EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
Underlining indicates amendments to bill.
Strike out indicates matter stricken from the bill by amendment or deleted from the law by
amendment.
*hb0357*
HOUSE BILL 357
C3 3lr0778
HB 1014/22 – HGO CF SB 898
By: Delegate Kipke Delegates Kipke, Alston, Bagnall, Bhandari, Chisholm,
Cullison, Guzzone, Hill, Hutchinson, S. Johnson, Kaiser, Kerr, R. Lewis,
Lopez, Martinez, M. Morgan, Pena–Melnyk, Reilly, Rosenberg, Szeliga,
Taveras, White, and Woods
Introduced and read first time: January 26, 2023
Assigned to: Health and Government Operations
Committee Report: Favorable with amendments
House action: Adopted
Read second time: March 5, 2023
CHAPTER ______
AN ACT concerning 1
Pharmacy Benefits Managers – Definitions Definition of Carrier, ERISA, and 2
Purchaser and Alteration of Application of Law 3
FOR the purpose of repealing the definitions of “carrier” and “ERISA” and altering the 4
definition altering the definition of “purchaser” for the purpose of applying certain 5
provisions of State insurance law governing pharmacy benefits managers to certain 6
persons that provide prescription drug coverage or benefits in the State through 7
plans or programs subject to the federal Employee Retirement Income Security Act 8
of 1974 (ERISA) exclude certain nonprofit health maintenance organizations; 9
repealing a certain provision provisions that restricts restrict the applicability of 10
certain provisions of law to pharmacy benefits managers that provide pharmacy 11
benefits management services on behalf of a carrier; and generally relating to 12
pharmacy benefits managers. 13
BY repealing and reenacting, with amendments, 14
Article – Insurance 15
Section 15–1601, 15–1606, 15–1611, 15–1611.1, 15–1612, 15–1613, 15–1622, 16
15–1628(a), 15–1628.3, 15–1629, and 15–1630, and 15–1633.1 17
Annotated Code of Maryland 18
(2017 Replacement Volume and 2022 Supplement) 19
BY repealing 20 2 HOUSE BILL 357
Article – Insurance 1
Section 15–1633 2
Annotated Code of Maryland 3
(2017 Replacement Volume and 2022 Supplement) 4
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 5
That the Laws of Maryland read as follows: 6
Article – Insurance 7
15–1601. 8
(a) In this subtitle the following words have the meanings indicated. 9
(b) “Agent” means a pharmacy, a pharmacist, a mail order pharmacy, or a 10
nonresident pharmacy acting on behalf or at the direction of a pharmacy benefits manager. 11
(c) “Beneficiary” means an individual who receives prescription drug coverage or 12
benefits from a purchaser. 13
(d) [(1) “Carrier” means the State Employee and Retiree Health and Welfare 14
Benefits Program, an insurer, a nonprofit health service plan, or a health maintenance 15
organization that: 16
(i) provides prescription drug coverage or benefits in the State; and 17
(ii) enters into an agreement with a pharmacy benefits manager for 18
the provision of pharmacy benefits management services. 19
(2) “Carrier” does not include a person that provides prescription drug 20
coverage or benefits through plans subject to ERISA and does not provide prescription drug 21
coverage or benefits through insurance, unless the person is a multiple employer welfare 22
arrangement as defined in § 514(b)(6)(A)(ii) of ERISA. 23
(e)] “Compensation program” means a program, policy, or process through which 24
sources and pricing information are used by a pharmacy benefits manager to determine the 25
terms of payment as stated in a participating pharmacy contract. 26
[(f)] (E) “Contracted pharmacy” means a pharmacy that participates in the 27
network of a pharmacy benefits manager through a contract with: 28
(1) the pharmacy benefits manager; or 29
(2) a pharmacy services administration organization or a group purchasing 30
organization. 31
[(g) “ERISA” has the meaning stated in § 8–301 of this article.] 32 HOUSE BILL 357 3
[(h)] (F) “Formulary” means a list of prescription drugs used by a purchaser. 1
[(i)] (G) (1) “Manufacturer payments” means any compensati on or 2
remuneration a pharmacy benefits manager receives from or on behalf of a pharmaceutical 3
manufacturer. 4
(2) “Manufacturer payments” includes: 5
(i) payments received in accordance with agreements with 6
