EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
*hb0357*
HOUSE BILL 357
C3 3lr0778
HB 1014/22 – HGO
By: Delegate Kipke
Introduced and read first time: January 26, 2023
Assigned to: Health and Government Operations
A BILL ENTITLED
AN ACT concerning 1
Pharmacy Benefits Managers – Definitions of Carrier, ERISA, and Purchaser 2
FOR the purpose of repealing the definitions of “carrier” and “ERISA” and altering the 3
definition of “purchaser” for the purpose of applying certain provisions of State 4
insurance law governing pharmacy benefits managers to certain persons that 5
provide prescription drug coverage or benefits in the State through plans or 6
programs subject to the federal Employee Retirement Income Security Act of 1974 7
(ERISA); repealing a certain provision that restricts applicability of certain 8
provisions of law to pharmacy benefits managers that provide pharmacy benefits 9
management services on behalf of a carrier; and generally relating to pharmacy 10
benefits managers. 11
BY repealing and reenacting, with amendments, 12
Article – Insurance 13
Section 15–1601, 15–1606, 15–1611, 15–1611.1, 15–1612, 15–1613, 15–1622, 14
15–1628(a), 15–1628.3, 15–1629, 15–1630, and 15–1633.1 15
Annotated Code of Maryland 16
(2017 Replacement Volume and 2022 Supplement) 17
BY repealing 18
Article – Insurance 19
Section 15–1633 20
Annotated Code of Maryland 21
(2017 Replacement Volume and 2022 Supplement) 22
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 23
That the Laws of Maryland read as follows: 24
Article – Insurance 25
15–1601. 26 2 HOUSE BILL 357
(a) In this subtitle the following words have the meanings indicated. 1
(b) “Agent” means a pharmacy, a pharmacist, a mail order pharmacy, or a 2
nonresident pharmacy acting on behalf or at the direction of a pharmacy benefits manager. 3
(c) “Beneficiary” means an individual who receives prescription drug coverage or 4
benefits from a purchaser. 5
(d) [(1) “Carrier” means the State Employee and Retiree Health and Welfare 6
Benefits Program, an insurer, a nonprofit health service plan, or a health maintenance 7
organization that: 8
(i) provides prescription drug coverage or benefits in the State; and 9
(ii) enters into an agreement with a pharmacy benefits manager for 10
the provision of pharmacy benefits management services. 11
(2) “Carrier” does not include a person that provides prescription drug 12
coverage or benefits through plans subject to ERISA and does not provide prescription drug 13
coverage or benefits through insurance, unless the person is a multiple employer welfare 14
arrangement as defined in § 514(b)(6)(A)(ii) of ERISA. 15
(e)] “Compensation program” means a program, policy, or process through which 16
sources and pricing information are used by a pharmacy benefits manager to determine the 17
terms of payment as stated in a participating pharmacy contract. 18
[(f)] (E) “Contracted pharmacy” means a pharmacy that participates in the 19
network of a pharmacy benefits manager through a contract with: 20
(1) the pharmacy benefits manager; or 21
(2) a pharmacy services administration organization or a group purchasing 22
organization. 23
[(g) “ERISA” has the meaning stated in § 8–301 of this article.] 24
[(h)] (F) “Formulary” means a list of prescription drugs used by a purchaser. 25
[(i)] (G) (1) “Manufacturer payments” means an y compensation or 26
remuneration a pharmacy benefits manager receives from or on behalf of a pharmaceutical 27
manufacturer. 28
(2) “Manufacturer payments” includes: 29
(i) payments received in accordance with agreements with 30 HOUSE BILL 357 3
pharmaceutical manufacturers for formulary placement and, if applicable, drug utilization; 1
(ii) rebates, regardless of how categorized; 2
(iii) market share incentives; 3
(iv) commissions; 4
(v) fees under products and services agreements; 5
(vi) any fees received for the sale of utilization data to a 6
pharmaceutical manufacturer; and 7
(vii) administrative or management fees. 8
(3) “Manufacturer payments” does not include purchase discounts based on 9
invoiced purchase terms. 10
[(j)] (H) “Nonprofit health maintenance organization” has the meaning stated 11
