Bill Text: CA SB966 | 2023-2024 | Regular Session | Amended
Bill Title: Pharmacy benefits.
Spectrum: Moderate Partisan Bill (Democrat 6-1)
Status: (Engrossed) 2024-07-03 - Read second time and amended. Re-referred to Com. on APPR. [SB966 Detail]
Download: California-2023-SB966-Amended.html
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Amended
IN
Assembly
July 03, 2024 |
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Amended
IN
Assembly
June 18, 2024 |
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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 Senators Wiener and Wahab (Coauthors: Senators Min and Portantino) (Coauthors: Assembly Members |
January 24, 2024 |
An act to amend Section 1367.243 of, and to add Section 1367.2075 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, to apply for and obtain a license from the Department of Insurance to operate as a pharmacy benefit manager no later than January 1, 2027. The bill would establish application qualifications and requirements, and would require initial license and renewal fees to be
collected into the newly created Pharmacy Benefit Manager Account in the Insurance Fund, to be available to the department for use, upon appropriation by the Legislature, as specified, for costs related to licensing and regulating pharmacy benefit managers.
This bill would require a pharmacy benefit manager to file with the department 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 reports are not to be disclosed to the public. The bill would require the department, at specified annual intervals, to submit 2 reports to the Legislature based on the reports submitted by pharmacy benefit managers, and would require the department to post the 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 requiring the pharmacy benefit manager to use a passthrough pricing model, in which the payment made by the health care service plan or health insurer client to the pharmacy benefit manager for a covered outpatient drug is equivalent to the payment the pharmacy benefit manager makes to the pharmacy or provider for the drug, and is passed through in its entirety by the health care service plan or health insurer client or the pharmacy benefit manager to the pharmacy or provider, as specified. The bill would make a violation of the above-specified provisions subject to specified civil penalties. The bill would establish various filing and service requirements when a proceeding is brought for a violation of specified requirements by a pharmacy benefit manager.
The bill would create the Pharmacy Benefit Manager Fines and Penalties Account in the General 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 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 from calculating an enrollee or insured’s cost sharing 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 cost sharing at an amount that exceeds the actual rate paid for the prescription drug.(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 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. 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 cost sharing at an amount that exceeds the actual rate paid for the prescription drug.(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 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. 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) “Financially viable” means that either of the following conditions is met:
(1) The pharmacy benefit manager has received an unqualified opinion from an independent public accountant, as described in Section 260.613(b) of Title 10 of the California Code of Regulations.
(2) If an independent public accountant opinion is not obtained, the pharmacy benefit manager remains solvent after adjusting for goodwill and intangible assets.
(f) “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).
(g) “Health insurer” means a disability insurer that issues health insurance, as defined in Section 106.
(h) “Manufacturer” has the same meaning as defined in Section 4033 of the Business and Professions Code.
(i) “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.
(j) “Passthrough pricing model” means a payment model used
by a pharmacy benefit manager in which the payments made by the health care service plan or health insurer client to the pharmacy benefit manager for the covered outpatient drugs are both of the following:
(1) Equivalent to the payments the pharmacy benefit manager makes to a pharmacy or provider for those drugs, including any contracted professional dispensing fee between the pharmacy benefit manager and its network of pharmacies. That dispensing fee would be paid if the pharmacy benefits plan or program was making the payments directly.
(2) Passed through in their entirety by the health care service plan or health insurer client or by the pharmacy benefit manager to the pharmacy or provider that dispenses the drugs, and the payments are made in a manner that is
not offset by any reconciliation.
(k) “Person” has the same meaning as defined in Section 4035 of the Business and Professions Code.
(l) “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.
(m) “Pharmacist” has the same meaning as defined in Section 4036 of the Business and Professions Code.
(n) “Pharmacist services” means products, goods, and services, or any combination of products, goods, and services, provided as a part of the practice of pharmacy.
(o) “Pharmacy” has the same meaning as defined in Section 4037 of the Business and Professions Code.
