Bill Text: CA SB966 | 2023-2024 | Regular Session | Amended
Bill Title: Pharmacy benefits.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced) 2024-05-16 - Read second time. Ordered to third reading. [SB966 Detail]
Download: California-2023-SB966-Amended.html
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Amended
IN
Senate
April 29, 2024 |
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Amended
IN
Senate
April 18, 2024 |
CALIFORNIA LEGISLATURE—
2023–2024 REGULAR SESSION
Senate Bill
No. 966
| Introduced by Senator Wiener |
January 24, 2024 |
An act to amend Section 1367.243 of, and to add Section 1367.2075 to to, the Health and Safety Code, and to amend Section 10123.205 of, to add Section 10123.2045 to, and to add Division 6 (commencing with Section 17000) to, the Insurance Code, relating to pharmacy benefits.
LEGISLATIVE COUNSEL'S DIGEST
SB 966, as amended, Wiener.
Pharmacy benefits.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975 (the Knox-Keene Act), a violation of which is a crime, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care. The Knox-Keene Act requires a pharmacy benefit manager under contract with a health care service plan to, among other things, register with the Department of Managed Health Care. Existing law provides for the regulation of health insurers by the Department of Insurance.
This bill would additionally require a pharmacy benefit manager, as defined by the bill, to apply for and obtain a license from the Department of Insurance to operate as a pharmacy benefit manager.
manager on and after January 1, 2026. The bill would establish application qualifications and requirements, and would establish an unspecified fee for initial licensure and renewal.
require initial license and renewal fees to be collected into the newly created Pharmacy Benefit Manager Fund to be available to the department for use, upon appropriation by the Legislature, for costs related to licensing and regulating pharmacy benefit managers.
This bill would require a pharmacy benefit manager, on or before April 1, 2027, and annually thereafter, manager to file with the department a report
containing specified information. at specified annual intervals 2 reports, one of which discloses product benefits specific to the purchaser, and the other of which includes information about categories of drugs and the pharmacy benefit manager’s contracts and revenues. The bill would specify that the contents of the report shall not reports are not to be disclosed to the public. The bill would require the department, on or before August 1, 2027, and annually thereafter, at specified annual intervals, to submit a report
2 reports to the Legislature based on the reports submitted by licensees, pharmacy benefit managers, and would require the department to post the report
reports on the department’s internet website.
This bill would impose specified duties on pharmacy benefit managers and requirements for pharmacy benefit manager services and pharmacy benefit manager contracts, including prohibiting a pharmacy benefit manager from deriving income from pharmacy benefit management services, except as specified. The bill would make a violation of the above-specified provisions subject to specified civil penalties. The bill would create the Pharmacy Benefit Manager Fines and Penalties Fund, into which fines and administrative penalties would be deposited.
Existing law requires a health care service plan contract or health insurance policy that provides coverage for outpatient prescription drugs to cover medically necessary prescription drugs and subjects
those policies to certain limitations on cost sharing and the placement of drugs on formularies. Existing law limits the maximum amount an enrollee or insured may be required to pay at the point of sale for a covered prescription drug to the lesser of the applicable cost-sharing amount or the retail price, and requires that payment apply to the applicable deductible. Existing law requires a plan or insurer that reports rate information to report specified prescription drug information to the relevant department no later than October 1 of each year.
This bill would require
prohibit a health care service plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2025, that provides prescription drug coverage to calculate
from calculating an enrollee or insured’s cost sharing amount, including deductible and coinsurance, based exclusively on its negotiated rate at an amount that exceeds the actual rate paid for the prescription drug. The bill, for a preexisting contract between a pharmacy benefit manager and a health care service plan or health insurer authorizing spread pricing, would prohibit an amendment or renewal of the contract from authorizing spread pricing. The bill would prohibit a contract between a pharmacy benefit manager and a health care service plan or health insurer that is executed on or after January 1, 2025, from authorizing spread pricing.
The bill would require a plan or insurer to include additional information in its annual prescription drug data reporting, including the aggregate amount of rebates received by the pharmacy benefit manager for each drug. By expanding the scope of a crime under the Knox-Keene Act, the bill would impose a state-mandated local program.
This bill would declare that it shall not narrow, abrogate, or otherwise alter the authority of the Attorney General to maintain or restore competitive markets and prosecute state and federal antitrust and unfair competition violations, and would declare that the provisions of this bill are severable.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.
This bill would make legislative findings to that effect.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YESBill Text
The people of the State of California do enact as follows:
SECTION 1.