in § 6–121(a) of this article. 12
[(k)] (I) “Nonresident pharmacy” has the meaning stated in § 12–403 of the 13
Health Occupations Article. 14
[(l)] (J) “Participating pharmacy contract” means a contract filed with the 15
Commissioner in accordance with § 15–1628(b) of this subtitle. 16
[(m)] (K) “Pharmacist” has the meaning stated in § 12–101 of the Health 17
Occupations Article. 18
[(n)] (L) “Pharmacy” has the meaning stated in § 12 –101 of the Health 19
Occupations Article. 20
[(o)] (M) “Pharmacy and therapeutics committee” means a committee 21
established by a pharmacy benefits manager to: 22
(1) objectively appraise and evaluate prescription drugs; and 23
(2) make recommendations to a purchaser regarding the selection of drugs 24
for the purchaser’s formulary. 25
[(p)] (N) (1) “Pharmacy benefits management services” means: 26
(i) the procurement of prescription drugs at a negotiated rate for 27
dispensation within the State to beneficiaries; 28
4 HOUSE BILL 357
(ii) the administration or management of prescription drug coverage 1
provided by a purchaser for beneficiaries; and 2
(iii) any of the following services provided with regard to the 3
administration of prescription drug coverage: 4
1. mail service pharmacy; 5
2. claims processing, retail network management, a nd 6
payment of claims to pharmacies for prescription drugs dispensed to beneficiaries; 7
3. clinical formulary development and management services; 8
4. rebate contracting and administration; 9
5. patient compliance, therapeutic intervention, and generic 10
substitution programs; or 11
6. disease management programs. 12
(2) “Pharmacy benefits management services” does not include any service 13
provided by a nonprofit health maintenance organization that operates as a group model, 14
provided that the service: 15
(i) is provided solely to a member of the nonprofit health 16
maintenance organization; and 17
(ii) is furnished through the internal pharmacy operations of the 18
nonprofit health maintenance organization. 19
[(q)] (O) “Pharmacy benefits manager” means a person that performs pharmacy 20
benefits management services. 21
[(r)] (P) “Proprietary information” means: 22
(1) a trade secret; 23
(2) confidential commercial information; or 24
(3) confidential financial information. 25
[(s)] (Q) (1) “Purchaser” means a person that offers a plan or program in the 26
State, including the State Employee and Retiree Health and Welfare Benefits Program, AN 27
INSURER, A NONPROFIT HEALTH S ERVICE PLAN , OR A HEALTH MAINTENA NCE 28
ORGANIZATION , that: 29
HOUSE BILL 357 5
[(1)] (I) provides prescription drug coverage or benefits in the State; and 1
[(2)] (II) enters into an agreement with a pharmacy benefits manager for 2
the provision of pharmacy benefits management services. 3
(2) “PURCHASER” DOES NOT INCLUDE A N ONPROFIT HEALTH 4
MAINTENANCE ORGANIZA TION THAT: 5
(I) OPERATES AS A GROUP MODEL; 6
(II) PROVIDES SERVICES SO LELY TO MEMBER S OR PATIENTS OF 7
THE NONPROFIT HEALTH MAINTENANCE ORGANIZA TION; AND 8
(III) FURNISHES SERVICES T HROUGH THE INTERNAL PHARMACY 9
OPERATIONS OF THE NO NPROFIT HEALTH MAINT ENANCE ORGANIZATION . 10
[(t)] (R) “Rebate sharing contract” means a contract between a pharmacy 11
benefits manager and a purchaser under which the pharmacy benefits manager agrees to 12
share manufacturer payments with the purchaser. 13
[(u)] (S) (1) “Therapeutic interchange” means any change from one 14
prescription drug to another. 15
(2) “Therapeutic interchange” does not include: 16
(i) a change initiated pursuant to a drug utilization review; 17
(ii) a change initiated for patient safety reasons; 18
(iii) a change required due to market unavailability of the currently 19
prescribed drug; 20
(iv) a change from a brand name drug to a generic drug in accordance 21
with § 12–504 of the Health Occupations Article; or 22
(v) a change required for coverage reasons because the originally 23
prescribed drug is not covered by the beneficiary’s formulary or plan. 24
[(v)] (T) “Therapeutic interchange solicitation” means any communication by a 25
