*SB0503.1*
February 7, 2025
SENATE BILL No. 503
_____
DIGEST OF SB 503 (Updated February 5, 2025 6:12 pm - DI 104)
Citations Affected: IC 2-5; IC 4-6; IC 5-10; IC 12-15; IC 27-1.
Synopsis: Pharmacy benefit administration. Requires the attorney
general to designate or appoint a pharmacy benefit compliance officer
if certain prescription drug benefit public-private partnership contracts
are entered into by the state. Establishes the pharmacy benefit
compliance fund. Authorizes: (1) the state personnel department, for
purposes of the state employee health plan; and (2) the office of the
secretary of family and social services (office), for purposes of the
Medicaid program; to issue a request for proposal to enter into a
public-private partnership to administer prescription drug benefits. Sets
forth certain requirements for a request for proposal and establishes the
competitive proposal procedure. Allows the budget committee to
review a contract before the state personnel department or the office
awards a final contract for the public-private partnership. Requires that,
if the state personnel department or the office enter into a contract for
the public-private partnership, the attorney general conduct a state
employee health plan audit or a Medicaid audit at least three years after
the implementation of the contract. Makes an appropriation.
Effective: July 1, 2025.
Zay, Charbonneau, Bohacek, Byrne,
Doriot, Johnson T
January 14, 2025, read first time and referred to Committee on Health and Provider
Services.
February 6, 2025, amended, reported favorably — Do Pass; reassigned to Committee on
Appropriations.
SB 503—LS 7353/DI 141 February 7, 2025
First Regular Session of the 124th General Assembly (2025)
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana
Constitution) is being amended, the text of the existing provision will appear in this style type,
additions will appear in this style type, and deletions will appear in this style type.
Additions: Whenever a new statutory provision is being enacted (or a new constitutional
provision adopted), the text of the new provision will appear in this style type. Also, the
word NEW will appear in that style type in the introductory clause of each SECTION that adds
a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts
between statutes enacted by the 2024 Regular Session of the General Assembly.
SENATE BILL No. 503
A BILL FOR AN ACT to amend the Indiana Code concerning
insurance and to make an appropriation.
Be it enacted by the General Assembly of the State of Indiana:
1 SECTION 1. IC 2-5-47-7, AS ADDED BY P.L.203-2023,
2 SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
3 JULY 1, 2025]: Sec. 7. The task force shall do the following:
4 (1) Review and make recommendations concerning the cost of
5 health care in the state and in comparison to other states.
6 (2) Review and make recommendations concerning reductions in
7 health care costs with the goal of ensuring that any reduction in
8 health care prices ultimately reaches the health care payer.
9 (3) Review and make recommendations concerning reports
10 submitted to the task force.
11 (4) Study and make recommendations concerning the availability
12 of value-based care and other health care models that emphasize
13 prevention and cost avoidance.
14 (5) Study and make recommendations concerning the market
15 concentration of health care providers and contributing factors,
16 including:
17 (A) whether:
SB 503—LS 7353/DI 141 2
1 (i) noncompete clauses in practitioner contracts contributes
2 to a restraint of trade; and
3 (ii) prohibiting noncompete clauses would create greater
4 competition in the health workforce;
5 (B) contract tiering with health carriers;
6 (C) all-or-nothing network plans; and
7 (D) disclosure of cost and price information to plan sponsors.
8 (6) Study and make recommendations concerning whether
9 medical consumers would benefit from prohibiting
10 anti-competitive practices or otherwise encouraging increased
11 competition among providers.
12 (7) Study and make recommendations concerning whether
13 medical consumers overall would benefit from reestablishing the
14 former Indiana comprehensive health insurance association
15 policies (IC 27-8-10).
16 (8) Review and make recommendations concerning required
17 reporting for pharmacy benefit managers to the department of
18 insurance, including the report required under IC 27-1-24.5-21.
19 (9) Study and make recommendations concerning whether there
20 is sufficient competition in the commercial insurance market and
21 whether health care consumers would benefit from policies
22 designed to increase competition among commercial carriers,
23 including the promotion of:
24 (A) direct contracting;
25 (B) narrow networks; and
26 (C) insurance brokers.
27 (10) Study and make recommendations concerning whether there
28 is sufficient innovation in the design of health insurance plans,
29 including whether health care consumers would benefit from
30 policies that:
31 (A) better distinguish wellness and prevention from
32 comprehensive and catastrophic coverage;
33 (B) promote price discounts based on individual underwriting;
34 and
35 (C) empower the health care consumer with a focus on
36 prevention and shoppable services.
37 (11) Study and make recommendations concerning the cost of
38 prescription drug benefits if required by IC 27-1-3.7-5.5.
39 (11) (12) Any other topic the task force deems relevant to the
40 oversight of health care costs in Indiana.
41 SECTION 2. IC 4-6-17 IS ADDED TO THE INDIANA CODE AS
42 A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE JULY
SB 503—LS 7353/DI 141 3
1 1, 2025]:
2 Chapter 17. Pharmacy Benefit Compliance Officer
3 Sec. 1. As used in this chapter, "pharmacy benefit partner"
4 refers to a private entity that enters into a public-private
5 partnership with:
6 (1) the state personnel department under IC 5-10-8-27 to
7 administer the prescription drug benefits on behalf of a state
8 employee health plan (as defined in IC 5-10-8-27(f)); or
9 (2) the office of the secretary of family and social services
10 under IC 12-15-48 to administer the prescription drug
11 benefits on behalf of the Medicaid program.
12 Sec. 2. If a contract is entered into as a result of a request for
13 proposal issued by the state personnel department under
14 IC 5-10-8-27 or the office of the secretary of family and social
15 services under IC 12-15-48, the attorney general shall designate or
16 appoint a deputy or an assistant attorney general as a pharmacy
17 benefit compliance officer to perform the duties listed in section 3
18 of this chapter.