(p) “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. The value of the service or services shall be based on the value to the health insurer or health care service plan.
(q) “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,
administration or reporting, or billing service.
(4) Other services as the department may define in regulation.
(r) “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, 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 health care service 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) An entity providing services pursuant to a contract authorized by Section 4600.2 of the Labor Code.
(3) A health care service plan or its contracted provider, as defined in subdivision (i) of Section 1345 of the Health and Safety Code, performing the services described in this subdivision.
(4) A health insurer.
(s) “Pharmacy services administration organization” means an entity that provides contracting and other administrative services relating to prescription drug benefits to pharmacies.
(t) “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.
(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.
17004.5.
Any activity conducted by a pharmacy benefit manager, as defined in this division, shall be construed as the business of insurance.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.
(a) The department shall establish procedures for receiving, investigating, tracking, and publicly reporting consumer complaints against pharmacy benefit managers.(b) The department shall publish on its internet website a record of consumer complaints against a pharmacy benefit manager that have been determined by the department to be justified. Complaint data shall not be published unless it has been provided to the pharmacy benefit manager in accordance with subdivision (c) of Section 12921.1.
CHAPTER 2. Licensing
17010.
(a) The department shall license and regulate pharmacy benefit managers. The department shall have the authority to enforce this division and Chapter 9.5 (commencing with Section 4430) of Division 2 of the Business and Professions Code and Article 3 (commencing with Section 127470) of Chapter 2.5 of Part 2 of Division 107 of the Health and Safety Code.(b) No later than January 1, 2027, a pharmacy benefit manager that provides services in this state shall apply for a license to operate as a pharmacy benefit manager from the department. A pharmacy benefit manager shall maintain its license in good standing.
(c) An application for a pharmacy benefit manager license shall be submitted in a form and manner determined by the department, and shall be signed by an officer or individual responsible for the conduct or affairs of the pharmacy benefit manager verifying that the contents of the application form and any attachments are correct. The application shall include all of the following:
(1) A nonrefundable application fee in an amount established by the department under Section 17015.
(2) A list of every health care service plan or health insurer on behalf of which the pharmacy benefit manager contracts with a pharmacy or a pharmacy services administration organization to provide health services to individuals covered by the health care service plan or health
insurer.
(3) A statement indicating all jurisdictions where the applicant has an application pending or has been registered, licensed, or otherwise certified to transact business as a pharmacy benefit manager.
(4) A statement indicating whether either of the following has occurred:
(A) The pharmacy benefit manager or any individual responsible for the conduct of the 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) Any individual responsible for the conduct of the affairs of the pharmacy benefit manager has been convicted of, or has entered a
plea of guilty or nolo contender to a felony without regard to whether adjudication was withheld.
(5) A copy of a power of attorney duly executed by the pharmacy benefit manager if not domiciled in this state, appointing the department, the department’s successors in office, and the department’s authorized deputies as the attorney of the pharmacy benefit manager in and for this state, on whom process in any legal action or proceeding against the pharmacy benefit manager on a cause of action arising in this state may be served.
(6) The names, addresses, official positions, and professional qualifications of each individual who is responsible for the conduct of the affairs of the pharmacy benefit manager.
(7) A copy of a
recent financial statements showing the pharmacy benefit manager’s assets, liabilities, and sources of financial support that the department determines are sufficient to show that the pharmacy benefit manager is financially viable. If the pharmacy benefit manager’s financial statements are prepared by an independent accountant public accountant, a copy of the most recent regular financial statement satisfies the requirement to show financial viability unless the department determines that additional or more recent financial information is required for the proper administration of this act.
(8) A document providing the names, addresses, dates of birth, social security numbers, official positions, and professional qualifications of each individual who owns, legally or the information as to each person beneficially, 10 percent or more in equity
in the entity interested therein or any person with management or control over the pharmacy benefit manager.
(9) A copy of all basic organizational and governing documents of the pharmacy benefit manager, including, but not limited to, the articles of incorporation, bylaws, articles of association, trade name certificate, and other similar documents and all amendments to those documents.
