BILL NUMBER: AB 1960	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 15, 2004
	AMENDED IN ASSEMBLY  APRIL 12, 2004

INTRODUCED BY   Assembly Members Pavley  and Frommer
  , Chu, Frommer, and Ridley-Thomas 
    (Coauthors:  Assembly Members Chu, and Ridley-Thomas)
  (Coauthor: Assembly Member Koretz) 
    (Coauthor: Senator Kuehl) 

                        FEBRUARY 12, 2004

   An act to add Article 8 (commencing with Section 4130) to Chapter
9 of Division 2 of the Business and Professions Code, relating to
pharmacy benefits management.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1960, as amended, Pavley.  Pharmacy benefits management.
   Existing law, the Pharmacy Law, creates the California State Board
of Pharmacy and makes it responsible for the regulation and
licensure of persons engaged in pharmacy practices relating to the
furnishing of dangerous drugs, as defined.  Under existing law, a
violation of  the provisions of  the Pharmacy Law is
a crime.
   This bill would define the term "pharmacy benefits management" as
 , among other things,  the procurement of
prescription drugs at a negotiated rate for dispensation within this
state  , the management of prescription drug benefits, and the
provision of specified services relating to pharmacy benefits  .
  The bill would also define the term "pharmacy benefits manager" as
an entity that performs pharmacy benefits management.  The bill would
require pharmacy benefits managers to register with the California
State Board of Pharmacy, and would require  that 
 the  board to set specified standards for  the
 registration  thereof  .  The bill would
further require a pharmacy benefits manager to make specified
disclosures to its purchasers and prospective purchasers with regard
to revenues and its drug formularies,  and to make specified
disclosures to the public  upon request.  The bill would also
establish certain standards and requirements with regard to pharmacy
benefits management contracts and the provision of certain drugs.
   Because the bill would  specify an additional requirement
  create additional requirements  under the
Pharmacy Law, a violation of which would be a crime, it would impose
a state-mandated local program.
  The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote:  majority.  Appropriation:  no.  Fiscal committee:  yes.
State-mandated local program:  yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Article 8 (commencing with Section 4130) is added to
Chapter 9 of Division 2 of the Business and Professions Code, to
read:

      Article 8.  Pharmacy Benefits Management

   4130.  For purposes of this article, the following definitions
shall apply:
   (a) "Labeler" means any person who receives prescription drugs
from a manufacturer or wholesaler and repackages those drugs for
later retail sale and who has a labeler code from the federal Food
and Drug Administration under Section 207.20 of Title 21 of the Code
of Federal Regulations.
   (b) "Pharmacy benefits management" is the procurement of
prescription drugs at a negotiated rate for dispensation within this
state, the administration or management of prescription drug
benefits, or the provision of any of the following services with
regard to the administration of  the following pharmacy
benefits   pharmacy benefits including  :
   (1) Mail service pharmacy.
   (2) Claims processing, retail network management, and payment of
claims to pharmacies for prescription drugs.
   (3) Clinical formulary development and management services.
   (4) Rebate contracting and administration.
   (5) Certain patient compliance, therapeutic intervention, and
generic substitution programs.
   (6) Disease management programs involving prescription drug
utilization.
   (c) "Pharmacy benefits manager" is any person who performs
pharmacy benefits management.  The term does not include a health
care service plan or health insurer if the health care service plan
or health insurer offers or provides pharmacy benefits management
services  or administration through an affiliate, subsidiary,
or other related entity,  and if those services  or
administration  are offered or provided only to enrollees,
subscribers, or insureds who are also covered by health benefits
offered or provided by that health care service plan or health
insurer  , nor does the term include an affiliate, subsidiary, or
other related entity of the health care service plan or health
insurer that would otherwise qualify as a pharmacy benefits manager,
as long as the services offered or provided by the related entity are
offered or provided only to enrollees, subscribers, or insureds who
are also covered by the health benefits offered or provided by that
health care service plan or health insurer.
   (d) "Purchaser" is any person who enters into an agreement with a
pharmacy benefits manager for the provision of pharmacy benefit
management services  .
   4131.  (a) A person may not engage in pharmacy benefits management
in the state unless the person registers with the board.
   (b) An applicant for registration shall do all of the following:
   (1) Submit to the board  , on an annual basis,  an
application on the form  that the board provides.   The
application shall include, but shall not be limited to, all of the
following items:
   (A) The name of the pharmacy benefits manager.
   (B) The address of the pharmacy benefits manager.
   (C) Contact information for the pharmacy benefits manager.
   (D) The number of individuals in California who receive services
from the pharmacy benefits manager. 
   (2) Submit the documents that the board requires.
   (3) Pay to the board a fee set by the board.
   (c) The board shall register each applicant that meets the
standards of this section  , and shall maintain an updated list
of registered pharmacy benefit managers  .
   (d) The board shall set standards for the denial of registration.