19 Sec. 3. (a) The pharmacy benefit compliance officer designated
20 under section 2 of this chapter shall do the following:
21 (1) Audit any data received from the state personnel
22 department under IC 5-10-8-27(k) and the office of the
23 secretary of family and social services, including all managed
24 care organizations or programs, under IC 12-15-48-11 to
25 ensure compliance with the following:
26 (A) A contract entered into as a result of a request for
27 proposal issued under IC 5-10-8-27 or IC 12-15-48.
28 (B) Applicable state and federal law.
29 (2) Provide notice to a pharmacy benefit partner or
30 manufacturer if, during an audit conducted under subdivision
31 (1), the pharmacy benefit compliance officer finds that the
32 pharmacy benefit partner or manufacturer is noncompliant.
33 (3) Impose a civil penalty in accordance with IC 5-10-8-27(l)
34 or IC 12-15-48-12.
35 (4) Collect any fees from a pharmacy benefit partner under
36 IC 5-10-8-27(h)(5) or IC 12-15-48-7(5).
37 (5) On an annual basis:
38 (A) prepare a report summarizing any data received from
39 the state personnel department under IC 5-10-8-27(k) or
40 the office of the secretary of family and social services,
41 including all managed care organizations or programs,
42 under IC 12-15-48-11 during the previous state fiscal year;
SB 503—LS 7353/DI 141 4
1 and
2 (B) submit the report described in clause (A) to the budget
3 committee and the chairperson of the health care cost
4 oversight task force.
5 (b) The pharmacy benefit compliance officer may engage the
6 services of consultants, including an economist, a technologist, and
7 other appropriate subject matter experts.
8 Sec. 4. (a) The pharmacy benefit compliance fund is established
9 for the purposes of:
10 (1) paying the salary of the pharmacy benefit compliance
11 officer; and
12 (2) administering this chapter.
13 (b) The fund shall be administered by the attorney general.
14 (c) The fund consists of:
15 (1) any fees collected under section 3(4) of this chapter; and
16 (2) any appropriations to the fund by the general assembly.
17 (d) The expenses of administering the fund shall be paid from
18 money in the fund.
19 (e) The treasurer of state shall invest the money in the fund not
20 currently needed to meet the obligations of the fund in the same
21 manner as other public money may be invested. Interest that
22 accrues from these investments shall be deposited in the fund.
23 (f) Money in the fund at the end of a state fiscal year does not
24 revert to the state general fund. Money in the fund is continuously
25 appropriated for the purposes of this chapter.
26 SECTION 3. IC 5-10-8-27 IS ADDED TO THE INDIANA CODE
27 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
28 1, 2025]: Sec. 27. (a) As used in this section, "covered individual"
29 means an individual who is covered under a state employee health
30 plan.
31 (b) As used in this section, "pharmacy benefit compliance
32 officer" refers to the pharmacy benefit compliance officer
33 designated by the attorney general under IC 4-6-17-2.
34 (c) As used in this section, "pharmacy benefit manager" means
35 an entity engaged in the administration and management of
36 prescription drug benefits, including:
37 (1) processing claims;
38 (2) managing formularies;
39 (3) negotiating prescription drug prices; and
40 (4) providing prescription drug utilization review services.
41 (d) As used in this section, "pharmacy benefit partner" refers
42 to the private entity that enters into a public-private partnership
SB 503—LS 7353/DI 141 5
1 with the state personnel department under this section to
2 administer the prescription drug benefits on behalf of a state
3 employee health plan.
4 (e) As used in this section, "rebate" has the meaning set forth in
5 IC 27-1-50-7.
6 (f) As used in this section, "state employee health plan" refers
7 to the following plans that provide coverage for prescription drugs:
8 (1) A self-insurance program established under section 7(b) of
9 this chapter.
10 (2) A contract with a prepaid health care delivery plan that is
11 entered into or renewed under section 7(c) of this chapter.
12 (g) The state personnel department may issue a request for a
13 proposal to enter into a public-private partnership with a private
14 entity to establish and operate a pharmacy benefit manager to
15 administer all the prescription drug benefits on behalf of a state
16 employee health plan. Under the public-private partnership:
17 (1) the private entity shall manage the pharmacy benefit
18 manager operations; and
19 (2) the state personnel department shall provide oversight of
20 the pharmacy benefit manager operations.
21 (h) A request for proposal described in subsection (g) must
22 include the following requirements for the public-private
23 partnership:
24 (1) The pharmacy benefit partner may not:
25 (A) be affiliated with an insurance company; and
26 (B) own a mail, a retail, a specialty, or other type of
27 pharmacy.
28 (2) The pharmacy benefit partner must:
29 (A) demonstrate a commitment to managing prescription
30 drug benefits through financial alignment with prior
31 experience in private and public positions;
32 (B) employ at least two (2) executives who have experience
33 in building a prescription drug benefit plan and serving
34 over ten thousand (10,000) persons;
35 (C) demonstrate prior experience in prescription drug cost
36 savings through prescription drug spending reductions of
37 at least fifteen percent (15%);
38 (D) demonstrate prior experience in cost savings for
39 prescription drug benefits for over three (3) years with a
40 reduced trend in support of a sustainable pharmacy
41 benefit; and
42 (E) demonstrate prior experience in developing and
SB 503—LS 7353/DI 141 6
1 implementing a value based formulary and biosimilar
2 conversion.
3 (3) The following apply to any decisions made by the
4 pharmacy benefit partner when establishing a formulary:
5 (A) The pharmacy benefit partner shall consider:
6 (i) the best value based formulary for the cost and care
7 for a covered individual; and
8 (ii) generic drugs for cost savings.
9 (B) The pharmacy benefit partner may not implement
10 formularies with a preference towards specialty drugs for
11 capturing rebates.
