Assigned to FICO & APPROP FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
FACT SHEET FOR S.B. 1164
pharmacy benefits; coverage; exemptions
Purpose
Prohibits a pharmacy benefit manager (PBM) from limiting or excluding coverage of a
prescription drug for any covered individual who is medically stable on a specific prescription
drug and outlined conditions are met. Establishes a prescription coverage exemption determination
process.
Background
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). Beginning January 1,
2025, PBMs must apply and pay a fee to DIFI for a valid certificate of authority to operate as a
PBM who performs services for a health plan subject to state jurisdiction (A.R.S. § 20-3333).
A PBM 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 price and drug information for each list that the PBM
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 contracted pharmacy services organization to file an appeal of a
drug on behalf of the organization's contracted pharmacies (A.R.S. § 20-3331).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation.
Provisions
PBM Prescription Drug Coverage
1. Prohibits a PBM, if the PBM enters into an agreement with a health care insurer (insurer) to
provide PBM services, from limiting or excluding coverage of a prescription drug for any
covered individual who is medically stable on a specific prescription drug as determined by
the covered individual's prescribing health care professional, if:
a) the drug was previously approved by the PBM or insurer for coverage for the covered
individual; and
b) the covered individual continues to be an enrollee of the insurer that the PBM has
contracted with to provide PBM services. FACT SHEET
S.B. 1164
Page 2
2. Prohibits a PBM, for the purposes of the prohibition on limiting or excluding a medically stable
individual's prescription drug, from:
a) limiting or reducing the maximum coverage of prescription drug benefits;
b) increasing cost sharing for a covered prescription drug;
c) moving a prescription drug to a more restrictive formulary tier; or
d) removing a prescription drug from a formulary unless either:
i. the U.S. Food and Drug Administration (FDA) revokes approval for or removes a
prescription drug from the prescription drug market; or
ii. the prescription drug manufacturer notifies the FDA of a manufacturing discontinuation
or potential discontinuation.
3. Requires a PBM, if the PBM enters into an agreement with an insurer to provide PBM services,
to continue coverage of a covered medically stable individual's prescription drug through the
last day of the covered individual's eligibility under their health plan, including any open
enrollment period.
Prescription Coverage Exemption Determination Process
4. Requires an insurer, PBM or utilization review agent that is contracted to provide PBM
services for the insurer to provide a covered individual and prescribing health care professional
with access to a clear and convenient process to request a coverage exemption determination.
5. Allows an insurer, PBM or utilization review agent to use its existing medical exceptions
process to satisfy the prescription coverage exemption determination requirement, if the
existing process is consistent with the prescribed requirements.
6. Requires an insurer, PBM or utilization review agent to respond to a coverage exemption
determination request within 72 hours, unless exigent circumstances exist and sufficient
justification and supporting clinical documentation is received in which case the insurer, PBM
or utilization review agent must respond within 24 hours.
7. Stipulates that a coverage exemption is automatically granted if a response is not received
within the applicable timeframe.
8. Requires a coverage exemption to be expeditiously granted for a discontinued health benefit
plan, including a health benefit plan from an individual's prior plan year, if the covered
individual enrolls in a comparable plan offered by the same group health plan and the following
conditions apply:
a) the covered individual is medically stable on a prescription drug as determined by the
covered individual's prescribing health care professional;
b) the prescribing health care professional continues to prescribe the drug for the covered
individual for their medical condition; and
c) in comparison to the discontinued health benefit plan, the new benefit plan:
i. limits or reduces the maximum coverage of prescription drug benefits;
ii. increases cost sharing for the prescription drug;
iii. moves the prescription drug to a more restrictive tier if the carrier, insurer or PBM uses
a formulary with tiers; or
iv. excludes the prescription drug from the carrier's, insurer's or PBM's formulary. FACT SHEET
S.B. 1164
Page 3
9. Requires a coverage exemption to be expeditiously granted for a covered individual without a
discontinued health benefit plan if the covered individual has previously received the
prescription drug by any means, including participation in a clinical trial, third-party patient
assistance or other financial support programs, and the following conditions apply:
a) the covered individual is medically stable on a prescription drug as determined by the
covered individual's prescribing health care professional;
b) the prescribing health care professional continues to prescribe the drug for the covered
individual for their medical condition; and
c) the prescription drug was not provided as a pharmaceutical sample.
10. Requires, if a request for a coverage exemption is denied, the insurer, PBM or utilization
review agent to provide the covered individual or the individual's prescribing health care
professional with the reasons for the denial and information regarding the procedure to appeal
the denial.
11. Allows a covered individual or their authorized representative to appeal any determination to
deny a coverage exemption and requires the determination to be upheld or reversed within 72
hours, unless exigent circumstances exist and sufficient justification and supporting clinical
documentation is provided in which case the insurer or PBM must uphold or reverse the
determination within 24 hours.
12. Stipulates that a coverage exemption denial is considered reversed and approved if the
determination is not upheld or reversed on appeal within the applicable time period.
13. Requires a coverage exemption denial, if the determination to deny is upheld on appeal, to be
considered a final agency action and allows the covered individual or their authorized
representative to challenge the determination in court.
Miscellaneous
14. Grants the Director of DIFI, if an insurer, PBM or utilization review agent violates the
prescription drug coverage and determination process requirements, the authority to take any
enforcement action against the insurer, PBM or utilization review agent.
15. Specifies that the prescription drug coverage and determination process requirements do not:
a) prevent a health care professional from prescribing another drug covered by the carrier,
insurer or PBM that the health care professional deems medically necessary for the covered
individual; or
b) prevent an insurer or PBM from adding a prescription drug to its formulary or removing a
prescription drug from its formulary, if the drug manufacturer has removed the drug for
sale in the United States.
16. Specifies that a policy that is issued or renewed by a disability insurer does not include a policy
that provides limited benefit coverage.
17. Defines terms.
18. Applies the newly established drug coverage and determination process requirements to
contracts entered into, amended, extended or renewed beginning January 1, 2025. FACT SHEET
S.B. 1164
Page 4
19. Becomes effective on the general effective date.
Prepared by Senate Research
February 7, 2024
MG/cs