HOUSE BILL No. 6493
November 27, 2018, Introduced by Rep. Hammoud and referred to the Committee on Health Policy.
A bill to provide for the regulation of the management of
pharmacy benefits; to require the licensing of pharmacy benefit
managers; to provide for the regulation of certain other entities
under certain circumstances; to provide for the powers and duties
of certain state governmental officers and entities; to prescribe
penalties and provide remedies; and to allow for the promulgation
of rules.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
1 Sec. 101. This act shall be known and may be cited as the
2 "pharmacy benefit management act".
3 Sec. 103. For purposes of this act, the words and phrases
4 defined in sections 105 to 111 have the meanings ascribed to them
5 in those sections.
6 Sec. 105. (1) "Board of pharmacy" means the Michigan board of
1 pharmacy created in part 177 of the public health code, 1978 PA
2 368, MCL 333.17701 to 333.17780.
3 (2) "Claim" means an attempt to cause a health benefit payer
4 or a pharmacy benefit manager to make a payment to cover a service
5 that is provided by a pharmacy benefit.
6 (3) "Department" means the department of insurance and
7 financial services.
8 (4) "Director" means the director of the department or his or
9 her designee.
10 Sec. 107. (1) "Federal act" means the federal food, drug, and
11 cosmetic act, 21 USC 301 to 399f.
12 (2) "Food and Drug Administration" means the United States
13 Food and Drug Administration.
14 (3) "Health benefit payer" means a public or private entity
15 that offers, provides, administers, or manages a health care
16 benefit plan, including, but not limited to, all of the following:
17 (a) An insurer or health maintenance organization regulated
18 under the insurance code of 1956, 1956 PA 218, MCL 500.100 to
19 500.8302, or a dental care corporation regulated under 1963 PA 125,
20 MCL 550.351 to 550.373.
21 (b) A nonprofit health care corporation.
22 (c) A preferred provider organization.
23 (d) The medical services administration in the department of
24 health and human services.
25 (e) A person acting in a contractual relationship with an
26 entity described in subdivisions (a) to (d) to perform any activity
27 on behalf of the entity described in subdivisions (a) to (d).
1 Sec. 109. (1) "Maximum allowable cost price" means a maximum
2 reimbursement amount for a multiple source drug.
3 (2) "Multiple source drug" means a drug for which there are 2
4 or more prescription drugs, each of which meets both of the
5 following requirements, as determined by the director:
6 (a) Is considered to be pharmaceutically equivalent or
7 otherwise interchangeable by the Food and Drug Administration.
8 (b) Is generally and readily available for purchase by
9 pharmacies in this state from national or regional wholesalers and
10 is not obsolete.
11 (3) "Obsolete" means that the prescription drug may be listed
12 in the national pricing compendia but is no longer actively
13 marketed by the manufacturer or labeler.
14 Sec. 111. (1) "Person" means an individual, sole
15 proprietorship, partnership, corporation, association, or any other
16 legal entity.
17 (2) "Pharmacy" means that term as defined in section 17707 of
18 the public health code, 1978 PA 368, MCL 333.17707.
19 (3) "Pharmacy benefit" means a health care benefit plan that
20 is offered by a health benefit payer and provides coverage for a
21 pharmacy service to a covered individual. Coverage under a pharmacy
22 benefit includes, but is not limited to, coverage for a
23 prescription drug that is dispensed to a covered individual.
24 (4) "Pharmacy benefit manager" means a person that manages a
25 pharmacy benefit on behalf of a health benefit payer. A person that
26 engages in, or subcontracts for, 3 or more of the following
27 activities is considered a pharmacy benefit manager that is subject
1 to this act:
2 (a) Claims processing.
3 (b) Pharmacy network management.
4 (c) Pharmacy discount card management.
5 (d) Payment of claims to pharmacies for prescription drugs
6 dispensed to individuals covered by a pharmacy benefit.
7 (e) Clinical formulary development and management services,
8 including, but not limited to, utilization management and quality
9 assurance programs.
10 (f) Rebate contracting and administration.
11 (g) Conducting audits of network pharmacies.
