BILL NUMBER: AB 627 CHAPTERED
BILL TEXT
CHAPTER 74
FILED WITH SECRETARY OF STATE JULY 13, 2015
APPROVED BY GOVERNOR JULY 13, 2015
PASSED THE SENATE JUNE 22, 2015
PASSED THE ASSEMBLY JUNE 25, 2015
AMENDED IN SENATE JUNE 16, 2015
AMENDED IN SENATE MAY 27, 2015
AMENDED IN ASSEMBLY MARCH 26, 2015
INTRODUCED BY Assembly Member Gomez
(Principal coauthor: Senator Stone)
FEBRUARY 24, 2015
An act to amend Sections 4430 and 4432 of, and to add Section 4440
to, the Business and Professions Code, relating to pharmacy benefit
managers.
LEGISLATIVE COUNSEL'S DIGEST
AB 627, 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.
This bill would exempt certain contracts governing the medicines
and medical supplies that are required to be provided to injured
employees in workers' compensation cases from these requirements. The
bill would also require a pharmacy benefit manager that reimburses a
contracting pharmacy for a drug on a maximum allowable cost basis to
include in a contract, initially entered into, or renewed on its
scheduled renewal date, 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.
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.
(h) "Pharmacy" has the same meaning as provided in Section 4037.
(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.
(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 4432 of the Business and Professions Code is
amended to read:
4432. Notwithstanding any other law, a contract that is issued,
amended, or renewed on or after January 1, 2013, between a pharmacy
and a carrier or a pharmacy benefit manager to provide pharmacy
services to beneficiaries of a health benefit plan shall comply with
the provisions of this chapter. This chapter shall not apply to
contracts authorized by Section 4600.2 of the Labor Code.
SEC. 3. 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,
initially entered into, or renewed on its scheduled renewal date, 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 approved drug
products with therapeutic equivalent evaluations, also known as the
Orange Book, or has an "NA," "NR," or "Z" 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 initially entered into, or renewed on the
scheduled renewal date, 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 initially entered into, or renewed on the
scheduled renewal date, 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.