Massachusetts 2023-2024 Regular Session

Massachusetts House Bill H1215 Compare Versions

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1	1	1 of 1
2	2	HOUSE DOCKET, NO. 1404 FILED ON: 1/18/2023
3	3	HOUSE . . . . . . . . . . . . . . . No. 1215
4	4	The Commonwealth of Massachusetts
5	5	_________________
6	6	PRESENTED BY:
7	7	John J. Lawn, Jr.
8	8	_________________
9	9	To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
10	10	Court assembled:
11	11	The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:
12	12	An Act relative to pharmacy benefit managers.
13	13	_______________
14	14	PETITION OF:
15	15	NAME:DISTRICT/ADDRESS :DATE ADDED:John J. Lawn, Jr.10th Middlesex1/18/2023Steven Owens29th Middlesex1/31/2023Michael J. Finn6th Hampden1/31/2023Smitty Pignatelli3rd Berkshire1/31/2023William J. Driscoll, Jr.7th Norfolk1/31/2023Christopher Hendricks11th Bristol1/31/2023Lindsay N. Sabadosa1st Hampshire2/2/2023Vanna Howard17th Middlesex2/2/2023 1 of 29
16	16	HOUSE DOCKET, NO. 1404 FILED ON: 1/18/2023
17	17	HOUSE . . . . . . . . . . . . . . . No. 1215
18	18	By Representative Lawn of Watertown, a petition (accompanied by bill, House, No. 1215) of
19	19	John J. Lawn, Jr. and others relative to pharmacy benefit managers. Health Care Financing.
20	20	The Commonwealth of Massachusetts
21	21	_______________
22	22	In the One Hundred and Ninety-Third General Court
23	23	(2023-2024)
24	24	_______________
25	25	An Act relative to pharmacy benefit managers.
26	26	Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority
27	27	of the same, as follows:
28	28	1 SECTION 1. Said section 1 of said chapter 6D , as so appearing, is hereby further
29	29	2amended by inserting after the definition of “Performance penalty” the following 2 definitions:-
30	30	3 “Pharmacy benefit manager”, as defined in section 1 of chapter 176X
31	31	4 “Pharmacy benefit services”, as defined in section 1 of chapter 176X
32	32	5 SECTION 2. Section 4 of said chapter 6D , as so appearing, is hereby amended by
33	33	6striking out, in lines 6 and 7, the word “manufacturers” and inserting in place thereof the
34	34	7following words:- pharmacy benefit managers.
35	35	8 SECTION 3. Section 6 of said chapter 6D , as so appearing, is hereby amended by adding
36	36	9the following paragraph:-
37	37	10 If the analysis of spending trends with respect to the pharmaceutical or biopharmaceutical
38	38	11products increases the expenses of the commission, the estimated increases in the commission’s 2 of 29
39	39	12expenses shall be assessed fully to pharmacy benefit managers in the same manner as the
40	40	13assessment pursuant to section 68 of chapter 118E. A pharmacy benefit manager that is a
41	41	14surcharge payor subject to the preceding paragraph and administers its own prescription drug,
42	42	15prescription device or pharmacist services or prescription drug and device and pharmacist
43	43	16services portion shall not be subject to additional assessment under this paragraph.
44	44	17 SECTION 4. Section 8 of said chapter 6D , as so appearing, is hereby amended by
45	45	18inserting after the word “organization” , in lines 6 and 7, the following words:- , pharmacy
46	46	19benefit manager.
47	47	20 SECTION 5. Said section 8 of said chapter 6D , as so appearing, is hereby further
48	48	21amended by inserting after the word “organizations”, in line 14, the following words:- ,
49	49	22pharmacy benefit managers.
50	50	23 SECTION 6. Said section 8 of said chapter 6D , as so appearing, is hereby further
51	51	24amended by striking out, in lines 32 and 33 , the words “and (xi) any witness identified by the
52	52	25attorney general or the center” and inserting in place thereof the following words:- (xi) 2
53	53	26pharmacy benefit managers; and (xii) any witness identified by the attorney general or the center.
54	54	27 SECTION 7. Subsection (g) of said section 8 of said chapter 6D , as so appearing, is
55	55	28hereby further amended by striking out the second sentence and inserting in place thereof the
56	56	29following sentence:- The report shall be based on the commission's analysis of information
57	57	30provided at the hearings by witnesses, providers, provider organizations, insurers and pharmacy
58	58	31benefit managers, registration data collected pursuant to section 11, data collected or analyzed by
59	59	32the center pursuant to sections 8, 9, 10,10A and 10B of chapter 12C and any other available 3 of 29
60	60	33information that the commission considers necessary to fulfill its duties in this section, as defined
61	61	34in regulations promulgated by the commission.
62	62	35 SECTION 8. Section 9 of said chapter 6D , as so appearing, is hereby amended by
63	63	36inserting after the word “organization”, in line 72, the following words:- , pharmacy benefit
64	64	37manager.
65	65	38 SECTION 9. Said Section 9 of said chapter 6D , as so appearing, is hereby further
66	66	39amended by inserting after the word “organizations”, in line 82, the following words:- ,
67	67	40pharmacy benefit manager.
68	68	41 SECTION 10. Section 1 of chapter 12C of the General Laws, as appearing in the 2018
69	69	42Official Edition, is hereby amended by inserting after the definition of “Patient-centered medical
70	70	43home” the following 5 definitions:-
71	71	44 “Pharmaceutical manufacturing company”, any entity engaged in the production,
72	72	45preparation, propagation, compounding, conversion or processing of prescription drugs, either
73	73	46directly or indirectly, by extraction from substances of natural origin, or independently by means
74	74	47of chemical synthesis or by a combination of extraction and chemical synthesis, or any entity
75	75	48engaged in the packaging, repackaging, labeling, relabeling or distribution of prescription drugs;
76	76	49provided however, that “pharmaceutical manufacturing company” shall not include a wholesale
77	77	50drug distributor licensed pursuant to section 36A of chapter 112 or a retail pharmacist registered
78	78	51pursuant to section 38 of said chapter 112.