Section 1367.2075 is added to the Health and Safety Code, immediately following Section 1367.207, to read:1367.2075.
(a) A health care service plan contract issued, amended, or renewed on or after January 1, 2025, that provides prescription drug coverage shall not calculate an enrollee’s(b) (1) Commencing January 1, 2025, if a preexisting contract between a pharmacy benefit manager licensed pursuant to Division 6 (commencing with Section 17000) of the Insurance Code and a health care service plan authorizes spread pricing, as that term is defined by Section 17000 of the Insurance Code, any subsequent amendment or renewal of that contract shall not authorize spread pricing.
(2) A contract that is executed on or after January 1, 2025, between a pharmacy benefit manager licensed
pursuant to
Division 6 (commencing with Section 17000) of the Insurance Code and a health care service plan shall not authorize spread pricing, as that term is defined by Section 17000 of the Insurance Code.
SEC. 2.
Section 1367.243 of the Health and Safety Code is amended to read:1367.243.
(a) (1) A health care service plan that reports rate information pursuant to Section 1385.03 or 1385.045 shall report the information described in paragraph (2) to the department no later than October 1 of each year, beginning October 1, 2018.(2) For all covered prescription drugs, including generic drugs, brand name drugs, and specialty drugs dispensed at a plan pharmacy, network pharmacy, or mail order pharmacy for outpatient use, all of the following shall be reported:
(A) The 25 most frequently prescribed drugs.
(B) The 25 most costly drugs by total annual plan spending.
(C) The 25 drugs with the highest year-over-year increase in total annual plan spending.
(D) For each list in subparagraphs (A) to (C), inclusive, all of the following:
(i) The aggregate wholesale acquisition costs from a pharmaceutical manufacturer or labeler for each drug.
(ii) The aggregate amount of rebates received by the pharmacy benefit manager for each drug.
(iii) Any administrative fees received from the pharmaceutical manufacturer or labeler.
(iv) The aggregate of payments, or the equivalent economic benefit, made by the pharmacy benefit
manager to pharmacies owned or controlled by the pharmacy benefit manager for each drug.
(v) The aggregate of payments made by the pharmacy benefit manager to pharmacies not owned or collected by the pharmacy benefit manager for each drug.
(b) The department shall compile the information reported pursuant to subdivision (a) into a report for the public and legislators that demonstrates the overall impact of drug costs on health care premiums. The data in the report shall be aggregated and shall not reveal information specific to individual health care service plans.
(c) For the purposes of this section, a “specialty drug” is one that exceeds the threshold for a specialty drug under the Medicare Part D program (Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law
108-173)).
(d) By January 1 of each year, beginning January 1, 2019, the department shall publish on its Internet Web site internet website the report required pursuant to subdivision (b).
(e) After the report required in subdivision (b) is released, the department shall include the report as part of the public meeting required pursuant to subdivision (b) of Section 1385.045.
(f) Except for the report required pursuant to subdivision (b), the department shall keep confidential all of the information provided to the department pursuant to this section, and the information shall be protected from public
disclosure.
SEC. 2.SEC. 3.
Section 10123.2045 is added to the Insurance Code, immediately following Section 10123.204, to read:10123.2045.
(a) A health insurance policy issued, amended, or renewed on or after January 1, 2025, that provides prescription drug coverage shall not calculate an insured’s(b) (1) Commencing January 1, 2025, if a preexisting contract between a pharmacy benefit manager licensed pursuant to Division 6 (commencing with Section 17000) and a health insurer authorizes spread pricing, as that term is defined by Section 17000, any subsequent amendment or renewal of that contract shall not authorize spread pricing.
(2) A contract that is executed on or after January 1, 2025, between a pharmacy benefit manager licensed pursuant to
Division 6 (commencing with Section 17000) and a health insurer shall not authorize spread pricing, as that term is defined by Section 17000.
SEC. 4.
Section 10123.205 of the Insurance Code is amended to read:10123.205.
(a) (1) A health insurer that reports rate information pursuant to Section 10181.3 or 10181.45 shall report the information described in paragraph (2) to the department no later than October 1 of each year, beginning October 1, 2018.(2) For all covered prescription drugs, including generic drugs, brand name drugs, and specialty drugs dispensed at a plan pharmacy, network pharmacy, or mail order pharmacy for outpatient use, all of the following shall be reported:
(A) The 25 most frequently prescribed drugs.
(B) The 25 most costly drugs by total annual plan spending.
(C) The 25 drugs with the highest year-over-year increase in total annual plan spending.
