H.F. _____ Section 1. Section 505.26, subsection 1, paragraph b, Code 1 2021, is amended to read as follows: 2 b. “Pharmacy benefits manager” means the same as defined in 3 section 510B.1 510C.1 . 4 Sec. 2. Section 507B.4, subsection 2, Code 2021, is amended 5 by adding the following new paragraph: 6 NEW PARAGRAPH . t. Pharmacy benefits managers. Any 7 violation of chapter 510B by a pharmacy benefits manager. 8 Sec. 3. Section 510B.1, Code 2021, is amended by striking 9 the section and inserting in lieu thereof the following: 10 510B.1 Definitions. 11 As used in this chapter, unless the context otherwise 12 requires: 13 1. “Clean claim” means a claim that has no defect or 14 impropriety, including a lack of any required substantiating 15 documentation, or other circumstances requiring special 16 treatment, that prevents timely payment from being made on the 17 claim. 18 2. “Commissioner ” means the commissioner of insurance. 19 3. “Cost-sharing” means any coverage limit, copayment, 20 coinsurance, deductible, or other out-of-pocket expense 21 obligation imposed by a health benefit plan on a covered 22 person. 23 4. “Covered person” means a policyholder, subscriber, or 24 other person participating in a health benefit plan that has 25 a prescription drug benefit managed by a pharmacy benefits 26 manager. 27 5. “Health benefit plan” means the same as defined in 28 section 514J.102. 29 6. “Health care professional” means the same as defined in 30 section 514J.102. 31 7. “Health carrier” means the same as defined in section 32 514J.102. 33 8. “Maximum allowable cost” means the maximum amount that a 34 pharmacy will be reimbursed by a pharmacy benefits manager or a 35 -1- LSB 2245YC (6) 89 ko/rn 1/ 14

H.F. _____ health carrier for a generic drug, brand-name drug, biologic 1 product, or other prescription drug, and that may include any 2 of the following: 3 a. Average acquisition cost. 4 b. National average acquisition cost. 5 c. Average manufacturer price. 6 d. Average wholesale price. 7 e. Brand effective rate. 8 f. Generic effective rate. 9 g. Discount indexing. 10 h. Federal upper limits. 11 i. Wholesale acquisition cost. 12 j. Any other term used by a pharmacy benefits manager or a 13 health carrier to establish reimbursement rates for a pharmacy. 14 9. “Maximum allowable cost list” means a list of 15 prescription drugs that includes the maximum allowable cost 16 for each prescription drug and that is used, directly or 17 indirectly, by a pharmacy benefits manager. 18 10. “Pharmacy” means the same as defined in section 155A.3. 19 11. “Pharmacy acquisition cost” means the cost to a pharmacy 20 for a prescription drug as invoiced by a wholesale distributor. 21 12. “Pharmacy benefits manager” means the same as defined 22 in section 510C.1. 23 13. “Pharmacy benefits manager affiliate” means a pharmacy or 24 a pharmacist that directly or indirectly through one or more 25 intermediaries, owns or controls, is owned and controlled by, 26 or is under common ownership or control of, a pharmacy benefits 27 manager. 28 14. “Pharmacy network” or “network” means pharmacies that 29 have contracted with a pharmacy benefits manager to dispense 30 or sell prescription drugs to covered persons of a health 31 benefit plan for which the pharmacy benefits manager manages 32 the prescription drug benefit. 33 15. “Prescription drug” means the same as defined in section 34 155A.3. 35 -2- LSB 2245YC (6) 89 ko/rn 2/ 14

