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Enrolled HB 240: Relating to prescription prices available to consumers; relating to penalties for certain pharmacy or pharmacist violations; 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 Enrolled HB 240                                                                                                         
01 Relating to prescription prices available to consumers; relating to penalties for certain                               
02 pharmacy or pharmacist violations; relating to the registration and duties of pharmacy benefits                         
03 managers; relating to procedures, guidelines, and enforcement mechanisms for pharmacy                                   
04 audits; relating to the cost of multi-source generic drugs and insurance reimbursement                                  
05 procedures; relating to the duties of the director of the division of insurance; and providing for                      
06 an effective date.                                                                                                      
07                           _______________                                                                               
08    * Section 1. AS 08.80.297 is amended by adding a new subsection to read:                                             
09            (b)  No contract or agreement may prohibit a pharmacy, pharmacist, or                                        
10       pharmacy benefits manager from informing a patient of a less costly alternative for a                             
11       prescription drug or medical device or supply, which may include the amount the                                   
12       patient would pay without the use of a health care plan.                                                          
13    * Sec. 2. AS 08.80.297 is amended by adding new subsections to read:                                                 
01 (c)  A pharmacist or person acting at the direction of a pharmacist shall notify                                        
02 the patient if a known less costly alternative for a prescription drug or medical device                                
03 or supply is available, which may include the amount the patient would pay without                                      
04       the use of a health care plan.                                                                                    
05            (d)  In this section,                                                                                        
06                 (1)  "health care plan" means a policy, contract, benefit, or agreement                                 
07       that provides, delivers, arranges for, pays for, or reimburses any of the costs of health                         
08       care services under                                                                                               
09                      (A)  a health care insurance plan as defined under                                                 
10            AS 21.54.500;                                                                                                
11 (B)  a governmental or employee welfare benefit plan under 29                                                           
12            U.S.C. 1001 - 1191 (Employee Retirement Income Security Act of 1974);                                        
13                      (C)  a plan offered under AS 39.30.090 or 39.30.091;                                               
14 (D)  a federal governmental plan as defined under                                                                       
15            AS 21.54.500;                                                                                                
16                      (E)  the Medicaid or Medicare program; or                                                          
17                      (F)  a self-insured employer benefit plan;                                                         
18 (2)  "pharmacy benefits manager" has the meaning given in                                                               
19       AS 21.27.955.                                                                                                     
20    * Sec. 3. AS 08.80.460(a) is amended to read:                                                                        
21 (a)  Except for a violation of AS 08.80.297, a [A] person who violates a                                              
22       provision of this chapter is guilty of a class B misdemeanor.                                                     
23    * Sec. 4. AS 08.80.460(b) is amended to read:                                                                        
24 (b)  A person who violates the provisions of AS 08.80.295 or 08.80.297 may                                            
25 be punished [IS PUNISHABLE] by a civil fine in an amount established by the board                                     
26 in a schedule or schedules establishing the amount of civil fine for a particular                                       
27 violation. The schedule or schedules shall be adopted by the board by regulation. Any                                   
28 civil fine imposed under this section may be appealed in the manner provided for                                        
29       appeals in AS 44.62 (Administrative Procedure Act).                                                               
30    * Sec. 5. AS 21.27 is amended by adding new sections to read:                                                        
31                   Article 10. Pharmacy Benefits Managers.                                                               
01 Sec. 21.27.901. Registration of pharmacy benefits managers; scope of                                                    
02 business practice. (a) A person may not conduct business in the state as a pharmacy                                     
03 benefits manager unless the person is registered with the director as a third-party                                     
04       administrator under AS 21.27.630.                                                                                 
05            (b)  A pharmacy benefits manager registered under AS 21.27.630 may                                           
06                 (1)  contract with an insurer to administer or manage pharmacy benefits                                 
07       provided by an insurer for a covered person, including claims processing services for                             
08       and audits of payments for prescription drugs and medical devices and supplies;                                   
09                 (2)  contract with network pharmacies;                                                                  
10                 (3)  set the cost of multi-source generic drugs under AS 21.27.945; and                                 
11 (4)  adjudicate appeals related to multi-source generic drug                                                            
12       reimbursement.                                                                                                    
13 Sec. 21.27.905. Renewal of registration. (a) A pharmacy benefits manager                                                
14       shall biennially renew a registration with the director.                                                          
15 (b)  To renew a registration under this section, a pharmacy benefits manager                                            
16 shall pay a renewal fee established by the director. The director shall set the amount of                               
17       the renewal fee to allow the renewal and oversight activities of the division to be self-                         
18       supporting.                                                                                                       
19 Sec. 21.27.910. Pharmacy audit procedural requirements. (a) When a                                                      
20 pharmacy benefits manager conducts an audit of the records of a pharmacy, the period                                    
21 covered by the audit of a claim may not exceed two years from the date that the claim                                   
22 was submitted to or adjudicated by the pharmacy benefits manager, whichever is                                          
23 earlier. Except as required under AS 21.36.495, a claim submitted to or adjudicated by                                  
24       a pharmacy benefits manager does not accrue interest during the audit period.                                     