(D) For each list in subparagraphs (A) to (C), inclusive, all of the following:
(i) The aggregate wholesale acquisition costs from a pharmaceutical manufacturer or labeler for each drug.
(ii) The aggregate amount of rebates received by the pharmacy benefit manager for each drug.
(iii) Any administrative fees received from the pharmaceutical manufacturer or labeler.
(iv) The aggregate of payments, or the equivalent economic benefit, made by the pharmacy benefit
manager to pharmacies owned or controlled by the pharmacy benefit manager for each drug.
(v) The aggregate of payments made by the pharmacy benefit manager to pharmacies not owned or collected by the pharmacy benefit manager for each drug.
(b) The department shall compile the information reported pursuant to subdivision (a) into a report for the public and legislators that demonstrates the overall impact of drug costs on health care premiums. The data in the report shall be aggregated and shall not reveal information specific to individual health insurers.
(c) For the purposes of this section, a “specialty drug” is one that exceeds the threshold for a specialty drug under the Medicare Part D program (Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law
108-173)).
(d) By January 1 of each year, beginning January 1, 2018, the department shall publish on its Internet Web site internet website the report required pursuant to subdivision (b).
(e) After the report required in subdivision (b) is released, the department shall include the report as part of the public meeting required pursuant to subdivision (b) of Section 10181.45.
(f) Except for the report required pursuant to subdivision (b), the department shall keep confidential all of the information provided to the department pursuant to this section, and the information shall be protected from public
disclosure.
SEC. 3.SEC. 5.
Division 6 (commencing with Section 17000) is added to the Insurance Code, to read:DIVISION 6. Regulation of Pharmacy Benefit Managers
CHAPTER 1. General Provisions
17000.
For purposes of this division:(a) “Affiliated pharmacy” means a contract pharmacy that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, a pharmacy benefit manager.
(b) “Claim” means a request for payment for administering, filling, or refilling a drug or for providing a pharmacy service or a medical supply or device to an enrollee or insured.
(c) “Contract pharmacy” means a retail pharmacy or other pharmacy that contracts directly or through a pharmacy services administration organization
with a pharmacy benefit manager.
(d) “Drug” has the same meaning as defined in Section 4025 of the Business and Professions Code.
(e) “Health care service plan” means an entity licensed pursuant to the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code), including an entity that enters into a contract with the State Department of Health Care Services for the delivery of health care services pursuant to Chapter 7 (commencing with Section 14000), Chapter 8 (commencing with Section 14200), Chapter 8.75 (commencing with Section 14591), or Chapter 8.9 (commencing with Section 14700) of Part 3 of Division 9 of the Welfare and Institutions Code. An entity that is licensed as a health care service plan
and that operates a prescription drug plan that is subject to the provisions of the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code) is subject to this chapter unless preempted by federal law. Code).
(f) “Health insurer” means a disability insurer that issues health insurance, as defined in Section 106.
(g) “Manufacturer” has the same meaning as defined in Section 4033 of the Business and Professions Code.
(h) “Nonaffiliated pharmacy” means a contract pharmacy that directly, or indirectly through
one or more intermediaries, does not control, is not controlled by, and is not under common control with, a pharmacy benefit manager.
(i) “Nonresident pharmacy” has the same meaning as described in Section 4112 of the Business and Professions Code.
(j) “Person” has the same meaning as defined in Section 4035 of the Business and Professions Code.
(k) “Personal representative” means an individual who has authority to make a health care decision on behalf of another individual pursuant to Division 4.7 (commencing with Section 4600) of the Probate Code.
(l) “Pharmacist” has the same meaning as defined in Section 4036 of the Business and Professions Code.
(m) “Pharmacist services” means products, goods, and services, or any combination of products, goods, and services, provided as a part of the practice of pharmacy.
(n) “Pharmacy” has the same meaning as defined in Section 4037 of the Business and Professions Code.
(o) “Pharmacy benefit management fee” means a fee that covers the cost of providing one or more pharmacy benefit management services and that does not exceed the value of the service or services actually performed by the pharmacy benefit manager.
(p) “Pharmacy benefit management service” means all of the following:
(1) Negotiating the price of
prescription drugs, including negotiating and contracting for direct or indirect rebates, discounts, or other price concessions.
(2) Managing any aspect of a prescription drug benefit, including, but not limited to, the processing and payment of claims for prescription drugs, the performance of drug utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to the prescription drug benefit, contracting with pharmacies, controlling the cost of covered prescription drugs, managing or providing data relating to the prescription drug benefit, or the provision of services related thereto.
(3) Performing any administrative, managerial, clinical, pricing, financial, reimbursement, data administration, or reporting, or billing
service.
