BILL NUMBER: AB 627 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 26, 2015
INTRODUCED BY Assembly Member Gomez
FEBRUARY 24, 2015
An act to amend Section 4431 of 4430 of,
and to add Section 4440 to, the Business and Professions Code,
relating to audits of pharmacy benefits
benefit managers .
LEGISLATIVE COUNSEL'S DIGEST
AB 627, as amended, Gomez. Audits of pharmacy benefits.
Pharmacy benefit managers: contracting pharmacies.
Existing law imposes specified requirements on an audit of
pharmacy services provided to beneficiaries of a health benefit plan,
and defines certain terms for its purposes, including, among others,
pharmacy benefit manager.
The bill would require a pharmacy benefit manager that reimburses
a contracting pharmacy for a drug on a maximum allowable cost basis
to include in a contract, renewed on or after January 1, 2016,
information identifying any national drug pricing compendia or other
data sources used to determine the maximum allowable cost for the
drugs on a maximum allowable cost list and to provide for an appeal
process for the contracting pharmacy, as specified. The bill would
also require a pharmacy benefit manager to make available to a
contracting pharmacy, upon request, the most up-to-date maximum
allowable cost list or lists used by the pharmacy benefit manager for
patients served by the pharmacy in a readily accessible, secure, and
usable Web-based format or other comparable format. The bill would
prohibit a drug from being included on a maximum allowable cost list
or from being reimbursed on a maximum allowable cost basis unless
certain requirements are met, including, but not limited to, that the
drug is not obsolete.
Existing law imposes specified requirements on an audit of
pharmacy services provided to beneficiaries of a health benefit plan.
Existing law provides that those requirements do not apply to an
audit conducted because a pharmacy benefit manager, carrier, health
benefit plan sponsor, or other 3rd-party payer has indications that
support a reasonable suspicion that criminal wrongdoing, willful
misrepresentation, fraud, or abuse has occurred, or to an audit
conducted by, or at the direction of, the California State Board of
Pharmacy, the State Department of Health Care Services, the State
Department of Public Health, or the Medicare program.
This bill would make nonsubstantive changes to that provision.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 4430 of the Business
and Professions Code is amended to read:
4430. For purposes of this chapter, the following definitions
shall apply:
(a) "Carrier" means a health care service plan, as defined in
Section 1345 of the Health and Safety Code, or a health insurer that
issues policies of health insurance, as defined in Section 106 of the
Insurance Code.
(b) "Clerical or recordkeeping error" includes a typographical
error, scrivener's error, or computer error in a required document or
record.
(c) "Extrapolation" means the practice of inferring a frequency or
dollar amount of overpayments, underpayments, nonvalid claims, or
other errors on any portion of claims submitted, based on the
frequency or dollar amount of overpayments, underpayments, nonvalid
claims, or other errors actually measured in a sample of claims.
(d) "Health benefit plan" means any plan or program that provides,
arranges, pays for, or reimburses the cost of health benefits.
"Health benefit plan" includes, but is not limited to, a health care
service plan contract issued by a health care service plan, as
defined in Section 1345 of the Health and Safety Code, and a policy
of health insurance, as defined in Section 106 of the Insurance Code,
issued by a health insurer.
(e) "Maximum allowable cost" means the maximum amount that a
pharmacy benefit manager will reimburse a pharmacy for the cost of a
drug.
(f) "Maximum allowable cost list" means a list of drugs for which
a maximum allowable cost has been established by a pharmacy benefit
manager.
(g) "Obsolete" means a drug that may be listed in national drug
pricing compendia but is no longer available to be dispensed based on
the expiration date of the last lot manufactured.
(e)
(h) "Pharmacy" has the same meaning as provided in
Section 4037.
(f)
(i) "Pharmacy audit" means an audit, either onsite or
remotely, of any records of a pharmacy conducted by or on behalf of a
carrier or a pharmacy benefits manager, or a representative thereof,
for prescription drugs that were dispensed by that pharmacy to
beneficiaries of a health benefit plan pursuant to a contract with
the health benefit plan or the issuer or administrator thereof.
"Pharmacy audit" does not include a concurrent review or desk audit
that occurs within three business days of transmission of a claim, or
a concurrent review or desk audit where no chargeback or recoupment
is demanded.
