EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
*sb0303*
SENATE BILL 303
J5 5lr2166
HB 726/24 – HGO CF HB 321
By: Senator Lam
Introduced and read first time: January 13, 2025
Assigned to: Finance
A BILL ENTITLED
AN ACT concerning 1
Pharmacy Benefits Managers – Definition of Purchaser and Alteration of 2
Application of Law 3
FOR the purpose of altering the definition of “purchaser” for the purpose of certain 4
provisions of State insurance law governing pharmacy benefits managers to exclude 5
certain nonprofit health maintenance organizations; repealing certain provisions 6
that restrict the applicability of certain provisions of law to pharmacy benefits 7
managers that provide pharmacy benefits management services on behalf of a 8
carrier; and generally relating to pharmacy benefits managers. 9
BY repealing and reenacting, with amendments, 10
Article – Insurance 11
Section 15–1601, 15–1611, 15–1611.1, 15–1612, 15–1622, 15–1629, and 12
15–1630 13
Annotated Code of Maryland 14
(2017 Replacement Volume and 2024 Supplement) 15
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 16
That the Laws of Maryland read as follows: 17
Article – Insurance 18
15–1601. 19
(a) In this subtitle the following words have the meanings indicated. 20
(b) “Agent” means a pharmacy, a pharmacist, a mail order pharmacy, or a 21
nonresident pharmacy acting on behalf or at the direction of a pharmacy benefits manager. 22
(c) “Beneficiary” means an individual who receives prescription drug coverage or 23
benefits from a purchaser. 24 2 SENATE BILL 303
(d) (1) “Carrier” means the State Employee and Retiree Health and Welfare 1
Benefits Program, an insurer, a nonprofit health service plan, or a health maintenance 2
organization that: 3
(i) provides prescription drug coverage or benefits in the State; and 4
(ii) enters into an agreement with a pharmacy benefits manager for 5
the provision of pharmacy benefits management services. 6
(2) “Carrier” does not include a person that provides prescription drug 7
coverage or benefits through plans subject to ERISA and does not provide prescription drug 8
coverage or benefits through insurance, unless the person is a multiple employer welfare 9
arrangement as defined in § 514(b)(6)(A)(ii) of ERISA. 10
(e) “Compensation program” means a program, policy, or process through which 11
sources and pricing information are used by a pharmacy benefits manager to determine the 12
terms of payment as stated in a participating pharmacy contract. 13
(f) “Contracted pharmacy” means a pharmacy that participates in the network of 14
a pharmacy benefits manager through a contract with: 15
(1) the pharmacy benefits manager; or 16
(2) a pharmacy services administration organization or a group purchasing 17
organization. 18
(g) “ERISA” has the meaning stated in § 8–301 of this article. 19
(h) “Formulary” means a list of prescription drugs used by a purchaser. 20
(i) (1) “Manufacturer payments” means any compensation or remuneration a 21
pharmacy benefits manager receives from or on behalf of a pharmaceutical manufacturer. 22
(2) “Manufacturer payments” includes: 23
(i) payments received in accordance with agreements with 24
pharmaceutical manufacturers for formulary placement and, if applicable, drug utilization; 25
(ii) rebates, regardless of how categorized; 26
(iii) market share incentives; 27
(iv) commissions; 28
(v) fees under products and services agreements; 29
SENATE BILL 303 3
(vi) any fees received for the sale of utilization data to a 1
pharmaceutical manufacturer; and 2
(vii) administrative or management fees. 3
(3) “Manufacturer payments” does not include purchase discounts based on 4
invoiced purchase terms. 5
(j) “Nonprofit health maintenance organization” has the meaning stated in § 6
6–121(a) of this article. 7
(k) “Nonresident pharmacy” has the meaning stated in § 12–403 of the Health 8
Occupations Article. 9
(l) “Participating pharmacy contract” means a contract filed with the 10
Commissioner in accordance with § 15–1628(b) of this subtitle. 11
(m) “Pharmacist” has the meaning stated in § 12–101 of the Health Occupations 12
Article. 13
(n) “Pharmacy” has the meaning stated in § 12–101 of the Health Occupations 14
Article. 15
(o) “Pharmacy and therapeutics committee” means a committee established by a 16
pharmacy benefits manager to: 17
(1) objectively appraise and evaluate prescription drugs; and 18
(2) make recommendations to a purchaser regarding the selection of drugs 19
for the purchaser’s formulary. 20
(p) (1) “Pharmacy benefits management services” means: 21
(i) the procurement of prescription drugs at a negotiated rate for 22
dispensation within the State to beneficiaries; 23