79	79	52 “Pharmacy benefit manager”, any person, business, or entity, however organized, that
80	80	53administers, either directly or through its subsidiaries, pharmacy benefit services for prescription 4 of 29
81	81	54drugs and devices on behalf of health benefit plan sponsors, including, but not limited to, self-
82	82	55insured employers, insurance companies and labor unions;
83	83	56 “Pharmacy benefit services” shall include, but not be limited to, formulary
84	84	57administration; drug benefit design; pharmacy network contracting; pharmacy claims processing;
85	85	58mail and specialty drug pharmacy services; and cost containment, clinical, safety, and adherence
86	86	59programs for pharmacy services. For the purposes of this section, a health benefit plan that does
87	87	60not contract with a pharmacy benefit manager shall be a pharmacy benefit manager, unless
88	88	61specifically exempted.
89	89	62 “Wholesale acquisition cost”, the cost of a prescription drug as defined in 42 U.S.C.
90	90	63§1395w-3a(c)(6)(B).
91	91	64 SECTION 11. Section 3 of said chapter 12C , as so appearing, is hereby amended by
92	92	65inserting after the word “organizations”, in lines 13 and 14, the following words:- , pharmacy
93	93	66benefit managers.
94	94	67 SECTION 12. Section 5 of said chapter 12C , as so appearing, is hereby amended by
95	95	68inserting after the word “organizations”, in line 11, the following words:- , pharmacy benefit
96	96	69managers.
97	97	70 SECTION 13. Said section 5 of said chapter 12C , as so appearing, is hereby further
98	98	71amended by inserting after the word “providers”, in line 15, the following words:- , affected
99	99	72pharmacy benefit managers.
100	100	73 SECTION 14. Section 7 of said chapter 12C , as so appearing, is hereby further amended
101	101	74by adding the following paragraph:- 5 of 29
102	102	75 To the extent that the analysis and reporting activities pursuant to section 10A increases
103	103	76the expenses of the center, the estimated increase in the center’s expenses shall be fully assessed
104	104	77to pharmacy benefit managers in the same manner as the assessment pursuant to section 68 of
105	105	78chapter 118E.
106	106	79 SECTION 15. Said chapter 12C is hereby further amended by inserting after section 10
107	107	80the following section:-
108	108	81 Section 10A . The center shall promulgate regulations necessary to ensure the uniform
109	109	82analysis of information regarding pharmacy benefit managers that enables the center to analyze:
110	110	83(1) year-over-year wholesale acquisition cost changes; (2) year-over-year trends in formulary,
111	111	84maximum allowable costs list and cost-sharing design, including the establishment and
112	112	85management of specialty product lists; (3) aggregate information regarding discounts,
113	113	86utilizations limits, rebates, manufacturer administrative fees and other financial incentives or
114	114	87concessions related to pharmaceutical products or formulary programs; (4) information regarding
115	115	88the aggregate amount of payments made to pharmacies owned or controlled by the pharmacy
116	116	89benefit managers and the aggregate amount of payments made to pharmacies that are not owned
117	117	90or controlled by the pharmacy benefit managers; and (5) additional information deemed
118	118	91reasonable and necessary by the center as set forth in the center’s regulations.
119	119	92 SECTION 16. Section 11 of said chapter 12C , as so appearing, is hereby amended by
120	120	93striking out the first sentence and inserting in place thereof the following sentence:-
121	121	94 The center shall ensure the timely reporting of information required pursuant to sections
122	122	958, 9, 10 and 10A. 6 of 29
123	123	96 SECTION 17. Said section 11 of said chapter 12C , as so appearing, is hereby further
124	124	97amended by striking out, in line 11, the figure “$1,000” and inserting in place thereof the
125	125	98following figure:- $5,000.
126	126	99 SECTION 18. Said section 11 of said chapter 12C , as so appearing, is hereby further
127	127	100amended by striking out, in line 16, the figure “$50,000” and inserting in place thereof the
128	128	101following figure:- $200,000.
129	129	102 SECTION 19. Section 12 of said chapter 12C, as so appearing, is hereby amended by
130	130	103striking out, in line 2, the words “9 and 10” and inserting in place thereof the following words:-
131	131	1049, 10 and 10A
132	132	105 SECTION 20. Subsection (a) of section 16 of said chapter 12C , as so appearing, is
133	133	106hereby amended by striking out the first sentence and inserting in place thereof the following
134	134	107sentence:- The center shall publish an annual report based on the information submitted pursuant
135	135	108to sections 8, 9, 10, 10A and 10B concerning health care provider, provider organization,
136	136	109pharmacy benefit manager and private and public health care payer costs and cost and price
137	137	110trends, pursuant to section 13 of chapter 6D relative to market impact reviews and pursuant to
138	138	111section 15 relative to quality data.
139	139	112 SECTION 21. Chapter 94C is hereby further amended by inserting after section 21B the
140	140	113following section:-
141	141	114 Section 21C. (a) For the purposes of this section, the following words shall, unless the
142	142	115context clearly requires otherwise, have the following meanings:- 7 of 29
143	143	116 “Cost sharing”, amounts owed by a consumer under the terms of the consumer’s health
144	144	117benefit plan as defined in section 1 of chapter 176O or as required by a pharmacy benefit
145	145	118manager as defined in section 1 of chapter 6D.
146	146	119 “Pharmacy retail price”, the amount an individual would pay for a prescription
147	147	120medication at a pharmacy if the individual purchased that prescription medication at that
148	148	121pharmacy without using a health benefit plan as defined in section 1 of chapter 176O or any
149	149	122other prescription medication benefit or discount.
150	150	123 “Registered pharmacist”, a pharmacist who holds a valid certificate of registration issued
151	151	124by the board of registration in pharmacy pursuant to section 24 of chapter 112.