(g)
(j) "Pharmacy benefit manager" means a person,
business, or other entity that, pursuant to a contract or under an
employment relationship with a carrier, health benefit plan sponsor,
or other third-party payer, either directly or through an
intermediary, manages the prescription drug coverage provided by the
carrier, plan sponsor, or other third-party payer, including, but not
limited to, the processing and payment of claims for prescription
drugs, the performance of drug utilization review, the processing of
drug prior authorization requests, the adjudication of appeals or
grievances related to prescription drug coverage, contracting with
network pharmacies, and controlling the cost of covered prescription
drugs.
SEC. 2. Section 4440 is added to the
Business and Professions Code , immediately
following Section 4439 , to read:
4440. (a) A pharmacy benefit manager that reimburses a
contracting pharmacy for a drug on a maximum allowable cost basis
shall comply with this section.
(b) A pharmacy benefit manager shall include in a contract,
entered into or renewed on or after January 1, 2016, with the
contracting pharmacy information identifying any national drug
pricing compendia or other data sources used to determine the maximum
allowable cost for the drugs on a maximum allowable cost list.
(c) A pharmacy benefit manager shall make available to a
contracting pharmacy, upon request, the most up-to-date maximum
allowable cost list or lists used by the pharmacy benefit manager for
patients served by that pharmacy in a readily accessible, secure,
and usable Web-based format or other comparable format.
(d) A drug shall not be included on a maximum allowable cost list
or reimbursed on a maximum allowable cost basis unless all of the
following apply:
(1) The drug is listed as "A" or "B" rated in the most recent
version of the federal Food and Drug Administration's (FDA) approved
drug products with therapeutic equivalent evaluations, also known as
the Orange Book or has an "NA" or "NR" rating or a similar rating by
a nationally recognized pricing reference, such as Medi-Span or First
DataBank.
(2) The drug is generally available for purchase in the state from
a national or regional wholesaler.
(3) The drug is not obsolete.
(e) For contracts entered into or renewed on or after January 1,
2016, a pharmacy benefit manager shall review and shall make
necessary adjustments to the maximum allowable cost of each drug on a
maximum allowable cost list using the most recent data sources
available at least once every seven days.
(f) For contracts entered into or renewed on or after January 1,
2016, a pharmacy benefit manager shall have a clearly defined process
for a contracting pharmacy to appeal the maximum allowable cost for
a drug on a maximum allowable cost list that includes all of the
following:
(1) A contracting pharmacy may base its appeal on either of the
following:
(A) The maximum allowable cost for a drug is below the cost at
which the drug is available for purchase by similarly situated
pharmacies in the state from a national or regional wholesaler.
(B) The drug does not meet the requirements of subdivision (d).
(2) A contracting pharmacy shall be provided no less than 14
business days following receipt of payment for the claim upon which
the appeal is based to file an appeal with a pharmacy benefit
manager. The pharmacy benefit manager shall make a final
determination regarding a contracting pharmacy's appeal within seven
business days of the pharmacy benefit manager's receipt of the
appeal.
(3) If an appeal is denied by a pharmacy benefit manager, the
pharmacy benefit manager shall provide to the contracting pharmacy
the reason for the denial and the national drug code (NDC) of an
equivalent drug that may be purchased by a similarly situated
pharmacy at the price that is equal to or less than the maximum
allowable cost of the appealed drug.
(4) If an appeal is upheld by a pharmacy benefit manager, the
pharmacy benefit manager shall adjust the maximum allowable cost of
the appealed drug for the appealing contracting pharmacy and all
similarly situated contracting pharmacies in the state within one
calendar day of the date of determination. The pharmacy benefit
manager shall permit the appealing pharmacy to reverse and resubmit
the claim upon which the appeal was based in order to receive the
corrected reimbursement.
(g) A contracting pharmacy shall not disclose to any third party
the maximum allowable cost list and any related information it
receives either directly from a pharmacy benefit manager or through a
pharmacy services administrative organization or similar entity with
which the contracting pharmacy has a contract to provide
administrative services for that pharmacy.
SECTION 1. Section 4431 of the Business and
Professions Code is amended to read:
4431. (a) This chapter shall not apply to an audit conducted
because a pharmacy benefit manager, carrier, health benefit plan
sponsor, or other third-party payer has indications that support a
reasonable suspicion that criminal wrongdoing, willful
misrepresentation, fraud, or abuse has occurred.
(b) This chapter shall not apply to an audit conducted by, or at
the direction of, the California State Board of Pharmacy, the State
Department of Health Care Services, the State Department of Public
Health, or the Medicare program.