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AN ACT relating to pharmacy benefit claim verification and declaring an 1
emergency. 2
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 3
SECTION 1. A NEW SECTION OF KRS CHAPTER 18A IS CREATED TO 4
READ AS FOLLOWS: 5
(1) (a) By December 31, 2022, the secretary of the Finance and Administration 6
Cabinet shall, upon the recommendation of the secretary of the Personnel 7
Cabinet and in accordance with KRS Chapter 45A, select and enter into a 8
contract, the effective date of which shall not be later than January 1, 2023, 9
with a single independent entity for the purpose of monitoring all pharmacy 10
benefit claims for every individual enrolled in the Public Employee Health 11
Insurance Program. 12
(b) A contract entered into pursuant to this subsection shall not be for a term 13
longer than two (2) years but may be renewed for like or lesser periods. 14
(2) To be eligible to receive a contract pursuant to subsection (1) of this section, an 15
entity shall: 16
(a) Have at least five (5) years of experience reviewing and auditing pharmacy 17
claims and pharmacy benefit manager operations; 18
(b) Be capable of performing the analysis of pharmacy benefit claims to 19
validate accuracy and identify errors in near real-time; 20
(c) Not be an entity that performs annual retroactive audits of pharmacy 21
benefit claims for the Public Employee Health Insurance Program; and 22
(d) Not be affiliated by common parent company or holding company, share 23
any common members of the board of directors, or share managers in 24
common with: 25
1. An insurer contracted pursuant to KRS 18A.225; 26
2. A third-party administrator contracted pursuant to KRS 18A.2254; or 27 UNOFFICIAL COPY 22 RS SB 68/GA
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3. A pharmacy benefit manager contracted by: 1
a. The Personnel Cabinet; 2
b. An insurer contracted pursuant to KRS 18A.225; or 3
c. A third-party administrator contracted pursuant to KRS 4
18A.2254. 5
(3) The entity contracted pursuant to subsection (1) of this section shall: 6
(a) Be granted full access to: 7
1. Any contract awarded to a pharmacy benefit manager for the purpose 8
of administering pharmacy benefits in the Public Employee Health 9
Insurance Program and all pertinent reference documents within that 10
contract, including but not limited to any price lists or specialty drug 11
price lists which shall be provided to the monitoring entity contracted 12
pursuant to this section by the Personnel Cabinet and which shall be 13
updated by the Personnel Cabinet within five (5) days of the effective 14
date of any pricing changes; 15
2. Any other contract that defines a pharmacy benefit manager's 16
obligations and responsibilities as it relates to processing Public 17
Employee Health Insurance Program pharmacy benefit claims, 18
including any contract between the pharmacy benefit manager and an 19
insurer contracted pursuant to KRS 18A.225 or a third-party 20
administrator contracted pursuant to KRS 18A.2254; and 21
3. Invoices and unaltered claims files associated with the Public 22
Employee Health Insurance Program pharmacy benefits; 23
(b) Analyze one hundred percent (100%) of invoices or claims submitted for 24
payment by the Public Employee Health Insurance Program. The entity 25
shall not utilize statistical sampling methods in lieu of analyzing all invoices 26
and claims; 27 UNOFFICIAL COPY 22 RS SB 68/GA
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(c) Identify and correct errors in pharmacy benefit claims in order to avoid or 1
reduce erroneous overpayments by an insurer contracted pursuant to KRS 2
18A.225, a third-party administrator contracted pursuant to KRS 18A.2254, 3
or a pharmacy benefit manager contracted to administer pharmacy benefits 4
in the Public Employee Health Insurance Program; 5
(d) Identify underpayments made by an insurer contracted pursuant to KRS 6
18A.225, a third-party administrator contracted pursuant to KRS 18A.2254, 7
or a pharmacy benefit manager contracted to administer pharmacy benefits 8
in the Public Employee Health Insurance Program; 9
(e) Identify inappropriate or erroneous fees imposed by an insurer contracted 10
pursuant to KRS 18A.225, a third-party administrator contracted pursuant 11
to KRS 18A.2254, or a pharmacy benefit manager contracted to administer 12
pharmacy benefits in the Public Employee Health Insurance Program; and 13
(f) Beginning on April 30, 2023, and quarterly thereafter, submit a report to 14
the Legislative Research Commission. The report shall include a summary 15
of the analysis and errors identified pursuant to paragraphs (c), (d), and (e), 16
of this subsection during the previous quarter. 17
(4) The entity contracted pursuant to subsection (1) of this section shall not perform 18
drug utilization reviews. 19
(5) The analysis of claims and the identification of potential errors required by 20
subsection (3)(b), (c), and (d) of this section shall: 21
(a) Occur prior to the due date of each claim or invoice submitted by an insurer 22
contracted pursuant to KRS 18A.225, a third-party administrator contracted 23
pursuant to KRS 18A.2254, or a pharmacy benefit manager contracted to 24
administer pharmacy benefits in the Public Employee Health Insurance 25
Program or within five (5) days of receipt of the claim or invoice, whichever 26
is later; and 27 UNOFFICIAL COPY 22 RS SB 68/GA
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(b) Consider at least the following: 1
1. Compliance with all relevant administrative regulations promulgated 2
by the Personnel Cabinet; 3
2. Compliance with all state and federal laws relating to or applicable to 4
the Public Employee Health Insurance Program; 5
3. Compliance with any contract between a pharmacy benefit manager 6
and the Personnel Cabinet, an insurer contracted pursuant to KRS 7
18A.225, or a third-party administrator contracted pursuant to KRS 8
18A.2254; and 9
