S.F. 2231 Section 1. Section 505.26, subsection 1, paragraph b, Code 1 2022, 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 3, Code 2022, 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 2022, 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 cost obligation 21 imposed by a health benefit plan on a covered person. 22 4. “Covered person” means a policyholder, subscriber, or 23 other person participating in a health benefit plan that has 24 a prescription drug benefit managed by a pharmacy benefits 25 manager. 26 5. “Health benefit plan” means the same as defined in 27 section 514J.102. 28 6. “Health care professional” means the same as defined in 29 section 514J.102. 30 7. “Health carrier” means the same as defined in section 31 514J.102. 32 8. “Maximum allowable cost” means the maximum amount that a 33 pharmacy will be reimbursed by a pharmacy benefits manager or a 34 health carrier for a generic drug, brand-name drug, biologic 35 -1- LSB 5519SV (1) 89 ko/rn 1/ 16

S.F. 2231 product, or other prescription drug, and that may include any 1 of the following: 2 a. Average acquisition cost. 3 b. National average acquisition cost. 4 c. Average manufacturer price. 5 d. Average wholesale price. 6 e. Brand effective rate. 7 f. Generic effective rate. 8 g. Discount indexing. 9 h. Federal upper limits. 10 i. Wholesale acquisition cost. 11 j. Any other term used by a pharmacy benefits manager or a 12 health carrier to establish reimbursement rates for a pharmacy. 13 9. “Maximum allowable cost list” means a list of 14 prescription drugs that includes the maximum allowable cost 15 for each prescription drug and that is used, directly or 16 indirectly, by a pharmacy benefits manager. 17 10. “Pharmacist” means the same as defined in section 18 155A.3. 19 11. “Pharmacy” means the same as defined in section 155A.3. 20 12. “Pharmacy acquisition cost” means the cost to a pharmacy 21 for a prescription drug as invoiced by a wholesale distributor. 22 13. “Pharmacy benefits manager” means the same as defined 23 in section 510C.1. 24 14. “Pharmacy benefits manager affiliate” means a pharmacy or 25 a pharmacist that directly or indirectly through one or more 26 intermediaries, owns or controls, is owned and controlled by, 27 or is under common ownership or control of, a pharmacy benefits 28 manager. 29 15. “Pharmacy network” or “network” means pharmacies that 30 have contracted with a pharmacy benefits manager to dispense 31 or sell prescription drugs to covered persons of a health 32 benefit plan for which the pharmacy benefits manager manages 33 the prescription drug benefit. 34 16. “Prescription drug” means the same as defined in section 35 -2- LSB 5519SV (1) 89 ko/rn 2/ 16

S.F. 2231 155A.3. 1 17. “Prescription drug benefit” means the same as defined 2 in section 510C.1. 3 18. “Prescription drug order” means the same as defined in 4 section 155A.3. 5 19. “Rebate” means the same as defined in section 510C.1. 6 20. “Wholesale distributor” means the same as defined in 7 section 155A.3. 8 Sec. 4. Section 510B.4, Code 2022, is amended to read as 9 follows: 10 510B.4 Performance of duties —— good faith —— conflict of 11 interest. 12 1. A pharmacy benefits manager shall perform the pharmacy 13 benefits manager’s duties exercising exercise good faith and 14 fair dealing in the performance of its the pharmacy benefits 15 manager’s contractual obligations toward the covered entity a 16 health carrier . 17 2. A pharmacy benefits manager shall notify the covered 18 entity a health carrier in writing of any activity, policy, 19 practice ownership interest, or affiliation of the pharmacy 20 benefits manager that presents any conflict of interest. 21 3. a. A pharmacy benefits manager shall owe a fiduciary 22 duty to each health carrier for whom the pharmacy benefits 23 manager manages a prescription drug benefit provided by the 24 health carrier, and shall discharge its duties in accordance 25 with applicable state and federal law. 26 b. A health carrier shall owe a fiduciary duty to each 27 covered person participating in a health benefit plan offered 28 or issued by the health carrier, and the health carrier shall 29 discharge its duties in accordance with applicable state and 30 federal law. 31 4. A pharmacy benefits manager, health carrier, or health 32 benefit plan shall not discriminate against a pharmacy 33 or a pharmacist with respect to participation, referral, 34 reimbursement of a covered service, or indemnification if a 35 -3- LSB 5519SV (1) 89 ko/rn 3/ 16