H.F. _____ 16. “Prescription drug benefit” means the same as defined 1 in section 510C.1. 2 17. “Prescription drug order” means the same as defined in 3 section 155A.3. 4 18. “Wholesale distributor” means the same as defined in 5 section 155A.3. 6 Sec. 4. Section 510B.2, Code 2021, is amended to read as 7 follows: 8 510B.2 Certification as a third-party administrator required. 9 A pharmacy benefits manager doing business in this state 10 shall obtain a certificate of registration as a third-party 11 administrator under chapter 510 pursuant to section 510.21 , and 12 the provisions relating to a third-party administrator pursuant 13 to chapter 510 shall apply to a pharmacy benefits manager. 14 Sec. 5. Section 510B.4, Code 2021, is amended to read as 15 follows: 16 510B.4 Performance of duties —— good faith —— conflict of 17 interest. 18 1. A pharmacy benefits manager shall perform the pharmacy 19 benefits manager’s duties exercising exercise good faith and 20 fair dealing in the performance of its the pharmacy benefits 21 manager’s contractual obligations toward the covered entity a 22 health carrier . 23 2. A pharmacy benefits manager shall notify the covered 24 entity a health carrier in writing of any activity, policy, 25 practice ownership interest, or affiliation of the pharmacy 26 benefits manager that presents any conflict of interest. 27 Sec. 6. Section 510B.5, Code 2021, is amended to read as 28 follows: 29 510B.5 Contacting covered individual persons —— requirements. 30 A pharmacy benefits manager, unless authorized pursuant to 31 the terms of its contract with a covered entity health carrier , 32 shall not contact any covered individual person without 33 the express written permission of the covered entity health 34 carrier . 35 -3- LSB 2245YC (6) 89 ko/rn 3/ 14

H.F. _____ Sec. 7. Section 510B.6, Code 2021, is amended to read as 1 follows: 2 510B.6 Dispensing of substitute Substitute prescription drug 3 for prescribed drug drugs . 4 1. The following provisions shall apply when if a pharmacy 5 benefits manager requests the dispensing of a substitute 6 prescription drug for a prescribed drug to prescribed for a 7 covered individual person by the covered person’s health care 8 professional : 9 a. The pharmacy benefits manager may request the 10 substitution of a lower priced generic and therapeutically 11 equivalent prescription drug for a higher priced prescribed 12 prescription drug. 13 b. If the substitute prescription drug’s net cost to the 14 covered individual person or covered entity to the health 15 carrier exceeds the cost of the prescribed prescription drug 16 originally prescribed for the covered person , the substitution 17 shall be made only for medical reasons that benefit the 18 covered individual person as determined by the covered person’s 19 prescribing health care professional . 20 2. A pharmacy benefits manager shall obtain the approval of 21 the prescribing practitioner health care professional prior to 22 requesting any substitution under this section . 23 3. A pharmacy benefits manager shall not substitute an 24 equivalent prescription drug contrary to a prescription drug 25 order that prohibits a substitution. 26 Sec. 8. Section 510B.7, Code 2021, is amended by striking 27 the section and inserting in lieu thereof the following: 28 510B.7 Pharmacy networks. 29 1. A pharmacy located in the state shall not be prohibited 30 from participating in a pharmacy network provided that the 31 pharmacy accepts the same terms and conditions as the pharmacy 32 benefits manager imposes on the pharmacies in the network. 33 2. A pharmacy benefits manager shall not assess, charge, or 34 collect any form of remuneration that passes from a pharmacy 35 -4- LSB 2245YC (6) 89 ko/rn 4/ 14

H.F. _____ or a pharmacist in a pharmacy network to the pharmacy benefits 1 manager including but not limited to claim processing fees, 2 performance-based fees, network participation fees, or 3 accreditation fees. 4 Sec. 9. Section 510B.8, Code 2021, is amended by striking 5 the section and inserting in lieu thereof the following: 6 510B.8 Prescription drugs —— point of sale. 7 1. A covered person shall not be required to make a 8 cost-sharing payment at the point of sale for a prescription 9 drug in an amount that exceeds the maximum allowable cost for 10 that drug at the pharmacy at which the covered person fills the 11 covered person’s prescription drug order. 12 2. A pharmacy benefits manager shall not prohibit a pharmacy 13 from disclosing the availability of a lower-cost prescription 14 drug option to a covered person, or from selling a lower-cost 15 prescription drug option to a covered person. 16 3. Any amount paid by a covered person for a prescription 17 drug purchased pursuant to this section shall be applied to any 18 deductible imposed by the covered person’s health benefit plan 19 in accordance with the health benefit plan coverage documents. 20 4. A covered person shall not be prohibited from filling 21 a prescription drug order at any pharmacy located in the 22 state provided that the pharmacy accepts the same terms and 23 conditions as the pharmacy benefits manager imposes on at least 24 one of the pharmacy networks that the pharmacy benefits manager 25 has established in the state. 26 5. A pharmacy benefits manager shall not impose different 27 cost-sharing or additional fees on a covered person based on 28 the pharmacy at which the covered person fills the covered 29 person’s prescription drug order. 30 6. A pharmacy may decline to dispense a prescription drug to 31 a covered person if, as a result of the maximum allowable cost 32 list to which the pharmacy is subject, the pharmacy will be 33 reimbursed less for the prescription drug than the pharmacy’s 34 acquisition cost. 35 -5- LSB 2245YC (6) 89 ko/rn 5/ 14