12 (h) Setting pharmacy reimbursement pricing and methodologies,
13 including maximum allowable cost price and other prescription drug
14 pricing standards, and determining single source drugs or multiple
15 source drugs.
16 (i) Retention of any spread or differential between what is
17 received under a pharmacy benefit as reimbursement for a
18 prescription drug and what is paid to pharmacies by the pharmacy
19 benefit manager for the prescription drug.
20 (5) "Prescription drug" means that term as defined in section
21 17708 of the public health code, 1978 PA 368, MCL 333.17708.
22 (6) "Prescription drug pricing standard" means a standard for
23 reimbursing a prescription drug that is based on the cost of the
24 prescription drug or an industry-recognized benchmark for the
25 pricing of the prescription drug. Prescription drug pricing
26 standard includes, but is not limited to, the average wholesale
27 price, the wholesale acquisition cost, the maximum allowable cost,
1 the national average drug acquisition cost, and the average
2 manufacturer price.
3 (7) "Temporarily unavailable" means that the prescription drug
4 is experiencing short-term supply interruptions and only
5 inconsistent or intermittent supply is available in the current
6 marketplace.
7 Sec. 113. (1) A pharmacy benefit manager that provides
8 services to residents of this state shall apply for, obtain, and
9 maintain a certificate of authority to operate as a pharmacy
10 benefit manager from the department. A certificate of authority
11 under this act is renewable annually.
12 (2) The director shall collect, and the persons affected shall
13 pay to the director, the following fees that, on appropriation, the
14 department shall use to cover the costs incurred by the department
15 in administering this act:
16
(a) Filing fee to accompany application
17
for pharmacy benefit manager's certificate
18
of authority........................................ $ 200.00.
19
(b) Certificate of authority for a
20
pharmacy benefit manager............................ $ 25.00.
21 (3) Subject to this section, an applicant for a certificate of
22 authority to operate in this state as a pharmacy benefit manager
23 shall submit to the department an application in a form and manner
24 prescribed by the director. An officer or authorized representative
25 of the pharmacy benefit manager shall verify the application form.
26 (4) An applicant shall include with an application form all of
27 the following:
1 (a) All organizational documents, including, but not limited
2 to, articles of incorporation, bylaws, and other similar documents,
3 and any amendments to the organizational documents.
4 (b) The names, addresses, titles, and qualifications of the
5 members and officers of the board of directors, board of trustees,
6 or other governing body or committee of the applicant, or the
7 partners, members, or owners if the applicant is a partnership or
8 other entity or association.
9 (c) A detailed description of the claims processing services,
10 pharmacy services, insurance services, other prescription drug or
11 device services, or other administrative services provided by the
12 applicant.
13 (d) The name and address of the agent for service of process
14 in this state.
15 (e) Financial statements for the current year and the
16 preceding year that show the assets, liabilities, direct or
17 indirect income, and any other sources of financial support
18 considered sufficient by the director that demonstrate financial
19 stability and viability of the pharmacy benefit manager to meet its
20 full obligations to covered individuals and network pharmacies. The
21 director may allow a recent financial statement prepared by an
22 independent certified public accountant to meet the requirement of
23 this subdivision.
24 (f) Any other information the director requires. However, the
25 director shall not demand trade secret information from an
26 applicant.
27 (5) The director may revoke, suspend, deny, or restrict a
1 certificate of authority of a pharmacy benefit manager for a
2 violation of this act or on other grounds or violations of state or
3 federal laws as determined necessary or appropriate by the
4 director. A pharmacy benefit manager has the same rights to notice,
5 hearings, and other provisions that are provided to insurers under
6 the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.
7 If a certificate of authority is revoked, suspended, or denied, the
8 director may permit the operation of the pharmacy benefit manager
9 for a limited time not to exceed 60 days under conditions and
10 restrictions as determined necessary by the director for the
11 beneficial interests of the covered individuals and network
12 pharmacies.
13 (6) The director may renew a certificate of authority of a
14 pharmacy benefit manager, subject to any restrictions considered
15 necessary or appropriate by the director.