pharmaceutical manufacturers for formulary placement and, if applicable, drug utilization; 7
(ii) rebates, regardless of how categorized; 8
(iii) market share incentives; 9
(iv) commissions; 10
(v) fees under products and services agreements; 11
(vi) any fees received for the sale of utilization data to a 12
pharmaceutical manufacturer; and 13
(vii) administrative or management fees. 14
(3) “Manufacturer payments” does not include purchase discounts based on 15
invoiced purchase terms. 16
[(j)] (H) “Nonprofit health maintenance organization” has the meaning stated 17
in § 6–121(a) of this article. 18
[(k)] (I) “Nonresident pharmacy” has the meaning stated in § 12–403 of the 19
Health Occupations Article. 20
[(l)] (J) “Participating pharmacy contract” means a contract filed with the 21
Commissioner in accordance with § 15–1628(b) of this subtitle. 22
[(m)] (K) “Pharmacist” has the meaning stated in § 12–101 of the Health 23
Occupations Article. 24
[(n)] (L) “Pharmacy” has the meaning stated in § 12 –101 of the Health 25
Occupations Article. 26
[(o)] (M) “Pharmacy and therap eutics committee” means a committee 27
established by a pharmacy benefits manager to: 28
4 HOUSE BILL 357
(1) objectively appraise and evaluate prescription drugs; and 1
(2) make recommendations to a purchaser regarding the selection of drugs 2
for the purchaser’s formulary. 3
[(p)] (N) (1) “Pharmacy benefits management services” means: 4
(i) the procurement of prescription drugs at a negotiated rate for 5
dispensation within the State to beneficiaries; 6
(ii) the administration or management of prescription drug coverage 7
provided by a purchaser for beneficiaries; and 8
(iii) any of the following services provided with regard to the 9
administration of prescription drug coverage: 10
1. mail service pharmacy; 11
2. claims processing, retail network management, and 12
payment of claims to pharmacies for prescription drugs dispensed to beneficiaries; 13
3. clinical formulary development and management services; 14
4. rebate contracting and administration; 15
5. patient compliance, therapeutic intervention, and generic 16
substitution programs; or 17
6. disease management programs. 18
(2) “Pharmacy benefits management services” does not include any service 19
provided by a nonprofit health maintenance organization that operates as a group model, 20
provided that the service: 21
(i) is provided solely to a member of the nonprofit health 22
maintenance organization; and 23
(ii) is furnished through the internal pharmacy operations of the 24
nonprofit health maintenance organization. 25
[(q)] (O) “Pharmacy benefits manager” means a person that performs pharmacy 26
benefits management services. 27
[(r)] (P) “Proprietary information” means: 28
(1) a trade secret; 29
HOUSE BILL 357 5
(2) confidential commercial information; or 1
(3) confidential financial information. 2
[(s)] (Q) (1) “Purchaser” means a person that offers a plan or program in the 3
State, including the State Employee and Retiree Health and Welfare Benefits Program, AN 4
INSURER, A NONPROFIT HEALTH S ERVICE PLAN , OR A HEALTH MAINTENA NCE 5
ORGANIZATION , that: 6
[(1)] (I) provides prescription drug coverage or benefits in the State; and 7
[(2)] (II) enters into an agreement with a pharmacy benefits manager for 8
the provision of pharmacy benefits management services. 9
(2) “PURCHASER” DOES NOT INCLUDE A N ONPROFIT HEALTH 10
MAINTENANCE ORGANIZA TION THAT: 11
(I) OPERATES AS A GROUP MODEL; 12
(II) PROVIDES SERVICES SO LELY TO MEMBERS OR P ATIENTS OF 13
THE NONPROFIT HEALTH MAINTENANCE ORGANIZA TION; AND 14
(III) FURNISHES SERVICES T HROUGH THE INTERNAL PHARMACY 15
OPERATIONS OF THE NO NPROFIT HEALTH MAINT ENANCE ORG ANIZATION. 16
[(t)] (R) “Rebate sharing contract” means a contract between a pharmacy 17
benefits manager and a purchaser under which the pharmacy benefits manager agrees to 18
share manufacturer payments with the purchaser. 19
[(u)] (S) (1) “Therapeutic interchange” means any change from one 20
prescription drug to another. 21
(2) “Therapeutic interchange” does not include: 22
(i) a change initiated pursuant to a drug utilization review; 23
(ii) a change initiated for patient safety reasons; 24