   4132.  (a) A pharmacy benefits manager shall disclose to the
purchaser or prospective purchaser  , on request, the amount
of all rebate revenues and the nature, type, and amounts of all other
revenues that the pharmacy benefits manager receives from each
pharmaceutical manufacturer or labeler with whom the pharmacy
benefits manager has a contract.  The pharmacy benefits manager shall
disclose  in writing all of the following:
   (1) The aggregate amount, and for a specified list of drugs, the
specific amount, of all rebates and other retrospective utilization
discounts received by the pharmacy benefits manager directly or
indirectly from each pharmaceutical manufacturer or labeler that are
earned in connection with  the dispensing of prescription
drugs to individuals benefiting from   prescription drug
benefits managed by  the pharmacy benefits manager 
services.   related to the purchaser or prospective
purchaser. 
   (2) The nature, type, and amount of all other revenue received by
the pharmacy benefits manager directly or indirectly from each
pharmaceutical manufacturer or labeler  for any other
products or services provided to the pharmaceutical manufacturer or
labeler by the pharmacy benefits manager with respect to programs
offered by the purchaser to individuals receiving the benefits of the
manager.   related to the purchaser or prospective
purchaser. 
   (3) Any prescription drug utilization information 
requested by the purchaser.   related to utilization by
the purchaser's enrollees or aggregate utilization data that is not
specific to an individual consumer, prescriber, or purchaser.
   (4) Records developed by the pharmacy and therapeutic committee of
the plan, or by others responsible for developing, modifying, and
overseeing formularies, including medical groups, individual practice
associations, and contracting pharmaceutical benefits management
companies, used to guide the drugs prescribed for the enrollees of
the plan, that fully describe the reasoning behind formulary
decisions.
   (5) Any arrangements with prescribing providers, medical groups,
individual practice associations, pharmacists, or other entities that
are associated with activities of the pharmacy benefits manager to
encourage formulary compliance or otherwise manage prescription drug
benefits. 
   (b) A pharmacy benefits manager shall provide the information
described in paragraphs (1), (2),  and (3)  
(3), (4), and (5)  of subdivision (a) within 30 days of receipt
of the request.  If requested, the information shall be provided no
less than once each year.
   (c) Except for utilization information, a pharmacy benefits
manager need not make the disclosures required in subdivision (a)
unless and until the purchaser or prospective purchaser agrees in
writing to maintain as confidential any information that the pharmacy
benefits manager reasonably considers proprietary.  That agreement
may provide for equitable and legal remedies in the event of a
violation of the agreement.  Proprietary information includes trade
secrets, and information on pricing, costs, revenues, taxes, market
share, negotiating strategies, customers and personnel held by a
pharmacy benefits manager and used for its business purposes.