H.F. _____ Sec. 10. NEW SECTION . 510B.8A Maximum allowable cost lists. 1 1. Prior to placement of a particular prescription drug on a 2 maximum allowable cost list, a pharmacy benefits manager shall 3 ensure that all of the following requirements are met: 4 a. The particular prescription drug must be listed as 5 therapeutically and pharmaceutically equivalent in the most 6 recent edition of the publication entitled “Approved Drug 7 Products with Therapeutic Equivalence Evaluations”, published 8 by the United States food and drug administration, otherwise 9 known as the orange book. 10 b. The particular prescription drug must not be obsolete or 11 temporarily unavailable. 12 c. The particular prescription drug must be available for 13 purchase, without limitations, by all pharmacies in the state 14 from a national or regional wholesale distributor that is 15 licensed in the state. 16 2. For each maximum allowable cost list that a pharmacy 17 benefits manager uses in the state, the pharmacy benefits 18 manager shall do all of the following: 19 a. Provide each pharmacy in a pharmacy network reasonable 20 access to the maximum allowable cost list to which the pharmacy 21 is subject. 22 b. Update the maximum allowable cost list within seven 23 calendar days from the date of an increase of ten percent or 24 more in the pharmacy acquisition cost of a prescription drug on 25 the list by one or more wholesale distributors doing business 26 in the state. 27 c. Update the maximum allowable cost list within seven 28 calendar days from the date of a change in the methodology, or 29 a change in the value of a variable applied in the methodology, 30 on which the maximum allowable cost list is based. 31 d. Provide a reasonable process for each pharmacy in a 32 pharmacy network to receive prompt notice of all changes to the 33 maximum allowable cost list to which the pharmacy is subject. 34 Sec. 11. NEW SECTION . 510B.8B Pharmacy benefits manager 35 -6- LSB 2245YC (6) 89 ko/rn 6/ 14

H.F. _____ affiliates —— reimbursement. 1 A pharmacy benefits manager shall not reimburse any pharmacy 2 located in the state in an amount less than the amount that 3 the pharmacy benefits manager reimburses a pharmacy benefits 4 manager affiliate for dispensing the same prescription drug 5 as dispensed by the pharmacy. The reimbursement amount shall 6 be calculated on a per unit basis based on the same generic 7 product identifier or generic code number. 8 Sec. 12. NEW SECTION . 510B.8C Clean claims. 9 After the date of receipt of a clean claim submitted by a 10 pharmacy in a pharmacy network, a pharmacy benefits manager 11 shall not retroactively reduce payment on the claim, either 12 directly or indirectly, except if the claim is found not to be 13 a clean claim during the course of a routine audit. 14 Sec. 13. NEW SECTION . 510B.8D Appeals and disputes. 15 1. A pharmacy benefits manager shall provide a reasonable 16 process to allow a pharmacy to appeal a maximum allowable cost, 17 or a reimbursement made under a maximum allowable cost list, 18 for a specific prescription drug for any of the following 19 reasons: 20 a. The pharmacy benefits manager violated section 510B.8A. 21 b. The maximum allowable cost is below the pharmacy 22 acquisition cost. 23 2. The appeal process must include all of the following: 24 a. A dedicated telephone number at which a pharmacy may 25 contact the pharmacy benefits manager and speak directly with 26 an individual involved in the appeal process. 27 b. A dedicated electronic mail address or internet site for 28 the purpose of submitting an appeal directly to the pharmacy 29 benefits manager. 30 c. A period of at least seven business days after the date 31 of a pharmacy’s initial submission of a clean claim during 32 which the pharmacy may initiate an appeal. 33 3. A pharmacy benefits manager shall respond to an appeal 34 within seven business days after the date on which the pharmacy 35 -7- LSB 2245YC (6) 89 ko/rn 7/ 14

