House File 160 - Introduced HOUSE FILE BY BELL Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to the regulation of pharmacy benefits managers 2 and providing for civil relief. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1013YH 81 5 pf/gg/14 PAG LIN 1 1 Section 1. NEW SECTION. 155B.1 DEFINITIONS. 1 2 As used in this chapter unless the context otherwise 1 3 requires: 1 4 1. "Commissioner" means the commissioner of insurance. 1 5 2. "Covered entity" means a nonprofit hospital or medical 1 6 services corporation, health insurer, health benefit plan, or 1 7 health maintenance organization; a health program administered 1 8 by the state in the capacity of provider of health coverage; 1 9 or an employer, labor union, or other group of persons 1 10 organized in the state that provides health coverage to 1 11 covered individuals who are employed or reside in the state. 1 12 "Covered entity" does not include a self=funded plan that is 1 13 exempt from state regulation pursuant to the federal Employee 1 14 Retirement Income Security Act of 1974 (ERISA), as codified at 1 15 29 U.S.C. } 1001 et seq., a plan issued for coverage for 1 16 federal employees, or a health plan that provides coverage 1 17 only for accidental injury, specified disease, hospital 1 18 indemnity, Medicare supplemental, disability income, long= 1 19 term care, or other limited benefit health insurance policies 1 20 and contracts. 1 21 3. "Covered individual" means a member, participant, 1 22 enrollee, contract holder, policyholder, or beneficiary of a 1 23 covered entity who is provided health coverage by the covered 1 24 entity. "Covered individual" includes a dependent or other 1 25 person provided health coverage through a policy, contract, or 1 26 plan for a covered individual. 1 27 4. "Generic drug" means a chemically equivalent copy of a 1 28 brand=name drug with an expired patent. 1 29 5. "Labeler" means an entity or person that receives 1 30 prescription drugs from a manufacturer or wholesaler and 1 31 repackages those drugs for later retail sale and that has a 1 32 labeler code from the federal food and drug administration 1 33 under 21 C.F.R. } 270.20l. 1 34 6. "Pharmacy benefits management" means the procurement of 1 35 prescription drugs at a negotiated rate for dispensing within 2 1 this state to covered individuals, the administration or 2 2 management of prescription drug benefits provided by a covered 2 3 entity for the benefit of covered individuals, or any of the 2 4 following services provided with regard to the administration 2 5 of the following pharmacy benefits: 2 6 a. Mail service pharmacy. 2 7 b. Claims processing, retail network management, or 2 8 payment of claims to pharmacies for prescription drugs 2 9 dispensed to covered individuals. 2 10 c. Clinical formulary development and management services. 2 11 d. Rebate contracting and administration. 2 12 e. Certain patient compliance, therapeutic intervention, 2 13 or generic substitution programs. 2 14 f. Disease management programs involving prescription drug 2 15 utilization. 2 16 7. "Pharmacy benefits manager" means an entity that 2 17 performs pharmacy benefits management services. "Pharmacy 2 18 benefits manager" includes a person or entity acting for a 2 19 pharmacy benefits manager in a contractual or employment 2 20 relationship in the performance of pharmacy benefits 2 21 management services for a covered entity. "Pharmacy benefits 2 22 manager" does not include a health insurance carrier or its 2 23 subsidiary when the health insurance carrier or its subsidiary 2 24 is providing pharmacy benefits management services to its own 2 25 insureds; or a public self=funded pool or a private single 2 26 employer self=funded plan that provides such benefits or 2 27 services directly to its beneficiaries. 2 28 8. "Prescription drug" means prescription drug as defined 2 29 in section 155A.3. 2 30 9. "Prescription drug order" means a written order from a 2 31 practitioner or an oral order from a practitioner or the 2 32 practitioner's authorized agent who communicates the 2 33 practitioner's instructions for a prescription drug or device 2 34 to be dispensed. 