(ii) the administration or management of prescription drug coverage 24
provided by a purchaser for beneficiaries; and 25
(iii) any of the following services provided with regard to the 26
administration of prescription drug coverage: 27
1. mail service pharmacy; 28
2. claims processing, retail network management, and 29
payment of claims to pharmacies for prescription drugs dispensed to beneficiaries; 30
4 SENATE BILL 303
3. clinical formulary development and management services; 1
4. rebate contracting and administration; 2
5. patient compliance, therapeutic intervention, and generic 3
substitution programs; or 4
6. disease management programs. 5
(2) “Pharmacy benefits management services” does not include any service 6
provided by a nonprofit health maintenance organization that operates as a group model, 7
provided that the service: 8
(i) is provided solely to a member of the nonprofit health 9
maintenance organization; and 10
(ii) is furnished through the internal pharmacy operations of the 11
nonprofit health maintenance organization. 12
(q) “Pharmacy benefits manager” means a person that performs pharmacy 13
benefits management services. 14
(r) “Proprietary information” means: 15
(1) a trade secret; 16
(2) confidential commercial information; or 17
(3) confidential financial information. 18
(s) (1) “Purchaser” means a person that offers a plan or program in the State, 19
including the State Employee and Retiree Health and Welfare Benefits Program, AN 20
INSURER, A NONPROFIT HEALTH S ERVICE PLAN , OR A HEALTH MAIN TENANCE 21
ORGANIZATION , that: 22
[(1)] (I) provides prescription drug coverage or benefits in the State; and 23
[(2)] (II) enters into an agreement with a pharmacy benefits manager for 24
the provision of pharmacy benefits management services. 25
(2) “PURCHASER” DOES NOT INCLUDE A N ONPROFIT HEALTH 26
MAINTENANCE ORGANIZA TION THAT: 27
(I) OPERATES AS A GROUP MODEL; 28
SENATE BILL 303 5
(II) PROVIDES SERVICES SO LELY TO MEMBERS OR P ATIENTS OF 1
THE NONPROFIT HEALTH MAINTENANCE ORGANIZA TION; AND 2
(III) FURNISHES SERVICES T HROUGH THE INTERNAL PHARMACY 3
OPERATIONS OF THE NO NPROFIT HEALTH MAINT ENANCE ORGANIZATION . 4
(t) “Rebate sharing contract” means a contract between a pharmacy benefits 5
manager and a purchaser under which the pharmacy benefits manager agrees to share 6
manufacturer payments with the purchaser. 7
(u) (1) “Therapeutic interchange” means any change from one prescription 8
drug to another. 9
(2) “Therapeutic interchange” does not include: 10
(i) a change initiated pursuant to a drug utilization review; 11
(ii) a change initiated for patient safety reasons; 12
(iii) a change required due to market unavailability of the currently 13
prescribed drug; 14
(iv) a change from a brand name drug to a generic drug in accordance 15
with § 12–504 of the Health Occupations Article; or 16
(v) a change required for coverage reasons because the originally 17
prescribed drug is not covered by the beneficiary’s formulary or plan. 18
(v) “Therapeutic interchange solicitation” means any communication by a 19
pharmacy benefits manager for the purpose of requesting a therapeutic interchange. 20
(w) “Trade secret” has the meaning stated in § 11–1201 of the Commercial Law 21
Article. 22
15–1611. 23
(a) [This section applies only to a pharmacy benefits manager that provides 24
pharmacy benefits management services on behalf of a carrier. 25
(b)] A pharmacy benefits manager may not prohibit a pharmacy or pharmacist 26
from: 27
(1) providing a beneficiary with information regarding the retail price for 28
a prescription drug or the amount of the cost share for which the beneficiary is responsible 29
for a prescription drug; 30
6 SENATE BILL 303
(2) discussing with a beneficiary information regarding the retail price for 1
a prescription drug or the amount of the cost share for which the beneficiary is responsible 2
for a prescription drug; or 3
(3) if a more affordable drug is available than one on the purchaser’s 4
formulary and the requirements for a therapeutic interchange under §§ 15–1633.1 through 5
15–1639 of this subtitle are met, selling the more affordable alternative to the beneficiary. 6
[(c)] (B) This section may not be construed to alter the requirements for a 7
therapeutic interchange under §§ 15–1633.1 through 15–1639 of this subtitle. 8
15–1611.1. 9
(a) [This section applies only to a pharmacy benefits manager that provides 10
pharmacy benefits management services on behalf of a carrier. 11
(b)] Except as provided in subsection [(c)] (B) of this section, a pharmacy benefits 12
manager may not require that a beneficiary use a specific pharmacy or entity to fill a 13
