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HB 240: "An Act relating to the registration and duties of pharmacy benefits managers; relating to procedures, guidelines, and enforcement mechanisms for pharmacy audits; relating to the cost of multi-source generic drugs and insurance reimbursement procedures; relating to the duties of the director of the division of insurance; and providing for an effective date."

00                             HOUSE BILL NO. 240                                                                          
01 "An Act relating to the registration and duties of pharmacy benefits managers; relating                                 
02 to procedures, guidelines, and enforcement mechanisms for pharmacy audits; relating to                                  
03 the cost of multi-source generic drugs and insurance reimbursement procedures;                                          
04 relating to the duties of the director of the division of insurance; and providing for an                               
05 effective date."                                                                                                        
06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
07    * Section 1. AS 21.27 is amended by adding new sections to read:                                                   
08                   Article 10. Pharmacy Benefits Managers.                                                             
09            Sec. 21.27.901. Registration of pharmacy benefits managers; scope of                                     
10       business practice. (a) A person may not conduct business in the state as a pharmacy                             
11       benefits manager unless the person is registered with the director as a third-party                               
12       administrator under AS 21.27.630.                                                                                 
13            (b)  A pharmacy benefits manager registered under AS 21.27.630 may                                           
01                 (1)  contract with an insurer to administer or manage pharmacy benefits                                 
02       provided by an insurer for a covered person, including claims processing services for                             
03       and audits of payments for prescription drugs and medical devices and supplies;                                   
04                 (2)  contract with network pharmacies;                                                                  
05                 (3)  set the cost of multi-source generic drugs under AS 21.27.945; and                                 
06                 (4)  adjudicate appeals related to multi-source generic drug                                            
07       reimbursement.                                                                                                    
08            Sec. 21.27.905. Renewal of registration. (a) A pharmacy benefits manager                                   
09       shall biennially renew a registration with the director.                                                          
10 (b)  To renew a registration under this section, a pharmacy benefits manager                                            
11 shall pay a renewal fee established by the director. The director shall set the amount of                               
12       the renewal fee to allow the renewal and oversight activities of the division to be self-                         
13       supporting.                                                                                                       
14 Sec. 21.27.910. Pharmacy audit procedural requirements. (a) When a                                                    
15 pharmacy benefits manager conducts an audit of the records of a pharmacy, the period                                    
16 covered by the audit of a claim may not exceed two years from the date that the claim                                   
17 was submitted to or adjudicated by the pharmacy benefits manager, whichever is                                          
18 earlier. Except as required under AS 21.36.495, a claim submitted to or adjudicated by                                  
19       a pharmacy benefits manager does not accrue interest during the audit period.                                     
20 (b)  A pharmacy benefits manager conducting an on-site audit shall give the                                             
21       pharmacy written notice of at least 10 business days before conducting an initial audit.                          
22            (c)  A pharmacy benefits manager may not conduct                                                             
23 (1)  an audit during the first seven calendar days of any month unless                                                  
24       agreed to by the pharmacy;                                                                                        
25 (2)  more than one on-site audit of a pharmacy within a 12-month                                                        
26       period; or                                                                                                        
27 (3)  on-site audits of more than 250 separate prescriptions at one                                                      
28 pharmacy within a 12-month period unless fraud by the pharmacy or an employee of                                        
29       the pharmacy is alleged.                                                                                          
30 (d)  If an audit involves clinical or professional judgment, the individual                                             
31       conducting the audit must                                                                                         
01                 (1)  be a pharmacist who is licensed and in good standing under                                         
02       AS 08.80; or                                                                                                      
03                 (2)  conduct the audit in consultation with a pharmacist who is licensed                                
04       and in good standing under AS 08.80.                                                                              
05            (e)  A pharmacy, in responding to an audit, may use                                                          
06                 (1)  verifiable statements or records, including medication                                             
07       administration records of a nursing home, assisted living facility, hospital, physician,                          
08       or other authorized practitioner, to validate the pharmacy record;                                                
09                 (2)  a legal prescription to validate claims in connection with                                         
10 prescriptions, refills, or changes in prescriptions, including medication administration                                
11 records, prescriptions transmitted by facsimile, electronic prescriptions, or                                           
12       documented telephone calls from the prescriber or the prescriber's agent.                                         
13 (f)  A pharmacy benefits manager shall audit each pharmacy under the same                                               
14 standards and parameters as other similarly situated pharmacies in a network                                            
15       pharmacy contract in this state.                                                                                  
16 Sec. 21.27.915. Overpayment or underpayment. (a) When a pharmacy                                                      
17 benefits manager conducts an audit of a pharmacy, the pharmacy benefits manager                                         
18 shall base a finding of overpayment or underpayment by the pharmacy on the actual                                       
19 overpayment or underpayment and not on a projection based on the number of patients                                     
20 served having a similar diagnosis or on the number of similar orders or refills for                                     
21       similar drugs, except as provided in (b) of this section.                                                       
22 (b)  A pharmacy benefits manager may resolve a finding of overpayment or                                                
23 underpayment by entering into a settlement agreement with the pharmacy. The                                             
24       settlement agreement                                                                                              
25                 (1)  must comply with the requirements of AS 21.36.125; and                                             
26                 (2)  may be based on a statistically justifiable projection method.                                     