(4) Other services as the department may define in regulation.
(q) “Pharmacy benefit manager” means a person, business, or other entity that, either directly or indirectly, manages the prescription drug coverage, including, but not limited to, the following: clinical or other formulary or preferred drug list development or management; the processing and payment of claims for prescription drugs, the negotiation or administration of rebates, discounts, payment differentials, or other incentives; for the inclusion of particular prescription drugs in a particular category or to promote the purchase of particular prescription drugs; the performance of drug utilization review; the processing of drug prior authorization requests; the adjudication of appeals or grievances
related to prescription drug coverage; contracting with pharmacies; and controlling the cost of covered prescription drugs. “Pharmacy benefit manager” does not include either of the following:
(1) A health care service plan that is part of a fully integrated delivery system in which enrollees primarily use pharmacies that are entirely owned and operated by the health care service plan, and the plan’s enrollees may use any pharmacy in the health care service plan’s network that has the ability to dispense the medication or provide the services.
(2) A contract authorized by Section 4600.2 of the Labor Code.
(r) “Pharmacy services administration organization” means an entity that provides contracting and other administrative services
relating to prescription drug benefits to pharmacies.
(s) “Rebate” means a formulary discount or remuneration attributable to the use of prescription drugs that is paid by a manufacturer or third party, directly or indirectly, to a pharmacy benefit manager after a claim has been adjudicated at a pharmacy. “Rebate” does not include a fee, including a bona fide service fee or administrative fee, that is not a formulary discount or remuneration.
(t) “Retail pharmacy” means a pharmacy that dispenses prescription drugs to the public at retail typically by face-to-face interaction with the individual or the individual’s caregiver.
(u) “Spread pricing” means the model of prescription drug pricing in which a pharmacy benefit
manager charges a health care service plan or health insurer a contracted price for prescription drugs, and the contracted price for the prescription drugs differs from the amount the pharmacy benefit manager directly or indirectly pays the pharmacist or pharmacy.
(v) “Third party” means a person that is not an enrollee, insured, or pharmacy benefit manager.
(w) “Wholesaler” has the same meaning as defined in Section 4043 of the Business and Professions Code.
17005.
The department shall adopt regulations necessary to implement this division.(a) Until January 1, 2028, necessary regulations for the purpose of implementing this division may be adopted as emergency regulations in accordance with the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code). The adoption of emergency regulations pursuant to this section shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare.
(b) Notwithstanding Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, including subdivisions (e) and (h) of Section 11346.1, an emergency regulation adopted pursuant to this section shall be repealed by operation of law unless the adoption, amendment, or repeal of the regulation is promulgated by the department pursuant to Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code within five years of the initial adoption of the emergency regulation.
(c) A regulation adopted pursuant to this section shall be discussed by the department during at least one public stakeholder meeting before the department adopts the rule or regulation.
17006.
The department shall establish procedures for receiving, investigating, tracking, and publicly reporting consumer complaints against pharmacy benefit managers.CHAPTER 2. Licensing
17010.
(a) The department shall license and regulate pharmacy benefit managers.(b) A On and after January 1, 2026, a pharmacy benefit manager that provides services in this state shall apply for, obtain, and maintain a license to operate as a pharmacy benefit manager from the department.
(c) An application for a pharmacy benefit manager license shall be submitted in a form and manner determined by the department. The application shall include all of the
following:
(1) The information as to each person beneficially interested therein or any person with management or control over the pharmacy benefit manager.
(2) A copy of all organizational and governing documents of the pharmacy benefit manager.
(3) A description of the pharmacy benefit manager, its services, facilities, and personnel.
(4) A document in which the pharmacy benefit manager confirms that its business practices and each ongoing contract comply with this chapter.
(d) Within 30 days after a significant modification of the information or documents submitted pursuant to subdivision
(b), a pharmacy benefit manager shall file a notice of the modification with the department.
17015.
(a) A pharmacy benefit manager license shall be renewed every two years and is nontransferable.(b) To renew a pharmacy benefit manager license, an applicant shall submit to the department both of the following:
(1) A renewal application in a form and manner determined by the department that is signed by an officer or individual responsible for the conduct or affairs of the pharmacy benefit manager verifying that the contents of the renewal form are correct.
(2) A renewal schedule and fee as determined by the department.
(c) A pharmacy benefit manager license shall expire if a complete renewal filing and fee is not received by the due date established by the department.
(a)The fee for a pharmacy benefit manager license shall be ____ dollars ($____) and may be increased to ____ dollars ($____). The fee for the issuance of a temporary pharmacy permit shall be ____ dollars ($____) and may be increased to ____ dollars ($____).