S.F. 2231 pharmacist is acting within the scope of the pharmacist’s 1 license. 2 Sec. 5. Section 510B.5, Code 2022, is amended to read as 3 follows: 4 510B.5 Contacting covered individual persons —— requirements. 5 A pharmacy benefits manager, unless authorized pursuant to 6 the terms of its contract with a covered entity health carrier , 7 shall not contact any covered individual person without 8 the express written permission of the covered entity health 9 carrier . 10 Sec. 6. Section 510B.6, Code 2022, is amended to read as 11 follows: 12 510B.6 Dispensing of substitute Substitute prescription drug 13 for prescribed drug drugs . 14 1. The following provisions shall apply when if a pharmacy 15 benefits manager requests the dispensing of a substitute 16 prescription drug for a prescribed drug to prescribed for a 17 covered individual person : 18 a. The pharmacy benefits manager may request the 19 substitution of a lower priced generic and therapeutically 20 equivalent prescription drug for a higher priced prescribed 21 prescription drug. 22 b. If the substitute prescription drug’s net cost to the 23 covered individual person or covered entity to the health 24 carrier exceeds the cost of the prescribed prescription drug 25 originally prescribed for the covered person , the substitution 26 shall be made only for medical reasons that benefit the covered 27 individual person . 28 2. A pharmacy benefits manager shall obtain the approval of 29 the prescribing practitioner health care professional prior to 30 requesting any substitution under this section . 31 3. A pharmacy benefits manager shall not substitute an 32 equivalent prescription drug contrary to a prescription drug 33 order that prohibits a substitution. 34 Sec. 7. Section 510B.7, Code 2022, is amended by striking 35 -4- LSB 5519SV (1) 89 ko/rn 4/ 16

S.F. 2231 the section and inserting in lieu thereof the following: 1 510B.7 Pharmacy networks. 2 1. A pharmacy located in the state shall not be prohibited 3 from participating in a pharmacy network provided that the 4 pharmacy accepts the same terms and conditions as the pharmacy 5 benefits manager imposes on the pharmacies in the network. 6 2. A pharmacy benefits manager shall not assess, charge, or 7 collect any form of remuneration that passes from a pharmacy 8 or a pharmacist in a pharmacy network to the pharmacy benefits 9 manager including but not limited to claim processing fees, 10 performance-based fees, network participation fees, or 11 accreditation fees. 12 Sec. 8. Section 510B.8, Code 2022, is amended by striking 13 the section and inserting in lieu thereof the following: 14 510B.8 Prescription drugs —— point of sale. 15 1. A covered person shall not be required to make a 16 cost-sharing payment at the point of sale for a prescription 17 drug in an amount that exceeds the maximum allowable cost for 18 that drug at the pharmacy at which the covered person fills the 19 covered person’s prescription drug order. 20 2. A pharmacy benefits manager shall not prohibit a pharmacy 21 from disclosing the availability of a lower-cost prescription 22 drug option to a covered person, or from selling a lower-cost 23 prescription drug option to a covered person. 24 3. Any amount paid by a covered person for a prescription 25 drug purchased pursuant to this section shall be applied to any 26 deductible imposed by the covered person’s health benefit plan 27 in accordance with the health benefit plan coverage documents. 28 4. A covered person shall not be prohibited from filling 29 a prescription drug order at any pharmacy located in the 30 state provided that the pharmacy accepts the same terms and 31 conditions as the covered person’s health benefit plan. 32 5. A pharmacy benefits manager shall not impose different 33 cost-sharing or additional fees on a covered person based on 34 the pharmacy at which the covered person fills the covered 35 -5- LSB 5519SV (1) 89 ko/rn 5/ 16