12 (C) A pharmacy benefit partner shall:
13 (i) pass through to the state employee health plan one
14 hundred percent (100%) of all rebates concerning the
15 dispensing or administration of prescription drugs to
16 covered individuals; and
17 (ii) disclose to the state personnel department, as the
18 state agency responsible for the administration of the
19 state employee health plan, clear and transparent
20 evidence of the amount of rebates passed through to the
21 state employee health plan not later than thirty-one (31)
22 days after the end of each month.
23 (D) A manufacturer that:
24 (i) distributes prescription drugs to covered individuals;
25 or
26 (ii) provides rebates for access to prescription drug
27 formularies;
28 shall provide an affidavit to the pharmacy benefit
29 compliance officer on a form prescribed by the pharmacy
30 benefit compliance officer in which the manufacturer
31 commits to reverting to the state employee health plan one
32 hundred percent (100%) of any rebate and any other
33 manufacturer incentives concerning the dispensing or
34 administration of prescription drugs to covered
35 individuals.
36 (4) An administrative fee charged by the pharmacy benefit
37 partner must be based on a flat fee per covered individual.
38 (5) The pharmacy benefit partner shall pay a fee of five
39 dollars ($5) for each covered individual per year to the
40 pharmacy benefit compliance officer. A fee collected under
41 this subdivision must be deposited in the pharmacy benefit
42 compliance fund established by IC 4-6-17-4.
SB 503—LS 7353/DI 141 7
1 (i) The state personnel department may submit a proposed
2 contract for a public-private partnership to the budget committee
3 for review. The budget committee may review the contract for
4 content and clarity to ensure that the contract is consistent with the
5 objectives of a request for proposal issued under this section.
6 (j) The state personnel department may make any information
7 received from a pharmacy benefit partner under subsection
8 (h)(3)(C) available to the budget committee.
9 (k) If the state personnel department enters into a contract with
10 a pharmacy benefit partner under this section, the state personnel
11 department shall submit to the pharmacy benefit compliance
12 officer a quarterly report that summarizes the:
13 (1) cost of all prescription drug claims; and
14 (2) amount of any rebates passed through to the state
15 employee health plan.
16 (l) A pharmacy benefit partner or manufacturer that violates
17 the terms of an agreed contract entered into under this section or
18 any applicable state or federal law is subject to a civil penalty of
19 one thousand dollars ($1,000) per noncompliant claim. A civil
20 penalty under this section shall be paid to the pharmacy benefit
21 compliance officer not later than ninety (90) days after receiving
22 notice of the violation from the pharmacy benefit compliance
23 officer. A civil penalty collected under this subsection must be
24 deposited in the state general fund.
25 (m) If a pharmacy benefit partner fails to meet the performance
26 metrics outlined in an agreed contract entered into under this
27 section, the state personnel department may reduce the value of the
28 contract or terminate the contract.
29 SECTION 4. IC 5-10-8-28 IS ADDED TO THE INDIANA CODE
30 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
31 1, 2025]: Sec. 28. (a) This section establishes the competitive
32 proposal procedure that the state personnel department may use
33 to enter into a public-private partnership under section 27 of this
34 chapter.
35 (b) The state personnel department may pursue a competitive
36 proposal procedure using a request for qualifications and a request
37 for proposals process or proceed directly to a request for
38 proposals.
39 (c) If the state personnel department elects to use a request for
40 qualifications phase, it must provide a public notice of the request
41 for qualifications, for the period considered appropriate by the
42 state personnel department, before the date set for receipt of
SB 503—LS 7353/DI 141 8
1 submittals in response to the solicitation. The state personnel
2 department shall provide the notice by posting in a designated
3 public area and publication in a newspaper of general circulation,
4 in the manner provided by IC 5-3-1. In addition, submittals in
5 response to the solicitation may be solicited directly from potential
6 offerors.
7 (d) The state personnel department shall evaluate qualification
8 submittals based on the requirements and evaluation criteria set
9 forth in the request for qualifications.
10 (e) If the state personnel department has undertaken a request
11 for qualifications phase resulting in one (1) or more prequalified or
12 shortlisted offerors, the request for proposals may be limited to
13 those offerors that have been prequalified or shortlisted.
14 (f) If the state personnel department has not issued a request for
15 qualifications and intends to use only a one (1) phase request for
16 proposals procurement, the state personnel department must
17 provide a public notice of the request for proposals for the period
18 considered appropriate by the state personnel department, before
19 the date set for receipt of proposals. The state personnel
20 department shall provide the notice by posting in a designated
21 public area and publication in a newspaper of general circulation,
22 in the manner provided by IC 5-3-1. In addition, proposals may be
23 solicited directly from potential offerors.
24 (g) The state personnel department may submit a draft of the
25 request for proposals to the budget committee for its review before
26 the issuance by the state personnel department of the request for
27 proposals to potential offerors. The request for proposals must:
28 (1) indicate in general terms the scope of work, goods, and
29 services sought to be procured;
30 (2) contain or incorporate by reference the specifications and
31 contractual terms and conditions applicable to the
32 procurement;
33 (3) specify the factors, criteria, and other information that
34 will be used in evaluating the proposals;
35 (4) specify any requirements or goals for use of:
36 (A) minority business enterprises and women's business
37 enterprises certified under IC 4-13-16.5;
38 (B) disadvantaged business enterprises under federal or
39 state law;
40 (C) businesses defined under IC 5-22-15-20.5 as Indiana
41 businesses, to the extent permitted by applicable federal
42 and state law and regulations; and
SB 503—LS 7353/DI 141 9
1 (D) businesses that qualify for a small business set-aside
2 under IC 4-13.6-2-11;
3 (5) contain or incorporate by reference the other applicable
4 contractual terms and conditions; and
5 (6) contain or incorporate by reference any other provisions,
6 materials, or documents that the state personnel department
7 considers appropriate.