4. The market competitiveness of pharmacy benefit payments, including 10
the adequacy of payments to pharmacies. 11
(6) The Personnel Cabinet may promulgate administrative regulations necessary to 12
carry out this section. 13
SECTION 2. A NEW SECTION OF KRS CHAPTER 205 IS CREATED TO 14
READ AS FOLLOWS: 15
(1) As used in this section: 16
(a) "Department" means the Department for Medicaid Services; 17
(b) "Managed care organization" has the same meaning as in KRS 205.532; 18
and 19
(c) "State pharmacy benefit manager" has the same meaning as in KRS 20
205.5510. 21
(2) (a) By December 31, 2022, the department shall, in accordance with KRS 22
Chapter 45A, select and enter into a contract, the effective date of which 23
shall not be later than January 1, 2023, with a single independent entity for 24
the purpose of monitoring all Medicaid pharmacy benefit claims for every 25
Medicaid beneficiary regardless of whether the beneficiary's Medicaid 26
benefits are managed through a fee-for-service or managed-care model. 27 UNOFFICIAL COPY 22 RS SB 68/GA
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(b) A contract entered into pursuant to this subsection shall not be for a term 1
longer than two (2) years but may be renewed for like or lesser periods. 2
(3) To be eligible to receive a contract pursuant to subsection (2) of this section, an 3
entity shall: 4
(a) Have at least five (5) years of experience reviewing and auditing pharmacy 5
claims and pharmacy benefit manager operations; 6
(b) Be capable of performing the analysis of pharmacy benefit claims to 7
validate accuracy and identify errors in near real-time; 8
(c) Not be an entity that performs annual retroactive audits of pharmacy 9
benefit claims for the department; and 10
(d) Not be affiliated by common parent company or holding company, share 11
any common members of the board of directors, or share managers in 12
common with the state pharmacy benefit manager or a managed care 13
organization. 14
(4) The entity contracted by the department pursuant to subsection (2) of this section 15
shall: 16
(a) Be granted full access to: 17
1. The state pharmacy benefit manager contract awarded by the 18
department pursuant to KRS 205.5512, and all pertinent reference 19
documents within that contract, including but not limited to any price 20
lists or specialty drug price lists which shall be provided to the 21
monitoring entity contracted pursuant to this section by the state 22
pharmacy benefit manager and which shall be updated by the state 23
pharmacy benefit manager within five (5) days of the effective date of 24
any pricing changes; 25
2. Any other contract that defines the state pharmacy benefit manager's 26
obligations and responsibilities as it relates to processing Medicaid 27 UNOFFICIAL COPY 22 RS SB 68/GA
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pharmacy benefit claims in the Commonwealth, including any 1
contract between the state pharmacy benefit manager and a managed 2
care organization; and 3
3. Invoices and unaltered claims files associated with Medicaid 4
pharmacy benefits; 5
(b) Analyze one hundred percent (100%) of invoices or claims submitted for 6
payment by the department or a managed care organization. The entity 7
shall not utilize statistical sampling methods in lieu of analyzing all invoices 8
and claims; 9
(c) Identify and correct errors in pharmacy benefit claims in order to avoid or 10
reduce erroneous overpayments by the department to the state pharmacy 11
benefit manager, either directly or indirectly through a managed care 12
organization; 13
(d) Identify underpayments made by the state pharmacy benefit manager to 14
pharmacies licensed in this state; 15
(e) Identify inappropriate or erroneous fees imposed by the state pharmacy 16
benefit manager in violation of KRS 205.5512; 17
(f) Analyze the state pharmacy benefit manager's performance and compliance 18
with: 19
1. The contract between the department and the state pharmacy benefit 20
manager; 21
2. The state pharmacy benefit manager and each managed care 22
organization; and 23
3. KRS 205.5512, 205.5514, 205.5516, and 205.5518; and 24
(g) Beginning on April 30, 2023, and quarterly thereafter, submit a report to 25
the Medicaid Oversight and Advisory Committee. The report shall include a 26
summary of the analysis and errors identified pursuant to paragraphs (c), 27 UNOFFICIAL COPY 22 RS SB 68/GA
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(d), (e), and (f) of this subsection during the previous quarter. 1
(5) The entity contracted by the department pursuant to subsection (2) of this section 2
shall not perform drug utilization reviews. 3
(6) The analysis of claims and the identification of potential errors required by 4
subsection (4)(b), (c), and (d) of this section shall: 5
(a) Occur prior to the due date of each claim or invoice submitted by the state 6
pharmacy benefit manager or within five (5) days of receipt of the claim or 7
invoice, whichever is later; and 8
(b) Consider at least the following: 9
1. Compliance with all relevant administrative regulations promulgated 10
by the department; 11
2. Compliance with the Medicaid State Plan; 12
3. Compliance with the contract between the department and the state 13
pharmacy benefit manager; 14
4. Compliance with any contract between the state pharmacy benefit 15
manager and a managed care organization; and 16
5. The market competitiveness of pharmacy benefit payments, including 17
the adequacy of the state pharmacy benefit manager's payments to 18
pharmacies. 19
(7) The department may promulgate administrative regulations necessary to carry 20
out this section. 21
Section 3. Whereas there is urgent need to improve the administration and 22
provision of pharmacy benefits for Medicaid beneficiaries and state employees, an 23
emergency is declared to exist, and this Act takes effect upon its passage and approval by 24
the Governor or upon its otherwise becoming law. 25