27 (c)  A pharmacy benefits manager may not include the dispensing fee amount                                              
28       in a finding of an overpayment unless                                                                             
29                 (1)  a prescription was not actually dispensed;                                                         
30                 (2)  the prescriber denied authorization;                                                               
31 (3)  the prescription dispensed was a medication error by the pharmacy;                                                 
01       or                                                                                                                
02                 (4)  the identified overpayment is solely based on an extra dispensing                                  
03       fee.                                                                                                              
04 Sec. 21.27.920. Recoupment. (a) When a pharmacy benefits manager                                                      
05 conducts an audit of a pharmacy, the pharmacy benefits manager shall base the                                           
06 recoupment of overpayments on the actual overpayment of the claim, except as                                            
07       provided in AS 21.27.915(b).                                                                                      
08            (b)  A pharmacy benefits manager conducting an audit of a pharmacy may not                                   
09                 (1)  use extrapolation in calculating recoupments or penalties for audits,                              
10       unless required by state or federal contracts;                                                                    
11 (2)  assess a charge-back, recoupment, or other penalty against a                                                       
12 pharmacy solely because a prescription is mailed or delivered at the request of a                                       
13       patient; or                                                                                                       
14                 (3)  receive payment                                                                                    
15                      (A)  based on a percentage of the amount recovered; or                                             
16 (B)  for errors that have no actual financial harm to the patient                                                       
17            or medical plan.                                                                                             
18 Sec. 21.27.925. Pharmacy audit reports. (a) A pharmacy benefits manager                                               
19 shall deliver a preliminary audit report to the pharmacy audited within 60 days after                                   
20       the conclusion of the audit.                                                                                    
21 (b)  A pharmacy benefits manager shall allow the pharmacy at least 30 days                                              
22 following receipt of the preliminary audit report to provide documentation to the                                       
23 pharmacy benefits manager to address a discrepancy found in the audit. A pharmacy                                       
24       benefits manager may grant a reasonable extension upon request by the pharmacy.                                   
25 (c)  A pharmacy benefits manager shall deliver a final audit report to the                                              
26 pharmacy within 120 days after receipt of the preliminary audit report, settlement                                      
27       agreement, or final appeal, whichever is latest.                                                                  
28 Sec. 21.27.930. Pharmacy audit appeal; future repayment. (a) A pharmacy                                               
29       benefits manager conducting an audit shall establish a written appeals process.                                 
30 (b)  Recoupment of disputed funds or repayment of funds to the pharmacy                                                 
31 benefits manager by the pharmacy, if permitted by contract, shall occur, to the extent                                  
01 demonstrated or documented in the pharmacy audit findings, after final internal                                         
02 disposition of the audit, including the appeals process. If the identified discrepancy for                              
03 an individual audit exceeds $15,000, future payments to the pharmacy may be                                             
04       withheld pending finalization of the audit.                                                                       
05            (c)  A pharmacy benefits manager may not assess against a pharmacy a charge-                                 
06       back, recoupment, or other penalty until the pharmacy benefits manager's appeals                                  
07       process has been exhausted and the final report or settlement agreement issued.                                   