(iii) a change required due to market unavailability of the currently 25
prescribed drug; 26
(iv) a change from a brand name drug to a generic drug in accordance 27
with § 12–504 of the Health Occupations Article; or 28
(v) a change required for coverage reasons because the originally 29
prescribed drug is not covered by the beneficiary’s formulary or plan. 30 6 HOUSE BILL 357
[(v)] (T) “Therapeutic interchange solicitation” means any communication by a 1
pharmacy benefits manager for the purpose of requesting a therapeutic interchange. 2
[(w)] (U) “Trade secret” has the meaning stated in § 11–1201 of the Commercial 3
Law Article. 4
15–1606. 5
A [carrier] PURCHASER may not enter into an agreement with a pharmacy benefits 6
manager that has not registered with the Commissioner. 7
15–1611. 8
(a) [This section applies only to a pharmacy benefits manager that provides 9
pharmacy benefits management services on behalf of a carrier. 10
(b)] A pharmacy benefits manager may not prohibit a pharmacy or pharmacist 11
from: 12
(1) providing a beneficiary with information regarding the retail price for 13
a prescription drug or the amount of the cost share for which the beneficiary is responsible 14
for a prescription drug; 15
(2) discussing with a beneficiary information regarding the retail price for 16
a prescription drug or the amount of the cost share for which the beneficiary is responsible 17
for a prescription drug; or 18
(3) if a more affordable drug is available than one on the purchaser’s 19
formulary and the requirements for a therapeutic interchange under §§ [15–1633.1] 20
15–1633 through 15–1639 of this subtitle are met, selling the more affordable alternative 21
to the beneficiary. 22
[(c)] (B) This section may not be construed to alter the requirements for a 23
therapeutic interchange under §§ [15–1633.1] 15–1633 through 15–1639 of this subtitle. 24
15–1611.1. 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)] Except as provided in subsection [(c)] (B) of this section, a pharmacy benefits 28
manager may not require that a beneficiary use a specific pharmacy or entity to fill a 29
prescription if: 30
HOUSE BILL 357 7
(1) the pharmacy benefits manager or a corporate affiliate of the pharmacy 1
benefits manager has an ownership interest in the pharmacy or entity; or 2
(2) the pharmacy or entity has an ownership interest in the pharmacy 3
benefits manager or a corporate affiliate of the pharmacy benefits manager. 4
[(c)] (B) A pharmacy benefits manager may require a beneficiary to use a 5
specific pharmacy or entity for a specialty drug as defined in § 15–847 of this title. 6
15–1612. 7
(a) [This section applies only to a pharmacy benefits manager that provides 8
pharmacy benefits management services on behalf of a carrier. 9
(b)] This section does not apply to reimbursement: 10
(1) for specialty drugs; 11
(2) for mail order drugs; or 12
(3) to a chain pharmacy with more than 15 stores or a pharmacist who is 13
an employee of the chain pharmacy. 14
[(c)] (B) A pharmacy benefits manager may n ot reimburse a pharmacy or 15
pharmacist for a pharmaceutical product or pharmacist service in an amount less than the 16
amount that the pharmacy benefits manager reimburses itself or an affiliate for providing 17
the same product or service. 18
15–1613. 19
A pharmacy and therapeutics committee established by a pharmacy benefits 20
manager performing pharmacy benefits management services [on behalf of a carrier] shall 21
meet the requirements of this part. 22
15–1622. 23
[(a) Except as provided for in subsection (b) of this section, the provisions of §§ 24
15–1623 and 15–1624 of this subtitle apply only to a pharmacy benefits manager that 25
provides pharmacy benefits management services on behalf of a carrier. 26
(b)] The provisions of §§ 15–1623 and 15–1624 of this part do not apply to a 27
pharmacy benefits manager when providing pharmacy benefits management services to a 28
purchaser that is affiliated with the pharmacy benefits manager through common 29
ownership within an insurance holding company. 30
15–1628. 31 8 HOUSE BILL 357
(a) (1) At the time of entering into a contract with a pharmacy or a pharmacist, 1