2 35 10. "Proprietary information" means information on 3 1 pricing, costs, revenue, taxes, market share, negotiating 3 2 strategies, customers, or personnel held by private entities 3 3 and used for that private entity's business purposes. 3 4 11. "Trade secret" means information, including a 3 5 formula, pattern, compilation, program, device, method, 3 6 technique, or process, that meets all of the following 3 7 conditions: 3 8 a. Derives independent economic value, actual or 3 9 potential, from not being generally known to, and not being 3 10 readily ascertainable by proper means by, other persons who 3 11 can obtain economic value from its disclosure or use. 3 12 b. Is the subject of efforts that are reasonable under the 3 13 circumstances to maintain its secrecy. 3 14 Sec. 2. NEW SECTION. 155B.2 PHARMACY BENEFITS MANAGER == 3 15 LICENSE. 3 16 1. A person shall not perform or act as a pharmacy 3 17 benefits manager in this state without obtaining an annual 3 18 license to do business in this state from the commissioner 3 19 under this section. 3 20 2. The commissioner shall adopt rules, pursuant to chapter 3 21 17A, relating to the issuance of a license under this section. 3 22 The rules shall include but are not limited to inclusion of 3 23 all of the following: 3 24 a. Definition of terms. 3 25 b. Use of prescribed forms. 3 26 c. Reporting requirements. 3 27 d. Enforcement procedures. 3 28 e. Protection of proprietary information and trade 3 29 secrets. 3 30 Sec. 3. NEW SECTION. 155B.3 MANAGER TO PERFORM DUTIES IN 3 31 GOOD FAITH. 3 32 Each pharmacy benefits manager shall perform its duties 3 33 exercising good faith and fair dealing toward the covered 3 34 entity and covered individuals. 3 35 Sec. 4. NEW SECTION. 155B.4 DISCLOSURE OF REVENUES 4 1 RECEIVED FROM PHARMACEUTICAL MANUFACTURER OR LABELER UNDER 4 2 CONTRACT WITH MANAGER == CONTENT == FEES. 4 3 1. A covered entity may request that any pharmacy benefits 4 4 manager with which it has a pharmacy benefits management 4 5 services contract disclose to the covered entity, the amount 4 6 of all rebate revenues and the nature, type, and amounts of 4 7 all other revenues that the pharmacy benefits manager receives 4 8 from each pharmaceutical manufacturer or labeler with whom the 4 9 pharmacy benefits manager has a contract. The pharmacy 4 10 benefits manager shall disclose all of the following in 4 11 writing: 4 12 a. The aggregate amount and, for a list of drugs to be 4 13 specified in the contract, the specific amount, of all rebates 4 14 and other retrospective utilization discounts received by the 4 15 pharmacy benefits manager, directly or indirectly, from each 4 16 pharmaceutical manufacturer or labeler that is earned in 4 17 connection with the dispensing of prescription drugs to 4 18 covered individuals of the health benefit plans issued by the 4 19 covered entity or for which the covered entity is the 4 20 designated administrator. 4 21 b. The nature, type, and amount of all other revenue 4 22 received by the pharmacy benefits manager directly or 4 23 indirectly from each pharmaceutical manufacturer or labeler 4 24 for any other products or services provided to the 4 25 pharmaceutical manufacturer or labeler by the pharmacy 4 26 benefits manager with respect to programs that the covered 4 27 entity offers or provides to its enrollees. 4 28 c. Any prescription drug utilization information requested 4 29 by the covered entity relating to covered individuals. 4 30 2. A pharmacy benefits manager shall provide the 4 31 information requested by the covered entity for such 4 32 disclosure within thirty days of receipt of the request. If 4 33 requested, the information shall be provided no less than once 4 34 each year. The contract entered into between the pharmacy 4 35 benefits manager and the covered entity shall specify any fees 5 1 to be charged for drug utilization reports requested by the 5 2 covered entity. 5 3 Sec. 5. NEW SECTION. 155B.5 PERMISSION OF ENTITY 5 4 REQUIRED TO CONTACT COVERED INDIVIDUAL == EXCEPTION. 5 5 A pharmacy benefits manager, unless authorized pursuant to 5 6 the terms of its contract with a covered entity, shall not 5 7 contact any covered individual without the express written 5 8 permission of the covered entity. 5 9 Sec. 6. NEW SECTION. 155B.6 CONFIDENTIALITY OF 5 10 INFORMATION == INJUNCTION == DAMAGES. 