   (d) Every pharmacy benefits manager that maintains one or more
drug formularies shall provide to members of the public, upon
request, a copy of the most current list of prescription drugs on the
formulary of the manager by major therapeutic category, with an
indication of whether any drugs on the list are preferred over other
listed drugs.  If the pharmacy benefits manager maintains more than
one formulary, the manager shall notify the requester that a choice
of formulary lists is available.
   (e) A pharmacy benefits manager shall disclose the membership of
any pharmacy and therapeutics committee, the credentials of committee
members, and any relationships between committee members and drug
manufacturers. 
   4133.  A pharmacy benefits manager may not execute a contract for
the provision of pharmacy benefits management services that fails to
address the following items:
   (a) The amount of the total revenues, rebates, and discounts
identified in paragraphs (1) and (2) of subdivision (a) of Section
4132 that shall be passed on to the purchaser.
   (b) The disclosure or sale of enrollee utilization data by the
pharmacy benefits manager to any person or entity other than the
purchaser or prospective purchaser.
   (c) Any administrative or other fees charged by the pharmacy
benefits manager to the purchaser or prospective purchaser.
   (d) Factors that trigger an audit of the contract for pharmacy
benefits management services.
   (e) Any revenues, rebates, or discounts received by the pharmacy
benefits manager directly or indirectly from entities other than
manufacturers and labelers.
   (f) Bulk purchase arrangements between  the  pharmacy
benefits  managers with   manager's 
mail-order pharmacies and drug manufacturers  and labelers 
.
   (g) The process for development of formularies and notification of
changes to formularies,  and approval of those changes by the
purchaser,  provided that the pharmacy benefits manager meets
the requirements of Sections  4134 and  4135 
and 4136  .
   4134.   A pharmacy benefits manager shall disclose to members
of the public, upon request, the following information:
   (a) A copy of the most current list of prescription drugs on the
formulary of the pharmacy benefits manager by major therapeutic
category, with an indication of whether any drugs on the list are
preferred over other listed drugs.  If the pharmacy benefits manager
maintains more than one formulary, the manager shall notify the
requester that a choice of formulary lists is available.
   (b) The membership of any pharmacy and therapeutics committee, the
credentials of committee members, and any direct or indirect
financial relationships between committee members and drug
manufacturers.
   4135.   A pharmacy benefits manager may not limit or exclude
coverage for a drug for an enrollee if the drug previously had been
approved for coverage by the pharmacy benefits manager for a medical
condition of the individual consumer and the prescribing provider
continues to prescribe the drug for the medical condition, provided
that the drug is appropriately prescribed and is considered safe and
effective for treating the consumer's medical condition.  Nothing in
this section shall preclude the prescribing provider from prescribing
another drug covered by the  pharmacy benefits  manager
that is medically appropriate for the consumer, nor shall this
section be construed to prohibit generic drug substitutions as
authorized by Section 4073.  For purposes of this section, a
prescribing provider shall include a provider authorized to write a
prescription to treat a medical condition of a consumer pursuant to
subdivision (a) of Section 4059.  
   4135.  
   4136.   (a) A pharmacy benefits manager shall maintain an
expeditious process by which prescribing providers may obtain
authorization for a medically necessary nonformulary prescription
drug.  On or before July 1, 2005, every pharmacy benefits manager
shall make public on request a description of its process, including
timelines, for responding to authorization requests for nonformulary
drugs.  Each pharmacy benefits manager shall provide a written
description of its most current process, including timelines, to each
purchaser and, on request, to prescribing providers.  For purposes
of this section, a prescribing provider shall include a provider
authorized to write a prescription to treat a medical condition of an
enrollee pursuant to subdivision (a) of Section 4040.
   (b) Any pharmacy benefits manager that disapproves a request made
pursuant to subdivision (a) by a prescribing provider to obtain
authorization for a nonformulary drug shall provide the reasons for
the disapproval in a notice provided to the purchaser.
   (c) The process described in subdivision (a) by which prescribing
providers may obtain authorization for medically necessary
nonformulary drugs does not apply to a nonformulary drug that has
been prescribed for an enrollee in conformity with Section 
4134   4135  .  
   (d) Every pharmacy benefits manager shall maintain all of the
following information, which shall be made available to the purchaser
or the public upon request:
   (1) The complete drug formulary or formularies of the plan, if the
plan maintains a formulary, including a list of the prescription
drugs on the formulary of the plan by major therapeutic category with
an indication of whether any drugs are preferred over other drugs.
   (2) Records developed by the pharmacy and therapeutic committee of
the plan, or by others responsible for developing, modifying, and
overseeing formularies, including medical groups, individual practice
associations, and contracting pharmaceutical benefits management
companies, used to guide the drugs prescribed for the enrollees of
the plan, that fully describe the reasoning behind formulary
decisions.
   (3) Any arrangements with prescribing providers, medical groups,
individual practice associations, pharmacists, or other entities that
are associated with activities of the pharmacy benefits manager to
encourage formulary compliance or otherwise manage prescription drug
benefits.
   (e)  
   (d)  Nonformulary prescription drugs shall include any drug
for which an individual's copayment or out-of-pocket costs are
different than the copayment for a formulary prescription drug,
except as otherwise provided by law or regulation.
  SEC. 2.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.