16 Sec. 115. Both of the following apply to a contract between a
17 pharmacy benefit manager and a pharmacy or between a pharmacy
18 benefit manager and a pharmacy's contracting representative or
19 agent, including, but not limited to, a pharmacy services
20 administrative organization:
21 (a) If a pharmacy benefit manager uses a prescription drug
22 pricing standard to reimburse a pharmacy or a health facility, both
23 of the following apply:
24 (i) The contract entered into by the pharmacy benefit manager
25 must include a current list of the sources used to determine the
26 prescription drug pricing standard. The pharmacy benefit manager
27 shall update the prescription drug pricing standard not less often
1 than every 7 days and provide a means by which the pharmacy may
2 promptly review the updates in a format that is readily available
3 and accessible.
4 (ii) The pharmacy benefit manager shall use the same
5 prescription drug pricing standard or set of prescription drug
6 pricing standards for all covered individuals and pharmacies
7 participating in the same pharmacy benefit. This subparagraph does
8 not prohibit a pharmacy benefit manager from managing multiple
9 pharmacy benefits for 1 or more health benefit payers.
10 (b) The pharmacy benefit manager shall include in the contract
11 a process to appeal, investigate, and resolve disputes regarding a
12 prescription drug pricing standard, which process must include all
13 of the following:
14 (i) A 21-day limit on the right to appeal following the
15 initial claim.
16 (ii) A requirement that the appeal be investigated and
17 resolved within 10 business days after the appeal.
18 (iii) A telephone number at which the pharmacy may contact the
19 pharmacy benefit manager to speak to an individual responsible for
20 processing appeals.
21 (iv) A requirement that the pharmacy benefit manager provide a
22 reason for any appeal denial and the identification of the national
23 drug code of a prescription drug that may be purchased by the
24 pharmacy at a price at or below the prescription drug pricing
25 standard used by the pharmacy benefit manager.
26 (v) A requirement that the pharmacy benefit manager do all of
27 the following if the appeal is successful:
1 (A) Adjust the prescription drug pricing standard that is the
2 subject of the appeal. The adjustment under this sub-subparagraph
3 shall take effect on the day after the date the appeal is resolved.
4 (B) Apply the prescription drug pricing standard that is
5 adjusted under sub-subparagraph (A) to all pharmacies and covered
6 individuals participating in the pharmacy benefit to which the
7 appeal was made.
8 (C) Allow the appealing pharmacy to resubmit the claim to the
9 pharmacy benefit manager for reimbursement using the prescription
10 drug pricing standard adjusted under sub-subparagraph (A).
11 Sec. 117. A pharmacy must be reimbursed for a legally valid
12 claim at a rate of not less than the rate in effect at the time of
13 original claim adjudication as submitted at the point of sale.
14 Sec. 119. (1) A pharmacy benefit manager shall not do any of
15 the following:
16 (a) Mandate that a covered individual use a specific pharmacy,
17 mail-order pharmacy, specialty pharmacy, or any other pharmacy, if
18 the pharmacy benefit manager has an ownership interest in the
19 pharmacy or if the pharmacy has an ownership interest in the
20 pharmacy benefit manager.
21 (b) Except as otherwise provided in this subdivision, provide
22 an incentive to a covered individual to encourage the use of a
23 specific pharmacy if the incentive only applies to a pharmacy in
24 which the pharmacy benefit manager has an ownership interest or
25 provide an incentive to a covered individual to encourage the use
26 of a specific pharmacy if the incentive only applies to a pharmacy
27 that has an ownership interest in the pharmacy benefit manager.
1 This subdivision does not apply if the covered individual willingly
2 designates as the covered individual's primary pharmacy a pharmacy
3 in which the pharmacy benefit manager has an ownership interest or
4 that has an ownership interest in the pharmacy benefit manager.
5 (c) Require that a pharmacist or pharmacy participate in a
6 network managed by the pharmacy benefit manager as a condition for
7 the pharmacy to participate in another network managed by the same
8 pharmacy benefit manager.
9 (d) Automatically enroll or disenroll a pharmacy in a contract
10 or modify an existing agreement without written agreement of the
11 pharmacist, pharmacy, or person acting on behalf of the pharmacist
12 or pharmacy.