(10) A description of the pharmacy benefit manager, its services, facilities, and personnel.
(11) A document in which the pharmacy benefit manager confirms that its business practices and each ongoing contract comply with this chapter.
(12) Any other relevant information
required by the department.
(d) The individual responsible for the conduct or affairs of the pharmacy benefit manager and any of the organization’s partners, members, controlling persons, officers, directors, and managers shall comply with the background check requirements as required by the commissioner.
(e) Within 30 days after a 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.
(f) An applicant for a pharmacy benefit manager license or licensed pharmacy benefit manager shall be subject to Sections 1702 and 1703, Article 6.5 (commencing with Section 790) of Chapter 1 of, and Article 3
(commencing with Section 1631), Article 4 (commencing with Section 1652), Article 6 (commencing with Section 1666), Article 10 (commencing with Section 1708), Article 12 (commencing with Section 1724), and Article 13 (commencing with Section 1737) of Chapter 5 of Part 2 of Division 1, and Article 1 (commencing with Section 12919), Article 3.5 (commencing with Section 12962), and Article 4 (commencing with Section 12970) of Chapter 2 of Division 3, excluding Sections 1634, 1635, 1640, 1642, 1647.5, 1649.5, 1661, 1725, 1725.5, 1726, 1728, 1729.5, 1730.5, 1730.6, 1731, 1732, and 1735.5.
(g) A pharmacy benefit manager shall not operate in this state unless it is licensed pursuant to this division.
(h) This division does not abrogate compliance by a pharmacy benefit manager with any
applicable requirements of Chapter 5A (commencing with Section 1759) of Part 2 of Division 1.
(i) A violation of this division constitutes an unfair practice under Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1.
(j) Notwithstanding any other law, the commissioner 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.
17015.
(a) A pharmacy benefit manager license applicant shall pay the initial application fee as determined by the department. A license shall be renewed every two years, beginning on the last calendar day of the month in which the initial license was issued. The license 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) (1) 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.
(2) The application for renewal of an expired license may be filed after the expiration date and until that same month and day of the next succeeding year. The fee for a renewal application under this subdivision shall be the fee specified in subdivision (d) and a delinquent fee in the amount specified for a one-year period in subdivision (d) for the filing. Each licensee shall be subject to payment of delinquent fees under this section.
(d) An application fee of ____ dollars ($____), and for each year of the two-year license term thereafter, a renewal fee of ____ dollars ($____). The commissioner may increase or decrease fees, and schedule fees and charges as set forth in Section 12978.
17020.
Beginning no earlier than January 1, 2026, 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 the act. Fees received under the act shall be deposited into the Pharmacy Benefit Manager Account, which is hereby created in the Insurance Fund, and shall be subject to an annual appropriation each fiscal year for the support of the Department of Insurance related to the licensing and regulation of pharmacy benefit managers.CHAPTER 3. Licensee Duties
17025.
(a) On or before July 1, 2028, and on or before each July 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) On or before January 1, 2029, and on or before each January 1 thereafter, the department shall prepare a report based on the information received by the department pursuant to subdivision (a) and shall publish the report on its internet website. 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.
(c) On or before July 1, 2027, and on or before each July 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 health care service plan or health insurer pays the pharmacy benefit manager, and the amount the pharmacy benefit manager pays the pharmacy.
(C) For each list in subparagraphs (A) and (B), 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.
(vii)
(vi) Deidentified claims level information in electronic format that allows the commissioner to sort and analyze the following information for each claim, whether the claim required prior authorization.
(viii)
(vii) The amount paid to the pharmacy for each prescription, net of the aggregate amount of fees or other assessments imposed on the pharmacy, including point-of-sale and retroactive charges. These data are confidential pursuant to subdivision (e).
(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, 2029, and on or before each January 1 thereafter, the department shall publish the report on its internet website.
(2) The department shall include the report as part of the public meeting required pursuant to subdivision (b) of Section 10181.45.