S.F. 2231 person’s prescription drug order. 1 6. A pharmacy benefits manager shall not require a covered 2 person, as a condition of payment or reimbursement, to purchase 3 pharmacy services, including prescription drugs, exclusively 4 through a mail-order pharmacy. 5 7. a. A covered person’s cost-sharing for a prescription 6 drug shall be calculated at the point-of-sale based on a price 7 that is reduced by an amount equal to at least one hundred 8 percent of all rebates that have been received, or that will be 9 received, by the health carrier or a pharmacy benefits manager 10 in connection with the dispensing or administration of the 11 prescription drug. 12 b. A health carrier shall not be precluded from decreasing 13 a covered person’s cost-sharing by an amount greater than the 14 covered person’s cost-sharing as calculated under paragraph 15 “a” . 16 8. A pharmacy benefits manager shall include any amount 17 paid by a covered person, or by any other person on behalf of 18 a covered person, when calculating the covered person’s total 19 contribution toward the covered person’s cost-sharing. 20 9. A pharmacy may decline to dispense a prescription drug to 21 a covered person if, as a result of the maximum allowable cost 22 list to which the pharmacy is subject, the pharmacy will be 23 reimbursed less for the prescription drug than the pharmacy’s 24 acquisition cost. 25 Sec. 9. NEW SECTION . 510B.8A Maximum allowable cost lists. 26 1. Prior to placement of a particular prescription drug on a 27 maximum allowable cost list, a pharmacy benefits manager shall 28 ensure that all of the following requirements are met: 29 a. The particular prescription drug must be listed as 30 therapeutically and pharmaceutically equivalent in the most 31 recent edition of the publication entitled “Approved Drug 32 Products with Therapeutic Equivalence Evaluations”, published 33 by the United States food and drug administration, otherwise 34 known as the orange book. 35 -6- LSB 5519SV (1) 89 ko/rn 6/ 16

S.F. 2231 b. The particular prescription drug must not be obsolete or 1 temporarily unavailable. 2 c. The particular prescription drug must be available for 3 purchase, without limitations, by all pharmacies in the state 4 from a national or regional wholesale distributor that is 5 licensed in the state. 6 2. For each maximum allowable cost list that a pharmacy 7 benefits manager uses in the state, the pharmacy benefits 8 manager shall do all of the following: 9 a. Provide each pharmacy in a pharmacy network reasonable 10 access to the maximum allowable cost list to which the pharmacy 11 is subject. 12 b. Update the maximum allowable cost list within seven 13 calendar days from the date of an increase of ten percent or 14 more in the pharmacy acquisition cost of a prescription drug on 15 the list by one or more wholesale distributors doing business 16 in the state. 17 c. Update the maximum allowable cost list within seven 18 calendar days from the date of a change in the methodology, or 19 a change in the value of a variable applied in the methodology, 20 on which the maximum allowable cost list is based. 21 d. Provide a reasonable process for each pharmacy in a 22 pharmacy network to receive prompt notice of all changes to the 23 maximum allowable cost list to which the pharmacy is subject. 24 Sec. 10. NEW SECTION . 510B.8B Reimbursement. 25 1. A pharmacy benefits manager shall not reimburse a 26 pharmacy or pharmacist for a prescription drug in an amount 27 less than the national average drug acquisition cost for the 28 prescription drug on the date that the drug is administered or 29 dispensed. 30 2. In addition to the reimbursement required under 31 subsection 1, a pharmacy benefits manager shall reimburse the 32 pharmacy or pharmacist a professional dispensing fee that is 33 no less than the pharmacy dispensing fee published in the Iowa 34 Medicaid enterprise provider fee schedule on the date that the 35 -7- LSB 5519SV (1) 89 ko/rn 7/ 16