13 (e) Prohibit a covered individual from receiving a
14 prescription drug benefit, including a 90-day supply of a
15 prescription drug, at a network pharmacy of the pharmacy benefit
16 manager.
17 (f) Impose on a covered individual who uses a pharmacy a
18 copayment, deductible, fee, limitation on benefits, or other
19 condition or requirement that is not otherwise imposed on the
20 covered individual when the covered individual uses a mail-order
21 pharmacy.
22 (g) Distribute to a pharmacy a prescription, or a copy of a
23 prescription, to dispense a drug utilizing information submitted to
24 the pharmacy benefit manager for the purpose of obtaining a prior
25 authorization or to complete any other nondispensing or
26 administrative function that is conducted by the pharmacy benefit
27 manager.
1 (h) Solicit a covered individual utilizing information
2 submitted to the pharmacy benefit manager for the purpose of
3 obtaining a prior authorization or to complete any other
4 nondispensing or administrative function that is conducted by the
5 pharmacy benefit manager.
6 (2) This section does not mandate the inclusion of a pharmacy
7 in a health benefit payer network or pharmacy benefit manager's
8 network or the exclusion of a pharmacy from a health benefit payer
9 network or pharmacy benefit manager's network.
10 Sec. 131. (1) Subject to this section, a health benefit payer
11 or a pharmacy benefit manager may conduct an audit of a pharmacy in
12 this state. A health benefit payer or a pharmacy benefit manager
13 that conducts an audit of a pharmacy in this state shall do all of
14 the following:
15 (a) In its pharmacy contract, identify and describe in detail
16 the audit procedures including the appeals process described in
17 subdivision (m). A health benefit payer or pharmacy benefit manager
18 shall update its pharmacy contract and communicate any changes to
19 the pharmacy as changes to the contract occur.
20 (b) Provide written notice to the pharmacy at least 2 weeks
21 before initiating and scheduling the initial on-site audit for each
22 audit cycle. Unless otherwise consented to by the pharmacist, a
23 health benefit payer or pharmacy benefit manager shall not initiate
24 or schedule an on-site audit during the first 6 calendar days of a
25 month, a holiday time frame, a weekend, or a Monday. A health
26 benefit payer or pharmacy benefit manager shall be flexible in
27 initiating and scheduling an audit at a time that is reasonably
1 convenient to the pharmacy and the health benefit payer or pharmacy
2 benefit manager.
3 (c) Utilize every effort to minimize inconvenience and
4 disruption to pharmacy operations during the audit process. A
5 health benefit payer or pharmacy benefit manager that conducts an
6 audit of a pharmacy in this state shall not interfere with the
7 delivery of pharmacy services to a patient.
8 (d) Conduct an audit that involves clinical or professional
9 judgment by or in consultation with a pharmacist.
10 (e) Subject to the requirements of article 15 of the public
11 health code, 1978 PA 368, MCL 333.16101 to 333.18838, for the
12 purpose of validating a pharmacy record with respect to orders,
13 refills, or changes in prescriptions, allow the use of either of
14 the following:
15 (i) Hospital or physician records that are written or that are
16 transmitted or stored electronically, including file annotations,
17 document images, and other supporting documentation that is date-
18 and time-stamped.
19 (ii) A prescription that complies with the requirements of the
20 board of pharmacy and state and federal law.
21 (f) Base any finding of an overpayment or underpayment on the
22 actual overpayment or underpayment of claims.
23 (g) Subject to subsection (4), base any recoupment or payment
24 adjustments of claims on a calculation that is reasonable and
25 proportional in relation to the type of error detected.
26 (h) If there is a finding of an underpayment, reimburse the
27 pharmacy as soon as possible after detection.
1 (i) Conduct its audit of each pharmacy under the same sampling
2 standards, parameters, and procedures that the health benefit payer
3 or pharmacy benefit manager uses when auditing other similarly
4 licensed pharmacies. The health benefit payer shall provide to the
5 pharmacy samples of the standards, parameters, and procedures for
6 the audit being conducted.
7 (j) Audit only claims submitted or adjudicated within the 1-
8 year period immediately preceding the initiation of the audit
9 unless a longer period is permitted under federal or state law.