(b)The fee for a pharmacy benefit manager license annual renewal shall be ____ dollars ($____) and may be increased to ____ dollars ($____).
17020.
(a) There is hereby established in the State Treasury the Pharmacy Benefit Manager Fund. The fund shall be available to the department for use, upon appropriation by the Legislature, for costs related to the licensing and regulation of pharmacy benefit managers.(b) The fees for a pharmacy benefit manager initial license and renewal application shall be sufficient to fund the department’s duties in relation to responsibilities under this chapter, but in no case shall the fee exceed the reasonable regulatory cost to administer this division. Fees shall be collected into the Pharmacy Benefit Manager Fund.
CHAPTER 3. Licensee Duties
17025.
(a) On or before April 1, 2027, and on or before each April 1 thereafter, a pharmacy benefit manager shall file with the department a report that contains all of the information required by subdivision (e) of Section 4441 of the Business and Professions Code from the preceding calendar year.(b)The report submitted pursuant to subdivision (a) shall be deemed confidential and shall not be disclosed to the public pursuant to the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code). Nothing in this section shall prevent disclosure to the Attorney General to investigate, prosecute, defend any legitimate legal claim or cause or action, or to use the reports in any court or proceeding
of law.
(c)
(b) On or before August 1, 2027, and on or before each August 1 thereafter, the department shall prepare a report based on the information received by the department pursuant to subdivision (a) and shall submit the report to the Legislature in compliance with Section 9795 of the Government Code. The report shall contain aggregate data and shall exclude any information that the department determines would cause financial, competitive, or proprietary harm to a pharmacy benefit manager. The department shall post the report on the department’s internet website.
(c) On or before October 1, 2025, and on or before each October 1 thereafter, a pharmacy benefit manager shall report to the department all of the following information:
(1) A list of the 50 costliest drugs, the 50 most frequently prescribed drugs, and the 50 highest revenue-producing drugs, grouped by generic, brand, specialty, and other. For each drug that falls into the above categories, the pharmacy benefit manager shall report both of the following:
(A) The pharmacy type used to fill the drug prescription, such as integrated, chain, independent, specialty, and mail order pharmacies.
(B) Pricing and rebate information, including the net price paid, the amount of rebate the pharmacy benefit manager receives from the manufacturer, the amount of rebate the
pharmacy benefit manager passes to the health care service plan or health insurer, the amount the plan or insurer pays the pharmacy benefit manager, and the amount the pharmacy benefit manager pays the pharmacy.
(2) All of the following information in the aggregate:
(A) The purchasers with which the pharmacy benefit manager contracts, the scope of services provided to the purchasers, and the number of enrollees, insureds, and plan members served.
(B) Pharmacy benefit manager revenue, including revenue from manufacturers, purchasers, and other revenue.
(C) Pharmacy benefit manager expenses, including payments to pharmacies, claims processing, special programs, administration, and other expenses.
(d) The department shall compile the information reported pursuant to subdivision (c) into a report for the public and Legislature that demonstrates the overall impact of pharmacy benefit managers on drug costs. The data in the report shall be aggregated and shall not reveal information specific to individual purchasers.
(1) On or before January 1, 2026, and on or before each January 1 thereafter, the department shall publish the report on its internet website.
(2) The report shall be submitted to the Legislature in compliance with Section 9795 of the Government Code.
(3) The department shall include the report as part of the public meeting required pursuant to subdivision (b) of Section 10181.45.
(e) Except for the reports required
pursuant to subdivisions (b) and (d), the information submitted to the department pursuant to subdivisions (a) and (c) shall be deemed confidential and shall not be disclosed to the public pursuant to the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code). This section does not prevent disclosure to the Attorney General to investigate, prosecute, or defend any legitimate legal claim or cause or action, or to use the reports in any court or proceeding of law.
(f) For purposes of this section, a “specialty drug” is one that exceeds the threshold for a specialty drug under the Medicare Part D program (Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173)).
17030.
(a) A pharmacy benefit manager shall not impose any requirements, conditions, or exclusions that discriminate against a nonaffiliated pharmacy in connection with dispensing drugs.(b) Discrimination prohibited pursuant to subdivision (a) includes all of the following:
(1) Terms or conditions applied to nonaffiliated pharmacies based on their status as a nonaffiliated pharmacy.
(2) Refusing to contract with or terminating a contract with a nonaffiliated pharmacy on the basis that the pharmacy is a nonaffiliated pharmacy or for reasons other
than those that apply equally to affiliated pharmacies.