prescription if: 14
(1) the pharmacy benefits manager or a corporate affiliate of the pharmacy 15
benefits manager has an ownership interest in the pharmacy or entity; or 16
(2) the pharmacy or entity has an ownership interest in the pharmacy 17
benefits manager or a corporate affiliate of the pharmacy benefits manager. 18
[(c)] (B) A pharmacy benefits manager may require a beneficiary to use a 19
specific pharmacy or entity for a specialty drug as defined in § 15–847 of this title. 20
15–1612. 21
(a) [This section applies only to a pharmacy benefits manager that provides 22
pharmacy benefits management services on behalf of a carrier. 23
(b)] This section does not apply to reimbursement: 24
(1) for specialty drugs; 25
(2) for mail order drugs; or 26
(3) to a chain pharmacy with more than 15 stores or a pharmacist who is 27
an employee of the chain pharmacy. 28
[(c)] (B) A pharmacy benefits manager may not reimburse a pharmacy or 29
pharmacist for a pharmaceutical product or pharmacist service in an amount less than the 30 SENATE BILL 303 7
amount that the pharmacy benefits manager reimburses itself or an affiliate for providing 1
the same product or service. 2
15–1622. 3
[(a) Except as provided for in subsection (b) of this section, the provisions of §§ 4
15–1623 and 15–1624 of this subtitle apply only to a pharmacy benefits manager that 5
provides pharmacy benefits management services on behalf of a carrier. 6
(b)] The provisions of §§ 15–1623 and 15–1624 of this part do not apply to a 7
pharmacy benefits manager when providing pharmacy benefits management services to a 8
purchaser that is affiliated with the pharmacy benefits manager through common 9
ownership within an insurance holding company. 10
15–1629. 11
(a) [This section applies only to a pharmacy benefits manager that provides 12
pharmacy benefits management services on behalf of a carrier. 13
(b)] This section does not apply to an audit that involves probable or potential 14
fraud or willful misrepresentation by a pharmacy or pharmacist. 15
[(c)] (B) A pharmacy benefits manager shall conduct an audit of a pharmacy or 16
pharmacist under contract with the pharmacy benefits manager in accordance with this 17
section. 18
[(d)] (C) (1) A pharmacy benefits manager may conduct an audit through an 19
auditing entity. 20
(2) The Commissioner may adopt regulations to carry out this subsection. 21
[(e)] (D) A pharmacy benefits manager may not schedule an onsite audit to begin 22
during the first 5 calendar days of a month unless requested by the pharmacy or 23
pharmacist. 24
[(f)] (E) When conducting an audit, a pharmacy benefits manager shall: 25
(1) if the audit is onsite, provide written notice to the pharmacy or 26
pharmacist at least 2 weeks before conducting the initial onsite audit for each audit cycle; 27
(2) employ the services of a pharmacist if the audit requires the clinical or 28
professional judgment of a pharmacist; 29
(3) allow its auditors to enter the prescription area of a pharmacy only 30
when accompanied by or authorized by a member of the pharmacy staff; 31
8 SENATE BILL 303
(4) allow a pharmacist or pharmacy to use any prescription, or authorized 1
change to a prescription, that meets the requirements of COMAR 10.34.20.02 to validate 2
claims submitted for reimbursement for dispensing of original and refill prescriptions; 3
(5) for purposes of validating the pharmacy record with respect to orders 4
or refills of a drug, allow the pharmacy or pharmacist to use records of a hospital or a 5
physician or other prescriber authorized by law that are: 6
(i) written; or 7
(ii) transmitted electronically or by any other means of 8
communication authorized by contract between the pharmacy and the pharmacy benefits 9
manager; 10
(6) accept a completed cash register transaction to serve as proof of delivery 11
or pickup for a pharmacy customer unless there is contradictory information; 12
(7) audit each pharmacy and pharmacist under the same standards and 13
parameters as other similarly situated pharmacies or pharmacists audited by the 14
pharmacy benefits manager; 15
(8) only audit claims submitted or adjudicated within the 2–year period 16
immediately preceding the audit, unless a longer period is authorized under federal or State 17
law; 18
(9) deliver the preliminary audit report to the pharmacy or pharmacist 19
within 120 calendar days after the completion of the audit, with reasonable extensions 20
allowed; 21
(10) in accordance with subsection [(m)] (L) of this section, allow a 22
pharmacy or pharmacist to produce documentation to address any discrepancy found 23
