SB 881 - HB 1244
FISCAL NOTE
Fiscal Review Committee
Tennessee General Assembly
March 13, 2025
Fiscal Analyst: Chris Higgins | Email: chris.higgins@capitol.tn.gov | Phone: 615-741-2564
SB 881 - HB 1244
SUMMARY OF BILL: Establishes prompt payment standards for pharmacy benefits
managers (PBMs), such that, no later than 30 calendar days after a PBM receives a claim submitted
on paper from a provider, or 14 days after receiving a claim by electronic submission, the PBM shall:
(1) for a clean claim, pay the total covered amount of the claim; (2) pay the portion of the claim that
constitutes a clean claim and that is not in dispute and notify the provider why the remaining
portion of the claim will not be paid; or (3) notify the provider of the reason why the claim does not
constitute a clean claim and will not be paid and what substantiating documentation and information
is required to adjudicate the claim.
Prohibits a paper claim from being denied upon resubmission for lack of substantiating
documentation or information that has been previously provided by the healthcare provider.
Requires a PBM to pay one percent interest per month, accruing from the day after the payment was
due, on the amount of a claim that remains unpaid in non-compliance with the legislation. Requires
the Commissioner of Commerce and Insurance to provide regulatory oversight of PBM's claim
processing, and to assess penalties of up to $200,000 for violating the legislation. Authorizes a PBM
to request an administrative hearing contesting the assessment of such an administrative penalty.
Authorizes the Department of Commerce and Insurance (DCI) to conduct examinations of PBMs
to determine compliance with the legislation. Establishes that there is no aggregate limit on the
amount of penalties assessed to a PBM by DCI.
Establishes that, when a pharmacy or pharmacy agent prevails in an appeal regarding a
reimbursement made by a PBM or covered entity, such PBM or covered entity must, within seven
business days, apply the findings from the appeal as to the rate of the reimbursement and actual cost
for the particular drug or medical product or device to all remaining refills on the issued prescription
drug or medical product or device, if the reimbursement aligns with the appeal.
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FISCAL IMPACT:
STATE GOVERNMENT
EXPENDITURES General Fund
FY25-26 & Subsequent Years $91,300
FEDERAL GOVERNMENT
EXPENDITURES
FY25-26 & Subsequent Years $274,300
OTHER FISCAL IMPACT
To the extent that appeal prices for pharmacy reimbursements under the State Group Insurance
Program are applied to future inventory that exceeds the actual acquisition price, there will be an
increase in expenditures; however, it is not possible to calculate the amount of increased
expenditures without additional information regarding such pharmacy reimbursements.
Assumptions:
• The DCI can conduct examinations and monitor compliance with the legislation utilizing
existing personnel and resources, without a significant increase in expenditures.
• The prompt payments standards established for PBMs will not have a significant impact on
the Division of TennCare or the State Group Insurance Program (SGIP).
• The proposed legislation makes changes to how a PBM or covered entity must handle
appeals regarding a reimbursement made by such PBM or covered entity.
• Pursuant to Tenn. Code Ann. § 56-7-3206(d), the appeal process established for a pharmacy
to appeal a reimbursement for failing to pay at least the actual cost to the pharmacy for the
prescription drug or device does not apply to a PBM when utilizing a reimbursement
methodology that is identical to the methodology provided for in the state plan for medical
assistance approved by the federal Centers for Medicare and Medicaid Services.
• The TennCare program's pharmacy reimbursement methodology is identical to the
methodology provided for in the state plan; therefore, there will be no impact to the
TennCare pharmacy program.
• However, the CoverKids program's pharmacy reimbursement methodology does not match
the state plan.
• Under the CoverKids program, pharmacies are reimbursed for prescription claims based on
market-driven acquisition costs that often fluctuate based on a number of conditions.
• If a pharmacy submits a pricing inquiry regarding the appropriate reimbursement of a
medication, and a change in reimbursement is approved, the reimbursement rate will be
updated retroactively for the inquiring pharmacy's submitted claim, and prospectively for all
pharmacies dispensing the medication until the next pricing adjustment.
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• The proposed legislation will require the CoverKids pharmacy program to apply the
findings from an appeal to all remaining refills on the issued prescription drug or medical
product or device for up to a year.
• Based on an analysis conducted by the Division of TennCare using reimbursement inquiry
adjustments made over a one-year period, requiring a fixed reimbursement rate for all
prescription refills will result in an increase in expenditures of $365,568 in FY25-26 and
subsequent years.
• Expenditures through the CoverKids program receive matching federal funds at a rate
75.025 percent federal to 24.975 percent state. Of this amount $91,301 ($365,568 x
24.975%) will be in state funds and $274,267 ($365,568 x 75.025%) will be in federal funds.
• The requirement to fix the reimbursement rates resulting from a pharmacy appeal also
applies to the SGIP.
• According to information provided by the Division of Benefits Administration, each time
an appeal price is applied to future inventory that exceeds the actual acquisition price, there
will be a cost to the SGIP; however, it is not possible to calculate the precise impact to the
SGIP without additional information.
IMPACT TO COMMERCE:
BUSINESS IMPACT
FISCAL YEAR REVENUE
FY25-26 & Subsequent Years $365,600
Assumptions:
• Pharmacies and pharmacy agents will experience an increase in business revenue of at least
$365,568 in FY25-26 and subsequent years from increased reimbursement rates for drugs,
medical products, and devices.
• Any impact to jobs in Tennessee is estimated to be not significant.
CERTIFICATION:
The information contained herein is true and correct to the best of my knowledge.
Bojan Savic, Executive Director