25 (b)  A pharmacy benefits manager conducting an on-site audit shall give the                                             
26       pharmacy written notice of at least 10 business days before conducting an initial audit.                          
27            (c)  A pharmacy benefits manager may not conduct                                                             
28 (1)  an audit during the first seven calendar days of any month unless                                                  
29       agreed to by the pharmacy;                                                                                        
30 (2)  more than one on-site audit of a pharmacy within a 12-month                                                        
31       period; or                                                                                                        
01                 (3)  on-site audits of more than 250 separate prescriptions at one                                      
02       pharmacy within a 12-month period unless fraud by the pharmacy or an employee of                                  
03       the pharmacy is alleged.                                                                                          
04            (d)  If an audit involves clinical or professional judgment, the individual                                  
05       conducting the audit must                                                                                         
06                 (1)  be a pharmacist who is licensed and in good standing under                                         
07       AS 08.80; or                                                                                                      
08                 (2)  conduct the audit in consultation with a pharmacist who is licensed                                
09       and in good standing under AS 08.80.                                                                              
10            (e)  A pharmacy, in responding to an audit, may use                                                          
11 (1)  verifiable statements or records, including medication                                                             
12 administration records of a nursing home, assisted living facility, hospital, physician,                                
13       or other authorized practitioner, to validate the pharmacy record;                                                
14 (2)  a legal prescription to validate claims in connection with                                                         
15 prescriptions, refills, or changes in prescriptions, including medication administration                                
16 records, prescriptions transmitted by facsimile, electronic prescriptions, or                                           
17       documented telephone calls from the prescriber or the prescriber's agent.                                         
18 (f)  A pharmacy benefits manager shall audit each pharmacy under the same                                               
19 standards and parameters as other similarly situated pharmacies in a network                                            
20       pharmacy contract in this state.                                                                                  
21 Sec. 21.27.915. Overpayment or underpayment. (a) When a pharmacy                                                        
22 benefits manager conducts an audit of a pharmacy, the pharmacy benefits manager                                         
23 shall base a finding of overpayment or underpayment by the pharmacy on the actual                                       
24 overpayment or underpayment and not on a projection based on the number of patients                                     
25 served having a similar diagnosis or on the number of similar orders or refills for                                     
26       similar drugs, except as provided in (b) of this section.                                                         
27 (b)  A pharmacy benefits manager may resolve a finding of overpayment or                                                
28 underpayment by entering into a settlement agreement with the pharmacy. The                                             
29       settlement agreement                                                                                              
30                 (1)  must comply with the requirements of AS 21.36.125; and                                             
31                 (2)  may be based on a statistically justifiable projection method.                                     