S.F. 2231 prescription drug is administered or dispensed. 1 Sec. 11. NEW SECTION . 510B.8C Pharmacy benefits manager 2 affiliates —— reimbursement. 3 A pharmacy benefits manager shall not reimburse any pharmacy 4 located in the state in an amount less than the amount that 5 the pharmacy benefits manager reimburses a pharmacy benefits 6 manager affiliate for dispensing the same prescription drug 7 as dispensed by the pharmacy. The reimbursement amount shall 8 be calculated on a per unit basis based on the same generic 9 product identifier or generic code number. 10 Sec. 12. NEW SECTION . 510B.8D Clean claims. 11 After the date of receipt of a clean claim submitted by a 12 pharmacy in a pharmacy network, a pharmacy benefits manager 13 shall not retroactively reduce payment on the claim, either 14 directly or indirectly, except if the claim is found not to be 15 a clean claim during the course of a routine audit. 16 Sec. 13. NEW SECTION . 510B.8E Appeals and disputes. 17 1. A pharmacy benefits manager shall provide a reasonable 18 process to allow a pharmacy to appeal a maximum allowable cost, 19 or a reimbursement made under a maximum allowable cost list, 20 for a specific prescription drug for any of the following 21 reasons: 22 a. The pharmacy benefits manager violated section 510B.8A. 23 b. The maximum allowable cost is below the pharmacy 24 acquisition cost. 25 2. The appeal process must include all of the following: 26 a. A dedicated telephone number at which a pharmacy may 27 contact the pharmacy benefits manager and speak directly with 28 an individual involved in the appeal process. 29 b. A dedicated electronic mail address or internet site for 30 the purpose of submitting an appeal directly to the pharmacy 31 benefits manager. 32 c. A period of at least seven business days after the date 33 of a pharmacy’s initial submission of a clean claim during 34 which the pharmacy may initiate an appeal. 35 -8- LSB 5519SV (1) 89 ko/rn 8/ 16

S.F. 2231 3. A pharmacy benefits manager shall respond to an appeal 1 within seven business days after the date on which the pharmacy 2 benefits manager receives the appeal. 3 a. If the pharmacy benefits manager grants a pharmacy’s 4 appeal, the pharmacy benefits manager shall do all of the 5 following: 6 (1) Adjust the maximum allowable cost of the prescription 7 drug that is the subject of the appeal and provide the national 8 drug code number that the adjustment is based on to the 9 appealing pharmacy. 10 (2) Permit the appealing pharmacy to reverse and rebill the 11 claim that is the subject of the appeal. 12 (3) Make the adjustment pursuant to subparagraph (1) 13 applicable to each pharmacy in the state subject to the same 14 maximum allowable cost list as the appealing pharmacy. 15 b. If the pharmacy benefits manager denies a pharmacy’s 16 appeal, the pharmacy benefits manager shall do all of the 17 following: 18 (1) Provide the appealing pharmacy the national drug 19 code number and the name of a wholesale distributor licensed 20 pursuant to section 155A.17 from which the pharmacy can obtain 21 the prescription drug at or below the maximum allowable cost. 22 (2) If the prescription drug identified by the national drug 23 code number provided by the pharmacy benefits manager pursuant 24 to subparagraph (1) is not available below the pharmacy 25 acquisition cost from the wholesale distributor from whom the 26 pharmacy purchases the majority of its prescription drugs for 27 resale, the pharmacy benefits manager shall adjust the maximum 28 allowable cost list above the appealing pharmacy’s pharmacy 29 acquisition cost, and permit the pharmacy to reverse and rebill 30 each claim affected by the pharmacy’s inability to procure the 31 prescription drug at a cost that is equal to or less than the 32 previously appealed maximum allowable cost. 33 Sec. 14. Section 510B.9, Code 2022, is amended to read as 34 follows: 35 -9- LSB 5519SV (1) 89 ko/rn 9/ 16