(3) The department may consolidate the reports required by this section.
(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.
(4) Reimbursing a nonaffiliated pharmacy less for a pharmacy service than the pharmacy benefit manager would reimburse an affiliated pharmacy for the same pharmacy service.
(c) This division does not preclude a pharmacy benefit manager or a purchaser of pharmacy benefit manager services from establishing a network of contracting 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 if there are nonaffiliated pharmacies in the network.
(b) Financially induce an enrollee, insured, or prescriber to transfer a prescription only to an affiliated pharmacy if there are nonaffiliated pharmacies in the network.
(c) Require a retail nonaffiliated pharmacy to transfer a prescription to a retail affiliated pharmacy if there are nonaffiliated pharmacies in the network. This paragraph does not prevent a purchaser or
pharmacy benefit manager from offering and communicating to enrollees or insureds financial incentives to use a particular pharmacy, 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 or insured verbally, electronically, or in writing insured, in any manner, that the enrollee or insured is required to have a prescription dispensed
at, or pharmacy services provided by, a particular affiliated pharmacy or pharmacies if there are other nonaffiliated pharmacies that have the ability to dispense the medication or provide the services and are also in network.
(f) Deny a nonaffiliated contract pharmacy the opportunity to participate in a pharmacy benefit 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 affiliated 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 nonaffiliated 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 than17050.
(a) A pharmacy benefit manager shall not derive income from pharmacy benefit management services provided to an insurer or health care service plan in this state except for income derived from a flat, defined, dollar-amount pharmacy benefit management fee for pharmacy benefit management services provided. The amount of any pharmacy benefit management fee shall be set forth in the agreement between the pharmacy benefit manager and the insurer or health care service plan. The pharmacy benefit manager shall disclose the amount and types of the pharmacy benefit management fees to the health insurer or health care service plan.(b) A pharmacy benefit manager shall use a passthrough pricing model.
(c) Pharmacy benefit managers shall pass 100 percent of all prescription drug manufacturer rebates received to the health care service plan, health insurer, or program, if the contractual arrangement delegates the negotiation of rebates to the pharmacy benefit manager, for the sole purpose of offsetting defined cost sharing, deductibles, and coinsurance contributions and reducing premiums of enrollees or insureds.
(d) This section does not preclude a health insurer or health care service plan from paying performance bonuses to a pharmacy benefit manager based on savings to the health care service plan or health insurer that affects rated paid by the enrollee and insured or subscriber and policy
holder, as long as the performance bonus is not based or contingent on any of the following:
(1) The acquisition cost or any other price metric of a drug.
(2) The amount of savings, rebates, or other fees charged, realized, or collected by, or generated based on the activity of, the pharmacy benefit manager, that is retained by the pharmacy
benefit manager.
(3) The amount of premiums, deductibles, or other cost sharing or fees charged, realized, or collected by the pharmacy benefit manager from patients or other persons on behalf of a patient.
(4) Compensation arrangements governed by this section shall be open for inspection by the department.
(e) A pharmacy benefit manager shall not make or permit any reduction of payment for pharmacist services by a pharmacy benefit manager or a health insurer or health care service plan directly or indirectly to a pharmacy under a reconciliation process to an effective rate of reimbursement, including without limitation generic effective rates, brand effective rates, direct and
indirect remuneration fees, or any other reduction or aggregate reduction of payment.
(f) A claim or aggregate of claims for pharmacist services shall not be directly or indirectly retroactively denied or reduced after adjudication of the claim or aggregate of claims unless any of the following have occurred:
(1) The original claim was submitted fraudulently.
(2) The original claim payment was incorrect because the pharmacy or pharmacist had already been paid for the pharmacist services.
(3) The pharmacist services were not properly rendered by the pharmacy or pharmacist.
(g) A pharmacy
benefit manager shall not reverse and resubmit the claim of a contract pharmacy under any of the following circumstances:
(1) Without prior written 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.
(h) A pharmacy benefit manager shall not charge a pharmacy or pharmacist a fee to process a claim electronically.
