H.F. 573 Section 1. Section 507B.2, subsection 1, Code 2019, is 1 amended to read as follows: 2 1. “Person” shall mean any individual, corporation, 3 association, partnership, reciprocal exchange, interinsurer, 4 fraternal beneficiary association, and any other legal entity 5 engaged in the business of insurance, including insurance 6 producers and adjusters. “Person” shall also mean any 7 corporation operating under the provisions of chapter 514 , 8 and any benevolent association as defined and operated under 9 chapter 512A , and any pharmacy benefit manager pursuant to 10 section 510C.1 . For purposes of this chapter , corporations 11 operating under the provisions of chapter 514 and chapter 512A 12 shall be deemed to be engaged in the business of insurance. 13 Sec. 2. Section 507B.3, Code 2019, is amended by adding the 14 following new subsection: 15 NEW SUBSECTION . 3. A person who violates a provision in 16 chapter 510C.1 shall be deemed to have committed an unfair 17 trade practice under this chapter. 18 Sec. 3. NEW SECTION . 510C.1 Pharmacy benefit managers —— 19 retail pharmacies. 20 1. As used in this section, unless the context otherwise 21 requires: 22 a. “Commissioner” means the commissioner of insurance or the 23 commissioner’s designee. 24 b. “Cost sharing” means any copayment, coinsurance, 25 deductible, or other out-of-pocket expense requirement. 26 c. “Covered person” , “health benefit plan” , and “health 27 carrier” mean the same as defined in section 514J.102. 28 d. “Pharmacy” and “prescription drug” mean the same as 29 defined in section 155A.3. 30 e. “Pharmacy benefit manager” means a person who, pursuant 31 to a contract or other relationship with a health carrier, 32 either directly or through an intermediary, manages a 33 prescription drug benefit provided by the health carrier and is 34 certified pursuant to section 510B.2. 35 -1- LSB 2553YH (4) 88 ko/lh 1/ 9

H.F. 573 f. “Pharmacy benefit manager’s retail pharmacy network” means 1 retail pharmacies who have contracted with a pharmacy benefit 2 manager to dispense or sell prescription drugs to covered 3 persons of a health carrier. 4 g. “Prescription drug benefit” means a health benefit plan 5 providing for third-party payment or prepayment of prescription 6 drugs. 7 h. “Retail pharmacy” means a pharmacy that is open to the 8 general public, dispenses prescription drugs to the general 9 public, and makes face-to-face consultations available 10 between licensed pharmacists and the general public to whom 11 prescription drugs are dispensed. 12 2. a. An otherwise qualified retail pharmacy that requests 13 to enter into a contract with a pharmacy benefit manager to 14 participate in the pharmacy benefit manager’s retail pharmacy 15 network and that accepts the pharmacy benefit manager’s 16 standard terms, conditions, formularies, and requirements 17 relating to dispensing fees, payments, reimbursement amounts, 18 and other pharmacy services shall be considered part of the 19 pharmacy benefit manager’s retail pharmacy network for purposes 20 of a covered person’s right to choose where to obtain the 21 covered person’s prescription drugs. 22 b. It shall be a violation of this section for a pharmacy 23 benefit manager to refuse to accept an otherwise qualified 24 retail pharmacy as described in paragraph “a” as a part of the 25 pharmacy benefit manager’s retail pharmacy network. It shall 26 also be a violation of this section for a health carrier which 27 has contracted with the pharmacy benefit manager to refuse to 28 accept an otherwise qualified retail pharmacy as described in 29 paragraph “a” as a part of the pharmacy benefit manager’s retail 30 pharmacy network. 31 c. A contractual relationship entered into by an otherwise 32 qualified retail pharmacy and a pharmacy benefit manager 33 establishing the otherwise qualified retail pharmacy as part of 34 the pharmacy benefit manager’s retail pharmacy network shall be 35 -2- LSB 2553YH (4) 88 ko/lh 2/ 9

H.F. 573 renewed annually unless otherwise agreed to by the otherwise 1 qualified retail pharmacy, the pharmacy benefit manager, and 2 the health carrier. 3 d. If a pharmacy benefit manager or a health carrier 4 considers a retail pharmacy not to be otherwise qualified, the 5 pharmacy benefit manager or the health carrier may file an 6 appeal relating to the retail pharmacy’s qualifications with 7 the insurance commissioner. The commissioner shall establish 8 by rule the standards and requirements necessary for a retail 9 pharmacy to be deemed “otherwise qualified” for purposes of 10 this section. 11 e. A pharmacy benefit manager that enters into a contractual 12 relationship with an otherwise qualified retail pharmacy 13 establishing the otherwise qualified retail pharmacy as part 14 of the pharmacy benefit manager’s retail pharmacy network, and 15 a health carrier whose prescription drug benefit the pharmacy 16 benefit manager is managing, shall not do any of the following: 17 (1) Require a covered person to obtain any prescription 18 exclusively from a mail order pharmacy. 19 (2) Impose any cost sharing or other condition on a covered 20 person electing to use the retail pharmacy to obtain the 21 covered person’s prescription drug if the cost sharing or other 22 condition is not imposed upon a covered person electing to use 23 a mail order pharmacy to obtain the same prescription drug. 24 (3) Restrict a prescription drug dispensed by the retail 25 pharmacy to a covered person to a minimum or maximum quantity 26 limit, or impose any requirement related to refills, if the 27 limitations or requirements are not also imposed on the same 28 prescription drug dispensed by a mail order pharmacy. 29 (4) Require a covered person to pay in whole or in part 30 for any prescription drug dispensed to the covered person by 31 the retail pharmacy and require the covered person to seek 32 reimbursement, if the same requirement is not imposed on a 33 covered person for a prescription drug dispensed by a mail 34 order pharmacy. 35 -3- LSB 2553YH (4) 88 ko/lh 3/ 9