and at least 30 working days before any contract change, a pharmacy benefits manager 2
shall disclose to the pharmacy or pharmacist: 3
(i) the applicable terms, conditions, and reimbursement rates; 4
(ii) the process and procedures for verifying pharmacy benefits and 5
beneficiary eligibility; 6
(iii) the dispute resolution and audit appeals process; and 7
(iv) the process and procedures for verifying the prescription drugs 8
included on the formularies used by the pharmacy benefits manager. 9
(2) (i) This paragraph does not apply to a requirement that a specialty 10
pharmacy obtain national certification to be considered a specialty pharmacy in a pharmacy 11
benefits manager’s or [carrier’s] PURCHASER ’S network. 12
(ii) For purposes of credentialing a pharmacy or a pharmacist as a 13
condition for participating in a pharmacy benefits manager’s OR PURCHASER ’S network 14
[for a carrier], the pharmacy benefits manager OR PURCHASER may not: 15
1. require a pharmacy or pharmacist to renew credentialing 16
more frequently than once every 3 years; or 17
2. charge a pharmacy or pharmacist a fee for the initial 18
credentialing or renewing credentialing. 19
15–1628.3. 20
(a) A pharmacy benefits manager or a [carrier] PURCHASER may not directly or 21
indirectly charge a contracted pharmacy, or hold a contracted pharmacy responsible for, a 22
fee or performance–based reimbursement related to the adjudication of a claim or an 23
incentive program. 24
(b) A pharmacy benefits manager or [carrier] PURCHASER may not make or 25
allow any reduction in payment for pharmacy services by a pharmacy benefits manager or 26
[carrier] PURCHASER or directly or indirectly reduce a payment for a pharmacy service 27
under a reconciliation process to an effective rate of reimbursement, including generic 28
effective rates, brand effective rates, direct and indirect remuneration fees, or any other 29
reduction or aggregate reduction of payments. 30
15–1629. 31
HOUSE BILL 357 9
(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 an audit that involves probable or potential 3
fraud or willful misrepresentation by a pharmacy or pharmacist. 4
[(c)] (B) A pharmacy benefits manager shall conduct an audit of a pharmacy or 5
pharmacist under contract with the pharmacy benefits manager in accordance with this 6
section. 7
[(d)] (C) A pharmacy benefits manager may not schedule an onsite audit to begin 8
during the first 5 calendar days of a month unless requested by the pharmacy or 9
pharmacist. 10
[(e)] (D) When conducting an audit, a pharmacy benefits manager shall: 11
(1) if the audit is onsite, provide written notice to the pharmacy or 12
pharmacist at least 2 weeks before conducting the initial onsite audit for each audit cycle; 13
(2) employ the services of a pharmacist if the audit requires the clinical or 14
professional judgment of a pharmacist; 15
(3) permit its auditors to enter the prescription area of a pharmacy only 16
when accompanied by or authorized by a member of the pharmacy staff; 17
(4) allow a pharmacist or pharmacy to use any prescription, or authorized 18
change to a prescription, that meets the requirements of COMAR 10.34.20.02 to validate 19
claims submitted for reimbursement for dispensing of original and refill prescriptions; 20
(5) for purposes of validating the pharmacy record with respect to orders 21
or refills of a drug, allow the pharmacy or pharmacist to use records of a hospital or a 22
physician or other prescriber authorized by law that are: 23
(i) written; or 24
(ii) transmitted electronically or by any other means of 25
communication authorized by contract between the pharmacy and the pharmacy benefits 26
manager; 27
(6) audit each pharmacy and pharmacist under the same standards and 28
parameters as other similarly situated pharmacies or pharmacists audited by the 29
pharmacy benefits manager; 30
(7) only audit claims submitted or adjudicated within the 2–year period 31
immediately preceding the audit, unless a longer period is authorized under federal or State 32
law; 33
10 HOUSE BILL 357
(8) deliver the preliminary audit report to the pharmacy or pharmacist 1
within 120 calendar days after the completion of the audit, with reasonable extensions 2
allowed; 3