(i) The termination of a contract with a nonaffiliated 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.
(j) 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 on and 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, health insurers, and health care service plans.
CHAPTER 4. Enforcement
17070.
(a) In addition to any of the grounds to deny a license listed in Section 17010, the department may deny, suspend, or revoke the license of a pharmacy benefit manager if the department finds 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.
(5) The pharmacy benefit manager failed to file a timely report as required by Section 17025.
(6) The pharmacy benefit manager is not financially viable.
(b) If a hearing is held pursuant to this section, it shall be conducted 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 any books and records of a pharmacy benefit manager pursuant to Article 4 (commencing with Section 729) of Chapter 1 of Part 2 of Division 1 to determine if the pharmacy benefit manager is in compliance with this division. A pharmacy benefit manager shall pay for reasonable expenses for any examinations or audits conducted pursuant to this section. Those payments shall be deposited into the Pharmacy Benefit Manager Account.(b) The department may produce and disclose publicly an examination report describing any act or omission committed by a pharmacy benefit manager that violates this division.
(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 required to be filed or kept on file with the department during the retention period.
(d) Section 735.5 does not prevent disclosure of information and data acquired during an examination to the Attorney General to investigate, prosecute, or defend any legitimate legal claim or cause of action, or to use the information and data in any
court or proceeding of law. 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) (1) Notwithstanding 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 the health care service plan of the enrollee or subscriber covered by the health care service plan contract, or the insurer of the insured or policyholder of the policy of health insurance, and shall perform its services with care, skill, prudence, diligence, and professionalism, and for the best interests of the health care service plan or health insurer. When there is a conflict between the pharmacy benefit manager’s duty or obligation under this subdivision to the individual enrollee or insured and any other party, the duty or obligation to the individual enrollee or insured shall be primary.(2) A pharmacy benefit manager shall disclose to a health insurer or health care service plan information of clinical efficacy and clinical evidence regarding the inclusion, exclusion, or limitation of prescription drugs in the formulary.
(b) Any pharmacy benefit manager that violates this division shall, in addition to any other penalty provided by law, be liable for restitution to any enrollee or insured harmed by the violation.
(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. This subdivision does not alter or abrogate the department’s authority to enforce this division.
(c) If a violation of this section, or Section 17030, 17035, or 17045 is alleged and is at issue in any proceeding in the Supreme Court, a state court of appeal, or the appellate division of a superior court, a person filing a brief or petition with the court in that proceeding shall serve, within three days of filing with the court, a copy of the brief or petition on the Attorney General at a service address designated on the Attorney General’s internet website for service of papers under this section, or, if a service address is not designated, at the Attorney
General’s office in San Francisco. Upon the Attorney General’s request, a person who has filed any other document, including all or a portion of the appellate record, with the court in addition to a brief or petition shall provide a copy of that document, without charge, to the Attorney General within five days of the request. The time for service may be extended by the Chief Justice or presiding justice or judge for good cause shown. No judgment or relief, temporary or permanent, shall be granted or opinion issued until proof of service of the brief or petition on the Attorney General is filed with the court.
17085.
(a) Any person that violates this division shall be subject to an injunction and liable for a civil penalty of not less than one thousand dollars ($1,000) or more than seven thousand five hundred dollars ($7,500) for each violation which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General.(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
However, this article does not 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.
(3)
(2) This subdivision does not alter or abrogate the department’s authority to enforce this division.
(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 division and shall be entitled to recover attorney’s fees and costs incurred in remedying each violation.
(c)
(d) 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.
17086.
The provisions of this division are severable. If any provision of this division 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.17090.
Beginning on or after January 1, 2026, the fines and administrative penalties collected pursuant to this chapter shall be deposited into the Pharmacy Benefit Manager Fines and Penalties Account, which is hereby established in the General Fund.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. 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. 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. 9.
The Legislature finds and declares that Section 5 of this act, which adds Sections 17025 and 17075 to the Insurance Code, imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 5 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:In 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.