5 11 1. With the exception of utilization information, a 5 12 covered entity shall maintain any information disclosed in 5 13 response to a request pursuant to section 155B.4 as 5 14 confidential and proprietary information, and shall not use 5 15 such information for any other purpose or disclose such 5 16 information to any other person except as provided in this 5 17 chapter or in the pharmacy benefits management services 5 18 contract between the parties. 5 19 2. A covered entity that discloses information in 5 20 violation of this section is subject to an action for 5 21 injunctive relief and is liable for any damages which are the 5 22 direct and proximate result of such disclosure. 5 23 3. This section does not prohibit a covered entity from 5 24 disclosing confidential or proprietary information to the 5 25 commissioner, upon request. Any such information obtained by 5 26 the commissioner is confidential and privileged and is not 5 27 open to public inspection or disclosure. 5 28 Sec. 7. NEW SECTION. 155B.7 AUDITS OF MANAGER'S RECORDS. 5 29 1. A covered entity may have the pharmacy benefits 5 30 manager's records related to the rebates or other information 5 31 described in section 155B.4 audited, to the extent the 5 32 information relates directly or indirectly to such covered 5 33 entity's contract, in accordance with the terms of the 5 34 pharmacy benefits management services contract between the 5 35 parties. However, if the parties have not expressly provided 6 1 for audit rights and the pharmacy benefits manager has advised 6 2 the covered entity that other reasonable options are available 6 3 and subject to negotiation, the covered entity may have such 6 4 records audited as follows: 6 5 a. An audit may be conducted no more frequently than once 6 6 in each twelve=month period upon not less than thirty business 6 7 days' written notice to the pharmacy benefits manager. 6 8 b. The covered entity may select an independent firm to 6 9 conduct the audit, and the independent firm shall sign a 6 10 confidentiality agreement with the covered entity and the 6 11 pharmacy benefits manager ensuring that all information 6 12 obtained during the audit will be treated as confidential. 6 13 The firm may not use, disclose, or otherwise reveal any such 6 14 information in any manner or form to any person or entity 6 15 except as otherwise permitted under the confidentiality 6 16 agreement. The covered entity shall treat all information 6 17 obtained as a result of the audit as confidential, and may not 6 18 use or disclose such information except as may be otherwise 6 19 permitted under the terms of the contract between the covered 6 20 entity and the pharmacy benefits manager or if ordered by a 6 21 court of competent jurisdiction for good cause shown. 6 22 c. Any audit shall be conducted at the pharmacy benefits 6 23 manager's office where such records are located, during normal 6 24 business hours, without undue interference with the pharmacy 6 25 benefits manager's business activities, and in accordance with 6 26 reasonable audit procedures. 6 27 Sec. 8. NEW SECTION. 155B.8 DISPENSING OF SUBSTITUTE 6 28 PRESCRIPTION DRUG FOR PRESCRIBED DRUG. 6 29 1. With regard to the dispensing of a substitute 6 30 prescription drug for a prescribed drug to a covered 6 31 individual, when the pharmacy benefits manager requests a 6 32 substitution, the following provisions shall apply: 6 33 a. The pharmacy benefits manager may request the 6 34 substitution of a lower=priced generic and therapeutically 6 35 equivalent drug for a higher=priced prescribed drug. 7 1 b. With regard to substitutions in which the substitute 7 2 drug's net cost is more for the covered individual or the 7 3 covered entity than the prescribed drug, the substitution 7 4 shall be made only for medical reasons that benefit the 7 5 covered individual. 7 6 2. If a substitution is being requested pursuant to this 7 7 section, the pharmacy benefits manager shall obtain the 7 8 approval of the prescribing health professional prior to the 7 9 substitution. 7 10 3. A pharmacy benefits manager shall not substitute an 7 11 equivalent drug product contrary to a prescription drug order 7 12 that prohibits a substitution. 7 13 Sec. 9. NEW SECTION. 155B.9 CIVIL ACTION == ENFORCEMENT 7 14 OF CHAPTER == DAMAGES. 