01            (c)  A pharmacy benefits manager may not include the dispensing fee amount                                   
02       in a finding of an overpayment unless                                                                             
03                 (1)  a prescription was not actually dispensed;                                                         
04                 (2)  the prescriber denied authorization;                                                               
05                 (3)  the prescription dispensed was a medication error by the pharmacy;                                 
06       or                                                                                                                
07                 (4)  the identified overpayment is solely based on an extra dispensing                                  
08       fee.                                                                                                              
09            Sec. 21.27.920. Recoupment. (a) When a pharmacy benefits manager                                             
10 conducts an audit of a pharmacy, the pharmacy benefits manager shall base the                                           
11 recoupment of overpayments on the actual overpayment of the claim, except as                                            
12       provided in AS 21.27.915(b).                                                                                      
13            (b)  A pharmacy benefits manager conducting an audit of a pharmacy may not                                   
14 (1)  use extrapolation in calculating recoupments or penalties for audits,                                              
15       unless required by state or federal contracts;                                                                    
16 (2)  assess a charge-back, recoupment, or other penalty against a                                                       
17 pharmacy solely because a prescription is mailed or delivered at the request of a                                       
18       patient; or                                                                                                       
19                 (3)  receive payment                                                                                    
20                      (A)  based on a percentage of the amount recovered; or                                             
21 (B)  for errors that have no actual financial harm to the patient                                                       
22            or medical plan.                                                                                             
23 Sec. 21.27.925. Pharmacy audit reports. (a) A pharmacy benefits manager                                                 
24 shall deliver a preliminary audit report to the pharmacy audited within 60 days after                                   
25       the conclusion of the audit.                                                                                      
26 (b)  A pharmacy benefits manager shall allow the pharmacy at least 30 days                                              
27 following receipt of the preliminary audit report to provide documentation to the                                       
28 pharmacy benefits manager to address a discrepancy found in the audit. A pharmacy                                       
29       benefits manager may grant a reasonable extension upon request by the pharmacy.                                   
30 (c)  A pharmacy benefits manager shall deliver a final audit report to the                                              
31 pharmacy within 120 days after receipt of the preliminary audit report, settlement                                      
01       agreement, or final appeal, whichever is latest.                                                                  
02            Sec. 21.27.930. Pharmacy audit appeal; future repayment. (a) A pharmacy                                      
03       benefits manager conducting an audit shall establish a written appeals process.                                   
04 (b)  Recoupment of disputed funds or repayment of funds to the pharmacy                                                 
05 benefits manager by the pharmacy, if permitted by contract, shall occur, to the extent                                  
06 demonstrated or documented in the pharmacy audit findings, after final internal                                         
07 disposition of the audit, including the appeals process. If the identified discrepancy for                              
08 an individual audit exceeds $15,000, future payments to the pharmacy may be                                             
09       withheld pending finalization of the audit.                                                                       
10 (c)  A pharmacy benefits manager may not assess against a pharmacy a charge-                                            
11 back, recoupment, or other penalty until the pharmacy benefits manager's appeals                                        
12       process has been exhausted and the final report or settlement agreement issued.                                   
13 Sec. 21.27.935. Fraudulent activity. When a pharmacy benefits manager                                                   
14 conducts an audit of a pharmacy, the pharmacy benefits manager may not consider                                         
15 unintentional clerical or record-keeping errors, including typographical errors, writer's                               
16 errors, or computer errors regarding a required document or record, to be fraudulent                                    
17 activity. In this section, "fraudulent activity" means an intentional act of theft,                                     
18       deception, misrepresentation, or concealment committed by the pharmacy.                                           
19 Sec. 21.27.940. Pharmacy audits; restrictions. The requirements of                                                      
20       AS 21.27.901 - 21.27.955 do not apply to an audit                                                                 
21 (1)  in which suspected fraudulent activity or other intentional or wilful                                              
22 misrepresentation is evidenced by a physical review, a review of claims data, a                                         
23       statement, or another investigative method; or                                                                    
24 (2)  of claims paid for under the medical assistance program under                                                      
25       AS 47.07.                                                                                                         
26 Sec. 21.27.945. Drug pricing list; procedural requirements. (a) A pharmacy                                              