during the audit; and 24
(11) deliver the final audit report to the pharmacy or pharmacist: 25
(i) within 6 months after delivery of the preliminary audit report if 26
the pharmacy or pharmacist does not request an internal appeal under subsection [(m)] 27
(L) of this section; or 28
(ii) within 30 days after the conclusion of the internal appeals 29
process under subsection [(m)] (L) of this section if the pharmacy or pharmacist requests 30
an internal appeal. 31
[(g)] (F) If a contract between a pharmacy or pharmacist and a pharmacy 32
benefits manager specifies a period of time in which a pharmacy or pharmacist is allowed 33
to withdraw and resubmit a claim and that period of time expires before the pharmacy 34
benefits manager delivers a preliminary audit report that identifies discrepancies, the 35 SENATE BILL 303 9
pharmacy benefits manager shall allow the pharmacy or pharmacist to withdraw and 1
resubmit a claim within 30 days after: 2
(1) the preliminary audit report is delivered if the pharmacy or pharmacist 3
does not request an internal appeal under subsection [(m)] (L) of this section; or 4
(2) the conclusion of the internal appeals process under subsection [(m)] 5
(L) of this section if the pharmacy or pharmacist requests an internal appeal. 6
[(h)] (G) During an audit, a pharmacy benefits manager may not disrupt the 7
provision of services to the customers of a pharmacy. 8
[(i)] (H) (1) A pharmacy benefits manager may not: 9
(i) use the accounting practice of extrapolation to calculate 10
overpayments or underpayments; 11
(ii) except as provided in paragraph (2) of this subsection: 12
1. share information from an audit with another pharmacy 13
benefits manager; or 14
2. use information from an audit conducted by another 15
pharmacy benefits manager; 16
(iii) recoup any funds from or charge any fees to a pharmacy or 17
pharmacist for a prescription with regard to an incorrect days of supply calculation if the 18
package size of the medication is unbreakable and the pharmacy benefits manager cannot 19
accept the correct mathematically calculable days’ supply during prescription adjudication; 20
(iv) have or request access to a pharmacy’s or pharmacist’s bank, 21
credit card, or depository statements or data as it relates to cost–sharing; or 22
(v) audit claims that were reversed or for which there was no 23
remuneration by the purchaser or cost to the pharmacy customer except if necessary to 24
evaluate compliance to a contract. 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 10 SENATE BILL 303
[(j)] (I) A pharmacy benefits manager or purchaser may not audit more than 1
125 prescriptions during a desk or site audit. 2
[(k)] (J) The recoupment of a claims payment from a pharmacy or pharmacist 3
by a pharmacy benefits manager shall be based on an actual overpayment or denial of an 4
audited claim unless the projected overpayment or denial is part of a settlement agreed to 5
by the pharmacy or pharmacist. 6
[(l)] (K) (1) In this subsection, “overpayment” means a payment by the 7
pharmacy benefits manager to a pharmacy or pharmacist that is greater than the rate or 8
terms specified in the contract between the pharmacy or pharmacist and the pharmacy 9
benefits manager at the time that the payment is made. 10
(2) A clerical error, record–keeping error, typographical error, or 11
scrivener’s error in a required document or record may not constitute fraud or grounds for 12
recoupment of a claims payment from a pharmacy or pharmacist by a pharmacy benefits 13
manager if the prescription was otherwise legally dispensed and the claim was otherwise 14
materially correct. 15
(3) Notwithstanding paragraph (2) of this subsection, claims remain 16
subject to recoupment of overpayment or payment of any discovered underpayment by the 17
pharmacy benefits manager. 18
[(m)] (L) (1) A pharmacy benefits manager shall establish an internal appeals 19
process under which a pharmacy or pharmacist may appeal any disputed claim in a 20
preliminary audit report. 21
(2) Under the internal appeals process, a pharmacy benefits manager shall 22
allow a pharmacy or pharmacist to request an internal appeal within 30 working days after 23
receipt of the preliminary audit report, with reasonable extensions allowed. 24
(3) The pharmacy benefits manager shall include in its preliminary audit 25
report a written explanation of the internal appeals process, including the name, address, 26
and telephone number of the person to whom an internal appeal should be addressed. 27
(4) The decision of the pharmacy benefits manager on an appeal of a 28
disputed claim in a preliminary audit report by a pharmacy or pharmacist shall be reflected 29
