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SENATE DOCKET, NO. 1262 FILED ON: 1/16/2025
SENATE . . . . . . . . . . . . . . No. 830
The Commonwealth of Massachusetts
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PRESENTED BY:
Bruce E. Tarr
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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 to preserve community pharmacies.
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PETITION OF:
NAME:DISTRICT/ADDRESS :Bruce E. TarrFirst Essex and Middlesex 1 of 7
SENATE DOCKET, NO. 1262 FILED ON: 1/16/2025
SENATE . . . . . . . . . . . . . . No. 830
By Mr. Tarr, a petition (accompanied by bill, Senate, No. 830) of Bruce E. Tarr for legislation to
preserve community pharmacies by conducting audits on contracts for pharmacy services.
Financial Services.
The Commonwealth of Massachusetts
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In the One Hundred and Ninety-Fourth General Court
(2025-2026)
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An Act to preserve community pharmacies.
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. Chapter 175 of the Massachusetts general laws is hereby amended by
2adding the following new section:
3 Section 226A Contracts for Community Pharmacy Services
4 “Brand name drug”, a drug that is: (i) produced or distributed pursuant to an original new
5drug application approved under 21 U.S.C. 355(c) except for: (A) any drug approved through an
6application submitted under section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act that
7is pharmaceutically equivalent, as that term is defined by the United States Food and Drug
8Administration, to a drug approved under 21 U.S.C. 355(c); (B) an abbreviated new drug 407
9application that was approved by the United States Secretary of Health and Human Services
10under section 505(c) of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. 355(c), before the
11date of the enactment of the federal Drug Price Competition and Patent Term Restoration Act of
1219 of 58 1984, Public Law 98-417, 98 Stat. 1585; or (C) an authorized generic drug as defined in 2 of 7
1342 C.F.R. 447.502; (ii) produced or distributed pursuant to a biologics license application
14approved 412 under 42 U.S.C. 262(a)(2)(C); or (iii) identified by the health benefit plan as a
15brand name drug based on available data resources such as Medi-Span.
16 “Generic drug”, a retail drug that is: (i) marketed or distributed pursuant to an
17abbreviated new drug application approved under 21 U.S.C. 355(j); (ii) an authorized generic
18drug as defined in 42 C.F.R. 447.502; (iii) a drug that entered the market before January 1, 1962
19and was not originally marketed under a new drug application; or (iv) identified by the health
20benefit plan as a generic drug based on available data resources such as Medi-Span.
21 “Pharmacy Audit”, a process that involves the inspection of pharmacy records to ensure
22high quality services and the lack of Fraud Waste, and Abuse. This includes desk audits as well
23as in-person audits.
24 “Pharmacy Benefit Manager” as defined in MGL c 175 Section 226 (a).
25 Section 1: Payment for pharmacy services
26 A contract for pharmacy services between a pharmacy benefit manager and a pharmacy
27must include an ingredient cost that meets the criteria in section 2 and a dispensing fee equal to
28what is paid by the State Medicaid Program. Payment for clean claims must include all
29applicable discounts. Contracts that include retroactive discounts and use “Generic Effective
30Rate” or “Brand Effective Rate or any other similar retroactive rate reductions are prohibited.
31 Section 2: Ingredient and Maximum Allowable Cost
32 (a) For the purposes of this section the term "maximum allowable cost list" shall mean a
33list of drugs, medical products or devices, or both medical products and devices, for which a 3 of 7
34maximum allowable cost has been established by a pharmacy benefits manager or covered entity.
35The term "maximum allowable cost" shall mean the maximum amount that a pharmacy benefits
36manager or covered entity will reimburse a pharmacy for the cost of a drug or a medical product
37or device inclusive of all discounts when the claim is processed or taken retroactively.
38 (b) The maxim allowable cost (if used) or the ingredient cost (if not used) must be equal
39to or greater than the cost used by the Massachusetts Medicaid Program
40 (c) The maximum allowable cost for non-affiliated pharmacies must be equal to or
41greater than the maximum allowable cost to pharmacies affiliated with or owned by the
42pharmacy benefit manager.
43 (d) Before a pharmacy benefits manager or covered entity may place a drug on a
44maximum allowable cost list the drug must be listed as "A" or "AB" rated in the most recent
45version of the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations, also
46known as the Orange Book, or has an "NR" or "NA" rating or a similar rating by a nationally
47recognized reference; and that there are at least two therapeutically equivalent, multiple source
48drugs, or at least one generic drug available from one manufacturer, available for purchase by
49network pharmacies from national or regional wholesalers registered in Massachusetts.
