BILL NUMBER: AB 1960 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 23, 2004
AMENDED IN SENATE JUNE 9, 2004
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
(Coauthors: Assembly Members Chan and 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 An act to add Division 113 (commencing
with Section 150000) to the Health and Safety 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 provides for
the regulation of health care benefits .
This bill would define the term "pharmacy benefits management" as
the 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 a pharmacy benefits manager to make specified disclosures to
its purchasers and prospective purchasers, 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 no . State-mandated local program:
yes no .
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
SECTION 1. Division 113 (commencing with Section 150000) is added
to the Health and Safety Code, to read:
Article 8. Pharmacy Benefits Management
DIVISION 113. PHARMACY BENEFITS MANAGEMENT
4130. For purposes of this article
150000. For purposes of this division , 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 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.
150001. A pharmacy benefits manager shall disclose to the
purchaser in writing all of the following:
(a) The aggregate 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 specific to the
purchaser.
(b) For a specified list of therapeutic classes, the aggregate
amount for each therapeutic class 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 specific to the purchaser. A therapeutic class shall
include at least two drugs.
(c) 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.
(d) 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.
(e) Any administrative or other fees charged by the pharmacy
benefits manager to the purchaser.
(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.
4132.
150002. A pharmacy benefits manager shall disclose to a
prospective purchaser in writing all of the following:
(a) The aggregate 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.
(b) For a specified list of therapeutic classes, the aggregate
amount for each therapeutic class 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 specific to the prospective purchaser. A
therapeutic class shall include at least two drugs.
(c) 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.
(d) Any administrative or other fees charged by the pharmacy
benefits manager to the prospective purchaser.
(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.
150003. (a) A pharmacy benefits manager shall provide the
information described in Sections 4131 and 4132
150001 and 150002 within 30 days of receipt of the
request. If requested, the information shall be provided no less
than once each year.
(b) Except for utilization information, a pharmacy benefits
manager need not make the disclosures required in Sections
4131 and 4132 150001 and 150002 unless and until
the purchaser or prospective purchaser agrees in writing to maintain
as confidential any proprietary information. 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.
4134.
150004. 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 subdivisions (a), (b), and (c) of Section 4131
150001 and subdivisions (a), (b), and (c) of
Section 4132 150002 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.
(c) Any administrative or other fees charged by the pharmacy
benefits manager to the purchaser.
(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) 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, 4136, and 4137.
4135. 150005, 150006, and 150007.
(g) Whether there is a difference between the price paid to a
retail pharmacy and the amount that will be billed to the purchaser
for prescription drugs.
150005. (a) 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 not be employed by the pharmacy benefits
manager.
(b) A pharmacy and therapeutics committee member shall not be an
officer, employee, director, or agent of, or any person who has
financial interest in, other than ownership of stock from open market
purchases of less than a nominal amount of the outstanding stock of,
pharmaceutical companies.
4136.
150006. 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.
150007. (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 of the Business
and Professions Code .
(2) If the medication substitution is initiated for patient safety
reasons.
(3) If the currently prescribed medication is no longer available
in the market.
(4) If initiated pursuant to a drug utilization review.
(5) If required for coverage reasons where the prescribed drug is
not covered by the individual's formulary or plan.
(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) Unless a prescribed drug is no longer on the purchaser's
formulary or the individual is unwilling to pay any higher applicable
copayment or other costs, the pharmacy benefits manager shall cancel
and reverse the medication substitution upon written or verbal
instructions from a prescriber or the individual.
(1) The pharmacy benefits manager shall maintain a toll-free
telephone number during normal business hours for a minimum of eight
hours per day Monday through Friday for prescribers and patients.
(2) The pharmacy benefits manager shall not charge the individual
any additional copayments or fees related to the replacement
medication.
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.
150008. All disclosures made pursuant to this division shall
comply with the privacy standards of the federal Health Insurance
Portability and Accountability Act.