in the final audit report. 30
(5) The pharmacy benefits manager shall deliver the final audit report to 31
the pharmacy or pharmacist within 30 calendar days after conclusion of the internal 32
appeals process. 33
[(n)] (M) (1) A pharmacy benefits manager may not recoup by setoff any 34
money for an overpayment or denial of a claim until: 35
SENATE BILL 303 11
(i) the pharmacy or pharmacist has an opportunity to review the 1
pharmacy benefits manager’s findings; and 2
(ii) if the pharmacy or pharmacist concurs with the pharmacy 3
benefits manager’s findings of overpayment or denial, 30 working days have elapsed after 4
the date the final audit report has been delivered to the pharmacy or pharmacist. 5
(2) If the pharmacy or pharmacist does not concur with the pharmacy 6
benefits manager’s findings of overpayment or denial, the pharmacy benefits manager may 7
not recoup by setoff any money pending the outcome of an appeal under subsection [(m)] 8
(L) of this section. 9
(3) A pharmacy benefits manager shall remit any money due to a pharmacy 10
or pharmacist as a result of an underpayment of a claim within 30 working days after the 11
final audit report has been delivered to the pharmacy or pharmacist. 12
(4) Notwithstanding the provisions of paragraph (1) of this subsection, a 13
pharmacy benefits manager may withhold future payments before the date the final audit 14
report has been delivered to the pharmacy or pharmacist if the identified discrepancy for 15
all disputed claims in a preliminary audit report for an individual audit exceeds $25,000. 16
[(o)] (N) (1) A pharmacy benefits manager shall provide a pharmacy or 17
pharmacist being audited with a phone number and, if available, access to a secure portal 18
that the pharmacy or pharmacist may use to ask questions regarding the audit. 19
(2) An individual who is familiar with the audit shall respond to all 20
inquiries made through a phone number or secure portal provided under paragraph (1) of 21
this subsection within 3 business days after the inquiry was made. 22
[(p)] (O) (1) The pharmacy benefits manager shall give the pharmacy or 23
pharmacist the option to provide requested audit documentation by postal mail, e–mail, or 24
facsimile. 25
(2) If a document is requested regarding an audit, the pharmacy benefits 26
manager shall provide a secure facsimile number and a mechanism for receiving secure 27
e–mails. 28
(3) On or before October 1, 2025, a pharmacy benefits manager shall 29
provide a mechanism for secure electronic communication for pharmacies and pharmacists 30
to communicate with and submit documents to the auditing entity. 31
[(q)] (P) (1) The Commissioner may adopt regulations regarding: 32
(i) the documentation that may be requested during an audit; and 33
(ii) the process a pharmacy benefits manager may use to conduct an 34
audit. 35 12 SENATE BILL 303
(2) On request of the Commissioner or the Commissioner’s designee, a 1
pharmacy benefits manager shall provide a copy of its audit procedures or internal appeals 2
process. 3
15–1630. 4
(a) [This section applies only to a pharmacy benefits manager that provides 5
pharmacy benefits management services on behalf of a carrier. 6
(b)] A pharmacy benefits manager shall establish a reasonable internal review 7
process for a pharmacy to request the review of a failure to pay the contractual 8
reimbursement amount of a submitted claim. 9
[(c)] (B) A pharmacy may request a pharmacy benefits manager to review a 10
failure to pay the contractual reimbursement amount of a claim within 180 calendar days 11
after the date the submitted claim was paid by the pharmacy benefits manager. 12
[(d)] (C) The pharmacy benefits manager shall give written notice of its review 13
decision within 90 calendar days after receipt of a request for review from a pharmacy 14
under this section. 15
[(e)] (D) If the pharmacy benefits manager determines through the internal 16
review process established under subsection [(b)] (A) of this section that the pharmacy 17
benefits manager underpaid a pharmacy, the pharmacy benefits manager shall pay any 18
money due to the pharmacy within 30 working days after completion of the internal review 19
process. 20
[(f)] (E) This section may not be construed to limit the ability of a pharmacy and 21
a pharmacy benefits manager to contractually agree that a pharmacy may have more than 22
180 calendar days to request an internal review of a failure of the pharmacy benefits 23
manager to pay the contractual amount of a submitted claim. 24
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 25
January 1, 2026. 26