BILL NUMBER: AB 1960 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 20, 2004
AMENDED IN ASSEMBLY APRIL 22, 2004
AMENDED IN ASSEMBLY APRIL 15, 2004
AMENDED IN ASSEMBLY APRIL 12, 2004
INTRODUCED BY Assembly Members Pavley, Chu, Frommer, 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 Pharmacy Law is a crime.
This bill would define the term "pharmacy benefits management" as
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 administration or management of
prescription drug 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 the board to set specified standards for
registration. The bill would further
require a pharmacy benefits manager to make specified disclosures to
its purchasers and prospective purchasers with regard to
, including specified information about the pharmacy
benefit manager's 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. The bill would impose certain requirements on
the membership of a pharmacy and therapeutics committee for a
pharmacy benefits manager. The bill would also require a pharmacy
benefits manager to meet certain conditions before substituting a
prescribed medication.
Because the bill would 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 administration or
management of prescription drug benefits. Pharmacy benefits
management includes 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 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. state, the processing of prescription
drug claims, and the administration of payments related to
prescription drug claims.
(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 and if those services 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) "Prospective purchaser" is any person to whom a pharmacy
benefits manager offers to provide pharmacy benefit management
services.
(e) "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 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 prescription drug benefits managed by the
pharmacy benefits manager 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 related to the purchaser or
prospective purchaser.
(3)
4131. A pharmacy benefits manager shall disclose to the purchaser
in writing all of the following:
(a) The aggregate amount, and for a specified list of therapeutic
classes, the specific amount, of all rebates and other retrospective
utilization discounts that the pharmacy benefits manager receives,
directly or indirectly, from pharmaceutical manufacturers or labelers
in connection with prescription drug benefits related to the
purchaser. A therapeutic class shall include at least two drugs.
(b) The nature, type, and amount of all other revenue that the
pharmacy benefits manager receives, directly or indirectly, from
pharmaceutical manufacturers or labelers in connection with
prescription drug benefits related to the purchaser.
(c) Any prescription drug utilization information 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)
(d) Any administrative or other fees charged by the pharmacy
benefits manager to the purchaser.
(e) The credentials of members of any pharmacy and therapeutic
committee and any direct or indirect financial relationships between
committee members and the pharmaceutical industry.
(f) 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)
4132. A pharmacy benefits manager shall disclose to a prospective
purchaser in writing all of the following:
(a) The aggregate amount, and for a specified list of therapeutic
classes, the specific amount, of all rebates and other retrospective
utilization discounts that the pharmacy benefits manager estimates it
will receive, directly or indirectly, from pharmaceutical
manufacturers or labelers in connection with prescription drug
benefits related to the prospective purchaser. A therapeutic class
shall include at least two drugs.
(b) The nature, type, and amount of all other revenue that the
pharmacy benefits manager estimates it will receive, directly or
indirectly, from pharmaceutical manufacturers or labelers in
connection with prescription drug benefits related to the prospective
purchaser.
(c) Any administrative or other fees charged by the pharmacy
benefits manager to the prospective purchaser.
(d) The credentials of members of any pharmacy and therapeutic
committee and any direct or indirect financial relationships between
committee members and the pharmaceutical industry.
(e) 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.
4133. (a) A pharmacy benefits manager shall provide the
information described in paragraphs (1), (2), (3), (4), and
(5) of subdivision (a) Sections 4131 and 4132
within 30 days of receipt of the request. If requested, the
information shall be provided no less than once each year.
(c)
(b) Except for utilization information, a pharmacy benefits
manager need not make the disclosures required in
subdivision (a) Sections 4131 and 4132 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. That agreement may also include persons or entities
with whom the purchaser or prospective purchaser contracts to provide
consultation regarding pharmacy services. 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.
4133.
4134. 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 subdivisions (a) and (b) of Section 4131
and subdivisions (a) and (b) 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. .
(d) Conditions under which an audit will be conducted of the
contract for pharmacy benefits management services, who will conduct
the audit, and who will pay for the audit.
(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
manager's mail-order pharmacies and drug manufacturers and labelers.
(g)
(f) 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 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.
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 4135.
(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.
4135. All members of a pharmacy and therapeutics committee for a
pharmacy benefits manager shall be physicians, pharmacists, or other
health care professionals, and a majority of committee members shall
be actively practicing and not employed by the pharmacy benefits
manager.
4136. A pharmacy benefits manager shall report not less than
quarterly to the pharmacy and therapeutics committee which shall
monitor the health effects of medication substitutions on the health
of the patients, including identifying information from patients and
prescribers concerning the efficacy or health effects of medication
substitution.
4137. (a) A pharmacy benefits manager shall not substitute a
medication for another currently prescribed medication without first
obtaining express verifiable authorization from the prescriber of the
currently prescribed drug except in the following instances:
(1) As provided in Sections 4052.5 and 4073.
(2) If the medication substitution is initiated for patient safety
reasons.
(3) If the currently prescribed medication is no longer available
in the market.
(b) The request for authorization to the prescriber shall include
all of the following:
(1) The cost savings for the purchaser, if any, that are a result
of the medication substitution.
(2) The difference, if any, in copayments or other out-of-pocket
costs paid by the patient in order to obtain the medication.
(3) The existence of any additional payments received by the
pharmacy benefits manager not reflected in the cost savings to the
purchaser.
(4) The circumstances, if any, under which the currently
prescribed medication will be covered.
(5) The circumstances and extent to which, if any, related health
care costs arising from the change in medications will be
compensated.
(6) Any known differences in potential effects on patient health
and safety, including side-effects.
(7) The name and title of the individual authorizing the change if
the authorization by the provider is given verbally.
(c) The pharmacy benefits manager shall not substitute a
medication for a currently prescribed medication unless the pharmacy
benefits manager communicates with the patient to provide that
patient or their representative the following information:
(1) The proposed medication and the currently prescribed
medication.
(2) The difference in copayments or other out-of-pocket costs paid
by the patient, if any.
(3) Any known differences in potential effects on patient health
and safety, including side-effects, if any.
(4) The circumstances, if any, under which the currently
prescribed medication will be covered.
(5) The cost savings for the purchaser, taking into account all
discounts, rebates, or other payments that lower the cost of the
medication to the purchaser.
(6) The existence of any additional payments received by the
pharmacy benefits manager not reflected in the cost savings to the
purchaser.
(7) A toll-free telephone number to communicate with the pharmacy
benefits manager.
(8) The circumstances and the extent to which, if any, related
health care costs will be compensated
(d) If either the prescriber or the patient instructs the pharmacy
benefits manager to reverse or cease the substitution and if the
currently prescribed medication remains on the formulary, the
pharmacy benefits manager shall assure that the patient does not
incur any additional copayments or other costs other than what the
patient would have incurred without the substitution. The pharmacy
benefits manager shall maintain a toll-free telephone number that is
known to prescribers and patients.
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.