152	152	125 (b) A pharmacy shall post a notice informing consumers that a consumer may request, at
153	153	126the point of sale, the current pharmacy retail price for each prescription medication the consumer
154	154	127intends to purchase. If the consumer’s cost-sharing amount for a prescription medication exceeds
155	155	128the current pharmacy retail price, the pharmacist, or an authorized individual at the direction of a
156	156	129pharmacist, shall notify the consumer that the pharmacy retail price is less than the patient’s cost-
157	157	130sharing amount. The pharmacist shall charge the consumer the applicable cost-sharing amount or
158	158	131the current pharmacy retail price for that prescription medication, as directed by the consumer.
159	159	132 A pharmacist shall not be subject to a penalty by the board of registration in pharmacy or
160	160	133a third party for failure to comply with this section.
161	161	134 (c) A contractual obligation shall not prohibit a pharmacist from complying with this
162	162	135section; provided however, that a pharmacist shall submit a claim to the consumer’s health
163	163	136benefit plan or its pharmacy benefit manager if the pharmacist has knowledge that the
164	164	137prescription medication is covered under the consumer’s health benefit plan. 8 of 29
165	165	138 (d) Failure to post notice pursuant to subsection (b) shall be an unfair or deceptive act of
166	166	139practice under chapter 93A.
167	167	140 SECTION 22 Section 226 of chapter 175 is hereby repealed.
168	168	141 SECTION 23. The General Laws are hereby amended by inserting after Chapter 176W
169	169	142the following chapter:-
170	170	143 Chapter 176X
171	171	144 Section 1 . As used in this chapter, the following words shall have the following
172	172	145meanings, unless the context clearly requires otherwise:-
173	173	146 “Carrier”, as defined in section 1 of chapter 176O “Commissioner”, the commissioner of
174	174	147the division of insurance.
175	175	148 “Cost-sharing requirement”, any copayment, coinsurance, deductible, or annual limitation
176	176	149on cost-sharing (including a limitation subject to 42 U.S.C. §§ 18022(c) and 300gg-6(b)),
177	177	150required by or on behalf of an insured in order to receive specific health care services, including
178	178	151a prescription drug, covered by a health benefit plan .
179	179	152 “Division”, the division of insurance.
180	180	153 “Health benefit plan”, as defined in section 1 of chapter 176O
181	181	154 “Health care services”, supplies, care and services of a medical, surgical, optometric,
182	182	155dental, podiatric, chiropractic, psychiatric, therapeutic, diagnostic, preventative, rehabilitative,
183	183	156supportive, or geriatric nature including, but not limited to, inpatient and outpatient acute
184	184	157hospital care and services, services provided by a community health center or by a sanatorium, as 9 of 29
185	185	158included in the definition of “hospital” in Title XVIII of the federal Social Security Act, and
186	186	159treatment and care compatible with such services or by a health maintenance organization.
187	187	160 “Insured”, an enrollee, covered person, insured, member, policyholder or subscriber of a
188	188	161carrier, including an individual whose eligibility as an insured of a carrier is in dispute or under
189	189	162review, or any other individual whose care may be subject to review by a utilization review
190	190	163program or entity as described under other provisions of this chapter.
191	191	164 “Mail order pharmacy”, a pharmacy whose primary business is to receive prescriptions
192	192	165by mail, telefax or through electronic submissions and to dispense medication to insureds
193	193	166through the use of the United States mail or other common or contract carrier services and that
194	194	167provides any consultation with patients electronically rather than face to face.“Network”, as
195	195	168defined in section 1 of chapter 176O.
196	196	169 “Network pharmacy”, a retail or other licensed pharmacy provider that contracts with a
197	197	170pharmacy benefit manager.
198	198	171 “Person”, a natural person, corporation, mutual company, unincorporated association,
199	199	172partnership, joint venture, limited liability company, trust, estate, foundation, not-for-profit
200	200	173corporation, unincorporated organization, government or governmental subdivision or agency.
201	201	174 “Pharmacy”, a facility, either physical or electronic, under the direction or supervision of
202	202	175a registered pharmacist which is authorized to dispense prescription drugs and has entered into a
203	203	176network contract with a pharmacy benefit manager or a carrier.
204	204	177 “Pharmacy benefit manager”, a person, business, or other entity that, pursuant to a
205	205	178contract or under an employment relationship with a carrier, a self-insurance plan, or other third- 10 of 29
206	206	179party payer, either directly or through an intermediary, manages the prescription drug coverage
207	207	180provided by the carrier, self-insurance plan, or other third-party payer including, but not limited
208	208	181to, the processing and payment of claims for prescription drugs, the performance of drug
209	209	182utilization review, the processing of drug prior authorization requests, the adjudication of appeals
210	210	183or grievances related to prescription drug coverage, contracting with network pharmacies, and
211	211	184controlling the cost of covered prescription drugs.
212	212	185 “Pharmacy benefit services” shall include, but not be limited to, formulary
213	213	186administration; drug benefit design; pharmacy network contracting; pharmacy claims processing;
214	214	187mail and specialty drug pharmacy services; and cost containment, clinical, safety, adherence
215	215	188programs for pharmacy services, and any other pharmacy benefit service that the commissioner
216	216	189deems appropriate. For the purposes of the chapter, a health benefit plan that does not contract
217	217	190with a pharmacy benefit manager shall be a pharmacy benefit manager.
218	218	191 “Rebates or fees”, all fees or price concessions paid by a manufacturer to a pharmacy
219	219	192benefit manager or carrier, including rebates, discounts, and other price concessions that are
220	220	193based on actual or estimated utilization of a prescription drug. Rebates also include price
221	221	194concessions based on the effectiveness a drug as in a value-based or performance-based contract.
222	222	195 “Retail pharmacy”, as defined in section 39D of chapter 112.
223	223	196 "Spread pricing" means the practice of a pharmacy benefit manager retaining an
224	224	197additional amount of money in addition to the amount paid to the pharmacy to fill a prescription.
