Assigned to HHS AS PASSED BY COMMITTEE
ARIZONA STATE SENATE
Fifty-Sixth Legislature, First Regular Session
AMENDED
FACT SHEET FOR S.B. 1382
pharmacy benefit managers; certificate requirements
Purpose
Effective January 1, 2025, requires a pharmacy benefit manager (PBM) to apply for, obtain
and maintain a valid certificate of authority (certificate) to operate as a PBM in Arizona and
outlines certification requirements. Requires a PBM to provide a reasonably adequate and
accessible retail PBM network for the distribution of prescription drugs.
Background
A pharmacy benefit manager is a person, business or entity that, either directly or through
an intermediary, manages the prescription drug coverage provided by a contracted insurer or other
third party payor, including 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 (A.R.S. § 20-3321).
PBMs are charged with: 1) updating the price and drug information for each list that the
manager maintains; 2) making the sources used to determine maximum allowable cost pricing
available to each network pharmacy at the beginning of a contract or upon renewal; 3) establishing
a process for network pharmacies to appeal its reimbursement for any drug subject to maximum
allowable cost pricing; and 4) allowing a pharmacy services organization that is contracted with
the manager to file an appeal of a drug on behalf of the organization's contracted pharmacies
(A.R.S. § 20-3331).
The Department of Insurance and Financial Institutions (DIFI) regulates and monitors
insurance companies and professionals operating in Arizona to protect the public and help ensure
that these entities follow Arizona and federal laws (Ariz. Const. art. 15 § 5). The Director of DIFI
(Director) may conduct examinations and investigations of insurance matters, including
examinations and investigations of adjusters, producers and brokers and any other applicable
regulated persons, in addition to examinations and investigations expressly authorized, as the
Director deems proper in determining whether a person has violated any insurance laws or for the
purpose of securing information useful in the lawful administration of insurance (A.R.S. § 20-142).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation.
Provisions
Certificate
1. Requires a PBM to apply for, obtain and maintain a valid certificate to operate as a PBM in
Arizona. FACT SHEET – Amended
S.B. 1382
Page 2
2. States that a certificate is renewable biennially and is nontransferable.
3. Requires a PBM that applies for a certificate to submit a Director-prescribed application form
and pay an application fee of $500.
4. Requires an officer or individual who is responsible for the conduct of the activities of the
PBM to sign the application and verify that the contents of the application and any attachments
are correct.
5. Requires the application form to include:
a) the name, address and telephone number of the PBM;
b) a copy of all basic organizational documents of the PBM, including the articles of
incorporation, bylaws, articles of association and trade name certificate, any other similar
documents and all amendments to the documents;
c) a copy of a power of attorney that is duly executed by the PBM if the PBM is not domiciled
in Arizona and that appoints a Director, the Director's successors in office and the
Director's authorized deputies as the power of attorney for the PBM that may receive
service of process;
d) the names, addresses, official positions and professional qualifications of each
individual who is responsible for the conduct of the activities of the PBM;
e) a copy of recent financial statements showing the PBM's assets, liabilities and sources of
financial support that the Director determines are sufficient to show that the PBM is
financially viable;
f) a description of the PBM and its services, facilities and personnel; and
g) a document in which the PBM confirms that its business practices and each ongoing
Arizona service contract comply with all Arizona laws.
6. Requires the Director, within 90 days after receipt of a completed application and application
fee, to review the application and issue a certificate if the applicant is deemed qualified.
7. Requires the Director, if the Director determines that the applicant is not qualified, to notify
the applicant and specify the reason for the denial and allow the applicant 60 days to remedy
the stated reasons for denial.
8. Requires the PBM, within 30 days after any material modification of the information submitted
with the certificate application, to file a notice of modification with the Director.
9. Stipulates that, if a PBM's financial statements are prepared by an independent public
accountant, a copy of the most recent regular financial statement satisfies the financial
statements requirement unless the Director determines that additional or more recent financial
information is necessary.
10. Allows the Director to refuse to issue a certificate if the Director determines that the PBM had
a PBM certificate or license denied or revoked for cause in another state or had a license denied
or revoked for any individual responsible for the conduct of the activities of the PBM in another
state.
11. Allows the Director to issue a cease and desist order if the PBM does not hold a valid certificate
of authority. FACT SHEET – Amended
S.B. 1382
Page 3
Denial, Suspension or Revocation of the Certificate
12. Allows the Director to deny, suspend or revoke a PBM's certificate of authority if the Director
finds, after notice and opportunity for hearing, that:
a) the PBM violated any applicable Director rule or order or any Arizona law;
b) the PBM refused to be examined or produce its accounts, records and files for examination
or audit, or if any individual responsible for the conduct of the activities in Arizona of the
PBM refused to provide the respective information or to perform any other
Director-required legal obligation;
c) the PBM has, without just cause, refused to pay proper claims or perform services under
its contract or has, without just cause, caused covered persons or enrollees to accept less
than the amount due, which may result in an enrollee procuring legal counsel to bring a
lawsuit against the PBM or a payor that it represents to secure full payment or settlement
of claims;
d) the PBM has a certificate and fails at any time to meet any certificate qualifications, where
the issuance of the certificate could have been refused had the failure existed at the time of
issuance and been known to the Director, unless the Director issued a certificate with
knowledge of the ground for disqualification and had the authority to waive it;
e) any individual who is responsible for the management of the PBM is convicted of or enters
a plea of guilty or no contest to a felony related to their activities on behalf of the PBM; or
f) the PBM's certificate or license has been suspended or revoked in another state.