(3) Retaliation against a nonaffiliated pharmacy based on its exercise of any right or remedy under this chapter.
(c)Before a prescription is dispensed, an affiliated pharmacy shall disclose to an enrollee or insured that the affiliated pharmacy is an affiliated pharmacy and that the enrollee or insured is not obligated to use the affiliated pharmacy.
(c) This division does not preclude a pharmacy benefit manager or a purchaser of pharmacy benefit manager services
from establishing a network of contracting or participating pharmacies.
17035.
A pharmacy benefit manager shall not do any of the following:(a) Require an enrollee or insured to use only an affiliated pharmacy that is a retail pharmacy. pharmacy if there are nonaffiliated pharmacies in the network.
(b) Financially induce an enrollee, insured, or prescriber to transfer a prescription only to a retail affiliated pharmacy.
pharmacy if there are nonaffiliated pharmacies in the network.
(c) Require a retail nonaffiliated pharmacy to transfer a prescription to a retail affiliated pharmacy. pharmacy if there are nonaffiliated pharmacies in the network. This paragraph does not prevent a health care service plan or the agent of a health care service plan
purchaser or pharmacy benefit manager from offering and communicating to enrollees’ financial incentives to use a particular pharmacy, including, but not limited to, reductions in copays or
other financial incentives given to the enrollee such as lower copays or costs for a prescription when the prescription is dispensed.
(d) Unreasonably restrict an enrollee or insured from using a particular contracted retail pharmacy for the purpose of receiving pharmacist services covered by the enrollee’s or insured’s contract or policy.
(e) Communicate to an enrollee verbally, electronically, or in writing that the enrollee is required to have a prescription dispensed at, or pharmacy services provided by, a particular affiliated pharmacy or pharmacies if there are other pharmacies that
have the ability to dispense the medication or provide the services. services and are also in network.
(f) Deny a contract pharmacy the opportunity to participate in a pharmacy benefits manager network as preferred participation status if the pharmacy is willing to accept the same terms and conditions that the pharmacy benefit manager has established for other pharmacies as a condition of preferred network participation status.
17040.
(a) A contract issued, amended, or renewed on or after January 1, 2025, between a retail pharmacy and a pharmacy benefit manager shall not prohibit the retail pharmacy from offering either of the following as an ancillary service of the retail pharmacy:(1) The delivery of a prescription drug by mail or common carrier to a patient or personal representative on request of the patient or personal representative if the request is made before the drug is delivered.
(2) The delivery of a prescription to a patient or personal representative by an employee or contractor of the retail pharmacy.
(b) Except as otherwise provided in a contract described in subdivision (a), the retail pharmacy shall not charge a pharmacy benefit manager for the delivery service described in subdivision (a). This section does not prohibit the use of remote pharmacies, secure locker systems, or other types of pickup stations if those services are otherwise permitted by law.
(c) Contracts entered into pursuant to this section shall be open for inspection by the department.
17045.
A pharmacy benefit manager shall not require more than two accreditations from an independent accrediting organization for pharmacists and pharmacies that apply to be in a specialty network and shall make every effort to ensure that enhanced standards are not imposed for participation in a specialty network beyond those related to the safety and competency necessary to comply with requirements for dispensing specified17050.
(a) A pharmacy benefit manager shall not derive income from pharmacy benefit management services provided to an insurer or health plan in this state except for income derived from(b) (1) The pharmacy benefit management fee charged by or paid to a pharmacy benefit manager from an insurer or health plan shall not be directly or indirectly based or contingent upon:
(1)
(A) The acquisition cost or any other price metric of a drug.
(2)
(B) The
amount of savings, rebates, or other fees charged, realized, or collected by or generated based on the activity of the pharmacy benefit manager.
(3)
(C) The amount of premiums, deductibles, or other cost-sharing cost sharing or fees charged, realized, or collected by the pharmacy benefit manager from patients or other persons on behalf of a patient.
(2) This subdivision does not preclude a health care service plan or insurer from paying performance bonuses to a pharmacy benefit manager.
(3) Compensation arrangements governed by this section shall be open for inspection by the department.
(c) A pharmacy benefit manager shall not reverse and resubmit the claim of a contract pharmacy:
(1) Without prior and proper notification to the contract pharmacy.
(2) Without just cause or attempt to first reconcile the claim with the pharmacy.
(3) More than 90 days after the claim was first affirmatively adjudicated.
