Amended in Senate May 27, 2015

Amended in Assembly March 26, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 627


Introduced by Assembly Member Gomez

begin insert

(Principal coauthor: Senator Stone)

end insert

February 24, 2015


An act to amend Section 4430 of, and to add Section 4440 to, the Business and Professions Code, relating to pharmacy benefit managers.

LEGISLATIVE COUNSEL’S DIGEST

AB 627, as amended, Gomez. 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,begin insert initially entered into, orend insert renewedbegin insert on its scheduled renewal date,end insert 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.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 4430 of the Business and Professions
2Code
is amended to read:

3

4430.  

For purposes of this chapter, the following definitions
4shall apply:

5(a) “Carrier” means a health care service plan, as defined in
6Section 1345 of the Health and Safety Code, or a health insurer
7that issues policies of health insurance, as defined in Section 106
8of the Insurance Code.

9(b) “Clerical or recordkeeping error” includes a typographical
10error, scrivener’s error, or computer error in a required document
11or record.

12(c) “Extrapolation” means the practice of inferring a frequency
13or dollar amount of overpayments, underpayments, nonvalid
14claims, or other errors on any portion of claims submitted, based
15on the frequency or dollar amount of overpayments,
16 underpayments, nonvalid claims, or other errors actually measured
17in a sample of claims.

18(d) “Health benefit plan” means any plan or program that
19provides, arranges, pays for, or reimburses the cost of health
20benefits. “Health benefit plan” includes, but is not limited to, a
21health care service plan contract issued by a health care service
22plan, as defined in Section 1345 of the Health and Safety Code,
23and a policy of health insurance, as defined in Section 106 of the
24Insurance Code, issued by a health insurer.

25(e) “Maximum allowable cost” means the maximum amount
26that a pharmacy benefit manager will reimburse a pharmacy for
27the cost of a drug.

28(f) “Maximum allowable cost list” means a list of drugs for
29which a maximum allowable cost has been established by a
30pharmacy benefit manager.

P3    1(g) “Obsolete” means a drug that may be listed in national drug
2pricing compendia but is no longer available to be dispensed based
3on the expiration date of the last lot manufactured.

4(h) “Pharmacy” has the same meaning as provided in Section
54037.

6(i) “Pharmacy audit” means an audit, either onsite or remotely,
7of any records of a pharmacy conducted by or on behalf of a carrier
8or a pharmacy benefits manager, or a representative thereof, for
9prescription drugs that were dispensed by that pharmacy to
10beneficiaries of a health benefit plan pursuant to a contract with
11the health benefit plan or the issuer or administrator thereof.
12“Pharmacy audit” does not include a concurrent review or desk
13audit that occurs within three business days of transmission of a
14claim, or a concurrent review or desk audit where no chargeback
15or recoupment is demanded.

16(j) “Pharmacy benefit manager” means a person, business, or
17 other entity that, pursuant to a contract or under an employment
18relationship with a carrier, health benefit plan sponsor, or other
19third-party payer, either directly or through an intermediary,
20manages the prescription drug coverage provided by the carrier,
21plan sponsor, or other third-party payer, including, but not limited
22to, the processing and payment of claims for prescription drugs,
23the performance of drug utilization review, the processing of drug
24prior authorization requests, the adjudication of appeals or
25grievances related to prescription drug coverage, contracting with
26network pharmacies, and controlling the cost of covered
27prescription drugs.

28

SEC. 2.  

Section 4440 is added to the Business and Professions
29Code
, immediately following Section 4439, to read:

30

4440.  

(a) A pharmacy benefit manager that reimburses a
31contracting pharmacy for a drug on a maximum allowable cost
32basis shall comply with this section.

33(b) A pharmacy benefit manager shall include in a contract,
34begin delete entered intoend deletebegin insert initially entered into,end insert or renewedbegin insert on its scheduled
35renewal date,end insert
on or after January 1, 2016, with the contracting
36pharmacy information identifying any national drug pricing
37compendia or other data sources used to determine the maximum
38allowable cost for the drugs on a maximum allowable cost list.

39(c) A pharmacy benefit manager shall make available to a
40contracting pharmacy, upon request, the most up-to-date maximum
P4    1allowable cost list or lists used by the pharmacy benefit manager
2for patients served by that pharmacy in a readily accessible, secure,
3and usable Web-based format or other comparable format.

4(d) A drug shall not be included on a maximum allowable cost
5list or reimbursed on a maximum allowable cost basis unless all
6of the following apply:

7(1) The drug is listed as “A” or “B” rated in the most recent
8version of the federal Food and Drug Administration’s (FDA)
9approved drug products with therapeutic equivalent evaluations,
10also known as the Orangebegin delete Bookend deletebegin insert Book,end insert or has anbegin delete “NA” or “NR”end delete
11begin insert “NA,” “NR,” or “Z”end insert rating or a similar rating by a nationally
12recognized pricing reference, such as Medi-Span or First DataBank.

13(2) The drug is generally available for purchase in the state from
14a national or regional wholesaler.

15(3) The drug is not obsolete.

16(e) For contractsbegin delete entered intoend deletebegin insert initially entered into,end insert or renewed
17begin insert on the scheduled renewal date,end insert on or after January 1, 2016, a
18pharmacy benefit manager shall review and shall make necessary
19adjustments to the maximum allowable cost of each drug on a
20maximum allowable cost list using the most recent data sources
21available at least once every seven days.

22(f) For contractsbegin delete entered intoend deletebegin insert initially entered into,end insert or renewed
23begin insert on the scheduled renewal date,end insert on or after January 1, 2016, a
24pharmacy benefit manager shall have a clearly defined process for
25a contracting pharmacy to appeal the maximum allowable cost for
26a drug on a maximum allowable cost list that includes all of the
27following:

28(1) A contracting pharmacy may base its appeal on either of the
29following:

30(A) The maximum allowable cost for a drug is below the cost
31at which the drug is available for purchase by similarly situated
32pharmacies in the state from a national or regional wholesaler.

33(B) The drug does not meet the requirements of subdivision (d).

34(2) A contracting pharmacy shall be provided no less than 14
35business days following receipt of payment for the claim upon
36which the appeal is based to file an appeal with a pharmacy benefit
37manager. The pharmacy benefit manager shall make a final
38determination regarding a contracting pharmacy’s appeal within
39seven business days of the pharmacy benefit manager’s receipt of
40the appeal.

P5    1(3) If an appeal is denied by a pharmacy benefit manager, the
2pharmacy benefit manager shall provide to the contracting
3pharmacy the reason for the denial and the national drug code
4(NDC) of an equivalent drug that may be purchased by a similarly
5situated pharmacy at the price that is equal to or less than the
6maximum allowable cost of the appealed drug.

7(4) If an appeal is upheld by a pharmacy benefit manager, the
8pharmacy benefit manager shall adjust the maximum allowable
9cost of the appealed drug for the appealing contracting pharmacy
10and all similarly situated contracting pharmacies in the state within
11one calendar day of the date of determination. The pharmacy
12benefit manager shall permit the appealing pharmacy to reverse
13and resubmit the claim upon which the appeal was based in order
14to receive the corrected reimbursement.

15(g) A contracting pharmacy shall not disclose to any third party
16the maximum allowable cost list and any related information it
17receives either directly from a pharmacy benefit manager or
18through a pharmacy services administrative organization or similar
19entity with which the contracting pharmacy has a contract to
20provide administrative services for that pharmacy.



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