8 (h) The state personnel department shall set forth criteria in the
9 request for proposals in accordance with the requirements under
10 section 27 of this chapter. The state personnel department may use
11 a selection process that results in selection of the proposal offering
12 the best value to the public, a selection process that results in
13 selection of the proposal offering the lowest price or cost, or any
14 other selection process that the state personnel department
15 determines is in the best interests of the state and the public.
16 (i) The state personnel department shall evaluate proposals
17 based on the requirements and evaluation criteria set forth in the
18 request for proposals.
19 (j) The state personnel department may select one (1) or more
20 offerors for negotiations based on the evaluation criteria set forth
21 in the request for proposals. If the state personnel department
22 believes that negotiations with the selected offeror or offerors are
23 not likely to result in a contract, or, in the case of a best value
24 selection process, no longer reflect the best value to the state and
25 the public, the state personnel department may commence
26 negotiations with other responsive offerors, if any, and may
27 suspend, terminate, or continue negotiations with the original
28 offeror or offerors. If negotiations are unsuccessful, the state
29 personnel department shall terminate the procurement, may not
30 award the contract, and may commence a new procurement for a
31 contract. If the state personnel department determines that
32 negotiations with an offeror have been successfully completed, the
33 state personnel department may award the contract to the offeror.
34 (k) Before awarding a contract to an offeror, the state personnel
35 department may schedule a public hearing on the preliminary
36 selection of the offeror and the terms of the proposed contract. If
37 the state personnel department schedules a public hearing under
38 this subsection, the state personnel department shall do the
39 following:
40 (1) At least ten (10) days before the public hearing, post on the
41 state personnel department's website:
42 (A) the proposal submitted by the offeror that has been
SB 503—LS 7353/DI 141 10
1 preliminarily selected, except for those parts of the
2 proposal that are confidential; and
3 (B) the proposed contract.
4 (2) At least ten (10) days before the public hearing:
5 (A) post notice of the public hearing on the state personnel
6 department's website; and
7 (B) publish notice of the hearing one (1) time in accordance
8 with IC 5-3-1 in two (2) newspapers of general circulation.
9 (3) Include the following in the notices required by
10 subdivision (2):
11 (A) The date, time, and place of the hearing.
12 (B) The subject matter of the hearing.
13 (C) A description of the contract to be awarded.
14 (D) The recommendation that has been made to award the
15 contract to an identified offeror.
16 (E) The address and telephone number of the state
17 personnel department.
18 (F) A statement indicating that, except for those portions
19 that are confidential, the following are available on the
20 state personnel department's website and are also available
21 for public inspection and copying at the principal office of
22 the state personnel department during regular business
23 hours:
24 (i) The selected offer.
25 (ii) An explanation of the basis upon which the
26 preliminary selection was made.
27 (iii) The proposed contract.
28 (l) At the hearing, the state personnel department may allow the
29 public to be heard on the preliminary selection of the offeror and
30 the terms of the proposed contract.
31 SECTION 5. IC 12-15-13.6-1, AS AMENDED BY P.L.233-2023,
32 SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
33 JULY 1, 2025]: Sec. 1. (a) Once every three (3) state fiscal years:
34 (1) the state board of accounts; or
35 (2) an independent auditor with experience auditing expenses
36 related to prescription drugs that is hired by the state board of
37 accounts;
38 shall conduct an audit examining prescription drug cost sharing for the
39 Medicaid program.
40 (b) The attorney general may, for an audit described under
41 IC 27-1-3.7, IC 27-1-3.7-3, issue a request for proposal under
42 IC 27-1-3.7 to evaluate and determine whether to include the following
SB 503—LS 7353/DI 141 11
1 in the request for proposal for the audit:
2 (1) Cost sharing.
3 (2) Spread pricing.
4 (3) Patient steering.
5 (4) Proper brand and generic definitions.
6 (5) Effective rate clawbacks.
7 (6) Medical loss ratio inflation.
8 (7) Formulary compliance.
9 (8) Discriminatory pricing.
10 (9) Specialty drug definition and categorization.
11 (10) Adherence to contracted pricing terms.
12 (11) Adherence to plan design, including:
13 (A) quantity limits; and
14 (B) prior authorization guidelines.
15 (12) Under market reimbursements to pharmacies.
16 (13) Dispensing fees.
17 (14) Lesser of logic pricing.
18 (15) Fraud, waste, and abuse.
19 (16) Rebates.
20 (17) Compliance with federal law.
21 (18) Review of practices of any of the following used within the
22 Medicaid program:
23 (A) Managed care organizations.
24 (B) Pharmacies.
25 (C) Pharmacy services administrative organizations.
26 (D) Wholesalers.
27 (E) Drug manufacturers.
28 (19) Any other metric determined by the attorney general for
29 inclusion in the audit of the Medicaid program.
30 This subsection expires December 31, 2025.
31 SECTION 6. IC 12-15-48 IS ADDED TO THE INDIANA CODE
32 AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE
33 JULY 1, 2025]:
34 Chapter 48. Selection of Pharmacy Benefit Manager
35 Sec. 1. As used in this chapter, "office" refers to the office of the
36 secretary of family and social services.
37 Sec. 2. As used in this chapter, "pharmacy benefit compliance
38 officer" refers to the pharmacy benefit compliance officer
39 designated by the attorney general under IC 4-6-17-2.
40 Sec. 3. As used in this chapter, "pharmacy benefit manager"
41 means an entity engaged in the administration and management of
42 prescription drug benefits, including:
SB 503—LS 7353/DI 141 12
1 (1) processing claims;
2 (2) managing formularies;
3 (3) negotiating prescription drug prices; and
4 (4) providing prescription drug utilization review services.
5 Sec. 4. As used in this chapter, "pharmacy benefit partner"
6 refers to the private entity that enters into a public-private
7 partnership with the office under this chapter to administer the
8 prescription drug benefits on behalf of the Medicaid program.
9 Sec. 5. As used in this chapter, "rebate" has the meaning set
10 forth in IC 27-1-50-7.