(d) A pharmacy benefit manager shall not directly or indirectly, including indirectly through a pharmacy services administrative organization, charge or hold a pharmacist or pharmacy responsible for a fee related to a claim or reduce the amount of the claim at the time of the claim’s adjudication or after the claim is adjudicated.
(e) Subdivision (a) does not apply to an audit of a pharmacy’s records pursuant to Chapter 9.5 (commencing with Section 4430) of Division 2 of the Business and Professions Code if either of the following apply:
(1) The review of claims data or statements indicates criminal wrongdoing, willful misrepresentation, fraud, or abuse.
(2) An
investigative method, other than a review described in paragraph (1), indicates that the pharmacy is or has committed criminal wrongdoing, willful misrepresentation, fraud, or abuse.
(f) A pharmacy benefit manager shall not charge a pharmacy or pharmacist a fee to process a claim electronically.
(g) The termination of a contract with a pharmacy by a pharmacy benefit manager shall not release the pharmacy benefit manager from the obligation to make a payment due to the pharmacy for an affirmatively adjudicated claim unless payments are withheld because of an investigation relating to insurance fraud.
(h) A pharmacy benefit manager shall not retaliate against a pharmacist or pharmacy based on the pharmacist’s or pharmacy’s exercise
of a right or remedy under this chapter. Prohibited retaliation includes any of the following:
(1) Terminating or refusing to renew a contract with the pharmacist or pharmacy.
(2) Subjecting the pharmacist or pharmacy to increased audits.
(3) Failing to promptly pay the pharmacist or pharmacy money owed by the pharmacy benefit manager to the pharmacist or pharmacy.
17055.
(a) Except as permitted under existing law, a pharmacy benefit manager shall not unreasonably obstruct or interfere with a patient’s right to timely access a prescription drug or device that has been legally prescribed for that patient at a contract pharmacy of their choice.(b) A pharmacy benefit manager shall not make, disseminate, or cause or permit the use of an advertisement, promotion, solicitation, representation, proposal, or offer that is known to be, or reasonably should be known to be, untrue, deceptive, or misleading.
(c) The department may investigate referrals provided by the California State Board of Pharmacy.
17060.
Commencing January 1, 2025, a pharmacy benefit manager shall not conduct spread pricing in this state. If a preexisting contract between a pharmacy benefit manager and a health care service plan or health insurer authorizes spread pricing, any subsequent amendment or renewal of that contract shall not contain that authorization. Any such spread pricing terms shall be void after January 1, 2028.17065.
(a) Notwithstanding any other law, a pharmacy benefit manager shall not enter into, amend, enforce, or renew a contract on or after January 1, 2025, with manufacturers who do business in California that expressly or implicitly restrict, or implements implicit or express exclusivity for, those manufacturers’ drugs, medical devices, or other products.(b) Notwithstanding any other law, a pharmacy benefit manager shall not enter into, amend, enforce, or renew a contract on or after January 1, 2025, with pharmacies or pharmacy administrative services organizations who do business in California that expressly or implicitly restrict, or impose implicit or express exclusivity
on, nonaffiliated pharmacies’ ability to contract with employers,
insurers, and health care service plans.
CHAPTER 4. Enforcement
17070.
(a) The department may refuse to issue a pharmacy benefit manager license if the department determines that the pharmacy benefit manager or an individual responsible for the conduct of affairs of the pharmacy benefit manager has had a pharmacy benefit manager certificate of authority or license denied or revoked for cause in another state.(b) The department may deny, suspend, or revoke the license of a pharmacy benefit manager, or may issue a cease and desist order if the pharmacy benefit manager is not licensed, if the department finds, after notice and opportunity for hearing, that any of the following are true:
(1) The pharmacy benefit manager has violated a statute or
regulation applicable to the pharmacy benefit manager.
(2) The pharmacy benefit manager has refused to be examined or to produce its accounts, records, and files for examination by the department, or an individual responsible for the conduct of affairs of the pharmacy benefit manager has refused to give information with respect to its affairs or has refused to perform any other legal obligation as to an examination required by the department.
(3) The pharmacy benefit manager has, without just cause, exhibited a pattern or practice of refusing to pay proper claims or perform services arising under its contracts or has, without just cause, caused enrollees or insureds to accept less than the amount due them.
(4) The pharmacy benefit manager is required under this chapter to have a license and fails to continue to meet the qualifications for licensure during its active licensure, unless the department issued a license with knowledge of the failure to qualify and waived the relevant requirement.
(5) An individual responsible for the conduct of affairs of the pharmacy benefit manager has been convicted of, or has entered a plea of guilty or nolo contendere to, a felony without regard to whether adjudication was withheld.
