Assigned to FICO AS PASSED BY COW
ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
AMENDED
FACT SHEET FOR S.B. 1165
pharmacy audit; procedures; prohibition
Purpose
Prohibits an auditing entity from retroactively reducing the amount of a claim payment to
a pharmacist or pharmacy after adjudication of the claim for a prescription drug, with certain
exceptions. Prescribes requirements for a wholesale invoice audit.
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.
FACT SHEET – Amended
S.B. 1165
Page 2
Provisions
1. Prohibits an auditing entity from, directly or indirectly, retroactively reducing the amount of a
claim payment to a pharmacist or pharmacy after adjudication of the claim for a prescription
drug, unless:
a) the original claim was found to have been fraudulently submitted through an audit
conducted as outlined;
b) the claim submitted was a duplicate for which the pharmacy had already received payment;
or
c) the original reimbursement was incorrect due to an error that resulted in an overpayment
by an insurer or PBM.
2. Specifies that the prohibition does not prohibit an auditing entity, insurer or PBM from
increasing the amount of a claim payment after adjudication of the claim.
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 the pharmacist or pharmacy dispensed the correct
quantity of the drug according to the prescription and either;
i. 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; or
ii. 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, subject to
validation that includes validating the pharmacy purchase order and the payment of the
supplier invoice, and 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 10th business day after receiving the pharmacy's request.
4. Specifies that the outlined pharmacy supplier invoice validation may also require information
required under the federal Drug Supply Chain Security Act.
5. Makes technical changes.
6. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Prohibits an auditing entity from retroactively reducing a claim payment to a pharmacist or
pharmacy after prescription drug claim adjudication, with certain exceptions. FACT SHEET – Amended
S.B. 1165
Page 3
2. Removes the prohibition against a PBM reimbursing a nonaffiliated pharmacy in an amount
less than the amount reimbursed for an affiliated pharmacy for providing the same product and
removes the associated reporting requirement.
3. Removes the definition of affiliated pharmacy.
Amendments Adopted by Committee of the Whole
1. Specifies that the pharmacy supplier invoice validation required when conducting a wholesale
invoice audit may also require information required under the federal Drug Supply Chain
Security Act.
2. Makes technical changes.
Senate Action
FICO 2/12/24 DPA 5-0-2
Prepared by Senate Research
February 27, 2024
MG/cs