11 Sec. 6. The office may issue a request for a proposal to enter into
12 a public-private partnership with a private entity to establish and
13 operate a pharmacy benefit manager to administer all the
14 prescription drug benefits on behalf of the Medicaid program.
15 Under the public-private partnership:
16 (1) the private entity shall manage the pharmacy benefit
17 manager operations; and
18 (2) the office shall provide oversight of the pharmacy benefit
19 manager operations.
20 Sec. 7. A request for proposal described in section 6 of this
21 chapter must include the following requirements for the
22 public-private partnership:
23 (1) The pharmacy benefit partner may not:
24 (A) be affiliated with an insurance company; and
25 (B) own a mail, a retail, a specialty, or any other type of
26 pharmacy.
27 (2) The pharmacy benefit partner must:
28 (A) demonstrate a commitment to managing prescription
29 drug benefits through financial alignment with prior
30 experience in private and public positions;
31 (B) employ at least two (2) executives who have experience
32 in building a prescription drug benefit plan and serving
33 over ten thousand (10,000) persons;
34 (C) demonstrate prior experience in prescription drug cost
35 savings through prescription drug spending reductions of
36 at least fifteen percent (15%);
37 (D) demonstrate prior experience in cost savings for
38 prescription drug benefits for over three (3) years with a
39 reduced trend in support of a sustainable pharmacy
40 benefit; and
41 (E) demonstrate prior experience in developing and
42 implementing a value based formulary and biosimilar
SB 503—LS 7353/DI 141 13
1 conversion.
2 (3) The following apply to any decisions made by the
3 pharmacy benefit partner when establishing a formulary:
4 (A) The pharmacy benefit partner shall consider:
5 (i) the best value based formulary for the cost and care
6 for a Medicaid recipient; and
7 (ii) generic drugs for cost savings.
8 (B) Except as provided in IC 12-15-35.5-7, the pharmacy
9 benefit partner may not implement formularies with a
10 preference towards specialty drugs for capturing rebates.
11 (C) A pharmacy benefit partner shall, except as otherwise
12 provided in federal law:
13 (i) pass through to the Medicaid program one hundred
14 percent (100%) of all rebates concerning the dispensing
15 or administration of prescription drugs to Medicaid
16 recipients; and
17 (ii) disclose to the office, as the state agency responsible
18 for the administration of the Medicaid program, clear
19 and transparent evidence of the amount of rebates
20 passed through to the Medicaid program not later than
21 thirty-one (31) days after the end of each month.
22 (D) A manufacturer that:
23 (i) distributes prescription drugs to Medicaid recipients;
24 or
25 (ii) provides rebates for access to prescription drug
26 formularies;
27 shall provide an affidavit to the pharmacy benefit
28 compliance officer on a form prescribed by the pharmacy
29 benefit compliance officer in which the manufacturer
30 commits to reverting to the Medicaid program, except as
31 otherwise provided in federal law, one hundred percent
32 (100%) of any rebate and any other manufacturer
33 incentives concerning the dispensing or administration of
34 prescription drugs to Medicaid recipients.
35 (4) An administrative fee charged by the pharmacy benefit
36 partner must be based on a flat fee per Medicaid recipient.
37 (5) The pharmacy benefit partner shall pay a fee of five
38 dollars ($5) for each Medicaid recipient per year to the
39 pharmacy benefit compliance officer. A fee collected under
40 this subdivision must be deposited in the pharmacy benefit
41 compliance fund established by IC 4-6-17-4.
42 Sec. 8. (a) This section establishes the competitive proposal
SB 503—LS 7353/DI 141 14
1 procedure that the office may use to enter into a public-private
2 partnership under this chapter.
3 (b) The office may pursue a competitive proposal procedure
4 using a request for qualifications and a request for proposals
5 process or proceed directly to a request for proposals.
6 (c) If the office elects to use a request for qualifications phase,
7 it must provide a public notice of the request for qualifications, for
8 the period considered appropriate by the office, before the date set
9 for receipt of submittals in response to the solicitation. The office
10 shall provide the notice by posting in a designated public area and
11 publication in a newspaper of general circulation, in the manner
12 provided by IC 5-3-1. In addition, submittals in response to the
13 solicitation may be solicited directly from potential offerors.
14 (d) The office shall evaluate qualification submittals based on
15 the requirements and evaluation criteria set forth in the request for
16 qualifications.
17 (e) If the office has undertaken a request for qualifications
18 phase resulting in one (1) or more prequalified or shortlisted
19 offerors, the request for proposals may be limited to those offerors
20 that have been prequalified or shortlisted.
21 (f) If the office has not issued a request for qualifications and
22 intends to use only a one (1) phase request for proposals
23 procurement, the office must provide a public notice of the request
24 for proposals for the period considered appropriate by the office,
25 before the date set for receipt of proposals. The office shall provide
26 the notice by posting in a designated public area and publication in
27 a newspaper of general circulation, in the manner provided by
28 IC 5-3-1. In addition, proposals may be solicited directly from
29 potential offerors.
30 (g) The office may submit a draft of the request for proposals to
31 the budget committee for its review before the issuance by the
32 office of the request for proposals to potential offerors. The request
33 for proposals must:
34 (1) indicate in general terms the scope of work, goods, and
35 services sought to be procured;
36 (2) contain or incorporate by reference the specifications and
37 contractual terms and conditions applicable to the
38 procurement;
39 (3) specify the factors, criteria, and other information that
40 will be used in evaluating the proposals;
41 (4) specify any requirements or goals for use of:
42 (A) minority business enterprises and women's business
SB 503—LS 7353/DI 141 15
1 enterprises certified under IC 4-13-16.5;
2 (B) disadvantaged business enterprises under federal or
3 state law;
4 (C) businesses defined under IC 5-22-15-20.5 as Indiana
5 businesses, to the extent permitted by applicable federal
6 and state law and regulations; and
7 (D) businesses that qualify for a small business set-aside
8 under IC 4-13.6-2-11;
9 (5) contain or incorporate by reference the other applicable
10 contractual terms and conditions; and
11 (6) contain or incorporate by reference any other provisions,
12 materials, or documents that the office considers appropriate.
