Senate File 2231 S-5158 Amend Senate File 2231 as follows: 1 1. By striking everything after the enacting clause and 2 inserting: 3 < Section 1. Section 505.26, subsection 1, paragraph b, Code 4 2022, is amended to read as follows: 5 b. “Pharmacy benefits manager” means the same as defined in 6 section 510B.1 510C.1 . 7 Sec. 2. Section 507B.4, subsection 3, Code 2022, is amended 8 by adding the following new paragraph: 9 NEW PARAGRAPH . t. Pharmacy benefits managers. Any 10 violation of chapter 510B by a pharmacy benefits manager. 11 Sec. 3. Section 510B.1, Code 2022, is amended by striking 12 the section and inserting in lieu thereof the following: 13 510B.1 Definitions. 14 As used in this chapter, unless the context otherwise 15 requires: 16 1. “Clean claim” means a claim that has no defect or 17 impropriety, including a lack of any required substantiating 18 documentation, or other circumstances requiring special 19 treatment, that prevents timely payment from being made on the 20 claim. 21 2. “Commissioner ” means the commissioner of insurance. 22 3. “Cost-sharing” means any coverage limit, copayment, 23 coinsurance, deductible, or other out-of-pocket cost obligation 24 imposed by a health benefit plan on a covered person. 25 4. “Covered person” means a policyholder, subscriber, or 26 other person participating in a health benefit plan that has 27 a prescription drug benefit managed by a pharmacy benefits 28 manager. 29 5. “Health benefit plan” means the same as defined in 30 section 514J.102. 31 6. “Health care professional” means the same as defined in 32 section 514J.102. 33 7. “Health carrier” means an entity subject to the 34 insurance laws and regulations of this state, or subject 35 -1- SF 2231.4062 (2) 89 (amending this SF 2231 to CONFORM to HF 2384) ko/rn 1/ 12 #1.

to the jurisdiction of the commissioner, including an 1 insurance company offering sickness and accident plans, a 2 health maintenance organization, a nonprofit health service 3 corporation, a plan established pursuant to chapter 509A 4 for public employees, or any other entity providing a plan 5 of health insurance, health care benefits, or health care 6 services. “Health carrier” does not include the department 7 of human services, or a managed care organization acting 8 pursuant to a contract with the department of human services to 9 administer the medical assistance program under chapter 249A 10 or the healthy and well kids in Iowa (hawk-i) program under 11 chapter 514I. 12 8. “Maximum allowable cost” means the maximum amount that a 13 pharmacy will be reimbursed by a pharmacy benefits manager or a 14 health carrier for a generic drug, brand-name drug, biologic 15 product, or other prescription drug, and that may include any 16 of the following: 17 a. Average acquisition cost. 18 b. National average acquisition cost. 19 c. Average manufacturer price. 20 d. Average wholesale price. 21 e. Brand effective rate. 22 f. Generic effective rate. 23 g. Discount indexing. 24 h. Federal upper limits. 25 i. Wholesale acquisition cost. 26 j. Any other term used by a pharmacy benefits manager or a 27 health carrier to establish reimbursement rates for a pharmacy. 28 9. “Maximum allowable cost list” means a list of 29 prescription drugs that includes the maximum allowable cost 30 for each prescription drug and that is used, directly or 31 indirectly, by a pharmacy benefits manager. 32 10. “Pharmacist” means the same as defined in section 33 155A.3. 34 11. “Pharmacy” means the same as defined in section 155A.3. 35 -2- SF 2231.4062 (2) 89 (amending this SF 2231 to CONFORM to HF 2384) ko/rn 2/ 12