(9) in accordance with subsection [(k)] (J) of this section, allow a pharmacy 4
or pharmacist to produce documentation to address any discrepancy found during the audit; 5
and 6
(10) deliver the final audit report to the pharmacy or pharmacist: 7
(i) within 6 months after delivery of the preliminary audit report if 8
the pharmacy or pharmacist does not request an internal appeal under subsection [(k)] (J) 9
of this section; or 10
(ii) within 30 days after the conclusion of the internal appeals 11
process under subsection [(k)] (J) of this section if the pharmacy or pharmacist requests 12
an internal appeal. 13
[(f)] (E) If a contract between a pharmacy or pharmacist and a pharmacy 14
benefits manager specifies a period of time in which a pharmacy or pharmacist is allowed 15
to withdraw and resubmit a claim and that period of time expires before the pharmacy 16
benefits manager delivers a preliminary audit report that identifies discrepancies, the 17
pharmacy benefits manager shall allow the pharmacy or pharmacist to withdraw and 18
resubmit a claim within 30 days after: 19
(1) the preliminary audit report is delivered if the pharmacy or pharmacist 20
does not request an internal appeal under subsection [(k)] (J) of this section; or 21
(2) the conclusion of the internal appeals process under subsection [(k)] (J) 22
of this section if the pharmacy or pharmacist requests an internal appeal. 23
[(g)] (F) During an audit, a pharmacy benefits manager may not disrupt the 24
provision of services to the customers of a pharmacy. 25
[(h)] (G) (1) A pharmacy benefits manager may not: 26
(i) use the accounting practice of extrapolation to calculate 27
overpayments or underpayments; or 28
(ii) Except as provided in paragraph (2) of this subsection: 29
1. share information from an audit with another pharmacy 30
benefits manager; or 31
2. use information from an audit conducted by another 32
pharmacy benefits manager. 33 HOUSE BILL 357 11
(2) Paragraph (1)(ii) of this subsection does not apply to the sharing of 1
information: 2
(i) required by federal or State law; 3
(ii) in connection with an acquisition or merger involving the 4
pharmacy benefits manager; or 5
(iii) at the payor’s request or under the terms of the agreement 6
between the pharmacy benefits manager and the payor. 7
[(i)] (H) The recoupment of a claims payment from a pharmacy or pharmacist 8
by a pharmacy benefits manager shall be based on an actual overpayment or denial of an 9
audited claim unless the projected overpayment or denial is part of a settlement agreed to 10
by the pharmacy or pharmacist. 11
[(j)] (I) (1) In this subsection, “overpayment” means a payment by the 12
pharmacy benefits manager to a pharmacy or pharmacist that is greater than the rate or 13
terms specified in the contract between the pharmacy or pharmacist and the pharmacy 14
benefits manager at the time that the payment is made. 15
(2) A clerical error, record–keeping error, typographical error, or 16
scrivener’s error in a required document or record may not constitute fraud or grounds for 17
recoupment of a claims payment from a pharmacy or pharmacist by a pharmacy benefits 18
manager if the prescription was otherwise legally dispensed and the claim was otherwise 19
materially correct. 20
(3) Notwithstanding paragraph (2) of this subsection, claims remain 21
subject to recoupment of overpayment or payment of any discovered underpayment by the 22
pharmacy benefits manager. 23
[(k)] (J) (1) A pharmacy benefits manager shall establish an internal appeals 24
process under which a pharmacy or pharmacist may appeal any disputed claim in a 25
preliminary audit report. 26
(2) Under the internal appeals process, a pharmacy benefits manager shall 27
allow a pharmacy or pharmacist to request an internal appeal within 30 working days after 28
receipt of the preliminary audit report, with reasonable extensions allowed. 29
(3) The pharmacy benefits manager shall include in its preliminary audit 30
report a written explanation of the internal appeals process, including the name, address, 31
and telephone number of the person to whom an internal appeal should be addressed. 32
(4) The decision of the pharmacy benefits manager on an appeal of a 33