08            Sec. 21.27.935. Fraudulent activity. When a pharmacy benefits manager                                      
09       conducts an audit of a pharmacy, the pharmacy benefits manager may not consider                                   
10 unintentional clerical or record-keeping errors, including typographical errors, writer's                               
11 errors, or computer errors regarding a required document or record, to be fraudulent                                    
12 activity. In this section, "fraudulent activity" means an intentional act of theft,                                     
13       deception, misrepresentation, or concealment committed by the pharmacy.                                           
14 Sec. 21.27.940. Pharmacy audits; restrictions. The requirements of                                                    
15       AS 21.27.901 - 21.27.955 do not apply to an audit                                                               
16 (1)  in which suspected fraudulent activity or other intentional or wilful                                              
17 misrepresentation is evidenced by a physical review, a review of claims data, a                                         
18       statement, or another investigative method; or                                                                    
19 (2)  of claims paid for under the medical assistance program under                                                      
20       AS 47.07.                                                                                                         
21 Sec. 21.27.945. Drug pricing list; procedural requirements. (a) A pharmacy                                            
22       benefits manager shall                                                                                            
23 (1)  make available to each network pharmacy at the beginning of the                                                    
24 term of the network pharmacy's contract, and upon renewal of the contract, the                                          
25       methodology and sources used to determine the drug pricing list;                                                  
26 (2)  provide a telephone number at which a network pharmacy may                                                         
27 contact an employee of a pharmacy benefits manager to discuss the pharmacy's                                            
28       appeal;                                                                                                           
29 (3)  provide a process for a network pharmacy to have ready access to                                                   
30       the list specific to that pharmacy;                                                                               
31 (4)  review and update applicable list information at least once every                                                  
01       seven business days to reflect modification of list pricing;                                                      
02                 (5)  update list prices within one business day after a significant price                               
03       update or modification provided by the pharmacy benefits manager's national drug                                  
04       database provider; and                                                                                            
05                 (6)  ensure that dispensing fees are not included in the calculation of the                             
06       list pricing.                                                                                                     
07            (b)  When establishing a list, the pharmacy benefits manager shall use                                       
08                 (1)  the most up-to-date pricing data to calculate reimbursement to a                                   
09       network pharmacy for drugs subject to list prices;                                                                
10 (2)  multi-source generic drugs that are sold or marketed in the state                                                  
11       during the list period.                                                                                           
12 Sec. 21.27.950. Multi-source generic drug appeal. (a) A pharmacy benefits                                             
13 manager shall establish a process by which a network pharmacy, or a network                                             
14 pharmacy's contracting agent, may appeal the reimbursement for a multi-source                                           
15 generic drug. A pharmacy benefits manager shall resolve an appeal from a network                                        
16 pharmacy within 10 calendar days after the network pharmacy or the contracting agent                                    
17       submits the appeal.                                                                                               
18 (b)  A network pharmacy, or a network pharmacy's contracting agent, may                                                 
19 appeal a reimbursement from a pharmacy benefits manager for a multi-source generic                                      
20 drug if the reimbursement for the drug is less than the amount that the network                                         
21       pharmacy can purchase from two or more of its contracted suppliers.                                               
22 (c)  A pharmacy benefits manager shall grant a network pharmacy's appeal if                                             
23 an equivalent multi-source generic drug is not available at a price at or below the                                     
24 pharmacy benefits manager's list price from at least one of the network pharmacy's                                      
25 contracted wholesalers who operate in the state. If an appeal is granted, the pharmacy                                  
26 benefits manager shall adjust the reimbursement of the network pharmacy to equal the                                    
27       network pharmacy acquisition cost for each paid claim included in the appeal.                                     