pharmacy benefits manager for the purpose of requesting a therapeutic interchange. 26
[(w)] (U) “Trade secret” has the meaning stated in § 11–1201 of the Commercial 27
Law Article. 28
15–1606. 29
6 HOUSE BILL 357
A [carrier] PURCHASER may not enter into an agreement with a pharmacy benefits 1
manager that has not registered with the Commissioner. 2
15–1611. 3
(a) [This section applies only to a pharmacy benefits manager that provides 4
pharmacy benefits management services on behalf of a carrier. 5
(b)] A pharmacy benefits manager may not prohibit a pharmacy or pharmacist 6
from: 7
(1) providing a beneficiary with information regarding the retail price for 8
a prescription drug or the amount of the cost share for which the beneficiary is responsible 9
for a prescription drug; 10
(2) discussing with a beneficiary information regarding the retail price for 11
a prescription drug or the amount of the cost share for which the beneficiary is responsible 12
for a prescription drug; or 13
(3) if a more affordable drug is available than one on the purchaser’s 14
formulary and the requirements for a therapeutic interchange under §§ [15–1633.1] 15
15–1633 through 15–1639 of this subtitle are met, selling the more affordable alternative 16
to the beneficiary. 17
[(c)] (B) This section may not be construed to alter the requirements for a 18
therapeutic interchange under §§ [15–1633.1] 15–1633 through 15–1639 of this subtitle. 19
15–1611.1. 20
(a) [This section applies only to a pharmacy benefits manager that provides 21
pharmacy benefits management services on behalf of a carrier. 22
(b)] Except as provided in subsection [(c)] (B) of this section, a pharmacy benefits 23
manager may not require that a beneficiary use a specific pharmacy or entity to fill a 24
prescription if: 25
(1) the pharmacy benefits manager or a corporate affiliate of the pharmacy 26
benefits manager has an ownership interest in the pharmacy or entity; or 27
(2) the pharmacy or entity has an ownership interest in the pharmacy 28
benefits manager or a corporate affiliate of the pharmacy benefits manager. 29
[(c)] (B) A pharmacy benefits manager may require a beneficiary to use a 30
specific pharmacy or entity for a specialty drug as defined in § 15–847 of this title. 31
15–1612. 32 HOUSE BILL 357 7
(a) [This section applies only to a pharmacy benefits manager that provides 1
pharmacy benefits management services on behalf of a carrier. 2
(b)] This section does not apply to reimbursement: 3
(1) for specialty drugs; 4
(2) for mail order drugs; or 5
(3) to a chain pharmacy with more than 15 stores or a pharmacist who is 6
an employee of the chain pharmacy. 7
[(c)] (B) A pharmacy benefits manager may not reimburse a pharmacy or 8
pharmacist for a pharmaceutical product or pharmacist service in an amount less than the 9
amount that the pharmacy benefits manager reimburses itself or an affiliate for providing 10
the same product or service. 11
15–1613. 12
A pharmacy and therapeutics committee established by a pharmacy benefits 13
manager performing pharmacy benefits management services [on behalf of a carrier] shall 14
meet the requirements of this part. 15
15–1622. 16
[(a) Except as provided for in subsection (b) of this section, the provisions of §§ 17
15–1623 and 15–1624 of this subtitle apply only to a pharmacy benefits manager that 18
provides pharmacy benefits management services on behalf of a carrier. 19
(b)] The provisions of §§ 15–1623 and 15–1624 of this part do not apply to a 20
pharmacy benefits manager when providing pharmacy benefits management services to a 21
purchaser that is affiliated with the pharmacy benefits manager through common 22
ownership within an insurance holding company. 23
15–1628. 24
(a) (1) At the time of entering into a contract with a pharmacy or a pharmacist, 25
and at least 30 working days before any contract change, a pharmacy benefits manager 26
shall disclose to the pharmacy or pharmacist: 27
(i) the applicable terms, conditions, and reimbursement rates; 28
(ii) the process and procedures for verifying pharmacy benefits and 29
beneficiary eligibility; 30
8 HOUSE BILL 357
(iii) the dispute resolution and audit appeals process; and 1