13. Stipulates that, if a PBM's certificate is suspended or restricted, the Director may allow the
operation of the PBM for a limited time, not to exceed 120 days.
14. Allows the Director to allow a PBM whose certificate has been suspended or restricted to
operate for a period that exceeds 120 days if the Director determines that the continued
operation of the PBM is in the beneficial interests of the covered persons by ensuring minimal
disruptions to the continuity of care.
15. Subjects a PBM whose certificate has been suspended or restricted to a fine, as determined by
the Director in an amount not to exceed $20,000 per month, until the PBM remedies the
violation.
16. Allows the Director to revoke the certificate if the PBM has been operating under a suspended
certificate for a period of more than 60 days.
17. Declares that a PBM has the same rights to notice and an administrative hearing as provided
under statutory uniform administrative hearing procedures.
18. Allows the Director to investigate officers, directors and owners of a PBM to ensure
compliance with PBM laws.
Renewal of a Certificate
19. Requires a PBM, in order to renew a certificate, to submit to the Director a:
a) renewal application in a Director-prescribed form and manner;
b) renewal schedule and a fee of $500; and
c) retail PBM Network Adequacy Report. FACT SHEET – Amended
S.B. 1382
Page 4
20. Requires an officer or authorized representative of the PBM to sign the application and verify
that the contents of the renewal form are correct.
21. Stipulates that a PBM's certificate of authority expires by operation of law if a complete
renewal application and fee is not received by the due date.
22. Stipulates that, if a PBM and an insurer enter into a contractual agreement, the PBM must
comply with the laws and rules that govern the contract, starting from the issuance date of the
certificate.
23. Requires a PBM to comply with the prescribed records retention schedules rule.
24. Allows the Director to adopt rules to implement renewals of the certificate.
Retail PBM Network Adequacy Report
25. Requires a PBM to provide a reasonably adequate and accessible retail PBM network for the
distribution of prescription drugs for a health care plan that provides convenient enrollee access
to pharmacies within a reasonable distance from an enrollee's residence, as determined by the
Director.
26. States that a retail PBM network does not include a mail-order pharmacy or specialty
pharmacy.
27. Requires a PBM to submit to the Director a retail PBM network adequacy report that describes
the retail PBM network and the retail PBM network’s accessibility in Arizona.
28. Requires the report to categorize the network by urban, suburban and rural geographic areas
and applicable zip codes.
29. Stipulates that, if the PBM is unable to meet the network adequacy requirements, a PBM may
apply for a waiver.
30. Requires a PBM applying for a waiver to submit an application on a Director-prescribed form
and manner that:
a) demonstrates with specific data why the PBM is not able to meet the network adequacy
requirements; and
b) includes information as to the steps that the PBM has taken and will take to address network
adequacy.
31. States that a network adequacy requirement waiver expires after two years.
32. Stipulates that, if a PBM seeks a renewal of the waiver, the Director must consider the steps
taken by the PBM to address network adequacy before granting another waiver.
PBM Audit
33. Allows the Director to determine if the PBM is in compliance and to examine or audit relevant
books and records of a PBM that provide claims processing services or other drug or device
services for a health care plan. FACT SHEET – Amended
S.B. 1382
Page 5
34. Specifies that all of the following apply to the information or data that is obtained during an
examination, audit or investigation:
a) the information is considered and treated as proprietary and confidential;
b) the information is not a public record and is exempt from public records requirements; and
c) the information is to be used only for the purpose of ensuring a PBM’s compliance.
Records Retention
35. Requires the Director to establish a retention schedule for all records, books, documentation
and other data on file with DIFI related to the records retention enforcement.
36. Prohibits the Director from ordering the destruction or other disposal of any record, book,
document or other data that is:
a) required by law to be maintained;
b) kept on file with DIFI until 10 years have passed; and
c) filed during the Director's administration.
37. Becomes effective on January 1, 2025.
Amendments Adopted by Committee
1. Replaces the Board-prescribed PMB certificate application fee with a $500 application fee.
2. Requires the application form to include the name, address and telephone number of the PBM.
3. Requires the Director:
a) within 90 days after receipt of a completed application and application fee, to review the
application and issue a certificate if the applicant is deemed qualified; and
b) if the Director determines that the applicant is not qualified, to notify the applicant and
specify the reason for the denial and allow the applicant 60 days to remedy the stated
reasons for denial.
4. Requires a PBM to file a notice of modification with the Director within 30 days after any
material modification, rather than a significant modification.
5. Removes the authority of the Director to refuse to issue a certificate of authority to a PBM if
the Director determines that the PBM is not financially viable.
6. Extends the limited operation time a PBM with a suspended or restricted certificate may
operate from a period of no more than 60 days to 120 days.
7. Authorizes the Director to allow a PBM whose certificate has been suspended or restricted to
operate for more than 120 days, rather than 60 days, if it is determined to be in the beneficial
interests of covered persons.
Senate Action
HHS 2/14/23 DPA 5-2-0
Prepared by Senate Research
February 15, 2023
MM/MC/slp