27       benefits manager shall                                                                                            
28 (1)  make available to each network pharmacy at the beginning of the                                                    
29 term of the network pharmacy's contract, and upon renewal of the contract, the                                          
30       methodology and sources used to determine the drug pricing list;                                                  
31 (2)  provide a telephone number at which a network pharmacy may                                                         
01       contact an employee of a pharmacy benefits manager to discuss the pharmacy's                                      
02       appeal;                                                                                                           
03                 (3)  provide a process for a network pharmacy to have ready access to                                   
04       the list specific to that pharmacy;                                                                               
05                 (4)  review and update applicable list information at least once every                                  
06       seven business days to reflect modification of list pricing;                                                      
07                 (5)  update list prices within one business day after a significant price                               
08       update or modification provided by the pharmacy benefits manager's national drug                                  
09       database provider; and                                                                                            
10 (6)  ensure that dispensing fees are not included in the calculation of the                                             
11       list pricing.                                                                                                     
12            (b)  When establishing a list, the pharmacy benefits manager shall use                                       
13 (1)  the most up-to-date pricing data to calculate reimbursement to a                                                   
14       network pharmacy for drugs subject to list prices;                                                                
15 (2)  multi-source generic drugs that are sold or marketed in the state                                                  
16       during the list period.                                                                                           
17 Sec. 21.27.950. Multi-source generic drug appeal. (a) A pharmacy benefits                                               
18 manager shall establish a process by which a network pharmacy, or a network                                             
19 pharmacy's contracting agent, may appeal the reimbursement for a multi-source                                           
20 generic drug. A pharmacy benefits manager shall resolve an appeal from a network                                        
21 pharmacy within 10 calendar days after the network pharmacy or the contracting agent                                    
22       submits the appeal.                                                                                               
23 (b)  A network pharmacy, or a network pharmacy's contracting agent, may                                                 
24 appeal a reimbursement from a pharmacy benefits manager for a multi-source generic                                      
25 drug if the reimbursement for the drug is less than the amount that the network                                         
26       pharmacy can purchase from two or more of its contracted suppliers.                                               
27 (c)  A pharmacy benefits manager may grant a network pharmacy's appeal if                                               
28 an equivalent multi-source generic drug is not available at a price at or below the                                     
29 pharmacy benefits manager's list price for purchase from national or regional                                           
30 wholesalers who operate in the state. If an appeal is granted, the pharmacy benefits                                    
31 manager shall adjust the reimbursement of the network pharmacy to equal the network                                     
01       pharmacy acquisition cost for each paid claim included in the appeal.                                             
02            (d)  If the pharmacy benefits manager denies a network pharmacy's appeal, the                                
03       pharmacy benefits manager shall provide the network pharmacy with the                                             
04                 (1)  reason for the denial;                                                                             
05 (2)  national drug code of an equivalent multi-source generic drug that                                                 
06 has been purchased by another network pharmacy located in the state at a price that is                                  
07 equal to or less than the pharmacy benefits manager's list price within seven days after                                
08       the network pharmacy appeals the claim; and                                                                       
09                 (3)  name of a pharmaceutical wholesaler who operates in the state in                                   
10       which the drug may be acquired by the challenging network pharmacy.                                               
11 (e)  A network pharmacy may request a hearing under AS 21.06.170 -                                                      
12 21.06.240 for an adverse decision from a pharmacy benefits manager within 30                                            
13 calendar days after receiving the decision. The parties may present all relevant                                        
14       information to the director for the director's review.                                                            
15            (f)  The director shall enter an order that                                                                  
16 (1)  grants the network pharmacy's appeal and directs the pharmacy                                                      
17       benefits manager to make an adjustment to the disputed claim;                                                     
18                 (2)  denies the network pharmacy's appeal; or                                                           
19                 (3)  directs other actions considered fair and equitable.                                               
20            Sec. 21.27.955. Definitions. In AS 21.27.901 - 21.27.955,                                                    
