SB 134 — An Act relating to pharmacy benefits managers; relating to third-party administrators; and providing for an effective date.

34-LS0461\N34-LS0461\A HOUSE CS FOR SENATE BILL NO.

134(HSS)134 IN THE LEGISLATURE OF THE STATE OF ALASKA THIRTY-FOURTH LEGISLATURE - FIRST SESSION BY THESENATOR HOUSEGIESSEL HEALTHIntroduced: AND SOCIAL SERVICES COMMITTEE Referred:

Rules53/18/25 Sponsor(s):Referred:

SENATORHealth GIESSELand Social Services, Labor and Commerce A BILL FOR AN ACT ENTITLED "An Act relating to pharmacy benefits managers;

In scheduling and determining the nature, scope, and frequency of examinations, the director may consider any factor or material that the director determines is appropriate, including the results of financial statement analysis and ratios, competency of management or change of ownership, actuarial opinions, reports of independent certified public accountants, number and nature of consumer complaints, results of prior examinations, SB0134bSB0134A -1- HCS SB 134(HSS)134 New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A frequency of prior violations of statute and regulation, and criteria set out in the most recent edition of the Financial Condition Examiners Handbook and the Market Regulation Handbook approved by the National Association of Insurance Commissioners and in effect when the director conducts an examination.

The director may waive payment of all or part of the actual out-of-pocket business expenses incurred by division staff examiners, or the compensation of a contract examiner, if the director determines that payment of the expenses or compensation creates a financial hardship for a managing general agent, HCS SB 134(HSS)134 -2- SB0134bSB0134A New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A third-party administrator, reinsurance intermediary manager, motor vehicle service contract provider, or surplus lines broker.

SB0134bSB0134A -3- HCS SB 134(HSS)134 New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A * Sec.

HCS SB 134(HSS)134 -4- SB0134bSB0134A New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A (c) Except as otherwise provided in this chapter, a thirdtthirt administrator shall be licensed [REGISTERED] under this chapter [AS 21.27.630 - 21.27.660] unless the third-party administrator only investigates and adjusts claims and is licensed under this chapter as an independent adjuster.

SB0134bSB0134A -5- HCS SB 134(HSS)134 New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A * Sec.

HCS SB 134(HSS)134 -6- SB0134bSB0134A New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A * Sec.

shareholders SB0134bSB0134A -7- HCS SB 134(HSS)134 New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A holding directly or indirectly 10 percent or more of the voting securities of the third-party administrator;

HCS SB 134(HSS)134 -8- SB0134bSB0134A New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A (d) If the director finds that the applicant or licensee [REGISTRANT] is qualified and that application, license [REGISTRATION], or renewal fees have been paid, the director may issue or renew the license [REGISTRATION].

(3) the third-party administrator provides the director on January 1, April 1, July 1, and October 1 of each year (A) a list of persons who supervise or have responsibility over personnel performing administrative functions, including claims administration and payment, marketing administrative functions, premium accounting, premium billing, coverage verification, underwriting, or certificate issuance onupon [UPON] a subject resident, located, or to be performed in this state;

(4) a written contract is in effect between the parties that establishes the responsibilities of each party, indicates both parties' share of responsibility for a SB0134bSB0134A -9- HCS SB 134(HSS)134 New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A particular function, and specifies the division of responsibilities;

(H) if the contract permits the third-party administrator to do HCS SB 134(HSS)134 -10- SB0134bSB0134A New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A underwriting, the contract must include the following:

SB0134bSB0134A -11- HCS SB 134(HSS)134 New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A (iv) each party to the contract shall comply with unfair claims settlement statutes and regulations;

HCS SB 134(HSS)134 -12- SB0134bSB0134A New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A (b) A pharmacy benefits manager licensed [REGISTERED] under this section may (1) contract with an insurer to administer or manage pharmacy benefits provided by an insurer for a covered person, including claims processing services for and audits of payments for prescription drugs and medical devices and supplies;

(b) The director may only issue or renew a license if thectorthctor is satisfied that the applicant is a trustworthy person.

