SB 1102
Initials AG Page 1 House Engrossed
ARIZONA HOUSE OF REPRESENTATIVES
Fifty-seventh Legislature
First Regular Session
Senate: HHS DPA 7-0-0-0 | 3
rd
Read 26-0-4-0
House: HHS DP 12-0-0-0
SB 1102: pharmacy benefits; prescribing; exemption
Sponsor: Senator Shamp, LD 29
House Engrossed
Overview
Forbids a pharmacy benefit manager (PBM) from limiting or excluding coverage of a
prescription drug for any covered individual who is on a specific prescription drug if certain
conditions are met. Establishes formulary change notification requirements and creates a
formulary prescription drug exception process.
History
A PBM is a person, business or entity that manages the prescription drug coverage provided
by a contracted insurer or other third-party payor. Responsibilities include 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 related to
prescription drug coverage, contracting with network pharmacies and controlling the cost of
covered prescription drugs (A.R.S. § 20-3321).
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 state 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).
PBMs are tasked 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).
Provisions
Prescription Drug Coverage Exclusions and Limitations
1. Forbids a PBM that enters into an agreement with a health care insurer (insurer) to
provide PBM services to covered individuals from limiting or excluding coverage of a
prescription drug for any covered individual who is on a specific prescription drug, if:
a) the prescription drug was previously approved for coverage by the PBM or insurer for
the covered individual; and
☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal Note SB 1102
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b) the covered individual continues to be an insured, enrollee or subscriber of the insurer
that the PBM has contracted with to provide PBM services. (Sec. 1)
2. Instructs a PBM who limits or excludes coverage of a prescription drug to continue
coverage of the drug through the last day of the plan year for any covered individuals
using the drug. (Sec. 1)
3. Prohibits PBMs and insurers from changing a covered individual from a previously
covered prescription drug if the individual's prescribing health care provider provides
electronic or written notice to the PBM or insurer that the individual will continue the
current prescription drug. (Sec. 1)
4. Requires a PBM or insurer that makes a formulary change that limits or excludes
coverage of a prescription drug to provide electronic or written notice of the removal or
change for any prescription drug on the drug formulary to each impacted covered
individual and their prescribing health care provider at least 60 days before the formulary
change. (Sec. 1)
5. Requires the notice to:
a) set forth the process by which a covered individual's health care provider may notify
the PBM or insurer of the continued use of the nonformulary prescription drugs; and
b) notify the prescribing health care provider that, if the health care provider provides
notice of the enrollee's or subscriber's continued use of the drug for the remainder of
the plan year, the provider will need to apply for a formulary exception for the
continued use of the nonformulary prescription drug upon renewal of the health care
plan. (Sec. 1)
Formulary Exception Process
6. Requires insurers, PBMs and utilization review agents to provide a covered individual
and prescribing health care provider with access to a clear and convenient process to
request a formulary exception process upon renewal of a health care plan. (Sec. 1)
7. Allows insurers, PBMs and utilization review agents to use existing formulary exception
processes to satisfy exception requirements if the medical exceptions process is consistent
with statutory requirements. (Sec. 1)
8. Instructs insurers, PBMs and utilization review agents to respond to a formulary
exception request within 72 hours after receiving the request and relevant clinical
documentation. (Sec. 1)
9. Permits a covered individual or the individual's prescribing health care provider to
request an expedited review in cases where exigent circumstances exist, in which case
the insurer, PBM or utilization review agent must respond to the request within 24 hours
after receiving the request and relevant clinical documentation. (Sec. 1)
10. Allows a covered individual who does not qualify for a formulary exception by way of a
health plan renewal to apply for a formulary exception using the insurer's, PBM's or
utilization review agent's formulary exception process. (Sec. 1)
11. Requires insurers, PBMs and utilization review agents to approve formulary exceptions
for any covered individual who renews the same health care plan if:
a) the covered individual has been previously approved to receive the nonformulary
prescription drug under the same health care plan; and SB 1102
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b) the prescribing health care provider uses the formulary exception process and
provides relevant clinical documentation to certify the following:
i. the covered individual has tried an ineffective formulary equivalent prescription
drug that was part of the individual's prescription drug benefit at the time of trial
and the health care provider specifies the contraindication or adverse harmful
reaction in the covered individual;
ii. the covered individual has experienced a positive therapeutic outcome on the
requested drug for more than 90 days; and
iii. formulary equivalent prescription drugs are contraindicated or will likely cause a
serious adverse reaction. (Sec. 1)
12. Requires insurers, PBMs and utilization review agents when evaluating whether a
covered individual qualifies for a formulary exception to consider the following factors:
a) whether the covered individual has experienced a positive therapeutic outcome on the
previously approved drug;
b) whether the formulary drug is not in the best interest of the covered individual based
on medical necessity because the covered individual's use of the formulary
prescription drug is expected to cause a negative impact on the individual's comorbid
condition or a clinically predictable negative drug interaction; and
c) whether the formulary prescription drug is contraindicated or will likely cause a
severe reaction. (Sec. 1)
13. Requires an insurer or PBM denial of coverage for a nonformulary prescription drug to
be made in writing to the covered individual by a licensed pharmacist or medical director
who made the decision to deny coverage, and include:
a) the medical or pharmacological reasons why the authorization was denied; and
b) the process by which a covered individual may appeal the denial. (Sec. 1)
14. Requires an insurer, PBM or utilization review agent to send a copy of the written denial
to the covered individual's treating health care provider who requested the formulary
exception. (Sec. 1)
15. Directs insurers, PBMs and utilization review agents to maintain copies of all formulary
prescription drug exception denials and to make the copies available to DIFI for
inspection. (Sec. 1)
16. Permits a covered individual or the individual's authorized representative to appeal any
formulary prescription drug exception denial. (Sec. 1)
17. Keeps any approved formulary exception for a covered individual in effect through the
end of the individual's plan year. (Sec. 1)
18. Requires approvals of formulary exceptions to be delivered, in writing, to the covered
individual and the individual's treating health care provider. (Sec. 1)
Miscellaneous
19. Clarifies that the requirements for prescription drug coverage and formulary exceptions
do not prevent a health care provider from prescribing another covered prescription drug
if the provider deems the drug medically necessary for the covered individual. (Sec. 1)
20. Clarifies that the requirements for prescription drug coverage and formulary exceptions
do not prevent an insurer or PBM from:
a) adding a prescription drug to its formulary; SB 1102
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b) removing a prescription drug from its formulary, if the drug manufacturer has
removed the drug for sale in the United States; or
c) making any formulary changes for patients who are not on a previously approved
prescription drug. (Sec. 1)
21. Permits the DIFI Director to take enforcement action, as authorized by, against a PBM,
insurer or utilization review agent in violation of requirements relating to drug
limitations or exclusions or formulary drug exceptions. (Sec. 1)
22. Subjects the requirements related to prescription drug limitations, exclusions and
formulary drug exceptions only to PBMs that are certified by DIFI. (Sec. 1)
23. Stipulates that a policy that is issued or renewed by a disability insurer does not include
a policy that provides limited benefit coverage. (Sec. 1)
24. Defines the following terms:
a) exigent circumstances;
b) formulary exception;
c) health care insurer;
d) health care plan;
e) limit or exclude coverage; and
f) utilization review agent. (Sec. 1)
25. Applies the drug coverage and formulary exception process requirements to contracts
entered into, amended, extended or renewed on January 1, 2026. (Sec. 1)