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