S.F. 2231 510B.9 Submission, approval, and use of prior Prior 1 authorization form . 2 A pharmacy benefits manager shall file with and have 3 approved by the commissioner a single prior authorization 4 form as provided in section 505.26 comply with all applicable 5 prior authorization requirements pursuant to section 505.26 . 6 A pharmacy benefits manager shall use the single prior 7 authorization form as provided in section 505.26 . 8 Sec. 15. Section 510B.10, Code 2022, is amended by striking 9 the section and inserting in lieu thereof the following: 10 510B.10 Enforcement. 11 1. The commissioner shall take any enforcement action under 12 the commissioner’s authority to enforce compliance with this 13 chapter. 14 2. After notice and hearing, the commissioner may issue any 15 order or impose any penalty pursuant to section 507B.7, and may 16 suspend or revoke a pharmacy benefits manager’s certificate 17 of registration as a third-party administrator upon a finding 18 that the pharmacy benefits manager violated this chapter, 19 or any applicable requirements pertaining to third-party 20 administrators under chapter 510. 21 3. A pharmacy benefits manager, as an agent or vendor of a 22 health carrier, is subject to the commissioner’s authority to 23 conduct an examination pursuant to chapter 507. The procedures 24 set forth in chapter 507 regarding examination reports shall 25 apply to an examination of a pharmacy benefits manager under 26 this chapter. 27 4. A pharmacy benefits manager is subject to the 28 commissioner’s authority to conduct a proceeding pursuant 29 to chapter 507B. The procedures set forth in chapter 507B 30 regarding proceedings shall apply to a proceeding related to a 31 pharmacy benefits manager under this chapter. 32 5. A pharmacy benefits manager is subject to the 33 commissioner’s authority to conduct an examination, audit, 34 or inspection pursuant to chapter 510 for third-party 35 -10- LSB 5519SV (1) 89 ko/rn 10/ 16

S.F. 2231 administrators. The procedures set forth in chapter 510 for 1 third-party administrators shall apply to an examination, 2 audit, or inspection of a pharmacy benefits manager under this 3 chapter. 4 6. If the commissioner conducts an examination of a pharmacy 5 benefits manager under chapter 507; a proceeding under chapter 6 507B; or an examination, audit, or inspection under chapter 7 510, all information received from the pharmacy benefits 8 manager, and all notes, work papers, or other documents related 9 to the examination, proceeding, audit, or inspection shall 10 be confidential records pursuant to chapter 22 and shall be 11 accorded the same confidentiality as notes, work papers, 12 investigatory materials, or other documents related to the 13 examination of an insurer as provided in section 507.14. 14 7. A violation of this chapter shall be an unfair or 15 deceptive act or practice in the business of insurance pursuant 16 to section 507B.4, subsection 3. 17 Sec. 16. NEW SECTION . 510B.11 Rules. 18 The commissioner shall adopt rules pursuant to chapter 17A 19 to administer this chapter. 20 Sec. 17. NEW SECTION . 510B.12 Severability. 21 If a provision of this chapter or its application to any 22 person or circumstance is held invalid, the invalidity does 23 not affect other provisions or applications of this chapter 24 which can be given effect without the invalid provision or 25 application, and to this end the provisions of this chapter are 26 severable. 27 Sec. 18. REPEAL. Section 510B.3, Code 2022, is repealed. 28 Sec. 19. APPLICABILITY. This Act applies to pharmacy 29 benefits managers that manage a health carrier’s prescription 30 drug benefit in the state on or after the effective date of 31 this Act. 32 EXPLANATION 33 The inclusion of this explanation does not constitute agreement with 34 the explanation’s substance by the members of the general assembly. 35 -11- LSB 5519SV (1) 89 ko/rn 11/ 16

S.F. 2231 This bill relates to pharmacy benefits managers (PBM), 1 pharmacies, and prescription drug benefits. 2 The bill provides that a PBM owes a fiduciary duty to 3 each health carrier (carrier) for whom the PBM manages a 4 prescription drug benefit (drug benefit) provided by the 5 carrier, and shall discharge its duties in accordance with 6 applicable state and federal law. The bill also provides that 7 a carrier shall owe a fiduciary duty to each covered person 8 participating in a health benefit plan (benefit plan) offered 9 or issued by the carrier, and the carrier shall discharge 10 its duties in accordance with applicable state and federal 11 law. The bill prohibits a PBM, carrier, or benefit plan from 12 discriminating against a pharmacy or pharmacist with respect to 13 participation, referral, reimbursement of a covered service, or 14 indemnification if a pharmacist is acting within the scope of 15 the pharmacist’s license. 16 The bill requires a PBM to allow a pharmacy located in the 17 state to participate in a pharmacy network (network) provided 18 that the pharmacy accepts the same terms and conditions as 19 the PBM imposes on the pharmacies in the network. “Pharmacy 20 benefits manager” is defined in the bill as a person who, 21 pursuant to a contract or other relationship with a carrier, 22 either directly or through an intermediary, manages a 23 drug benefit provided by the carrier. “Pharmacy network”, 24 “pharmacist”, “pharmacy”, “prescription drug benefit”, and 25 “health carrier” are also defined in the bill. 26 The bill prohibits a PBM from assessing, charging, or 27 collecting any form of remuneration that passes from a pharmacy 28 in the network to the PBM including but not limited to claim 29 processing fees, performance-based fees, network participation 30 fees, or accreditation fees. 31 The bill prohibits a covered person from being required 32 to make a cost-sharing payment at the point-of-sale for a 33 prescription drug (drug) in an amount that exceeds the maximum 34 allowable cost (MAC) for that drug. The bill defines the MAC 35 -12- LSB 5519SV (1) 89 ko/rn 12/ 16