(iv) the process and procedures for verifying the prescription drugs 2
included on the formularies used by the pharmacy benefits manager. 3
(2) (i) This paragraph does not apply to a requirement that a specialty 4
pharmacy obtain national certification to be considered a specialty pharmacy in a pharmacy 5
benefits manager’s or [carrier’s] PURCHASER ’S network. 6
(ii) For purposes of credentialing a pharmacy or a pharmacist as a 7
condition for participating in a pharmacy benefits manager’s OR PURCHASER ’S network 8
[for a carrier], the pharmacy benefits manager OR PURCHASER may not: 9
1. require a pharmacy or pharmacist to renew credentialing 10
more frequently than once every 3 years; or 11
2. charge a pharmacy or pharmacist a fee for the initial 12
credentialing or renewing credentialing. 13
15–1628.3. 14
(a) A pharmacy benefits manager or a [carrier] PURCHASER may not directly or 15
indirectly charge a contracted pharmacy, or hold a contracted pharmacy responsible for, a 16
fee or performance–based reimbursement related to the adjudication of a claim or an 17
incentive program. 18
(b) A pharmacy benefits manager or [carrier] PURCHASER may not make or 19
allow any reduction in payment for pharmacy services by a pharmacy benefits manager or 20
[carrier] PURCHASER or directly or indirectly reduce a payment for a pharmacy service 21
under a reconciliation process to an effective rate of reimbursement, including generic 22
effective rates, brand effective rates, direct and indirect remuneration fees, or any other 23
reduction or aggregate reduction of payments. 24
15–1629. 25
(a) [This section applies only to a pharmacy benefits manager that provides 26
pharmacy benefits management services on behalf of a carrier. 27
(b)] This section does not apply to an audit that involves probable or potential 28
fraud or willful misrepresentation by a pharmacy or pharmacist. 29
[(c)] (B) A pharmacy benefits manager shall conduct an audit of a pharmacy or 30
pharmacist under contract with the pharmacy benefits manager in accordance with this 31
section. 32
[(d)] (C) A pharmacy benefits manager may not schedule an onsite audit to begin 33 HOUSE BILL 357 9
during the first 5 calendar days of a month unless requested by the pharmacy or 1
pharmacist. 2
[(e)] (D) When conducting an audit, a pharmacy benefits manager shall: 3
(1) if the audit is onsite, provide written notice to the pharmacy or 4
pharmacist at least 2 weeks before conducting the initial onsite audit for each audit cycle; 5
(2) employ the services of a pharmacist if the audit requires the clinical or 6
professional judgment of a pharmacist; 7
(3) permit its auditors to enter the prescription area of a pharmacy only 8
when accompanied by or authorized by a member of the pharmacy staff; 9
(4) allow a pharmacist or pharmacy to use any prescription, or authorized 10
change to a prescription, that meets the requirements of COMAR 10.34.20.02 to validate 11
claims submitted for reimbursement for dispensing of original and refill prescriptions; 12
(5) for purposes of validating the pharmacy record with respect to orders 13
or refills of a drug, allow the pharmacy or pharmacist to use records of a hospital or a 14
physician or other prescriber authorized by law that are: 15
(i) written; or 16
(ii) transmitted electronically or by any other means of 17
communication authorized by contract between the pharmacy and the pharmacy benefits 18
manager; 19
(6) audit each pharmacy and pharmacist under the same standards and 20
parameters as other similarly situated pharmacies or pharmacists audited by the 21
pharmacy benefits manager; 22
(7) only audit claims submitted or adjudicated within the 2–year period 23
immediately preceding the audit, unless a longer period is authorized under federal or State 24
law; 25
(8) deliver the preliminary audit report to the pharmacy or pharmacist 26
within 120 calendar days after the completion of the audit, with reasonable extensions 27
allowed; 28
(9) in accordance with subsection [(k)] (J) of this section, allow a pharmacy 29
or pharmacist to produce documentation to address any discrepancy found during the audit; 30