H.F. _____ benefits manager receives the appeal. 1 a. If the pharmacy benefits manager grants a pharmacy’s 2 appeal, the pharmacy benefits manager shall do all of the 3 following: 4 (1) Adjust the maximum allowable cost of the prescription 5 drug that is the subject of the appeal and provide the national 6 drug code number that the adjustment is based on to the 7 appealing pharmacy. 8 (2) Permit the appealing pharmacy to reverse and rebill the 9 claim that is the subject of the appeal. 10 (3) Make the adjustment pursuant to subparagraph (1) 11 applicable to each pharmacy in the state subject to the same 12 maximum allowable cost list as the appealing pharmacy. 13 b. If the pharmacy benefits manager denies a pharmacy’s 14 appeal, the pharmacy benefits manager shall do all of the 15 following: 16 (1) Provide the appealing pharmacy the national drug 17 code number and the name of a wholesale distributor licensed 18 pursuant to section 155A.17 from which the pharmacy can obtain 19 the prescription drug at or below the maximum allowable cost. 20 (2) If the national drug code number provided by the 21 pharmacy benefits manager pursuant to subparagraph (1) is 22 not available below the pharmacy acquisition cost from the 23 wholesale distributor from whom the pharmacy purchases the 24 majority of its prescription drugs for resale, the pharmacy 25 benefits manager shall adjust the maximum allowable cost list 26 above the appealing pharmacy’s pharmacy acquisition cost, and 27 permit the pharmacy to reverse and rebill each claim affected 28 by the pharmacy’s inability to procure the prescription drug 29 at a cost that is equal to or less than the previously appealed 30 maximum allowable cost. 31 Sec. 14. Section 510B.9, Code 2021, is amended to read as 32 follows: 33 510B.9 Submission, approval, and use of prior Prior 34 authorization form . 35 -8- LSB 2245YC (6) 89 ko/rn 8/ 14

H.F. _____ A pharmacy benefits manager shall file with and have 1 approved by the commissioner a single prior authorization 2 form as provided in section 505.26 comply with all applicable 3 prior authorization requirements pursuant to section 505.26 . 4 A pharmacy benefits manager shall use the single prior 5 authorization form as provided in section 505.26 . 6 Sec. 15. Section 510B.10, Code 2021, is amended by striking 7 the section and inserting in lieu thereof the following: 8 510B.10 Enforcement. 9 1. The commissioner shall take any enforcement action under 10 the commissioner’s authority to enforce compliance with this 11 chapter. 12 2. After notice and hearing, the commissioner may impose any 13 sanctions pursuant to section 507B.7, and may suspend or revoke 14 a pharmacy benefits manager’s certificate of registration as 15 a third-party administrator upon a finding that the pharmacy 16 benefits manager violated this chapter, or any applicable 17 requirements pertaining to third-party administrators under 18 chapter 510. 19 3. A pharmacy benefits manager, as an agent or vendor of a 20 health carrier, is subject to the commissioner’s authority to 21 conduct an examination pursuant to chapter 507. The procedures 22 set forth in chapter 507 regarding examination reports shall 23 apply to an examination of a pharmacy benefits manager under 24 this chapter. 25 4. A pharmacy benefits manager is subject to the 26 commissioner’s authority to conduct a proceeding pursuant 27 to chapter 507B. The procedures set forth in chapter 507B 28 regarding proceedings shall apply to a proceeding related to a 29 pharmacy benefits manager under this chapter. 30 5. A pharmacy benefits manager is subject to the 31 commissioner’s authority to conduct an examination, audit, 32 or inspection pursuant to chapter 510 for third-party 33 administrators. The procedures set forth in chapter 510 for 34 third-party administrators shall apply to an examination, 35 -9- LSB 2245YC (6) 89 ko/rn 9/ 14

