and final reports and for allowing a pharmacist or pharmacy to address any discrepancies and requires the entity to refrain from using extrapolation in calculating the recoupments or penalties from an audit among other requirements in the bill. If an audit identifies a clerical or record-keeping error, the pharmacy benefit manager or entity must prove that the pharmacist or pharmacy intended to commit fraud or that the error resulted in actual financial harm before requesting recoupment from the pharmacist or pharmacy based on the error. A pharmacy benefit manager or other entity conducting an audit may not pay an auditor based on a percentage of the amount recovered in an audit.

Allowing disclosures to consumers

This bill prohibits a health insurance policy, referred to in the statutes as a disability insurance policy, or a governmental self-insured health plan from including in a contract for pharmacy services, or allowing a pharmacy benefit manager or another entity to include in a contract for pharmacy services, a provision that prohibits or penalizes a pharmacist's disclosure to an individual purchasing a prescribed drug or device of the cost of a prescribed drug or device, a less expensive therapeutically equivalent drug or device, or a less expensive method of purchasing the drug or device.