13 (h) The office shall set forth criteria in the request for proposals
14 in accordance with the requirements under this chapter. The office
15 may use a selection process that results in selection of the proposal
16 offering the best value to the public, a selection process that results
17 in selection of the proposal offering the lowest price or cost, or any
18 other selection process that the office determines is in the best
19 interests of the state and the public.
20 (i) The office shall evaluate proposals based on the requirements
21 and evaluation criteria set forth in the request for proposals.
22 (j) The office may select one (1) or more offerors for
23 negotiations based on the evaluation criteria set forth in the
24 request for proposals. If the office believes that negotiations with
25 the selected offeror or offerors are not likely to result in a contract,
26 or, in the case of a best value selection process, no longer reflect the
27 best value to the state and the public, the office may commence
28 negotiations with other responsive offerors, if any, and may
29 suspend, terminate, or continue negotiations with the original
30 offeror or offerors. If negotiations are unsuccessful, the office shall
31 terminate the procurement, may not award the contract, and may
32 commence a new procurement for a contract. If the office
33 determines that negotiations with an offeror have been successfully
34 completed, the office may award the contract to the offeror.
35 (k) Before awarding a contract to an offeror, the office may
36 schedule a public hearing on the preliminary selection of the
37 offeror and the terms of the proposed contract. If the office
38 schedules a public hearing under this subsection, the office shall do
39 the following:
40 (1) At least ten (10) days before the public hearing, post on the
41 office's website:
42 (A) the proposal submitted by the offeror that has been
SB 503—LS 7353/DI 141 16
1 preliminarily selected, except for those parts of the
2 proposal that are confidential; and
3 (B) the proposed contract.
4 (2) At least ten (10) days before the public hearing:
5 (A) post notice of the public hearing on the office's website;
6 and
7 (B) publish notice of the hearing one (1) time in accordance
8 with IC 5-3-1 in two (2) newspapers of general circulation.
9 (3) Include the following in the notices required by
10 subdivision (2):
11 (A) The date, time, and place of the hearing.
12 (B) The subject matter of the hearing.
13 (C) A description of the contract to be awarded.
14 (D) The recommendation that has been made to award the
15 contract to an identified offeror.
16 (E) The address and telephone number of the office.
17 (F) A statement indicating that, except for those portions
18 that are confidential, the following are available on the
19 office's website and are also available for public inspection
20 and copying at the principal office of the office during
21 regular business hours:
22 (i) The selected offer.
23 (ii) An explanation of the basis upon which the
24 preliminary selection was made.
25 (iii) The proposed contract.
26 (l) At the hearing, the office may allow the public to be heard on
27 the preliminary selection of the offeror and the terms of the
28 proposed contract.
29 Sec. 9. The office may submit a proposed contract for a
30 public-private partnership to the budget committee for review. The
31 budget committee may review the contract for content and clarity
32 to ensure that the contract is consistent with the objectives of a
33 request for proposal issued under this chapter.
34 Sec. 10. The office may make any information received from a
35 pharmacy benefit partner under section 7(3)(C) of this chapter
36 available to the budget committee.
37 Sec. 11. If the office enters into a contract with a pharmacy
38 benefit partner under this chapter, the office shall submit to the
39 pharmacy benefit compliance officer a quarterly report that
40 summarizes the:
41 (1) cost of all prescription drug claims; and
42 (2) amount of any rebates passed through to the Medicaid
SB 503—LS 7353/DI 141 17
1 program.
2 Sec. 12. A pharmacy benefit partner or manufacturer that
3 violates the terms of an agreed contract entered into under this
4 chapter or any applicable state or federal law is subject to a civil
5 penalty of one thousand dollars ($1,000) per noncompliant claim.
6 A civil penalty under this section shall be paid to the pharmacy
7 benefit compliance officer not later than ninety (90) days after
8 receiving notice of the violation from the pharmacy benefit
9 compliance officer. A civil penalty collected under this subsection
10 must be deposited in the state general fund.
11 Sec. 13. If a pharmacy benefit partner fails to meet the
12 performance metrics outlined in an agreed contract entered into
13 under this chapter, the office may reduce the value of the contract
14 or terminate the contract.
15 SECTION 7. IC 27-1-3.7-1.5 IS ADDED TO THE INDIANA
16 CODE AS A NEW SECTION TO READ AS FOLLOWS
17 [EFFECTIVE JULY 1, 2025]: Sec. 1.5. As used in this chapter,
18 "pharmacy benefit partner" refers to a private entity that enters
19 into a public-private partnership with:
20 (1) the state personnel department under IC 5-10-8-27 to
21 administer the prescription drug benefits on behalf of a state
22 employee health plan; or
23 (2) the office of the secretary of family and social services
24 under IC 12-15-48 to administer the prescription drug
25 benefits on behalf of the Medicaid program.
26 SECTION 8. IC 27-1-3.7-4, AS ADDED BY P.L.233-2023,
27 SECTION 6, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
28 JULY 1, 2025]: Sec. 4. (a) For an audit conducted under section 3 of
29 this chapter, the audit look back period must be the previous five (5)
30 state fiscal years.
31 (b) The:
32 (1) state personnel department;
33 (2) office of the secretary of family and social services; and
34 (3) private agency, business firm, limited liability company, or
35 corporation with which the state personnel department or the
36 office of the secretary has contracted for administrative services;
37 shall provide the necessary data to the auditor to complete an audit
38 described in this chapter.