12. “Pharmacy acquisition cost” means the cost to a 1 pharmacy for a prescription drug as invoiced by a wholesale 2 distributor, and reduced by any discounts, rebates, or other 3 price concessions applicable to the prescription drug that are 4 not shown on the invoice and are known at the time that the 5 pharmacy files an appeal with a pharmacy benefits manager. 6 13. “Pharmacy benefits manager” means the same as defined 7 in section 510C.1. 8 14. “Pharmacy benefits manager affiliate” means a pharmacy or 9 a pharmacist that directly or indirectly through one or more 10 intermediaries, owns or controls, is owned and controlled by, 11 or is under common ownership or control of, a pharmacy benefits 12 manager. 13 15. “Pharmacy network” or “network” means pharmacies that 14 have contracted with a pharmacy benefits manager to dispense 15 or sell prescription drugs to covered persons of a health 16 benefit plan for which the pharmacy benefits manager manages 17 the prescription drug benefit. 18 16. “Prescription drug” means the same as defined in section 19 155A.3. 20 17. “Prescription drug benefit” means the same as defined 21 in section 510C.1. 22 18. “Prescription drug order” means the same as defined in 23 section 155A.3. 24 19. “Rebate” means the same as defined in section 510C.1. 25 20. “Wholesale distributor” means the same as defined in 26 section 155A.3. 27 Sec. 4. Section 510B.4, Code 2022, is amended to read as 28 follows: 29 510B.4 Performance of duties —— good faith —— conflict of 30 interest. 31 1. A pharmacy benefits manager shall perform the pharmacy 32 benefits manager’s duties exercising exercise good faith and 33 fair dealing in the performance of its the pharmacy benefits 34 manager’s contractual obligations toward the covered entity a 35 -3- SF 2231.4062 (2) 89 (amending this SF 2231 to CONFORM to HF 2384) ko/rn 3/ 12

health carrier . 1 2. A pharmacy benefits manager shall notify the covered 2 entity a health carrier in writing of any activity, policy, 3 practice ownership interest, or affiliation of the pharmacy 4 benefits manager that presents any conflict of interest. 5 3. A pharmacy benefits manager shall act in the best 6 interest of each health carrier for whom the pharmacy benefits 7 manager manages a prescription drug benefit provided by the 8 health carrier, and shall discharge its duties in accordance 9 with applicable state and federal law. 10 4. A pharmacy benefits manager, health carrier, or health 11 benefit plan shall not discriminate against a pharmacy 12 or a pharmacist with respect to participation, referral, 13 reimbursement of a covered service, or indemnification if a 14 pharmacist is acting within the scope of the pharmacist’s 15 license. 16 Sec. 5. Section 510B.5, Code 2022, is amended to read as 17 follows: 18 510B.5 Contacting covered individual persons —— requirements. 19 A pharmacy benefits manager, unless authorized pursuant to 20 the terms of its contract with a covered entity health carrier , 21 shall not contact any covered individual person without 22 the express written permission of the covered entity health 23 carrier . 24 Sec. 6. Section 510B.6, Code 2022, is amended to read as 25 follows: 26 510B.6 Dispensing of substitute Substitute prescription drug 27 for prescribed drug drugs . 28 1. The following provisions shall apply when if a pharmacy 29 benefits manager requests the dispensing of a substitute 30 prescription drug for a prescribed drug to prescribed for a 31 covered individual person : 32 a. The pharmacy benefits manager may request the 33 substitution of a lower priced generic and therapeutically 34 equivalent prescription drug for a higher priced prescribed 35 -4- SF 2231.4062 (2) 89 (amending this SF 2231 to CONFORM to HF 2384) ko/rn 4/ 12

prescription drug. 1 b. If the substitute prescription drug’s net cost to the 2 covered individual person or covered entity to the health 3 carrier exceeds the cost of the prescribed prescription drug 4 originally prescribed for the covered person , the substitution 5 shall be made only for medical reasons that benefit the covered 6 individual person . 7 2. A pharmacy benefits manager shall obtain the approval of 8 the prescribing practitioner health care professional prior to 9 requesting any substitution under this section . 10 3. A pharmacy benefits manager shall not substitute an 11 equivalent prescription drug contrary to a prescription drug 12 order that prohibits a substitution. 13 Sec. 7. Section 510B.7, Code 2022, is amended by striking 14 the section and inserting in lieu thereof the following: 15 510B.7 Pharmacy networks. 16 1. A pharmacy located in the state shall not be prohibited 17 from participating in a pharmacy network provided that the 18 pharmacy accepts the same terms and conditions as the pharmacy 19 benefits manager imposes on the pharmacies in the network. 20 2. A pharmacy benefits manager shall not assess, charge, or 21 collect any form of remuneration that passes from a pharmacy 22 or a pharmacist in a pharmacy network to the pharmacy benefits 23 manager including but not limited to claim processing fees, 24 performance-based fees, network participation fees, or 25 accreditation fees. 26 Sec. 8. Section 510B.8, Code 2022, is amended by striking 27 the section and inserting in lieu thereof the following: 28 510B.8 Prescription drugs —— point of sale. 29 1. A covered person shall not be required to make a 30 cost-sharing payment at the point of sale for a prescription 31 drug in an amount that exceeds the total amount that the 32 pharmacy at which the covered person fills the covered person’s 33 prescription drug order is reimbursed. 34 2. A pharmacy benefits manager shall not prohibit a pharmacy 35 -5- SF 2231.4062 (2) 89 (amending this SF 2231 to CONFORM to HF 2384) ko/rn 5/ 12