H.F. _____ audit, or inspection of a pharmacy benefits manager under this 1 chapter. 2 6. If the commissioner conducts an examination of a pharmacy 3 benefits manager under chapter 507; a proceeding under chapter 4 507B; or an examination, audit, or inspection under chapter 5 510, all information received from the pharmacy benefits 6 manager, and all notes, work papers, or other documents related 7 to the examination, proceeding, audit, or inspection shall 8 be confidential records pursuant to chapter 22 and shall be 9 accorded the same confidentiality as notes, work papers, 10 investigatory materials, or other documents related to the 11 examination of an insurer as provided in section 507.14. 12 7. A violation of this chapter shall be an unfair or 13 deceptive act or practice in the business of insurance pursuant 14 to section 507B.4, subsection 3. 15 Sec. 16. NEW SECTION . 510B.11 Rules. 16 The commissioner shall adopt rules pursuant to chapter 17A 17 to administer this chapter. 18 Sec. 17. NEW SECTION . 510B.12 Severability. 19 If a provision of this chapter or its application to any 20 person or circumstance is held invalid, the invalidity does 21 not affect other provisions or applications of this chapter 22 which can be given effect without the invalid provision or 23 application, and to this end the provisions of this chapter are 24 severable. 25 Sec. 18. REPEAL. Section 510B.3, Code 2021, is repealed. 26 Sec. 19. APPLICABILITY. This Act applies to pharmacy 27 benefits managers that manage a health carrier’s prescription 28 drug benefit in the state on or after the effective date of 29 this Act. 30 EXPLANATION 31 The inclusion of this explanation does not constitute agreement with 32 the explanation’s substance by the members of the general assembly. 33 This bill relates to pharmacy benefits managers, pharmacies, 34 and prescription drug benefits. 35 -10- LSB 2245YC (6) 89 ko/rn 10/ 14

H.F. _____ The bill requires a pharmacy benefits manager (PBM) to allow 1 a pharmacy located in the state to participate in a pharmacy 2 network (network) provided that the pharmacy accepts the same 3 terms and conditions as the PBM imposes on the pharmacies 4 in the network. “Pharmacy benefits manager” is defined in 5 the bill as a person who, pursuant to a contract or other 6 relationship with a health carrier, either directly or through 7 an intermediary, manages a prescription drug benefit provided 8 by the health carrier. “Pharmacy network”, “pharmacy”, 9 “prescription drug benefit”, and “health carrier” are also 10 defined in the bill. 11 The bill prohibits a PBM from assessing, charging, or 12 collecting any form of remuneration that passes from a pharmacy 13 in the network to the PBM including but not limited to claim 14 processing fees, performance-based fees, network participation 15 fees, or accreditation fees. 16 The bill prohibits a covered person from being required 17 to make a cost-sharing payment at the point-of-sale for a 18 prescription drug (drug) in an amount that exceeds the maximum 19 allowable cost (MAC) for that drug. The bill defines the 20 “maximum allowable cost” as the maximum amount that a pharmacy 21 will be reimbursed by a PBM or a health carrier for a generic 22 drug, brand-name drug, biologic product, or other drug and 23 that may include the average or national average acquisition 24 cost; the average manufacturer price; the average wholesale 25 price; the brand or generic effective rate; discount indexing; 26 federal upper limits; wholesale acquisition cost; or any other 27 term used by a PBM or health carrier to establish reimbursement 28 rates for a pharmacy. “Covered person” is defined in the bill. 29 A PBM cannot prohibit a pharmacy from disclosing the 30 availability of a lower-cost drug option to a covered person, 31 or from selling a lower-cost drug option to a covered person. 32 The bill requires that any amount paid by a covered person 33 for a drug in the circumstances detailed in the bill must 34 be applied to any deductible imposed by the covered person’s 35 -11- LSB 2245YC (6) 89 ko/rn 11/ 14