39 SECTION 9. IC 27-1-3.7-5, AS ADDED BY P.L.233-2023,
40 SECTION 6, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
41 JULY 1, 2025]: Sec. 5. Before September 1, 2024, the attorney general
42 shall provide the results of an audit conducted under section 3 of this
SB 503—LS 7353/DI 141 18
1 chapter to the interim study committee on public health, behavioral
2 health, and human services established by IC 2-5-1.3-4 in an electronic
3 format under IC 5-14-6.
4 SECTION 10. IC 27-1-3.7-5.5 IS ADDED TO THE INDIANA
5 CODE AS A NEW SECTION TO READ AS FOLLOWS
6 [EFFECTIVE JULY 1, 2025]: Sec. 5.5. (a) If:
7 (1) the state personnel department enters into a contract
8 under IC 5-10-8-27; or
9 (2) the office of the secretary of family and social services
10 enters into a contract under IC 12-15-48;
11 with a pharmacy benefit partner, the attorney general shall, at
12 least three (3) years after the contract is entered into, conduct a
13 state employee health plan audit or a Medicaid audit. An audit
14 conducted under this section must evaluate the same metrics that
15 were included in the audit of prescription drugs conducted under
16 section 3 of this chapter and the metrics described in subsection
17 (b).
18 (b) The following performance metrics must be used to evaluate
19 the pharmacy benefit partner's effectiveness:
20 (1) Annual reductions in the cost of prescription drugs for
21 covered individuals (as defined in IC 5-10-8-27(a)) and
22 Medicaid recipients.
23 (2) Availability of covered prescription drugs and timely
24 processing of claims.
25 (3) Improved health outcomes through proper medication
26 management, including reductions in hospitalizations related
27 to medication nonadherence.
28 (4) Annual surveys of covered individuals (as defined in
29 IC 5-10-8-27(a)) and Medicaid recipients to gauge satisfaction
30 with the pharmacy benefit partner's services.
31 (c) For an audit conducted under this section, the audit look
32 back period must be the previous three (3) state fiscal years.
33 (d) The attorney general shall provide the results of an audit
34 conducted under this section to the health care cost oversight task
35 force established by IC 2-5-47-3.
36 (e) If the cost of prescription drugs for the state employee health
37 plan and the Medicaid program have not decreased by at least
38 twenty-five percent (25%) during the look back period of the audit
39 under this section, the health care cost oversight task force shall
40 study and make recommendations concerning the cost of
41 prescription drug benefits.
SB 503—LS 7353/DI 141 19
COMMITTEE REPORT
Mr. President: The Senate Committee on Health and Provider
Services, to which was referred Senate Bill No. 503, has had the same
under consideration and begs leave to report the same back to the
Senate with the recommendation that said bill be AMENDED as
follows:
Page 2, line 38, delete "as" and insert "if".
Page 2, delete lines 41 through 42.
Delete page 3.
Page 4, delete lines 1 through 17, begin a new paragraph and insert:
"SECTION 2. IC 4-6-17 IS ADDED TO THE INDIANA CODE AS
A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE JULY
1, 2025]:
Chapter 17. Pharmacy Benefit Compliance Officer
Sec. 1. As used in this chapter, "pharmacy benefit partner"
refers to a private entity that enters into a public-private
partnership with:
(1) the state personnel department under IC 5-10-8-27 to
administer the prescription drug benefits on behalf of a state
employee health plan (as defined in IC 5-10-8-27(f)); or
(2) the office of the secretary of family and social services
under IC 12-15-48 to administer the prescription drug
benefits on behalf of the Medicaid program.
Sec. 2. If a contract is entered into as a result of a request for
proposal issued by the state personnel department under
IC 5-10-8-27 or the office of the secretary of family and social
services under IC 12-15-48, the attorney general shall designate or
appoint a deputy or an assistant attorney general as a pharmacy
benefit compliance officer to perform the duties listed in section 3
of this chapter.
Sec. 3. (a) The pharmacy benefit compliance officer designated
under section 2 of this chapter shall do the following:
(1) Audit any data received from the state personnel
department under IC 5-10-8-27(k) and the office of the
secretary of family and social services, including all managed
care organizations or programs, under IC 12-15-48-11 to
ensure compliance with the following:
(A) A contract entered into as a result of a request for
proposal issued under IC 5-10-8-27 or IC 12-15-48.
(B) Applicable state and federal law.
(2) Provide notice to a pharmacy benefit partner or
manufacturer if, during an audit conducted under subdivision
SB 503—LS 7353/DI 141 20
(1), the pharmacy benefit compliance officer finds that the
pharmacy benefit partner or manufacturer is noncompliant.
(3) Impose a civil penalty in accordance with IC 5-10-8-27(l)
or IC 12-15-48-12.
(4) Collect any fees from a pharmacy benefit partner under
IC 5-10-8-27(h)(5) or IC 12-15-48-7(5).
(5) On an annual basis:
(A) prepare a report summarizing any data received from
the state personnel department under IC 5-10-8-27(k) or
the office of the secretary of family and social services,
including all managed care organizations or programs,
under IC 12-15-48-11 during the previous state fiscal year;
and
(B) submit the report described in clause (A) to the budget
committee and the chairperson of the health care cost
oversight task force.
(b) The pharmacy benefit compliance officer may engage the
services of consultants, including an economist, a technologist, and
other appropriate subject matter experts.
Sec. 4. (a) The pharmacy benefit compliance fund is established
for the purposes of:
(1) paying the salary of the pharmacy benefit compliance
officer; and
(2) administering this chapter.
(b) The fund shall be administered by the attorney general.
(c) The fund consists of:
(1) any fees collected under section 3(4) of this chapter; and
(2) any appropriations to the fund by the general assembly.
(d) The expenses of administering the fund shall be paid from
money in the fund.
(e) The treasurer of state shall invest the money in the fund not
currently needed to meet the obligations of the fund in the same
manner as other public money may be invested. Interest that
accrues from these investments shall be deposited in the fund.