7 15 A covered entity may bring a civil action to enforce the 7 16 provisions of this chapter or to seek civil damages for the 7 17 violation of the provisions of this chapter. 7 18 Sec. 10. NEW SECTION. 155B.10 APPLICATION OF CHAPTER TO 7 19 CERTAIN CONTRACTS. 7 20 The provisions of this chapter apply only to pharmacy 7 21 benefits management services contracts entered into or renewed 7 22 on or after July 1, 2005. 7 23 EXPLANATION 7 24 This bill provides for the regulation of pharmacy benefits 7 25 managers. The bill provides definitions, requires that a 7 26 pharmacy benefits manager in this state obtain an annual 7 27 license from the commissioner of insurance, and directs the 7 28 commissioner of insurance to adopt rules related to defining 7 29 of terms, use of prescribed forms, reporting requirements, 7 30 enforcement procedures, and protection of proprietary 7 31 information and trade secrets. 7 32 The bill requires pharmacy benefits managers to perform 7 33 their duties exercising good faith and fair dealing toward the 7 34 covered entity and covered individuals. 7 35 The bill provides that a covered entity may request that a 8 1 pharmacy benefits manager with which it has a pharmacy 8 2 benefits management services contract disclose to the covered 8 3 entity the amount of all rebate revenues and the nature, type, 8 4 and amounts of all other revenues that the pharmacy benefits 8 5 manager receives from each pharmaceutical manufacturer or 8 6 labeler with whom the pharmacy benefits manager has a 8 7 contract. The bill specifies the information that the 8 8 pharmacy benefits manager is to disclose in writing, requires 8 9 the pharmacy benefits manager to provide the information 8 10 requested by the covered entity within 30 days of receipt of 8 11 the request, provides that if requested, the information is to 8 12 be provided no less than once each year, and requires that the 8 13 contract entered into between the pharmacy benefits manager 8 14 and the covered entity specify any fees to be charged for drug 8 15 utilization reports requested by the covered entity. 8 16 The bill prohibits a pharmacy benefits manager from 8 17 contacting a covered individual without the express written 8 18 permission of the covered entity, unless authorized pursuant 8 19 to the terms of its contract with a covered entity. 8 20 The bill provides that with the exception of utilization 8 21 information, a covered entity is required to maintain any 8 22 information disclosed in response to a request as confidential 8 23 and proprietary information, and prohibits the covered entity 8 24 from using any such information for any other purpose or 8 25 disclosing such information to any other person except as 8 26 provided in the bill or in the pharmacy benefits management 8 27 services contract between the parties. The bill provides that 8 28 any covered entity who discloses information in violation of 8 29 the bill is subject to an action for injunctive relief and is 8 30 liable for any damages which are the direct and proximate 8 31 result of such disclosure. The bill provides that the 8 32 prohibition against disclosure of information provided does 8 33 not prohibit a covered entity from disclosing confidential or 8 34 proprietary information to the commissioner of insurance, upon 8 35 request, but also provides that any such information obtained 9 1 by the commissioner is confidential and privileged and is not 9 2 open to public inspection or disclosure. 9 3 The bill provides for auditing of the pharmacy benefits 9 4 manager's records to the extent the information included in 9 5 the records relates directly or indirectly to the covered 9 6 entity's contract. 9 7 The bill provides that a pharmacy benefits manager may 9 8 request a substitution for a prescribed drug to a covered 9 9 individual and provides certain limitations on the 9 10 substitution. 9 11 The bill provides that a covered entity may bring a civil 9 12 action to enforce the provisions of the bill or to seek civil 9 13 damages for a violation of the bill. The bill provides that 9 14 the provisions of the bill apply only to pharmacy benefits 9 15 management services contracts entered into or renewed on or 9 16 after July 1, 2005. 9 17 LSB 1013YH 81 9 18 pf/gg/14