225	225	198 "Steering", a practice employed by a pharmacy benefit manager or carrier that channels a
226	226	199prescription to a pharmacy in which a pharmacy benefit manager or carrier has an ownership
227	227	200interest, and includes but is not limited to retail, mail-order, or specialty pharmacies. 11 of 29
228	228	201 Section 2. (a) Any pharmacy benefit manager contracting with a pharmacy that operates
229	229	202in the commonwealth shall comply with the provisions of this chapter.
230	230	203 (b) A pharmacy benefit manager shall receive a license from the division before
231	231	204conducting business in the commonwealth. A license granted pursuant to this section is not
232	232	205transferable.
233	233	206 (c) A license may be granted only when the division is satisfied that the entity possesses
234	234	207the necessary organization, background expertise, and financial integrity to supply the services
235	235	208sought to be offered.
236	236	209 (d) The division may issue a license subject to restrictions or limitations upon the
237	237	210authorization, including the type of services that may be supplied or the activities in which the
238	238	211entity may be engaged.
239	239	212 (e) A license shall be valid for a period of three years. The commissioner shall charge
240	240	213application and renewal fees in the amount of $25,000
241	241	214 (f) The division shall develop an application for licensure that includes at least the
242	242	215following information: (i) the name of the pharmacy benefit manager; (ii) the address and contact
243	243	216telephone number for the pharmacy benefit manager; (iii) the name and address of the pharmacy
244	244	217benefit manager’s agent for service of process in the commonwealth; (iv) the name and address
245	245	218of each person beneficially interested in the pharmacy benefit manager; and (v) the name and
246	246	219address of each person with management or control over the pharmacy benefit manager.
247	247	220 (g) The division may suspend, revoke, or place on probation a pharmacy benefit manager
248	248	221license under any of the following circumstances: (i) the pharmacy benefit manager has engaged 12 of 29
249	249	222in fraudulent activity that constitutes a violation of state or federal law; (ii) the division received
250	250	223consumer complaints that justify an action under this chapter to protect the safety and interests of
251	251	224consumers; (iii) the pharmacy benefit manager fails to pay an application fee for the license; or
252	252	225(iv) the pharmacy benefit manager fails to comply with a requirement set forth in this chapter.
253	253	226 (h) If an entity performs the functions of pharmacy benefit manager acts without
254	254	227registering, it will be subject to a fine of $5,000 per day for the period they are found to be in
255	255	228violation.
256	256	229 Section 3
257	257	230 (a) (i) The pharmacy benefit manager shall have a duty and obligation to perform
258	258	231pharmacy benefit services with care, skill, prudence, diligence, and professionalism.
259	259	232 (ii) In addition to the duties as may be prescribed by regulation:
260	260	233 (1) A pharmacy benefit manager interacting with a covered individual shall have the
261	261	234same duty to a covered individual as the health plan for whom it is performing pharmacy benefit
262	262	235services.
263	263	236 (2) A pharmacy benefit manager shall have a duty of good faith and fair dealing with all
264	264	237parties, including but not limited to covered individuals and pharmacies, with whom it interacts
265	265	238in the performance of pharmacy benefit services.
266	266	239 Section 4
267	267	240 (a) A pharmacy benefit manager shall provide a reasonably adequate and accessible
268	268	241pharmacy benefit manager network for the provision of prescription drugs, which provides for
269	269	242convenient patient access to pharmacies within a reasonable distance from a patient’s residence. 13 of 29
270	270	243 (b) A pharmacy benefit manager may not deny a pharmacy the opportunity to participate
271	271	244in a pharmacy benefit manager network at preferred participation status if the pharmacy is
272	272	245willing to accept the terms and conditions that the pharmacy benefit manager has established for
273	273	246other pharmacies as a condition of preferred network participation status.
274	274	247 (c) A mail-order pharmacy shall not be included in the calculations for determining
275	275	248pharmacy benefit manager network adequacy under this section.
276	276	249 Section 5.
277	277	250 (a) After the date of receipt of a clean claim for payment made by a pharmacy, a
278	278	251pharmacy benefit manager shall not retroactively reduce payment on the claim, either directly or
279	279	252indirectly, through aggregated effective rate, direct or indirect remuneration, quality assurance
280	280	253program or otherwise, except if the claim is found not to be a clean claim during the course of a
281	281	254routine audit performed pursuant to an agreement between the pharmacy benefit manager and the
282	282	255pharmacy. When a pharmacy adjudicates a claim at the point of sale, the reimbursement amount
283	283	256provided to the pharmacy by the pharmacy benefit manager shall constitute a final
284	284	257reimbursement amount. Nothing in this section shall be construed to prohibit any retroactive
285	285	258increase in payment to a pharmacy pursuant to a contract between the pharmacy benefit manager
286	286	259or a pharmacy.
287	287	260 (b) For the purpose of this section, "clean claim" means a claim that has no defect or
288	288	261impropriety, including a lack of any required substantiating documentation, or other
289	289	262circumstance requiring special treatment, including, but not limited to, those listed in subsection
290	290	263(d) of this section, that prevents timely payment from being made on the claim. 14 of 29
291	291	264 (c) A pharmacy benefit manager shall not recoup funds from a pharmacy in connection
292	292	265with claims for which the pharmacy has already been paid unless the recoupment is:
293	293	266 (1) otherwise permitted or required by law; or
294	294	267 (2) the result of an audit, performed pursuant to a contract between the pharmacy benefit
295	295	268manager and the pharmacy; or
296	296	269 (d) The provisions of this section shall not apply to an investigative audit of pharmacy
297	297	270records when:
298	298	271 (1) fraud, waste, abuse or other intentional misconduct is indicated by physical review or
299	299	272review of claims data or statements; or
300	300	273 (2) other investigative methods indicate a pharmacy is or has been engaged in criminal
301	301	274wrongdoing, fraud or other intentional or willful misrepresentation.