28 (d)  If the pharmacy benefits manager denies a network pharmacy's appeal, the                                           
29       pharmacy benefits manager shall provide the network pharmacy with the                                             
30                 (1)  reason for the denial;                                                                             
31 (2)  national drug code of an equivalent multi-source generic drug that                                                 
01       has been purchased by another network pharmacy located in the state at a price that is                            
02       equal to or less than the pharmacy benefits manager's list price within seven days after                          
03       the network pharmacy appeals the claim; and                                                                       
04                 (3)  name of a pharmaceutical wholesaler who operates in the state in                                   
05       which the drug may be acquired by the challenging network pharmacy.                                               
06 (e)  A network pharmacy may request a hearing under AS 21.06.170 -                                                      
07 21.06.240 for an adverse decision from a pharmacy benefits manager within 30                                            
08 calendar days after receiving the decision. The parties may present all relevant                                        
09       information to the director for the director's review.                                                            
10            (f)  The director shall enter an order that                                                                  
11 (1)  grants the network pharmacy's appeal and directs the pharmacy                                                      
12       benefits manager to make an adjustment to the disputed claim;                                                     
13                 (2)  denies the network pharmacy's appeal; or                                                           
14                 (3)  directs other actions considered fair and equitable.                                               
15            Sec. 21.27.955. Definitions. In AS 21.27.901 - 21.27.955,                                                  
16 (1)  "audit" means an official examination and verification of accounts                                                 
17       and records;                                                                                                      
18                 (2)  "board" means the Board of Pharmacy;                                                               
19 (3)  "claim" means a request from a pharmacy or pharmacist to be                                                        
20 reimbursed for the cost of filling or refilling a prescription for a drug or for providing                              
21       a medical supply or device;                                                                                       
22 (4)  "extrapolation" means the practice of inferring a frequency or                                                     
23 dollar amount of overpayments, underpayments, invalid claims, or other errors on any                                    
24 portion of claims submitted, based on the frequency or dollar amount of                                                 
25 overpayments, underpayments, invalid claims, or other errors actually measured in a                                     
26       sample of claims;                                                                                                 
27 (5)  "list" means the list of multi-source generic drugs for which a                                                    
28 predetermined reimbursement amount has been established such as a maximum                                               
29 allowable cost or maximum allowable cost list or any other list of prices used by a                                     
30       pharmacy benefits manager;                                                                                        
31 (6)  "multi-source generic drug" means any covered outpatient                                                           
01 prescription drug that the United States Food and Drug Administration has determined                                    
02 is pharmaceutically equivalent or bioequivalent to the originator or name brand drug                                    
03 and for which there are at least two drug products that are rated as therapeutically                                    
04 equivalent under the United States Food and Drug Administration's most recent                                           
05 publication of "Approved Drug Products with Therapeutic Equivalence Evaluations";                                       
06 (7)  "network pharmacy" means a pharmacy that provides covered                                                          
07 health care services or supplies to an insured or a member under a contract with a                                      
08       network plan to act as a participating provider;                                                                  
09                 (8)  "pharmacy" has the meaning given in AS 08.80.480;                                                  
10 (9)  "pharmacy acquisition cost" means the amount that a                                                                
11 pharmaceutical wholesaler or distributor charges for a pharmaceutical product as listed                                 
12       on the pharmacy's invoice;                                                                                        
13 (10)  "pharmacy benefits manager" means a person that contracts with a                                                  
14 pharmacy on behalf of an insurer to process claims or pay pharmacies for prescription                                   
15 drugs or medical devices and supplies or provide network management for                                                 
16       pharmacies;                                                                                                       
17 (11)  "recoupment" means the amount that a pharmacy must remit to a                                                     
18 pharmacy benefits manager when the pharmacy benefits manager has determined that                                        
19       an overpayment to the pharmacy has occurred.                                                                      
20    * Sec. 2. The uncodified law of the State of Alaska is amended by adding a new section to                          
21 read:                                                                                                                   
22 APPLICABILITY. (a) This Act applies to audits of pharmacies conducted by                                                
23 pharmacy benefits managers and contracts with pharmacy benefits managers entered into on                                
24 or after the effective date of sec. 1 of this Act.                                                                      
25 (b)  In this section, "pharmacy" and "pharmacy benefits manager" have the meanings                                      
26 given in AS 21.27.955, added by sec. 1 of this Act.                                                                     
27    * Sec. 3. The uncodified law of the State of Alaska is amended by adding a new section to                          
28 read:                                                                                                                   
29 TRANSITIONAL PROVISIONS: REGULATIONS. The division of insurance may                                                     
30 adopt regulations necessary to implement the changes made by this Act. The regulations take                             
31 effect under AS 44.62 (Administrative Procedure Act), but not before the effective date of the                          
01 law implemented by the regulation.                                                                                      
02    * Sec. 4. The uncodified law of the State of Alaska is amended by adding a new section to                          
03 read:                                                                                                                   
04       REVISOR'S INSTRUCTIONS. The revisor of statutes is requested to renumber                                          
05 AS 21.27.900 as AS 21.27.990. The revisor of statutes is requested to change "AS 21.27.900"                             
06 to "AS 21.27.990" in AS 21.36.475(c)(2) and (4) and AS 21.97.900(26).                                                   
07    * Sec. 5. Section 3 of this Act takes effect immediately under AS 01.10.070(c).                                    
08    * Sec. 6. Except as provided in sec. 5 of this Act, this Act takes effect July 1, 2018.