SB 175: "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 SENATE BILL NO. 175 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 under this section or 12 AS 21.27.905. 13 (b) A pharmacy benefits manager registered under this section 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 (c) To register under (a) of this section, a person shall 09 (1) submit to the director a registration statement on a form provided 10 by the director that includes 11 (A) the identity of the applicant; 12 (B) the name, business address, telephone number, and contact 13 person for the applicant; and 14 (C) where applicable, the federal employer identification 15 number for the applicant; and 16 (2) pay a registration fee established by the director; the director shall 17 set the amount of the registration fee to allow the registration and oversight activities 18 of the division to be self-supporting. 19 (d) In this section, "person" includes a person acting for a pharmacy benefits 20 manager under a contractual or employment relationship. 21 Sec. 21.27.905. Renewal of registration. (a) A pharmacy benefits manager 22 shall annually renew a registration with the director. 23 (b) To renew a registration under this section, a pharmacy benefits manager 24 shall pay a renewal fee established by the director. The director shall set the amount of 25 the renewal fee to allow the renewal and oversight activities of the division to be self- 26 supporting. 27 Sec. 21.27.910. Pharmacy audit procedural requirements. (a) When a 28 pharmacy benefits manager conducts an audit of the records of a pharmacy, the period 29 covered by the audit of a claim may not exceed two years from the date that the claim 30 was submitted to or adjudicated by the pharmacy benefits manager, whichever is 31 earlier. A claim submitted to or adjudicated by a pharmacy benefits manager does not
01 accrue interest during the audit period. 02 (b) A pharmacy benefits manager conducting an on-site audit shall give the 03 pharmacy written notice of at least 10 business days before conducting an initial audit. 04 (c) A pharmacy benefits manager may not conduct 05 (1) an audit during the first seven calendar days of any month unless 06 agreed to by the pharmacy; 07 (2) more than one on-site audit of a pharmacy within a 12-month 08 period; or 09 (3) on-site audits of more than 250 separate prescriptions at one 10 pharmacy within a 12-month period unless fraud by the pharmacy or an employee of 11 the pharmacy is alleged. 12 (d) If an audit involves clinical or professional judgment, the individual 13 conducting the audit must 14 (1) be a licensed pharmacist; or 15 (2) conduct the audit in consultation with a licensed pharmacist. 16 (e) A pharmacy, in responding to an audit, may use 17 (1) verifiable statements or records, including medication 18 administration records of a nursing home, assisted living facility, hospital, physician, 19 or other authorized practitioner, to validate the pharmacy record; 20 (2) a legal prescription to validate claims in connection with 21 prescriptions, refills, or changes in prescriptions, including medication administration 22 records, prescriptions transmitted by facsimile, electronic prescriptions, or 23 documented telephone calls from the prescriber or the prescriber's agent. 24 (f) A pharmacy benefits manager shall audit each pharmacy under the same 25 standards and parameters as other similarly situated pharmacies in a network 26 pharmacy contract in this state. 27 Sec. 21.27.915. Overpayment or underpayment. (a) When a pharmacy 28 benefits manager conducts an audit of a pharmacy, the pharmacy benefits manager 29 shall base a finding of overpayment or underpayment by the pharmacy on the actual 30 overpayment or underpayment and not on a projection based on the number of patients 31 served having a similar diagnosis or on the number of similar orders or refills for
01 similar drugs. 02 (b) A pharmacy benefits manager may not include the dispensing fee amount 03 in a finding of an overpayment unless 04 (1) a prescription was not actually dispensed; 05 (2) the prescriber denied authorization; 06 (3) the prescription dispensed was a medication error by the pharmacy; 07 or 08 (4) the identified overpayment is solely based on an extra dispensing 09 fee. 10 Sec. 21.27.920. Recoupment. (a) When a pharmacy benefits manager 11 conducts an audit of a pharmacy, the pharmacy benefits manager shall base the 12 recoupment of overpayments on the actual overpayment of the claim. 13 (b) A pharmacy benefits manager conducting an audit of a pharmacy may 14 recoup overpayments for errors resulting from a pharmacy's failure to comply with a 15 formal corrective action plan. 16 (c) A pharmacy benefits manager conducting an audit of a pharmacy may not 17 (1) use extrapolation in calculating recoupments or penalties for audits, 18 unless required by state or federal contracts; 19 (2) assess a charge-back, recoupment, or other penalty against a 20 pharmacy solely because a prescription is mailed or delivered at the request of a 21 patient; or 22 (3) receive payment 23 (A) based on a percentage of the amount recovered; or 24 (B) for errors that have no actual financial harm to the patient 25 or medical plan. 26 Sec. 21.27.925. Pharmacy audit reports. (a) A pharmacy benefits manager 27 shall deliver a preliminary audit report to the pharmacy audited within 60 days after 28 the conclusion of the audit. 29 (b) A pharmacy benefits manager shall allow the pharmacy at least 30 days 30 following receipt of the preliminary audit report to provide documentation to the 31 pharmacy benefits manager to address a discrepancy found in the audit. A pharmacy