H.F. 573 (5) Impose any administrative burden, term, condition, 1 or requirement related to a covered person electing to use a 2 retail pharmacy that materially or unreasonably interferes with 3 the covered person’s right to obtain a prescription drug from 4 the retail pharmacy. 5 3. a. Each pharmacy benefit manager and health carrier 6 covered by this section shall file an attestation annually with 7 the commissioner confirming compliance with all provisions of 8 this section for the preceding calendar year. The attestation 9 shall include a report that shall fully disclose the amounts, 10 terms, and conditions relating to copayments, reimbursement 11 options, and any other payments imposed on covered persons for 12 prescription drug benefits that the health carrier offers or 13 the pharmacy benefit manager manages. 14 b. The commissioner shall review and examine records of the 15 pharmacy benefit manager and the health carrier that support 16 the attestation and report. The pharmacy benefit manager and 17 the health carrier shall provide any other records requested by 18 the commissioner within ten business days of the commissioner’s 19 request. 20 4. The commissioner may take any action within the 21 commissioner’s authority to enforce compliance with this 22 section and may assess a pharmacy benefit manager and a health 23 carrier a fine of up to ten thousand dollars for each violation 24 of subsection 2. 25 5. Failure of a pharmacy benefit manager or of a health 26 carrier to comply with any provision of this section shall be 27 an unfair trade practice under section 507B.3, subsection 3. 28 6. A pharmacy benefit manager or a health carrier may appeal 29 any decision of the commissioner in accordance with chapter 30 17A. 31 7. The commissioner shall adopt rules pursuant to chapter 32 17A to administer this section. 33 Sec. 4. Section 514C.5, Code 2019, is amended by striking 34 the section and inserting in lieu thereof the following: 35 -4- LSB 2553YH (4) 88 ko/lh 4/ 9

H.F. 573 514C.5 Prescription drug benefits. 1 1. Notwithstanding the uniformity of treatment requirements 2 of section 514C.6, a policy, contract, or plan providing for 3 third-party payment or prepayment of prescription drug benefits 4 shall not impose any terms, conditions, or requirements upon 5 a person covered under the policy, contract, or plan for 6 prescription drugs dispensed by a retail pharmacy which are 7 different from the terms, conditions, or requirements imposed 8 for prescription drugs dispensed by a mail order pharmacy. 9 2. This section applies to the following classes of 10 third-party payment provider policies, contracts, or plans 11 delivered, issued for delivery, continued, or renewed in this 12 state on or after January 1, 2020: 13 a. Individual or group accident and sickness insurance 14 providing coverage on an expense-incurred basis. 15 b. An individual or group hospital or medical service 16 contract issued pursuant to chapter 509, 514, or 514A. 17 c. An individual or group health maintenance organization 18 contract regulated under chapter 514B. 19 d. A plan established pursuant to chapter 509A for public 20 employees. 21 3. This section shall not apply to accident-only, 22 specified disease, short-term hospital or medical, hospital 23 confinement indemnity, credit, dental, vision, Medicare 24 supplement, long-term care, basic hospital and medical-surgical 25 expense coverage as defined by the commissioner, disability 26 income insurance coverage, coverage issued as a supplement 27 to liability insurance, workers’ compensation or similar 28 insurance, or automobile medical payment insurance. 29 4. The commissioner of insurance shall adopt rules pursuant 30 to chapter 17A to administer this section. 31 Sec. 5. APPLICABILITY. The following apply to a health 32 benefit plan that is delivered, issued for delivery, continued, 33 or renewed in this state on or after January 1, 2020: 34 The section of this Act enacting requirements for pharmacy 35 -5- LSB 2553YH (4) 88 ko/lh 5/ 9