(2) any administrative action taken against the owners, officers, directors, or partners by a governmental agency of this or another jurisdiction and any sanction imposed by a financial industry regulatory authority or arbitration SB0134bSB0134A -13- HCS SB 134(HSS)134 New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A proceeding;

(6) certified financial statements for the preceding two years, or for each year and partial year that the applicant has been in business if less than two years, prepared by an independent certified public accountant establishing that the applicant is solvent, that the applicant's system of accounting, internal control, and procedure is HCS SB 134(HSS)134 -14- SB0134bSB0134A New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A operating effectively to provide reasonable assurance that money is promptly accounted for and paid to the person entitled to the money, and any other information that the director may require to review the current financial condition of the applicant.

(2) a change in compliance officer, residence, place of business, mailing address, or telephonephone number;

(c) The fees required under (b) of this section must include fees to cover the SB0134bSB0134A -15- HCS SB 134(HSS)134 New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N34-LS0461\A cost of (1) salaries and benefits paid to the personnel of the division engaged in the enforcement of this chapter;

AS 21.36.520(a) is amended to read:

(a) An insurer providing a health care insurance policy or its pharmacy benefits manager may not (1) interfere with a covered person's right to choose a pharmacy or provider;

(2) interfere with a covered person's right of access to a cnliician- administered drug;

(3) interfere with the right of a pharmacy or pharmacist torticipate as a network pharmacy;

(4) reimburse a pharmacy or pharmacist an amount less than the amount the pharmacy benefits manager reimburses an affiliate for providing the same pharmacy services, calculated on a per-unit basis using the same generic product identifier or generic code number;

(5) impose a reduction in reimbursement for pharmacy services because of the person's choice among pharmacies that have agreed to participate in the plan according to the terms offered by the insurer or its pharmacy benefits manager;

(6) use a covered person's pharmacy services data collected under the provision of claims processing services for the purpose of soliciting, marketing, or HCS SB 134(HSS) -16- SB0134b New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N referring the person to an affiliate of the pharmacy benefits manager;

(7) prohibit or limit a pharmacy from mailing, shipping, or delivering drugs to a patient as an ancillary service;

however, the insurer or its pharmacy benefits manager (A) is not required to reimburse a delivery fee charged by a pharmacy unless the fee is specified in the contract between the pharmacy benefits manager and the pharmacy;

(B) may not require a patient signature as proof of delivery of a mailed or shipped drug if the pharmacy (i) maintains a mailing or shipping log signed by a representative of the pharmacy or keeps a record of each notification of delivery provided by the United States mail or a package delivery service;

and (ii) is responsible for the cost of mailing, shipping, or delivering a replacement for a drug that was mailed or shipped but not received by the covered person;

(8) prohibit or limit a network pharmacy from informing an insured person of the difference between the out-of-pocket cost to the covered person to purchase a drug, medical device, or supply using the covered person's pharmacy benefits and the pharmacy's usual and customary charge for the drug, medical device, or supply;

(9) conduct or participate in spread pricing in the state;

(10) assess, charge, or collect a form of remuneration that passes from a pharmacy or a pharmacist in a pharmacy network to the pharmacy benefits manager, including claim processing fees, performance-based fees, network participation fees, or accreditation fees;

(11) reverse and resubmit the claim of a pharmacy more than 90 days after the date the claim was first adjudicated, and may not reverse and resubmit the claim of a pharmacy unless the insurer or pharmacy benefits manager (A) provides prior written notification to the pharmacy;

(B) has just cause;

SB0134b -17- HCS SB 134(HSS) New Text Underlined [DELETED TEXT BRACKETED] 34-LS0461\N (C) first attempts to reconcile the claim with the pharmacy;

and (D) provides to the pharmacy, at the time of the reversal and resubmittal, a written description that includes details of and justification for the reversal and resubmittal;