from disclosing the availability of a lower-cost prescription 1 drug option to a covered person, or from selling a lower-cost 2 prescription drug option to a covered person. 3 3. Any amount paid by a covered person for a prescription 4 drug purchased pursuant to this section shall be applied to any 5 deductible imposed by the covered person’s health benefit plan 6 in accordance with the health benefit plan coverage documents. 7 4. A covered person shall not be prohibited from filling 8 a prescription drug order at any pharmacy located in the 9 state provided that the pharmacy accepts the same terms and 10 conditions as the pharmacies participating in the covered 11 person’s health benefit plan’s network. 12 5. Excluding incentives in value-based programs established 13 by a health carrier or a pharmacy benefits manager to promote 14 the use of higher quality pharmacies, a pharmacy benefits 15 manager shall not impose different cost-sharing or additional 16 fees on a covered person based on the pharmacy at which the 17 covered person fills the covered person’s prescription drug 18 order. 19 6. A pharmacy benefits manager shall not require a covered 20 person, as a condition of payment or reimbursement, to purchase 21 pharmacy services, including prescription drugs, exclusively 22 through a mail-order pharmacy. 23 7. a. For purposes of calculating a covered person’s 24 contribution toward the covered person’s cost-sharing, a 25 pharmacy benefits manager shall include all cost-sharing paid 26 by the covered person and all cost-sharing paid by any other 27 person on behalf of the covered person. 28 b. If application of paragraph “a” will result in health 29 savings account ineligibility under section 223 of the Internal 30 Revenue Code, paragraph “a” shall only apply to the covered 31 person’s deductible for a health savings account qualified-high 32 deductible health plan after the covered person has satisfied 33 the minimum deductible under section 223 of the Internal 34 Revenue Code, except for items or services that are preventive 35 -6- SF 2231.4062 (2) 89 (amending this SF 2231 to CONFORM to HF 2384) ko/rn 6/ 12

care, in which case, the requirement shall apply regardless of 1 if the minimum deductible under section 223 of the Internal 2 Revenue Code has been satisfied. For purposes of this section, 3 “preventive care” means the same as under section 223(c)(2)(C) 4 of the Internal Revenue Code. 5 c. Paragraph “a” shall not apply to cost-sharing paid by 6 a covered person, or to cost-sharing paid by any other person 7 on behalf of the covered person, for a specialty drug or for 8 a prescription drug for which a medically appropriate A-rated 9 generic equivalent or an interchangeable biological product is 10 available to the covered person. 11 d. Paragraph “a” shall not apply to a state-regulated 12 high-deductible health plan to the extent application 13 of paragraph “a” will result in the state-regulated 14 high-deductible health plan not qualifying as a high-deductible 15 health plan under section 223 of the Internal Revenue Code. 16 e. If paragraph “a” conflicts with a federal law or a 17 federal regulation as applied to a specific health carrier or 18 to a specific circumstance, paragraph “a” shall apply to all 19 health carriers and in all circumstances in which the federal 20 law or federal regulation does not conflict. 21 Sec. 9. NEW SECTION . 510B.8A Maximum allowable cost lists. 22 1. Prior to placement of a particular prescription drug on a 23 maximum allowable cost list, a pharmacy benefits manager shall 24 ensure that all of the following requirements are met: 25 a. The particular prescription drug must be listed as 26 therapeutically and pharmaceutically equivalent in the most 27 recent edition of the publication entitled “Approved Drug 28 Products with Therapeutic Equivalence Evaluations”, published 29 by the United States food and drug administration, otherwise 30 known as the orange book. 31 b. The particular prescription drug must not be obsolete or 32 temporarily unavailable. 33 c. The particular prescription drug must be available for 34 purchase, without limitations, by all pharmacies in the state 35 -7- SF 2231.4062 (2) 89 (amending this SF 2231 to CONFORM to HF 2384) ko/rn 7/ 12