H.F. 573 benefit managers, retail pharmacies, and participation in 1 pharmacy benefit manager retail pharmacy networks. 2 EXPLANATION 3 The inclusion of this explanation does not constitute agreement with 4 the explanation’s substance by the members of the general assembly. 5 This bill relates to prescription drug benefits, pharmacies, 6 and pharmacy benefit managers. 7 The bill provides that if an otherwise qualified retail 8 pharmacy requests to enter into a contract with a pharmacy 9 benefit manager to participate in the pharmacy benefit 10 manager’s retail pharmacy network and accepts the pharmacy 11 benefit manager’s standard terms and conditions, the pharmacy 12 is considered part of the pharmacy benefit manager’s retail 13 pharmacy network for purposes of a covered person’s right to 14 choose where the covered person wants to obtain the covered 15 person’s prescription drugs. The bill prohibits a pharmacy 16 benefit manager or a health carrier from refusing to accept 17 an otherwise qualified retail pharmacy as part of a pharmacy 18 benefit manager’s retail pharmacy network. 19 The bill defines a “pharmacy benefit manager” as a person 20 who, pursuant to a contract or other relationship with a 21 health carrier, either directly or through an intermediary, 22 manages a prescription drug benefit provided by the health 23 carrier. “Pharmacy” is defined in the bill as a location 24 where prescription drugs are compounded, dispensed, or sold by 25 a pharmacist and where prescription drug orders are received 26 or processed in accordance with the pharmacy laws of this 27 state. “Pharmacy benefit manager’s retail pharmacy network” 28 is defined as retail pharmacies who have contracted with a 29 pharmacy benefit manager to dispense or sell prescription drugs 30 to covered persons of a health carrier. “Retail pharmacy” 31 is defined as a pharmacy that is open to the general public, 32 dispenses prescription drugs to the general public, and 33 makes face-to-face consultations available between licensed 34 pharmacists and the general public. 35 -6- LSB 2553YH (4) 88 ko/lh 6/ 9

H.F. 573 A contractual relationship entered into by an otherwise 1 qualified retail pharmacy and a pharmacy benefit manager 2 establishing the otherwise qualified retail pharmacy as part 3 of the pharmacy benefit manager’s retail pharmacy network must 4 be renewed annually unless otherwise agreed by the retail 5 pharmacy, the pharmacy benefit manager, and the health carrier. 6 If a pharmacy benefit manager or a health carrier considers 7 a retail pharmacy not otherwise qualified, the pharmacy benefit 8 manager or the health carrier may file an appeal relating 9 to the retail pharmacy’s qualifications with the insurance 10 commissioner. The commissioner shall establish by rule the 11 standards and requirements necessary for a retail pharmacy to 12 be deemed “otherwise qualified”. 13 If an otherwise qualified retail pharmacy is a part of a 14 pharmacy benefit manager’s retail pharmacy network, the bill 15 prohibits a pharmacy benefit manager or a health carrier from 16 imposing certain specific restrictions and conditions on a 17 covered person who obtains prescriptions from the retail 18 pharmacy. The commissioner of insurance may assess a pharmacy 19 benefit manager or a health carrier a fine of up to $10,000 for 20 each violation. 21 Each pharmacy benefit manager and health carrier must 22 file an annual attestation with the commissioner confirming 23 compliance with all requirements related to retail pharmacies 24 and the pharmacy benefit manager’s retail pharmacy network 25 for the preceding calendar year, which shall include a report 26 disclosing certain information as described in the bill. The 27 commissioner is required to examine the pharmacy benefit 28 manager’s and the health carrier’s records supporting the 29 accuracy and completeness of each report. The pharmacy 30 benefit manager and health carrier are required to provide any 31 additional records requested by the commissioner within ten 32 business days of the commissioner’s request. 33 The failure of a pharmacy benefit manager or of a health 34 carrier to comply with any provision of the section of the 35 -7- LSB 2553YH (4) 88 ko/lh 7/ 9

H.F. 573 bill as described above is made an unfair trade practice under 1 Code section 507B.3(3). The commissioner is authorized to 2 take any action within the commissioner’s authority to enforce 3 compliance with this section of the bill and must adopt rules 4 to administer this section of the bill. A pharmacy benefit 5 manager or a health carrier may appeal any decision, in 6 accordance with chapter 17A, of the commissioner under this 7 section. This section of the bill applies to a health benefit 8 plan that is delivered, issued for delivery, continued, or 9 renewed in this state on or after January 1, 2020. 10 The bill also prohibits a policy, contract, or plan 11 providing for third-party payment or prepayment of prescription 12 drug benefits from imposing any terms, conditions, or 13 requirements upon a person covered under the policy, contract, 14 or plan for prescription drugs dispensed by a retail pharmacy 15 which are different from the terms, conditions, or requirements 16 imposed for prescription drugs dispensed by a mail order 17 pharmacy. This prohibition applies to the following classes 18 of third-party payment provider policies, contracts, or plans 19 delivered, issued for delivery, continued, or renewed in this 20 state on or after January 1, 2020, including individual or 21 group accident and sickness insurance providing coverage on 22 an expense-incurred basis; an individual or group hospital 23 or medical service contract issued pursuant to Code chapter 24 509, 514, or 514A; an individual or group health maintenance 25 organization contract regulated under Code chapter 514B; and 26 a plan established pursuant to Code chapter 509A for public 27 employees. The prohibition does not apply to accident-only, 28 specified disease, short-term hospital or medical, hospital 29 confinement indemnity, credit, dental, vision, Medicare 30 supplement, long-term care, basic hospital and medical-surgical 31 expense coverage as defined by the commissioner, disability 32 income insurance coverage, coverage issued as a supplement 33 to liability insurance, workers’ compensation or similar 34 insurance, or automobile medical payment insurance. The 35 -8- LSB 2553YH (4) 88 ko/lh 8/ 9