disputed claim in a preliminary audit report by a pharmacy or pharmacist shall be reflected 34
in the final audit report. 35 12 HOUSE BILL 357
(5) The pharmacy benefits manager shall deliver the final audit report to 1
the pharmacy or pharmacist within 30 calendar days after conclusion of the internal 2
appeals process. 3
[(l)] (K) (1) A pharmacy benefits manager may not recoup by setoff any 4
money for an overpayment or denial of a claim until: 5
(i) the pharmacy or pharmacist has an opportunity to review the 6
pharmacy benefits manager’s findings; and 7
(ii) if the pharmacy or pharmacist concurs with the pharmacy 8
benefits manager’s findings of overpayment or denial, 30 working days have elapsed after 9
the date the final audit report has been delivered to the pharmacy or pharmacist. 10
(2) If the pharmacy or pharmacist does not concur with the pharmacy 11
benefits manager’s findings of overpayment or denial, the pharmacy benefits manager may 12
not recoup by setoff any money pending the outcome of an appeal under subsection [(k)] 13
(J) of this section. 14
(3) A pharmacy benefits manager shall remit any money due to a pharmacy 15
or pharmacist as a result of an underpayment of a claim within 30 working days after the 16
final audit report has been delivered to the pharmacy or pharmacist. 17
(4) Notwithstanding the provisions of paragraph (1) of this subsection, a 18
pharmacy benefits manager may withhold future payments before the date the final audit 19
report has been delivered to the pharmacy or pharmacist if the identified discrepancy for 20
all disputed claims in a preliminary audit report for an individual audit exceeds $25,000. 21
[(m)] (L) (1) The Commissioner may adopt regulations regarding: 22
(i) the documentation that may be requested during an audit; and 23
(ii) the process a pharmacy benefits manager may use to conduct an 24
audit. 25
(2) On request of the Commissioner or the Commissioner’s designee, a 26
pharmacy benefits manager shall provide a copy of its audit procedures or internal appeals 27
process. 28
15–1630. 29
(a) [This section applies only to a pharmacy benefits manager that provides 30
pharmacy benefits management services on behalf of a carrier. 31
HOUSE BILL 357 13
(b)] A pharmacy benefits manager shall establish a reasonable internal review 1
process for a pharmacy to request the review of a failure to pay the contractual 2
reimbursement amount of a submitted claim. 3
[(c)] (B) A pharmacy may request a pharmacy benefits manager to review a 4
failure to pay the contractual reimbursement amount of a claim within 180 calendar days 5
after the date the submitted claim was paid by the pharmacy benefits manager. 6
[(d)] (C) The pharmacy benefits manager shall give written notice of its review 7
decision within 90 calendar days after receipt of a request for review from a pharmacy 8
under this section. 9
[(e)] (D) If the pharmacy benefits manager determines through the internal 10
review process established under subsection [(b)] (A) of this section that the pharmacy 11
benefits manager underpaid a pharmacy, the pharmacy benefits manager shall pay any 12
money due to the pharmacy within 30 working days after completion of the internal review 13
process. 14
[(f)] (E) This section may not be construed to limit the ability of a pharmacy and 15
a pharmacy benefits manager to contractually agree that a pharmacy may have more than 16
180 calendar days to request an internal review of a failure of the pharmacy benefits 17
manager to pay the contractual amount of a submitted claim. 18
[15–1633. 19
The provisions of §§ 15–1633.1 through 15–1639 of this subtitle apply only to a 20
pharmacy benefits manager performing pharmacy benefits management services on behalf 21
of a carrier.] 22
[15–1633.1.] 15–1633. 23
A pharmacy benefits manager or its agent may not request a therapeutic interchange 24
unless: 25
(1) the proposed therapeutic interchange is for medical reasons that benefit 26
the beneficiary; or 27
(2) the proposed therapeutic interchange will result in financial savings 28
and benefits to the purchaser or the beneficiary. 29
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 30
January 1, 2024. 31