(6) The pharmacy benefit manager’s license or registration has been suspended or revoked in another state.
(7) The pharmacy benefit manager failed to file a timely report as required by Section
17025.
(c) If a pharmacy benefit manager’s license is suspended or restricted, the department may permit the operation of the pharmacy benefit manager for a limited time not to exceed 60 days. However, the department may permit a pharmacy benefit manager whose license has been suspended or restricted to operate for a period that exceeds 60 days if the department determines that the continued operation of the pharmacy benefit manager is in the beneficial interests of enrollees and insureds by ensuring minimal disruptions to the continuity of care.
(d) A pharmacy benefit manager whose license has been suspended or restricted is subject to a fine each month, as determined by the department, not to exceed twenty thousand dollars ($20,000) per month, until the pharmacy benefit
manager has remedied the violation leading to the suspension or restriction.
(e) The department may revoke the license of a pharmacy benefit manager if the pharmacy benefit manager has been operating under a suspended license for a period of more than 60 days.
(f) For purposes of this section, a pharmacy benefit manager has the right to appropriate notice and opportunity for hearing in accordance with the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code).
17075.
(a) The department may examine or audit(b) Information or data acquired during an examination pursuant to subdivision (a), or otherwise acquired under this division shall be deemed confidential and shall not be disclosed to the public pursuant to the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code). This section does not prevent disclosure to the Attorney General to investigate, prosecute, defend any legitimate legal claim or cause or action, or to use the information and data in any court or proceeding of law.
(c) (1) The department shall establish a retention schedule for all
records, books, papers, and other data on file with the department related to the enforcement of this chapter.
(2) The department shall not order the destruction or other disposal of a record, book, paper, or other data that is either of the following:
(A) Required by law to be filed or kept on file with the department.
(B) Filed during the department’s administration or administrations.
(d) In any matter arising under this chapter, the department may provide to the Attorney General information related to competition and obtain an opinion from a consultant or consultants with the expertise to assess the competitive impact of the
matter.
17080.
(a) Notwithstanding the Section 4441 of the Business and Professions Code and Chapter 2.2 (commencing with Section 1385.001) of Division 2 of the Health and Safety Code, a pharmacy benefit manager shall have a duty and obligation to(b)An enrollee or insured shall be deemed to be third-party beneficiaries of the duties, obligations, and requirements applicable to the pharmacy benefit manager under this chapter and shall be entitled to legal or equitable relief for any injury or loss to the enrollee or insured caused by any violation of those duties, obligations, or requirements.
(c)
(b) Any pharmacy benefit manager that violates Chapter 3 (commencing with Section 17025) shall, in addition to any other penalty provided by law, be liable for restitution to any enrollee or insured harmed by the violation and shall also be subject to a penalty not exceeding the greater of (1) one thousand dollars ($1,000) for the first violation and two thousand five hundred dollars ($2,500) for each subsequent violation or (2) the aggregate economic gross receipts attributable to all violations.
(d)
(c) Notwithstanding any other law, the Attorney General shall be entitled to specific performance, injunctive relief, and other equitable remedies a court deems appropriate for enforcement of this chapter and shall be entitled to recover attorney’s fees and costs incurred in remedying each violation.
17085.
(a) Any person that violates this(b) (1) A violation of Section 17030, 17035, or 17045 is an act of unfair competition within the meaning
of Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code. But nothing in this article shall limit any other statutory or common law rights or remedies, including liability pursuant to the Unfair Competition Law (Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code).
(2) An action shall not be brought in the name of the people of the State of California that seeks relief under this section pursuant to the Unfair Competition Law (Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code) without the written consent and permission of the Attorney General.
(c) The remedies or penalties provided by this chapter are cumulative to each
other and to the remedies or penalties available under all other laws of this state.
17090.
There is hereby established in the State Treasury the Pharmacy Benefit Manager Fines and Penalties Fund. The fines and administrative penalties collected pursuant to this chapter shall be deposited into the Pharmacy Benefit Manager Fines and Penalties Fund for use upon appropriation by the Legislature.SEC. 4.SEC. 6.
The authority of the Attorney General to maintain or restore competitive markets and prosecute state and federal antitrust and unfair competition violations shall not be narrowed, abrogated, or otherwise altered by this act.SEC. 5.SEC. 7.
The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.SEC. 6.SEC. 8.
No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.SEC. 7.SEC. 9.
The Legislature finds and declares that SectionIn order to protect the confidentiality of information received by state agencies from pharmacy benefit managers, it is necessary that those documents be presumptively confidential, except as otherwise provided by law.