from a national or regional wholesale distributor that is 1 licensed in the state. 2 2. For each maximum allowable cost list that a pharmacy 3 benefits manager uses in the state, the pharmacy benefits 4 manager shall do all of the following: 5 a. Provide each pharmacy in a pharmacy network reasonable 6 access to the maximum allowable cost list to which the pharmacy 7 is subject. 8 b. Update the maximum allowable cost list within seven 9 calendar days from the date of an increase of ten percent or 10 more in the pharmacy acquisition cost of a prescription drug on 11 the list by one or more wholesale distributors doing business 12 in the state. 13 c. Update the maximum allowable cost list within seven 14 calendar days from the date of a change in the methodology, or 15 a change in the value of a variable applied in the methodology, 16 on which the maximum allowable cost list is based. 17 d. Provide a reasonable process for each pharmacy in a 18 pharmacy network to receive prompt notice of all changes to the 19 maximum allowable cost list to which the pharmacy is subject. 20 Sec. 10. NEW SECTION . 510B.8C Pharmacy benefits manager 21 affiliates —— reimbursement. 22 A pharmacy benefits manager shall not reimburse any pharmacy 23 located in the state in an amount less than the amount that 24 the pharmacy benefits manager reimburses a pharmacy benefits 25 manager affiliate for dispensing the same prescription drug 26 as dispensed by the pharmacy. The reimbursement amount shall 27 be calculated on a per unit basis based on the same generic 28 product identifier or generic code number. 29 Sec. 11. NEW SECTION . 510B.8D Clean claims. 30 After the date of receipt of a clean claim submitted by a 31 pharmacy in a pharmacy network, a pharmacy benefits manager 32 shall not retroactively reduce payment on the claim, either 33 directly or indirectly except in the following circumstances: 34 a. The claim is found not to be a clean claim during the 35 -8- SF 2231.4062 (2) 89 (amending this SF 2231 to CONFORM to HF 2384) ko/rn 8/ 12

course of a routine audit. 1 b. The claim submission was fraudulent. 2 c. The claim submission was a duplicate submission of a 3 claim for which the pharmacy had already received payment. 4 Sec. 12. NEW SECTION . 510B.8E Appeals and disputes. 5 1. A pharmacy benefits manager shall provide a reasonable 6 process to allow a pharmacy to appeal a maximum allowable cost 7 or reimbursement rate for a specific prescription drug for any 8 of the following reasons: 9 a. The pharmacy benefits manager violated section 510B.8A. 10 b. The maximum allowable cost or the reimbursement rate is 11 below the pharmacy acquisition cost. 12 2. The appeal process must include all of the following: 13 a. A dedicated telephone number at which a pharmacy may 14 contact the pharmacy benefits manager and speak directly with 15 an individual involved in the appeal process. 16 b. A dedicated electronic mail address or internet site for 17 the purpose of submitting an appeal directly to the pharmacy 18 benefits manager. 19 c. A period of at least thirty business days after the date 20 of a pharmacy’s initial submission of a clean claim during 21 which the pharmacy may initiate an appeal. 22 3. A pharmacy benefits manager shall respond to an appeal 23 within seven business days after the date on which the pharmacy 24 benefits manager receives the appeal. 25 a. If the pharmacy benefits manager grants a pharmacy’s 26 appeal, the pharmacy benefits manager shall do all of the 27 following: 28 (1) Adjust the maximum allowable cost or the reimbursement 29 rate of the prescription drug that is the subject of the appeal 30 and provide the national drug code number that the adjustment 31 is based on to the appealing pharmacy. 32 (2) Permit the appealing pharmacy to reverse and resubmit 33 the claim that is the subject of the appeal. 34 (3) Make the adjustment pursuant to subparagraph (1) 35 -9- SF 2231.4062 (2) 89 (amending this SF 2231 to CONFORM to HF 2384) ko/rn 9/ 12