302	302	275 (e) No pharmacy benefit manager shall charge or collect from an individual a copayment
303	303	276that exceeds the total submitted charges by the pharmacy for which the pharmacy is paid. If an
304	304	277individual pays a copayment, the pharmacy shall retain the adjudicated costs and the pharmacy
305	305	278benefit manager shall not redact or recoup the adjudicated cost.
306	306	279 Section 6.
307	307	280 (a) As used in this section:
308	308	281 (1) “Generically equivalent drug”, a drug that is pharmaceutically and therapeutically
309	309	282equivalent to the drug prescribed; 15 of 29
310	310	283 (2)(A) “Maximum allowable cost list”, a listing of drugs or other methodology used by a
311	311	284pharmacy benefit manager, directly or indirectly, setting the maximum allowable payment to a
312	312	285pharmacy or pharmacist for a generic drug, brand-name drug, biologic product, or other
313	313	286prescription drug.
314	314	287 (B) Maximum allowable cost list includes without limitation:
315	315	288 (i) Average acquisition cost, including national average drug acquisition cost;
316	316	289 (ii) Average manufacturer price;
317	317	290 (iii) Average wholesale price;
318	318	291 (iv) Brand effective rate or generic effective rate;
319	319	292 (v) Discount indexing;
320	320	293 (vi) Federal upper limits;
321	321	294 (vii) Wholesale acquisition cost; and
322	322	295 (viii) Any other term that a pharmacy benefit manager or a carrier may use to establish
323	323	296reimbursement rates to a pharmacist or pharmacy for pharmacist services;
324	324	297 (3) “Pharmaceutical wholesaler”, as defined in section 36A of chapter 112;
325	325	298 (4) “Pharmacist”, a pharmacist who, pursuant to the provisions of M.G.L. c. 112, § 24, is
326	326	299registered by the Board to practice pharmacy; 16 of 29
327	327	300 (5) “Pharmacist services”, products, goods, and services, or any combination of products,
328	328	301goods, and services, provided as a part of the practice of pharmacy as defined in section 39D of
329	329	302chapter 112;
330	330	303 (6) “Pharmacy”, shall have the same meaning as defined in section 39D of chapter 112;
331	331	304 (7) “Pharmacy acquisition cost” means the amount that a pharmaceutical wholesaler
332	332	305charges for a pharmaceutical product as listed on the pharmacy's billing invoice;
333	333	306 (8) “Pharmacy benefit manager”, as defined in section 1 of chapter 176X;
334	334	307 (9) “Pharmacy benefit manager affiliate”, a pharmacy or pharmacist that directly or
335	335	308indirectly, through one (1) or more intermediaries, owns or controls, is owned or controlled by,
336	336	309or is under common ownership or control with a pharmacy benefits manager; and
337	337	310 (10) “Pharmacy benefit plan or program”, a plan or program that pays for, reimburses,
338	338	311covers the cost of, or otherwise provides for pharmacist services to individuals who reside in or
339	339	312are employed in the commonwealth.
340	340	313 (b) Before a pharmacy benefit manager places or continues a particular drug on a
341	341	314maximum allowable cost list, the drug:
342	342	315 (1) If the drug is a generically equivalent drug, it shall be listed as therapeutically
343	343	316equivalent and pharmaceutically equivalent A or B rated in the United States Food and Drug
344	344	317Administration's most recent version of the Orange Book or Green Book or have an NR or NA
345	345	318rating by Medi-Span, Gold Standard, or a similar rating by a nationally recognized reference;
346	346	319 (2) Shall be available for purchase by each pharmacy in the state from national or
347	347	320regional wholesalers operating in the commonwealth; and 17 of 29
348	348	321 (3) Shall not be obsolete.
349	349	322 (c ) A pharmacy benefit manager shall:
350	350	323 (1) Provide access to its maximum allowable cost list to each pharmacy subject to the
351	351	324maximum allowable cost list;
352	352	325 (2) Update its maximum allowable cost list on a timely basis, but in no event longer than
353	353	326seven (7) calendar days from an increase of ten per cent or more in the pharmacy acquisition cost
354	354	327from sixty per cent or more of the pharmaceutical wholesalers doing business in the state or a
355	355	328change in the methodology on which the maximum allowable cost list is based or in the value of
356	356	329a variable involved in the methodology;
357	357	330 (3) Provide a process for each pharmacy subject to the maximum allowable cost list to
358	358	331receive prompt notification of an update to the maximum allowable cost list; and
359	359	332 (4)(A)(i) Provide a reasonable administrative appeal procedure to allow pharmacies to
360	360	333challenge maximum allowable cost list and reimbursements made under a maximum allowable
361	361	334cost list for a specific drug or drugs as:
362	362	335 (a) Not meeting the requirements of this section; or
363	363	336 (b) Being below the pharmacy acquisition cost.
364	364	337 (ii) The reasonable administrative appeal procedure shall include the following:
365	365	338 (a) A dedicated telephone number, email address, and website for the purpose of
366	366	339submitting administrative appeals; 18 of 29
367	367	340 (b) The ability to submit an administrative appeal directly to the pharmacy benefit
368	368	341manager regarding the pharmacy benefits plan or program or through a pharmacy service
369	369	342administrative organization; and
370	370	343 (c) No less than thirty business days to file an administrative appeal.
371	371	344 (B) The pharmacy benefit manager shall respond to the challenge under subdivision
372	372	345(c)(4)(A) of this section within thirty business days after receipt of the challenge.