21 (1)  "audit" means an official examination and verification of accounts                                                 
22       and records;                                                                                                      
23 (2)  "claim" means a request from a pharmacy or pharmacist to be                                                        
24 reimbursed for the cost of filling or refilling a prescription for a drug or for providing                              
25       a medical supply or device;                                                                                       
26 (3)  "extrapolation" means the practice of inferring a frequency or                                                     
27 dollar amount of overpayments, underpayments, invalid claims, or other errors on any                                    
28 portion of claims submitted, based on the frequency or dollar amount of                                                 
29 overpayments, underpayments, invalid claims, or other errors actually measured in a                                     
30       sample of claims;                                                                                                 
31 (4)  "list" means the list of multi-source generic drugs for which a                                                    
01 predetermined reimbursement amount has been established such as a maximum                                               
02 allowable cost or maximum allowable cost list or any other list of prices used by a                                     
03       pharmacy benefits manager;                                                                                        
04 (5)  "multi-source generic drug" means any covered outpatient                                                           
05 prescription drug that the United States Food and Drug Administration has determined                                    
06 is pharmaceutically equivalent or bioequivalent to the originator or name brand drug                                    
07 and for which there are at least two drug products that are rated as therapeutically                                    
08 equivalent under the United States Food and Drug Administration's most recent                                           
09       publication of "Approved Drug Products with Therapeutic Equivalence Evaluations";                                 
10 (6)  "network pharmacy" means a pharmacy that provides covered                                                          
11 health care services or supplies to an insured or a member under a contract with a                                      
12       network plan to act as a participating provider;                                                                  
13                 (7)  "pharmacy" has the meaning given in AS 08.80.480;                                                  
14 (8)  "pharmacy acquisition cost" means the amount that a                                                                
15 pharmaceutical wholesaler or distributor charges for a pharmaceutical product as listed                                 
16       on the pharmacy's invoice;                                                                                        
17 (9)  "pharmacy benefits manager" means a person that contracts with a                                                   
18 pharmacy on behalf of an insurer to process claims or pay pharmacies for prescription                                   
19 drugs or medical devices and supplies or provide network management for                                                 
20       pharmacies;                                                                                                       
21 (10)  "recoupment" means the amount that a pharmacy must remit to a                                                     
22 pharmacy benefits manager when the pharmacy benefits manager has determined that                                        
23       an overpayment to the pharmacy has occurred.                                                                      
24    * Sec. 6. The uncodified law of the State of Alaska is amended by adding a new section to                            
25 read:                                                                                                                   
26 APPLICABILITY. (a) AS 21.27.901 - 21.27.955, enacted by sec. 5 of this Act, apply                                       
27 to audits of pharmacies conducted by pharmacy benefits managers and contracts entered into                              
28 or renewed on or after the effective date of sec. 5 of this Act.                                                        
29 (b)  AS 08.80.297(b), enacted by sec. 1 of this Act, applies to contracts entered into or                               
30 renewed on or after the effective date of sec. 1 of this Act.                                                           
31 (c)  In this section, "pharmacy" and "pharmacy benefits manager" have the meanings                                      
01 given in AS 21.27.955, enacted by sec. 5 of this Act.                                                                   
02    * Sec. 7. The uncodified law of the State of Alaska is amended by adding a new section to                            
03 read:                                                                                                                   
04 TRANSITIONAL PROVISIONS: REGULATIONS. The division of insurance may                                                     
05 adopt regulations necessary to implement the changes made by this Act. The regulations take                             
06 effect under AS 44.62 (Administrative Procedure Act), but not before the effective date of the                          
07 law implemented by the regulation.                                                                                      
08    * Sec. 8. The uncodified law of the State of Alaska is amended by adding a new section to                            
09 read:                                                                                                                   
10       REVISOR'S INSTRUCTIONS. The revisor of statutes is requested to renumber                                          
11 AS 21.27.900 as AS 21.27.990. The revisor of statutes is requested to change "AS 21.27.900"                             
12 to "AS 21.27.990" in AS 21.36.475(c)(2) and (4) and AS 21.97.900(27).                                                   
13    * Sec. 9. Sections 1, 3, 6(b), and 7 of this Act take effect immediately under                                       
14 AS 01.10.070(c).                                                                                                        
15    * Sec. 10. Except as provided in sec. 9 of this Act, this Act takes effect July 1, 2019.