applicable to all of the following: 1 (a) Each pharmacy that is under common ownership with the 2 pharmacy that submitted the appeal. 3 (b) Each pharmacy in the state that demonstrates the 4 inability to purchase the prescription drug for less than the 5 established maximum allowable cost or reimbursement rate. 6 b. If the pharmacy benefits manager denies a pharmacy’s 7 appeal, the pharmacy benefits manager shall do all of the 8 following: 9 (1) Provide the appealing pharmacy the national drug 10 code number and the name of a wholesale distributor licensed 11 pursuant to section 155A.17 from which the pharmacy can obtain 12 the prescription drug at or below the maximum allowable cost 13 or reimbursement rate. 14 (2) If the prescription drug identified by the national drug 15 code number provided by the pharmacy benefits manager pursuant 16 to subparagraph (1) is not available below the pharmacy 17 acquisition cost from the wholesale distributor from whom the 18 pharmacy purchases the majority of its prescription drugs for 19 resale, the pharmacy benefits manager shall adjust the maximum 20 allowable cost or the reimbursement rate above the appealing 21 pharmacy’s pharmacy acquisition cost, and permit the pharmacy 22 to reverse and resubmit each claim affected by the pharmacy’s 23 inability to procure the prescription drug at a cost that is 24 equal to or less than the previously appealed maximum allowable 25 cost or the reimbursement rate. 26 Sec. 13. Section 510B.9, Code 2022, is amended to read as 27 follows: 28 510B.9 Submission, approval, and use of prior Prior 29 authorization form . 30 A pharmacy benefits manager shall file with and have 31 approved by the commissioner a single prior authorization 32 form as provided in section 505.26 comply with all applicable 33 prior authorization requirements pursuant to section 505.26 . 34 A pharmacy benefits manager shall use the single prior 35 -10- SF 2231.4062 (2) 89 (amending this SF 2231 to CONFORM to HF 2384) ko/rn 10/ 12

authorization form as provided in section 505.26 . 1 Sec. 14. Section 510B.10, Code 2022, is amended by striking 2 the section and inserting in lieu thereof the following: 3 510B.10 Enforcement. 4 1. The commissioner may take any enforcement action under 5 the commissioner’s authority to enforce compliance with this 6 chapter. 7 2. After notice and hearing, the commissioner may issue any 8 order or impose any penalty pursuant to section 507B.7, and may 9 suspend or revoke a pharmacy benefits manager’s certificate 10 of registration as a third-party administrator upon a finding 11 that the pharmacy benefits manager violated this chapter, 12 or any applicable requirements pertaining to third-party 13 administrators under chapter 510. 14 3. A pharmacy benefits manager shall be subject to the 15 commissioner’s authority to conduct an examination pursuant to 16 chapter 507. 17 4. A pharmacy benefits manager is subject to the 18 commissioner’s authority to conduct a proceeding pursuant 19 to chapter 507B. The procedures set forth in chapter 507B 20 regarding proceedings shall apply to a proceeding related to a 21 pharmacy benefits manager under this chapter. 22 5. A pharmacy benefits manager is subject to the 23 commissioner’s authority to conduct an examination, audit, 24 or inspection pursuant to chapter 510 for third-party 25 administrators. The procedures set forth in chapter 510 for 26 third-party administrators shall apply to an examination, 27 audit, or inspection of a pharmacy benefits manager under this 28 chapter. 29 6. If the commissioner conducts an examination of a pharmacy 30 benefits manager under chapter 507; a proceeding under chapter 31 507B; or an examination, audit, or inspection under chapter 32 510, all information received from the pharmacy benefits 33 manager, and all notes, work papers, or other documents related 34 to the examination, proceeding, audit, or inspection shall 35 -11- SF 2231.4062 (2) 89 (amending this SF 2231 to CONFORM to HF 2384) ko/rn 11/ 12

be confidential records pursuant to chapter 22 and shall be 1 accorded the same confidentiality as notes, work papers, 2 investigatory materials, or other documents related to the 3 examination of an insurer as provided in section 507.14. 4 7. A violation of this chapter shall be an unfair or 5 deceptive act or practice in the business of insurance pursuant 6 to section 507B.4, subsection 3. 7 Sec. 15. NEW SECTION . 510B.11 Rules. 8 The commissioner may adopt rules pursuant to chapter 17A to 9 administer this chapter. 10 Sec. 16. NEW SECTION . 510B.12 Severability. 11 If a provision of this chapter or its application to any 12 person or circumstance is held invalid, the invalidity does 13 not affect other provisions or applications of this chapter 14 which can be given effect without the invalid provision or 15 application, and to this end the provisions of this chapter are 16 severable. 17 Sec. 17. REPEAL. Section 510B.3, Code 2022, is repealed. 18 Sec. 18. APPLICABILITY. 1. This Act applies to pharmacy 19 benefits managers that manage a health carrier’s prescription 20 drug benefit in the state on or after the effective date of 21 this Act. 22 2. The following applies to all health benefit plans 23 delivered, issued for delivery, continued, or renewed in this 24 state on or after January 1, 2023: 25 The section of this Act amending section 510B.8, subsection 26 7. > 27 ______________________________ MIKE KLIMESH -12- SF 2231.4062 (2) 89 (amending this SF 2231 to CONFORM to HF 2384) ko/rn 12/ 12