S.F. 2231 as the maximum amount that a pharmacy will be reimbursed by a 1 PBM or a carrier for a generic drug, brand-name drug, biologic 2 product, or other drug and that may include the average or 3 national average acquisition cost; the average manufacturer 4 price; the average wholesale price; the brand or generic 5 effective rate; discount indexing; federal upper limits; 6 wholesale acquisition cost; or any other term used by a PBM 7 or carrier to establish reimbursement rates for a pharmacy. 8 “Covered person” is defined in the bill. 9 A PBM cannot prohibit a pharmacy from disclosing the 10 availability of a lower-cost drug option to a covered person, 11 or from selling a lower-cost drug option to a covered person. 12 The bill requires that any amount paid by a covered person 13 for a drug in the circumstances detailed in the bill must 14 be applied to any deductible imposed by the covered person’s 15 health benefit plan in accordance with the plan’s coverage 16 documents. Under the bill, a covered person cannot be 17 prohibited from filling a drug order at any pharmacy located 18 in the state if the pharmacy accepts the same terms and 19 conditions as the covered person’s benefit plan. A PBM cannot 20 impose different cost-sharing or additional fees on a covered 21 person based on the pharmacy at which a covered person fills 22 their prescription. A PBM cannot require a covered person, 23 as a condition of payment or reimbursement, to purchase 24 pharmacy services, including drugs, exclusively through 25 a mail-order pharmacy. The bill requires that a covered 26 person’s cost-sharing for a drug shall be calculated at the 27 point-of-sale based on a price that is reduced by an amount 28 equal to at least 100 percent of all rebates that have been 29 received, or that will be received, by the health carrier or 30 a PBM in connection with the dispensing or administration of 31 the drug. A health carrier may decrease a covered person’s 32 cost-sharing by a greater amount. “Rebate” is defined in the 33 bill. A PBM shall include any amount paid by a covered person, 34 or by any other person on behalf of a covered person, when 35 -13- LSB 5519SV (1) 89 ko/rn 13/ 16

S.F. 2231 calculating the covered person’s total contribution toward the 1 covered person’s cost-sharing. “Cost-sharing” is defined in 2 the bill. The bill allows a pharmacy to decline to dispense 3 a drug to a covered person if, as a result of the maximum 4 allowable cost list (MACL) to which the pharmacy is subject, 5 the pharmacy will be reimbursed less than the pharmacy’s 6 acquisition cost. “Pharmacy acquisition cost” is defined in 7 the bill. “Maximum allowable cost list” is defined in the 8 bill as a list of prescription drugs that includes the MAC for 9 each drug and that is used, directly or indirectly, by a PBM. 10 “Pharmacy acquisition cost” is also defined in the bill. 11 The bill requires that prior to placement of a particular 12 drug on a MACL, a PBM must ensure that the drug is listed as 13 therapeutically and pharmaceutically equivalent in the most 14 recent edition of the “Approved Drug Products with Therapeutic 15 Equivalence Evaluations”, published by the United States 16 food and drug administration; the drug cannot be obsolete or 17 temporarily unavailable; and the drug must be available for 18 purchase by all pharmacies in the state from a national or 19 regional wholesale distributor that is licensed in the state. 20 “Wholesale distributor” is defined in the bill. 21 The bill requires a PBM to provide each pharmacy in a 22 network reasonable access to the MACL to which the pharmacy is 23 subject, and to update each MACL within seven calendar days 24 from the date of an increase of 10 percent or more in the 25 pharmacy acquisition cost of a drug by one or more wholesale 26 distributors doing business in the state. The PBM must also 27 update a MACL within seven calendar days from the date of a 28 change in the methodology, or a change in a value of a variable 29 applied in the methodology, on which the MACL is based. The 30 PBM is also required to provide a process for each pharmacy in 31 a network to receive prompt notice of all changes to a MACL. 32 The bill provides that a PBM shall not reimburse a pharmacy 33 or pharmacist for a drug in an amount less than the national 34 average drug acquisition cost for the drug on the date that 35 -14- LSB 5519SV (1) 89 ko/rn 14/ 16