373	373	346 (C) If a challenge is made under subdivision (c)(4)(A) of this section, the pharmacy
374	374	347benefit manager shall within thirty business days after receipt of the challenge either:
375	375	348 (i) If the appeal is upheld:
376	376	349 (a) Make the change in the maximum allowable cost list payment to at least the pharmacy
377	377	350acquisition cost;
378	378	351 (b) Permit the challenging pharmacy or pharmacist to reverse and rebill the claim in
379	379	352question;
380	380	353 (c) Provide the National Drug Code that the increase or change is based on to the
381	381	354pharmacy or pharmacist; and
382	382	355 (d) Make the change under subdivision (c)(4)(C)(i)(a) of this section effective for each
383	383	356similarly situated pharmacy as defined by the payor subject to the maximum allowable cost list;
384	384	357 (ii) If the appeal is denied, provide the challenging pharmacy or pharmacist the National
385	385	358Drug Code and the name of the national or regional pharmaceutical wholesalers operating in the 19 of 29
386	386	359commonwealth that have the drug currently in stock at a price below the maximum allowable
387	387	360cost as listed on the maximum allowable cost list; or
388	388	361 (iii) If the National Drug Code provided by the pharmacy benefit manager is not available
389	389	362below the pharmacy acquisition cost from the pharmaceutical wholesaler from whom the
390	390	363pharmacy or pharmacist purchases the majority of prescription drugs for resale, then the
391	391	364pharmacy benefit manager shall adjust the maximum allowable cost as listed on the maximum
392	392	365allowable cost list above the challenging pharmacy's pharmacy acquisition cost and permit the
393	393	366pharmacy to reverse and rebill each claim affected by the inability to procure the drug at a cost
394	394	367that is equal to or less than the previously challenged maximum allowable cost.
395	395	368 (d)(1) A pharmacy benefit manager shall not reimburse a pharmacy or pharmacist in the
396	396	369commonwealth an amount less than the amount that the pharmacy benefit manager reimburses a
397	397	370pharmacy benefit manager affiliate for providing the same pharmacist services.
398	398	371 (2) The amount shall be calculated on a per unit basis based on the same generic product
399	399	372identifier or generic code number.
400	400	373 (e) A pharmacy or pharmacist may decline to provide the pharmacist services to a patient
401	401	374or pharmacy benefit manager if, as a result of a maximum allowable cost list, a pharmacy or
402	402	375pharmacist is to be paid less than the pharmacy acquisition cost of the pharmacy providing
403	403	376pharmacist services.
404	404	377 (f) This section does not apply to a maximum allowable cost list maintained by
405	405	378MassHealth or the division of insurance. 20 of 29
406	406	379 (g)(1)A violation of this section shall constitute an unfair or deceptive act or practice
407	407	380pursuant to chapter 93A.
408	408	381 Section 7.
409	409	382 (a) No pharmacy benefit manager or representative of a pharmacy benefit manager shall
410	410	383conduct spread pricing in the commonwealth.
411	411	384 (b) A pharmacy benefit manager or representative of a pharmacy benefit manager that
412	412	385violates this section shall be subject to the surcharge under section 8 of chapter 176X.
413	413	386 (c) A pharmacy benefit manager shall report to the commissioner on a quarterly basis for
414	414	387each healthcare insurer the following information:
415	415	388 (A) The aggregate number of rebates received by the pharmacy benefit manager;
416	416	389 (B) The aggregate number of rebates distributed to the appropriate healthcare insurer;
417	417	390 (C) The aggregate number of rebates passed on to an insured of each healthcare insurer at
418	418	391the point of sale that reduced the insured’s applicable deductible, copayment, coinsurance, or
419	419	392other cost-sharing amount;
420	420	393 (D) The individual and aggregate amount paid by the healthcare insurer to the pharmacy
421	421	394benefit manager for pharmacist services itemized by pharmacy, by product, and by goods and
422	422	395services; and
423	423	396 (E) The individual and aggregate amount a pharmacy benefit manager paid for
424	424	397pharmacist services itemized by pharmacy, by product, and by goods and services. 21 of 29
425	425	398 (d) The commissioner, in consultation with the health policy commission and the center
426	426	399for health information and analysis, shall annually report on the rebates and amounts reported
427	427	400under subsection (c), which shall be public record.
428	428	401 Section 8.
429	429	402 (a) A pharmacy benefits manager that engages in the practices of (i) spread pricing; (ii)
430	430	403steering; or (iii) imposing point-of-sale fees or retroactive fees shall be subject to a surcharge
431	431	404payable to the division of 10 percent on the aggregate dollar amount it reimbursed pharmacies in
432	432	405the previous calendar year for prescription drugs in the commonwealth.
433	433	406 (b) By March 1 of each year, a pharmacy benefit manager shall provide a letter to the
434	434	407commissioner attesting as to whether or not, in the previous calendar year, it engaged in the any
435	435	408of the practices under subsection (a). The pharmacy benefit manager shall also submit to the
436	436	409commissioner, in a form and manner and by a date specified by the commissioner, data detailing
437	437	410all prescription drug claims it administered in the commonwealth for insured residents on behalf
438	438	411of each health plan client and any other data the commissioner deems necessary to evaluate
439	439	412whether a pharmacy benefit manager may be engaged in any of the practices under subsection
440	440	413(a)
441	441	414 (c) By April 1 of each year, a pharmacy benefit manager shall pay into the general fund
442	442	415the surcharge owed, if any, as contained in the report submitted pursuant to subsection (b) of this
443	443	416section.
444	444	417 (d) Nothing in this section shall be construed to authorize the practices of steering or
445	445	418imposing point-of-sale fees or retroactive fees where otherwise prohibited by law. 22 of 29
446	446	419 (e) The commissioner, in consultation with the health policy commission and the center
447	447	420for health information and analysis, shall prepare an aggregate report reflecting the total number
448	448	421of prescriptions administered by the reporting pharmacy benefit manager with the total sum due
449	449	422to the commonwealth, which shall be public record.
450	450	423 Section 9.
451	451	424 (a) Any person operating a health plan whose contracted pharmacy benefits manager
452	452	425engages in the practices of (i) spread pricing; (ii) steering; or (iii) imposing point-of-sale fees or
453	453	426retroactive fees in connection with its health plans shall be subject to a surcharge payable to the
454	454	427division of 10 percent on the aggregate dollar amount its pharmacy benefit manager reimbursed
455	455	428pharmacies on its behalf in the previous calendar year for prescription drugs in the
456	456	429commonwealth.