10 (k) Not receive payment based on a percentage of the amount
11 recovered.
12 (l) Not include the dispensing fee amount in a finding of an
13 overpayment.
14 (m) Establish a written appeals process that includes a
15 process to appeal preliminary audit reports and final audit reports
16 prepared under this section. If either party is not satisfied with
17 the results of the appeal, that party may seek mediation.
18 (2) On completion of an audit of a pharmacy, the health
19 benefit payer or pharmacy benefit manager shall do all of the
20 following:
21 (a) Deliver a preliminary written audit report to the pharmacy
22 on or before the expiration of 60 days after the completion of the
23 audit. The preliminary written audit report must include contact
24 information for the person performing the audit and a description
25 of the appeal process established under subsection (1)(m).
26 (b) Allow the pharmacy at least 30 days following its receipt
27 of the preliminary written audit report under subdivision (a) to
1 produce documentation to address any discrepancy found during the
2 audit.
3 (c) If an appeal is not filed, deliver a final written audit
4 report to the pharmacy within 90 days after the time described in
5 subdivision (b) has elapsed. If an appeal is filed, deliver a final
6 written audit report to the pharmacy within 90 days after the
7 conclusion of the appeal.
8 (d) Except as otherwise provided in this section, only recoup
9 disputed funds or overpayments or restore underpayments after the
10 final written audit report is delivered to the pharmacy under
11 subdivision (c).
12 (e) On request, provide to the sponsor of the health care
13 benefit plan a copy of the final written audit report delivered to
14 the pharmacy under subdivision (c).
15 (3) A health benefit payer or pharmacy benefit manager shall
16 not conduct an extrapolation audit in calculating recoupments,
17 restoration, or penalties for an audit under this section. As used
18 in this subsection, "extrapolation audit" means an audit of a
19 sample of prescription drug benefit claims submitted by a pharmacy
20 to the health benefit payer that is then used to estimate audit
21 results for a larger batch or group of claims not reviewed during
22 the audit.
23 (4) Any clerical or record-keeping error, including a
24 typographical error, a scrivener's error, or a computer error,
25 regarding a required document or record that is found during an
26 audit under this section does not, on its face, constitute fraud.
27 An error described in this subsection does not subject the
1 individual involved to criminal penalties without proof of intent
2 to commit fraud. To the extent that an audit results in the
3 identification of a clerical or record-keeping error, including a
4 typographical error, a scrivener's error, or a computer error, in a
5 required document or record, the pharmacy is not subject to
6 recoupment of funds by the health benefit payer or pharmacy benefit
7 manager unless the health benefit payer can provide proof of intent
8 to commit fraud or the error results in actual financial harm to
9 the health benefit payer, pharmacy benefit manager, or a covered
10 individual.
11 (5) This section does not apply to any of the following:
12 (a) An audit conducted to investigate fraud, willful
13 misrepresentation, or abuse, including, but not limited to,
14 investigative audits or audits conducted under any other statutory
15 provision that authorizes investigation relating to insurance
16 fraud.
17 (b) An audit based on a criminal investigation.
18 (6) This section does not impair or supersede a provision
19 regarding health benefit payer pharmacy audits in the insurance
20 code of 1956, 1956 PA 218, MCL 500.100 to 500.8302. If any
21 provision of this section conflicts with a provision of the
22 insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302, with
23 regard to health benefit payer pharmacy audits, the provision in
24 the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302,
25 controls.
26 Sec. 133. (1) The director is responsible for the enforcement
27 of this act. The director shall take action or impose sanctions to
1 bring noncomplying entities into full compliance with this act. The
2 director has the same authority to examine and investigate entities
3 regulated by this act and may enforce this act in the same manner
4 as provided for insurers under the insurance code of 1956, 1956 PA
5 218, MCL 500.100 to 500.8302.
6 (2) The department may promulgate rules under the
7 administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
8 24.328, that it considers necessary to implement, administer, and
9 enforce this act.
10 Enacting section 1. This act takes effect 90 days after the
11 date it is enacted into law.
12 Enacting section 2. This act applies to contracts delivered,
13 executed, issued, amended, adjusted, or renewed in this state after
14 December 31, 2018.