50 (e) A pharmacy benefits manager or covered entity shall make available to each
51pharmacy with which the pharmacy benefits manager or covered entity has a contract and to
52each pharmacy included in a network of pharmacies served by a pharmacy services
53administrative organization with which the pharmacy benefits manager or covered entity has a
54contract, at the beginning of the term of a contract upon renewal of a contract, or upon request: 4 of 7
55 (1) The sources used to determine the maximum allowable costs for the drugs and
56medical products and devices on each maximum allowable cost list;
57 (2) Every maximum allowable cost for individual drugs used by that pharmacy benefits
58manager or covered entity for patients served by that contracted pharmacy; and
59 (3) Upon request, every maximum allowable cost list used by that pharmacy benefits
60manager or covered entity for patients served by that contracted pharmacy.
61 (f) A pharmacy benefits manager or covered entity shall:
62 (1) update each maximum allowable cost list at least every 3 business days
63 (2) Make the updated lists available to every pharmacy with which the pharmacy benefits
64manager or covered entity has a contract and to every pharmacy included in a network of
65pharmacies served by a pharmacy services administrative organization with which the pharmacy
66benefits manager or covered entity has a contract, in a readily accessible, secure and usable web-
67based format or other comparable format or process; and
68 (3) Utilize the updated maximum allowable costs to calculate the payments made to the
69contracted pharmacies within 2 business days.
70 (g) A pharmacy benefits manager or covered entity shall establish a clearly defined
71process through which a pharmacy may contest the cost for a particular drug or medical product
72or device.
73 (h) A pharmacy may base its appeal on one or more of the following: 5 of 7
74 (1) The ingredient cost established for a particular drug or medical product, or device is
75below the cost used by the Massachusetts Medicaid Program
76 (2) The pharmacy benefits manager or covered entity has placed a drug on the maximum
77allowable cost list that does not meet the requirements of subsection (d).
78 (i) The pharmacy must file its appeal within seven business days of its submission of the
79initial claim for reimbursement for the drug or medical product or device. A Pharmacy Services
80Administrative Organization (PSAO) may appeal on behalf of a pharmacy or group of
81pharmacies. The pharmacy benefits manager or covered entity must make a final determination
82resolving the pharmacy's appeal within seven business days of the pharmacy benefits manager or
83covered entity's receipt of the appeal.
84 (j) If the final determination is a denial of the pharmacy's appeal, the pharmacy benefits
85manager or covered entity must state the reason for the denial and provide the national drug code
86of an equivalent drug that is generally available for purchase by pharmacies in this state from
87national or regional wholesalers licensed by the state at a price which is equal to or less than the
88cost for that drug.
89 (k) If a pharmacy's appeal is determined to be valid by the pharmacy benefits manager or
90covered entity, the pharmacy benefits manager or covered entity shall retroactively adjust the
91cost of the drug or medical product or device and reprocess all claims that were paid incorrectly.
92The adjustment shall be effective from the date the pharmacy's appeal was filed, and the
93pharmacy benefits manager or covered entity shall provide reimbursement for all reprocessed
94claims. 6 of 7
95 (l) Once a pharmacy's appeal is determined to be valid by the pharmacy benefits manager
96or covered entity, the pharmacy benefits manager or covered entity shall adjust the cost of the
97drug or medical product or device for all similar pharmacies in the network as determined by the
98pharmacy benefits manager within 3 business days.
99 (m) A pharmacy benefits manager or covered entity shall make available on its secure
100web site information about the appeals process, including, but not limited to, a telephone number
101or process that a pharmacy may use to submit cost appeals. The medical products and devices
102subject to the requirements of this part are limited to the medical products and devices included
103as a pharmacy benefit under the pharmacy benefits contract.
104 (n) A pharmacy shall not disclose to any third party the cost lists and any related
105information it receives from a pharmacy benefits manager or covered entity; provided, a
106pharmacy may share such lists and related information with a pharmacy services administrative
107organization or similar entity with which the pharmacy has a contract to provide administrative
108services for that pharmacy. If a pharmacy shares this information with a pharmacy services
109administrative organization or similar entity, that organization or entity shall not disclose the
110information to any third party.
111 (o) Pharmacy Benefit Managers shall provide annually a report to the Commissioner that
112details all denied pharmacy appeals for that year to include: the name of the pharmacy, date of
113service for the claim as well as drug name and billing code used on the claim, and the reason for
114the denial.
115 Section 3: The Insurance Commissioner shall enforce this act and shall promulgate
116regulations to enforce the provisions of this act. The commissioner may examine or audit the 7 of 7
117books and records of a pharmacy benefits manager providing claims processing services or other
118prescription drug or device services for a health benefit plan to determine if the pharmacy
119benefits manager is in compliance with this act. The information or data acquired during an
120examination is:
121 (a) Considered proprietary and confidential; and
122 (b) Not subject to the Freedom of Information Act of Massachusetts