H.F. _____ health benefit plan in accordance with the plan’s coverage 1 documents. Under the bill, a covered person cannot be 2 prohibited from filling a drug order at any pharmacy located in 3 the state if the pharmacy accepts the same terms and conditions 4 as the PBM imposes on at least one of the pharmacy networks 5 that the PBM has established in the state. A PBM cannot 6 impose different cost-sharing or additional fees on a covered 7 person based on the pharmacy at which a covered person fills 8 their prescription. The bill allows a pharmacy to decline 9 to dispense a drug to a covered person if, as a result of 10 the maximum allowable cost list (MACL) to which the pharmacy 11 is subject, the pharmacy will be reimbursed less than the 12 pharmacy’s acquisition cost. “Pharmacy acquisition cost” is 13 defined in the bill. “Maximum allowable cost list” is defined 14 in the bill as a list of prescription drugs that includes the 15 MAC for each drug and that is used, directly or indirectly, 16 by a PBM. “Pharmacy acquisition cost” is also defined in the 17 bill. 18 The bill requires that prior to placement of a particular 19 drug on a MACL, a PBM must ensure that the drug is listed as 20 therapeutically and pharmaceutically equivalent in the most 21 recent edition of the “Approved Drug Products with Therapeutic 22 Equivalence Evaluations”, published by the United States 23 food and drug administration; the drug cannot be obsolete or 24 temporarily unavailable; and the drug must be available for 25 purchase by all pharmacies in the state from a national or 26 regional wholesale distributor (distributor) that is licensed 27 in the state. “Wholesale distributor” is defined in the bill. 28 The bill requires a PBM to provide each pharmacy in a 29 network reasonable access to the MACL to which the pharmacy is 30 subject, and to update each MACL within seven calendar days 31 from the date of an increase of 10 percent or more in the 32 pharmacy acquisition cost of a drug by one or more distributors 33 doing business in the state. The PBM must also update a MACL 34 within seven calendar days from the date of a change in the 35 -12- LSB 2245YC (6) 89 ko/rn 12/ 14

H.F. _____ methodology, or a change in a value of a variable applied in 1 the methodology, on which the MACL is based. The PBM is also 2 required to provide a process for each pharmacy in a network to 3 receive prompt notice of all changes to a MACL. 4 The bill prohibits a PBM from reimbursing a pharmacy located 5 in the state in an amount less than the amount that the PBM 6 reimburses a PBM affiliate for dispensing the same drug as the 7 pharmacy. “Pharmacy benefits manager affiliate” is defined in 8 the bill. 9 The bill provides that after the date of receipt of a clean 10 claim submitted by a pharmacy, a PBM cannot retroactively 11 reduce payment on the claim, either directly or indirectly, 12 except if the claim is found not to be a clean claim during the 13 course of a routine audit. “Clean claim” is defined in the 14 bill. 15 The bill requires a PBM to provide a process for pharmacies 16 to appeal a MAC, or a reimbursement made under a MACL. The 17 requirements for the appeal process are detailed in the bill. 18 The commissioner of insurance (commissioner) is required to 19 take any enforcement action under the commissioner’s authority 20 to enforce compliance with the bill. After notice and hearing, 21 the commissioner may impose any sanctions pursuant to Code 22 section 507B.7, and may suspend or revoke a PBM’s certificate 23 of registration as a third-party administrator (administrator) 24 upon a finding that the PBM violated any requirements of 25 the bill, or any applicable requirements pertaining to 26 administrators under Code chapter 510. 27 A PBM is subject to the commissioner’s authority to conduct 28 an examination pursuant to Code chapter 507 and a proceeding 29 pursuant to Code chapter 507B. A PBM is also subject to 30 the commissioner’s authority to conduct an examination, 31 audit, or inspection pursuant to Code chapter 510. If the 32 commissioner conducts an examination, a proceeding, an audit, 33 or an inspection, all information received from the PBM, and 34 all documents related to the examination, proceeding, audit, or 35 -13- LSB 2245YC (6) 89 ko/rn 13/ 14

H.F. _____ inspection are confidential records pursuant to Code chapter 1 22. 2 A violation of the bill is an unfair or deceptive act or 3 practice in the business of insurance pursuant to Code section 4 507B.4. 5 The bill requires the commissioner to adopt rules to 6 administer the bill. 7 If a provision of the bill or its application to any person 8 or circumstance is held invalid, the invalidity does not affect 9 other provisions or applications of the bill that can be given 10 effect without the invalid provision or application. 11 The bill make conforming changes to Code sections 510B.2, 12 510B.4, 510B.5, 510B.6, and 510B.9. 13 The bill repeals Code section 510B.3 which is replaced in 14 large part by new Code section 510B.10 (enforcement). 15 The bill applies to PBMs that manage a health carrier’s 16 prescription drug benefit in the state on or after the 17 effective date of the bill. 18 -14- LSB 2245YC (6) 89 ko/rn 14/ 14