457	457	430 (b) By March 1 of each year, any person operating a health plan and licensed in the
458	458	431commonwealth that utilizes a contracted pharmacy benefit manager shall provide a letter to the
459	459	432commissioner attesting as to whether or not, in the previous calendar year, its contracted
460	460	433pharmacy benefit manager engaged in any of the practices under subsection (a) in connection
461	461	434with its health plans. The health plan shall also submit to the commissioner, in a form and
462	462	435manner and by a date specified by the commissioner, data detailing all prescription drug claims
463	463	436its contracted pharmacy benefit manager administered in the commonwealth for insured
464	464	437residents and any other data the commissioner deems necessary to evaluate whether a health
465	465	438plan's pharmacy benefit manager may be engaged in any of the practices under subsection (a). 23 of 29
466	466	439 (c) By April 1 of each year, any person operating a health plan and licensed under this
467	467	440title shall pay into the general fund the surcharge owed, if any, as contained in the report
468	468	441submitted pursuant to subsection (b) of this section.
469	469	442 (d) Nothing in this section shall be construed to authorize the practices of steering or
470	470	443imposing point-of-sale fees or retroactive fees where otherwise prohibited by law.
471	471	444 (e) The commissioner, in consultation with the health policy commission and the center
472	472	445for health information and analysis, shall prepare an aggregate report reflecting the total number
473	473	446of prescriptions administered by the reporting health plan along with the total sum due to the
474	474	447commonwealth, which shall be public record.
475	475	448 Section 10.
476	476	449 When calculating an insured’s contribution to any applicable cost sharing requirement, a
477	477	450pharmacy benefit manager shall include any cost-sharing amounts paid by the insured or on
478	478	451behalf of the insured by another person.
479	479	452 Section 11.
480	480	453 (a) A pharmacy benefit manager shall conduct an audit of the records of a pharmacy in
481	481	454accordance with paragraphs (1) to (13), inclusive.
482	482	455 (1) The contract between a pharmacy and a pharmacy benefit manager shall identify and
483	483	456describe the audit procedures in detail.
484	484	457 (2) With the exception of an investigative fraud audit, the auditor shall give the pharmacy
485	485	458written notice at least 2 weeks prior to conducting the initial on-site audit for each audit cycle. 24 of 29
486	486	459 (3) A pharmacy benefit manager shall not audit claims beyond 2 years prior to the date of
487	487	460audit.
488	488	461 (4) The auditor shall not interfere with the delivery of pharmacist services to a patient and
489	489	462shall make a reasonable effort to minimize the inconvenience and disruption to the pharmacy
490	490	463operations during the audit process.
491	491	464 (5) Any audit that involves clinical or professional judgment shall be conducted by, or in
492	492	465consultation with, a licensed pharmacist from any state.
493	493	466 (6) A finding of an overpayment or underpayment shall be based on the actual
494	494	467overpayment or underpayment. A statistically sound calculation for overpayment or
495	495	468underpayment may be used to determine recoupment as part of a settlement as agreed to by the
496	496	469pharmacy.
497	497	470 (7) The auditor shall audit each pharmacy under the same standards and parameters with
498	498	471which they audit other similarly situated pharmacies.
499	499	472 (8) An audit shall not be initiated or scheduled during the first 5 calendar days of any
500	500	473month for any pharmacy that averages more than 600 prescriptions per week without the
501	501	474pharmacy's consent.
502	502	475 (9) A preliminary audit report shall be delivered to the pharmacy not later than 30 days
503	503	476after the conclusion of the audit.
504	504	477 (10) The preliminary audit report shall be signed and shall include the signature of any
505	505	478pharmacist participating in the audit. 25 of 29
506	506	479 (11) A pharmacy benefit manager shall not withhold payment to a pharmacy for
507	507	480reimbursement claims as a means to recoup money until after the final internal disposition of an
508	508	481audit, including the appeals process, as provided in subsection (b), unless fraud or
509	509	482misrepresentation is reasonably suspected or the discrepant amount exceeds $15,000.
510	510	483 (12) The auditor shall provide a copy of the final audit report to the pharmacy and plan
511	511	484sponsor within 30 days following the pharmacy's receipt of the signed preliminary audit report or
512	512	485the completion of the appeals process, as provided in subsection (b), whichever is later.
513	513	486 (13) No auditing company or agent shall receive payment based upon a percentage of the
514	514	487amount recovered or other financial incentive tied to the findings of the audit.
515	515	488 (b)(1) Each auditor shall establish an appeals process under which a pharmacy may
516	516	489appeal findings in a preliminary audit.
517	517	490 (2) To appeal a finding, a pharmacy may use the records of a hospital, physician, or other
518	518	491authorized prescriber to validate the record with respect to orders or refills of prescription drugs
519	519	492or devices.
520	520	493 (3) A pharmacy shall have 30 days to appeal any discrepancy found during the
521	521	494preliminary audit.
522	522	495 (4) The National Council for Prescription Drug Programs or any other recognized
523	523	496national industry standard shall be used to evaluate claims submission and product size disputes.
524	524	497 (5) If an audit results in the identification of any clerical or record-keeping errors in a
525	525	498required document or record, the pharmacy shall not be subject to recoupment of funds by the
526	526	499pharmacy benefit manager; provided, that the pharmacy may provide proof that the patient 26 of 29
527	527	500received the medication billed to the plan via patient signature logs or other acceptable methods,
528	528	501unless there is financial harm to the plan or errors that exceed the normal course of business.
529	529	502 (c) This section shall not apply to any audit or investigation of a pharmacy that involves
530	530	503potential fraud, willful misrepresentation or abuse, including, but not limited to, investigative
531	531	504audits or any other statutory or regulatory provision which authorizes investigations relating to
532	532	505insurance fraud.