and 31
(10) deliver the final audit report to the pharmacy or pharmacist: 32
(i) within 6 months after delivery of the preliminary audit report if 33 10 HOUSE BILL 357
the pharmacy or pharmacist does not request an internal appeal under subsection [(k)] (J) 1
of this section; or 2
(ii) within 30 days after the conclusion of the internal appeals 3
process under subsection [(k)] (J) of this section if the pharmacy or pharmacist requests 4
an internal appeal. 5
[(f)] (E) If a contract between a pharmacy or pharmacist and a pharmacy 6
benefits manager specifies a period of time in which a pharmacy or pharmacist is allowed 7
to withdraw and resubmit a claim and that period of time expires before the pharmacy 8
benefits manager delivers a preliminary audit report that identifies discrepancies, the 9
pharmacy benefits manager shall allow the pharmacy or pharmacist to withdraw and 10
resubmit a claim within 30 days after: 11
(1) the preliminary audit report is delivered if the pharmacy or pharmacist 12
does not request an internal appeal under subsection [(k)] (J) of this section; or 13
(2) the conclusion of the internal appeals process under subsection [(k)] (J) 14
of this section if the pharmacy or pharmacist requests an internal appeal. 15
[(g)] (F) During an audit, a pharmacy benefits manager may not disrupt the 16
provision of services to the customers of a pharmacy. 17
[(h)] (G) (1) A pharmacy benefits manager may not: 18
(i) use the accounting practice of extrapolation to calculate 19
overpayments or underpayments; or 20
(ii) Except as provided in paragraph (2) of this subsection: 21
1. share information from an audit with another pharmacy 22
benefits manager; or 23
2. use information from an audit conducted by another 24
pharmacy benefits manager. 25
(2) Paragraph (1)(ii) of this subsection does not apply to the sharing of 26
information: 27
(i) required by federal or State law; 28
(ii) in connection with an acquisition or merger involving the 29
pharmacy benefits manager; or 30
(iii) at the payor’s request or under the terms of the agreement 31
between the pharmacy benefits manager and the payor. 32 HOUSE BILL 357 11
[(i)] (H) The recoupment of a claims payment from a pharmacy or pharmacist 1
by a pharmacy benefits manager shall be based on an actual overpayment or denial of an 2
audited claim unless the projected overpayment or denial is part of a settlement agreed to 3
by the pharmacy or pharmacist. 4
[(j)] (I) (1) In this subsection, “overpayment” means a payment by the 5
pharmacy benefits manager to a pharmacy or pharmacist that is greater than the rate or 6
terms specified in the contract between the pharmacy or pharmacist and the pharmacy 7
benefits manager at the time that the payment is made. 8
(2) A clerical error, record–keeping error, typographical error, or 9
scrivener’s error in a required document or record may not constitute fraud or grounds for 10
recoupment of a claims payment from a pharmacy or pharmacist by a pharmacy benefits 11
manager if the prescription was otherwise legally dispensed and the claim was otherwise 12
materially correct. 13
(3) Notwithstanding paragraph (2) of this subsection, claims remain 14
subject to recoupment of overpayment or payment of any discovered underpayment by the 15
pharmacy benefits manager. 16
[(k)] (J) (1) A pharmacy benefits manager shall establish an internal appeals 17
process under which a pharmacy or pharmacist may appeal any disputed claim in a 18
preliminary audit report. 19
(2) Under the internal appeals process, a pharmacy benefits manager shall 20
allow a pharmacy or pharmacist to request an internal appeal within 30 working days after 21
receipt of the preliminary audit report, with reasonable extensions allowed. 22
(3) The pharmacy benefits manager shall include in its preliminary audit 23
report a written explanation of the internal appeals process, including the name, address, 24
and telephone number of the person to whom an internal appeal should be addressed. 25
(4) The decision of the pharmacy benefits manager on an appeal of a 26
disputed claim in a preliminary audit report by a pharmacy or pharmacist shall be reflected 27