(f) Money in the fund at the end of a state fiscal year does not
revert to the state general fund. Money in the fund is continuously
appropriated for the purposes of this chapter.".
Page 5, line 4, delete "Before January 1, 2026, the state personnel
department shall" and insert "The state personnel department may".
Page 5, line 14, delete "The" and insert "A".
Page 5, delete lines 17 through 25, begin a new line block indented
and insert:
SB 503—LS 7353/DI 141 21
"(1) The pharmacy benefit partner may not:
(A) be affiliated with an insurance company; and
(B) own a mail, a retail, a specialty, or other type of
pharmacy.".
Page 6, delete lines 41 through 42.
Page 7, delete lines 1 through 7, begin a new paragraph and insert:
"(i) The state personnel department may submit a proposed
contract for a public-private partnership to the budget committee
for review. The budget committee may review the contract for
content and clarity to ensure that the contract is consistent with the
objectives of a request for proposal issued under this section.".
Page 7, line 8, delete "(k)" and insert "(j)".
Page 7, line 8, delete "shall" and insert "may".
Page 7, line 11, delete "(l) After " and insert "(k) If".
Page 7, line 18, delete "(m)" and insert "(l)".
Page 7, line 27, delete "(n)" and insert "(m)".
Page 7, line 34, delete "shall" and insert "may".
Page 8, line 14, delete "shall" and insert "may".
Page 8, line 26, delete "shall" and insert "may".
Page 9, line 35, delete "shall, subject to the other requirements" and
insert "may".
Page 9, line 36, delete "of section 27 of this chapter and this
section,".
Page 9, line 39, delete "shall" and insert "may".
Page 9, line 40, delete "contract. The" and insert "contract. If the
state personnel department schedules a public hearing under this
subsection, the".
Page 10, line 30, delete "shall" and insert "may".
Page 11, line 42, delete "section," and insert "chapter,".
Page 12, line 7, delete "section," and insert "chapter,".
Page 12, line 13, delete "Before July 1, 2027, the office shall" and
insert "The office may".
Page 12, line 22, delete "The" and insert "A".
Page 12, delete lines 25 through 33, begin a new line block indented
and insert:
"(1) The pharmacy benefit partner may not:
(A) be affiliated with an insurance company; and
(B) own a mail, a retail, a specialty, or any other type of
pharmacy.".
Page 13, line 15, delete "The" and insert "Except as provided in
IC 12-15-35.5-7, the".
Page 13, line 18, delete "shall:" and insert "shall, except as
SB 503—LS 7353/DI 141 22
otherwise provided in federal law:".
Page 13, line 36, delete "program" and insert "program, except as
otherwise provided in federal law,".
Page 14, line 7, delete "shall" and insert "may".
Page 14, line 25, delete "shall" and insert "may".
Page 14, line 36, delete "shall" and insert "may".
Page 15, line 40, delete "shall, subject to the other requirements of
this" and insert "may".
Page 15, line 41, delete "chapter,".
Page 15, line 42, delete "shall" and insert "may".
Page 16, line 2, delete "contract. The" and insert "contract. If the
office schedules a public hearing under this subsection, the".
Page 16, line 32, delete "shall" and insert "may".
Page 16, delete lines 35 through 42, begin a new paragraph and
insert:
"Sec. 9. The office may submit a proposed contract for a
public-private partnership to the budget committee for review. The
budget committee may review the contract for content and clarity
to ensure that the contract is consistent with the objectives of a
request for proposal issued under this chapter.".
Page 17, line 1, delete "11." and insert "10.".
Page 17, line 1, delete "shall" and insert "may".
Page 17, line 4, delete "12. After" and insert "11. If".
Page 17, line 11, delete "13." and insert "12.".
Page 17, line 20, delete "14." and insert "13.".
Page 18, delete lines 13 through 42, begin a new paragraph and
insert:
"SECTION 10. IC 27-1-3.7-5.5 IS ADDED TO THE INDIANA
CODE AS A NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2025]: Sec. 5.5. (a) If:
(1) the state personnel department enters into a contract
under IC 5-10-8-27; or
(2) the office of the secretary of family and social services
enters into a contract under IC 12-15-48;
with a pharmacy benefit partner, the attorney general shall, at
least three (3) years after the contract is entered into, conduct a
state employee health plan audit or a Medicaid audit. An audit
conducted under this section must evaluate the same metrics that
were included in the audit of prescription drugs conducted under
section 3 of this chapter and the metrics described in subsection
(b).
(b) The following performance metrics must be used to evaluate
SB 503—LS 7353/DI 141 23
the pharmacy benefit partner's effectiveness:
(1) Annual reductions in the cost of prescription drugs for
covered individuals (as defined in IC 5-10-8-27(a)) and
Medicaid recipients.
(2) Availability of covered prescription drugs and timely
processing of claims.
(3) Improved health outcomes through proper medication
management, including reductions in hospitalizations related
to medication nonadherence.
(4) Annual surveys of covered individuals (as defined in
IC 5-10-8-27(a)) and Medicaid recipients to gauge satisfaction
with the pharmacy benefit partner's services.
(c) For an audit conducted under this section, the audit look
back period must be the previous three (3) state fiscal years.
(d) The attorney general shall provide the results of an audit
conducted under this section to the health care cost oversight task
force established by IC 2-5-47-3.
(e) If the cost of prescription drugs for the state employee health
plan and the Medicaid program have not decreased by at least
twenty-five percent (25%) during the look back period of the audit
under this section, the health care cost oversight task force shall
study and make recommendations concerning the cost of
prescription drug benefits.".
Delete pages 19 through 27.
Renumber all SECTIONS consecutively.
and when so amended that said bill do pass and be reassigned to the
Senate Committee on Appropriations.
(Reference is to SB 503 as introduced.)
CHARBONNEAU, Chairperson
Committee Vote: Yeas 11, Nays 0.
SB 503—LS 7353/DI 141