533	533	506 (d) This section shall not apply to a public health care payer, as defined in section 1 of
534	534	507chapter 12C.
535	535	508 (e) The commissioner shall promulgate regulations to enforce this section.
536	536	509 Section 12.
537	537	510 (a) The commissioner may make an examination of the affairs of a Pharmacy Benefit
538	538	511Manager when the commissioner deems prudent but not less frequently than once every 3 years.
539	539	512The focus of the examination shall be to ensure that a pharmacy benefit manager is able to meet
540	540	513its responsibilities under contracts with licensed carriers. The examination shall be conducted
541	541	514according to the procedures set forth in subsection (6) of section 4 of chapter 175.
542	542	515 (b) The commissioner, a deputy or an examiner may conduct an on-site examination of
543	543	516each pharmacy benefit manager in the commonwealth to thoroughly inspect and examine its
544	544	517affairs.
545	545	518 (c) The charge for each such examination shall be determined annually according to the
546	546	519procedures set forth in subsection (6) of section 4 of chapter 175. 27 of 29
547	547	520 (d) Not later than 60 days following completion of the examination, the examiner in
548	548	521charge shall file with the commissioner a verified written report of examination under oath.
549	549	522Upon receipt of the verified report, the commissioner shall transmit the report to the pharmacy
550	550	523benefit manager examined with a notice which shall afford the pharmacy benefit manager
551	551	524examined a reasonable opportunity of not more than 30 days to make a written submission or
552	552	525rebuttal with respect to any matters contained in the examination report. Within 30 days of the
553	553	526end of the period allowed for the receipt of written submissions or rebuttals, the commissioner
554	554	527shall consider and review the reports together with any written submissions or rebuttals and any
555	555	528relevant portions of the examiner’s work papers and enter an order:
556	556	529 (i) adopting the examination report as filed with modifications or corrections and, if the
557	557	530examination report reveals that the pharmacy benefit manager is operating in violation of this
558	558	531section or any regulation or prior order of the commissioner, the commissioner may order the
559	559	532pharmacy benefit manager to take any action the commissioner considered necessary and
560	560	533appropriate to cure such violation;
561	561	534 (ii) rejecting the examination report with directions to examiners to reopen the
562	562	535examination for the purposes of obtaining additional data, documentation or information and re-
563	563	536filing pursuant to the above provisions; or
564	564	537 (iii) calling for an investigatory hearing with no less than 20 days’ notice to the pharmacy
565	565	538benefit manager for purposes of obtaining additional documentation, data, information and
566	566	539testimony.
567	567	540 (e) Notwithstanding any general or special law to the contrary, including clause 26 of
568	568	541section 7 of chapter 4 and chapter 66, the records of any such audit, examination or other 28 of 29
569	569	542inspection and the information contained in the records, reports or books of any pharmacy
570	570	543benefit manager examined pursuant to this section shall be confidential and open only to the
571	571	544inspection of the commissioner, or the examiners and assistants. Access to such confidential
572	572	545material may be granted by the commissioner to law enforcement officials of the commonwealth
573	573	546or any other state or agency of the federal government at any time, so long as the agency or
574	574	547office receiving the information agrees in writing to keep such material confidential. Nothing
575	575	548herein shall be construed to prohibit the required production of such records, and information
576	576	549contained in the reports of such company or organization before any court of the commonwealth
577	577	550or any master or auditor appointed by any such court, in any criminal or civil proceeding,
578	578	551affecting such pharmacy benefit manager, its officers, partners, directors or employees. The final
579	579	552report of any such audit, examination or any other inspection by or on behalf of the division of
580	580	553insurance shall be a public record.
581	581	554 Section 13.
582	582	555 A pharmacy benefit manager shall be required to submit to periodic audits by a licensed
583	583	556carrier if the pharmacy benefit manager has entered into a contract with the carrier to provide
584	584	557pharmacy benefits to the carrier or its members. The commissioner shall direct or provide
585	585	558specifications for such audits
586	586	559 Section 14.
587	587	560 (a) A contract between a pharmacy benefit manager and a participating pharmacy or
588	588	561pharmacist or contracting agent shall not include any provision that prohibits, restricts, or limits a
589	589	562pharmacist or contracting agent or pharmacy’s right to provide an insured with information on
590	590	563the amount of the insured's cost share for such insured's prescription drug and the clinical 29 of 29
591	591	564efficacy of a more affordable alternative drug if one is available. Neither a pharmacy nor a
592	592	565pharmacist shall be penalized by a pharmacy benefit manager for disclosing such information to
593	593	566an insured or for selling to an insured a more affordable alternative if one is available.
594	594	567 (b) A pharmacy benefit manager shall not charge a pharmacist or pharmacy a fee related
595	595	568to the adjudication of a claim, including, without limitation, a fee for: (i) the receipt and
596	596	569processing of a pharmacy claim; (ii) the development or management of claims processing
597	597	570services in a pharmacy benefit manager network; or (iii) participation in a pharmacy benefit
598	598	571manager network, unless such fee is set out in a contract between the pharmacy benefit manager
599	599	572and the pharmacist or contracting agent or pharmacy.
600	600	573 (c) A contract between a pharmacy benefit manager and a participating pharmacy or
601	601	574pharmacist or contracting agent shall not include any provision that prohibits, restricts, or limits
602	602	575disclosure of information to the division deemed necessary by the division to ensure a pharmacy
603	603	576benefit manager's compliance with the requirements under this section or section 21C of chapter
604	604	57794C.
605	605	578 SECTION 24. Sections 1 to 22 shall take effect 6 months after the effective date of this
606	606	579act.
607	607	580 SECTION 25. The commissioner of insurance shall promulgate regulations to implement
608	608	581chapter 176X of the General Laws, as inserted by section 23, not later than 1 year after the
609	609	582effective date of this act.