Assigned to FICO FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
FACT SHEET FOR S.B. 1165
pharmacy audit; procedures; prohibition
Purpose
Prohibits a pharmacy benefit manager (PBM) from reimbursing a nonaffiliated pharmacy
in an amount less than the amount reimbursed for an affiliated pharmacy for providing the same
product. Prescribes requirements for a wholesale invoice audit and establishes a reporting
requirement.
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).
Statute prescribes procedures for in-person and desktop audits performed by an auditing
entity. An auditing entity is any person, company, group or plan working on behalf of or pursuant
to a contract with an insurer or PBM for the purposes of auditing pharmacy drug claims adjudicated
by pharmacies (A.R.S. § 20-3322).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation.
Provisions
1. Prohibits a PBM from reimbursing a nonaffiliated pharmacy in an amount less than the amount
reimbursed for an affiliated pharmacy for providing the same product. FACT SHEET
S.B. 1165
Page 2
2. Requires a PBM to submit an annual report to the Director of DIFI that details the difference
in reimbursement amounts paid to an affiliated pharmacy and a nonaffiliated pharmacy for
providing the same product.
3. Requires an auditing entity, when conducting a wholesale invoice audit, to:
a) not audit the pharmacy claims of another auditing entity;
b) reverse a finding of discrepancy if:
i. the pharmacist or pharmacy dispensed the correct quantity of the drug according to the
prescription;
ii. the National Drug Code (NDC) published by the U.S. Food and Drug Administration
(FDA) is in a quantity that is a subunit or multiple of the drug purchased by the
pharmacist or pharmacy according to the supplier invoice; and
iii. the drug dispensed by the pharmacist or pharmacy shares all but the last two digits of
the FDA's NDC of the drug reflected on the supplier invoice;
c) as a presumption of validity of a purchase of a dispensed drug, accept any of the following
to support the pharmacy's claim related to a dispensed drug;
i. copies of the supplier invoices in the pharmacist's or pharmacy's possession, including
any supplier invoices issued before the date the drug was dispensed but not earlier than
90 days before the first day of the audit period and any other invoices and supporting
documentation authorized by federal or state law to transfer ownership of a drug to the
pharmacist or pharmacy; or
ii. any reports required by a state board or agency; and
d) provide any supporting documentation that the pharmacy supplier provided to the auditing
entity by the fifth business day after receiving the pharmacy's request.
4. Defines affiliated pharmacy as a network pharmacy that directly or indirectly through one or
more intermediaries controls, is controlled by or is under common control with a PBM.
5. Makes technical changes.
6. Becomes effective on the general effective date.
Prepared by Senate Research
February 7, 2024
MG/cs