in the final audit report. 28
(5) The pharmacy benefits manager shall deliver the final audit report to 29
the pharmacy or pharmacist within 30 calendar days after conclusion of the internal 30
appeals process. 31
[(l)] (K) (1) A pharmacy benefits manager may not recoup by setoff any 32
money for an overpayment or denial of a claim until: 33
(i) the pharmacy or pharmacist has an opportunity to review the 34
pharmacy benefits manager’s findings; and 35
12 HOUSE BILL 357
(ii) if the pharmacy or pharmacist concurs with the pharmacy 1
benefits manager’s findings of overpayment or denial, 30 working days have elapsed after 2
the date the final audit report has been delivered to the pharmacy or pharmacist. 3
(2) If the pharmacy or pharmacist does not concur with the pharmacy 4
benefits manager’s findings of overpayment or denial, the pharmacy benefits manager may 5
not recoup by setoff any money pending the outcome of an appeal under subsection [(k)] 6
(J) of this section. 7
(3) A pharmacy benefits manager shall remit any money due to a pharmacy 8
or pharmacist as a result of an underpayment of a claim within 30 working days after the 9
final audit report has been delivered to the pharmacy or pharmacist. 10
(4) Notwithstanding the provisions of paragraph (1) of this subsection, a 11
pharmacy benefits manager may withhold future payments before the date the final audit 12
report has been delivered to the pharmacy or pharmacist if the identified discrepancy for 13
all disputed claims in a preliminary audit report for an individual audit exceeds $25,000. 14
[(m)] (L) (1) The Commissioner may adopt regulations regarding: 15
(i) the documentation that may be requested during an audit; and 16
(ii) the process a pharmacy benefits manager may use to conduct an 17
audit. 18
(2) On request of the Commissioner or the Commissioner’s designee, a 19
pharmacy benefits manager shall provide a copy of its audit procedures or internal appeals 20
process. 21
15–1630. 22
(a) [This section applies only to a pharmacy benefits manager that provides 23
pharmacy benefits management services on behalf of a carrier. 24
(b)] A pharmacy benefits manager shall establish a reasonable internal review 25
process for a pharmacy to request the review of a failure to pay the contractual 26
reimbursement amount of a submitted claim. 27
[(c)] (B) A pharmacy may request a pharmacy benefits manager to review a 28
failure to pay the contractual reimbursement amount of a claim within 180 calendar days 29
after the date the submitted claim was paid by the pharmacy benefits manager. 30
[(d)] (C) The pharmacy benefits manager shall give written notice of its review 31
decision within 90 calendar days after receipt of a request for review from a pharmacy 32
under this section. 33
HOUSE BILL 357 13
[(e)] (D) If the pharmacy benefits manager determines through the internal 1
review process established under subsection [(b)] (A) of this section that the pharmacy 2
benefits manager underpaid a pharmacy, the pharmacy benefits manager shall pay any 3
money due to the pharmacy within 30 working days after completion of the internal review 4
process. 5
[(f)] (E) This section may not be construed to limit the ability of a pharmacy and 6
a pharmacy benefits manager to contractually agree that a pharmacy may have more than 7
180 calendar days to request an internal review of a failure of the pharmacy benefits 8
manager to pay the contractual amount of a submitted claim. 9
[15–1633. 10
The provisions of §§ 15–1633.1 through 15–1639 of this subtitle apply only to a 11
pharmacy benefits manager performing pharmacy benefits management services on behalf 12
of a carrier.] 13
[15–1633.1.] 15–1633. 14
A pharmacy benefits manager or its agent may not request a therapeutic interchange 15
unless: 16
(1) the proposed therapeutic interchange is for medical reasons that benefit 17
the beneficiary; or 18
(2) the proposed therapeutic interchange will result in financial savings 19
and benefits to the purchaser or the beneficiary. 20
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 21
January 1, 2024. 22