S.F. 2231 the drug is administered or dispensed. In addition to the 1 reimbursement, a PBM shall reimburse the pharmacy or pharmacist 2 a professional dispensing fee that is no less than the pharmacy 3 dispensing fee published in the Iowa Medicaid enterprise 4 provider fee schedule on the date that the drug is administered 5 or dispensed. 6 The bill prohibits a PBM from reimbursing a pharmacy located 7 in the state in an amount less than the amount that the PBM 8 reimburses a PBM affiliate for dispensing the same drug as the 9 pharmacy. “Pharmacy benefits manager affiliate” is defined in 10 the bill. 11 The bill provides that after the date of receipt of a clean 12 claim submitted by a pharmacy, a PBM cannot retroactively 13 reduce payment on the claim, either directly or indirectly, 14 except if the claim is found not to be a clean claim during the 15 course of a routine audit. “Clean claim” is defined in the 16 bill. 17 The bill requires a PBM to provide a process for pharmacies 18 to appeal a MAC, or a reimbursement made under a MACL. The 19 requirements for the appeal process are detailed in the bill. 20 The commissioner of insurance (commissioner) is required 21 to take any enforcement action under the commissioner’s 22 authority to enforce compliance with the bill. After notice 23 and hearing, the commissioner may issue any order or impose 24 any penalty pursuant to Code section 507B.7, and may suspend 25 or revoke a PBM’s certificate of registration as a third-party 26 administrator upon a finding that the PBM violated any 27 requirements of the bill, or any applicable requirements 28 pertaining to third-party administrators under Code chapter 29 510. 30 A PBM is subject to the commissioner’s authority to conduct 31 an examination pursuant to Code chapter 507 and a proceeding 32 pursuant to Code chapter 507B. A PBM is also subject to 33 the commissioner’s authority to conduct an examination, 34 audit, or inspection pursuant to Code chapter 510. If the 35 -15- LSB 5519SV (1) 89 ko/rn 15/ 16

S.F. 2231 commissioner conducts an examination, a proceeding, an audit, 1 or an inspection, all information received from the PBM, and 2 all documents related to the examination, proceeding, audit, or 3 inspection are confidential records pursuant to Code chapter 4 22. 5 A violation of the bill is an unfair or deceptive act or 6 practice in the business of insurance pursuant to Code section 7 507B.4, for which the commissioner may issue an order or impose 8 a penalty. 9 The bill requires the commissioner to adopt rules to 10 administer the bill. 11 If a provision of the bill or its application to any person 12 or circumstance is held invalid, the invalidity does not affect 13 other provisions or applications of the bill that can be given 14 effect without the invalid provision or application. 15 The bill makes conforming changes to Code sections 510B.2, 16 510B.4, 510B.5, 510B.6, and 510B.9. 17 The bill repeals Code section 510B.3 which is replaced in 18 large part by new Code section 510B.10 (enforcement). 19 The bill applies to PBMs that manage a health carrier’s 20 prescription drug benefit in the state on or after the 21 effective date of the bill. 22 -16- LSB 5519SV (1) 89 ko/rn 16/ 16