01 benefits manager may grant a reasonable extension upon request by the pharmacy. 02 (c) A pharmacy benefits manager shall deliver a final audit report to the 03 pharmacy within 120 days after either receipt of the preliminary audit report or final 04 appeal, whichever is later. 05 Sec. 21.27.930. Pharmacy audit appeal; future repayment. (a) A pharmacy 06 benefits manager conducting an audit shall establish a written appeals process. 07 (b) Recoupment of disputed funds or repayment of funds to the pharmacy 08 benefits manager by the pharmacy, if permitted by contract, shall occur, to the extent 09 demonstrated or documented in the pharmacy audit findings, after final internal 10 disposition of the audit, including the appeals process. If the identified discrepancy for 11 an individual audit exceeds $15,000, future payments to the pharmacy may be 12 withheld pending finalization of the audit. 13 (c) A pharmacy benefits manager may not assess against a pharmacy a charge- 14 back, recoupment, or other penalty until the appeals process has been exhausted and 15 the final report issued. 16 Sec. 21.27.935. Fraud. When conducting an audit of a pharmacy, a pharmacy 17 benefits manager may not consider clerical or record-keeping errors, including 18 typographical errors, writer's errors, or computer errors regarding a required document 19 or record, to be fraud by the pharmacy. 20 Sec. 21.27.940. Pharmacy audits; restrictions. The requirements of 21 AS 21.27.901 - 21.27.955 do not apply to an audit 22 (1) in which suspected fraudulent activity or other intentional or wilful 23 misrepresentation is evidenced by a physical review, a review of claims data, a 24 statement, or another investigative method; or 25 (2) of claims paid for under the medical assistance program under 26 AS 47.07. 27 Sec. 21.27.945. Drug pricing list; procedural requirements. (a) A pharmacy 28 benefits manager shall 29 (1) make available to each network pharmacy at the beginning of the 30 term of the network pharmacy's contract, and upon renewal of the contract, the 31 methodology and sources used to determine the drug pricing list;
01 (2) provide a telephone number at which a network pharmacy may 02 contact an employee of a pharmacy benefits manager to discuss the pharmacy's 03 appeal; 04 (3) provide a process for a network pharmacy to have ready access to 05 the list specific to that pharmacy; 06 (4) review and update applicable list information at least once every 07 seven business days to reflect modification of list pricing; 08 (5) update list prices within one business day after a significant price 09 update or modification provided by the pharmacy benefits manager's national drug 10 database provider; and 11 (6) ensure that dispensing fees are not included in the calculation of the 12 list pricing. 13 (b) When establishing a list, the pharmacy benefits manager shall use 14 (1) the most up-to-date pricing data to calculate reimbursement to a 15 network pharmacy for drugs subject to list prices; 16 (2) multi-source generic drugs that are sold or marketed in the state 17 during the list period. 18 Sec. 21.27.950. Multi-source generic drug appeal. (a) A pharmacy benefits 19 manager shall establish a process by which a network pharmacy, or a network 20 pharmacy's contracting agent, may appeal the reimbursement for a multi-source 21 generic drug. A pharmacy benefits manager shall resolve an appeal from a network 22 pharmacy within 10 calendar days after the network pharmacy or the contracting agent 23 submits the appeal. 24 (b) A network pharmacy, or a network pharmacy's contracting agent, may 25 appeal a reimbursement from a pharmacy benefits manager for a multi-source generic 26 drug if the reimbursement for the drug is less than the amount that the network 27 pharmacy can purchase from two or more of its contracted suppliers. 28 (c) A pharmacy benefits manager shall grant a network pharmacy's appeal if 29 an equivalent multi-source generic drug is not available at a price at or below the 30 pharmacy benefits manager's list price from at least one of the network pharmacy's 31 contracted wholesalers who operate in the state. If an appeal is granted, the pharmacy
01 benefits manager shall adjust the reimbursement of the network pharmacy to equal the 02 network pharmacy acquisition cost for each paid claim included in the appeal. 03 (d) If the pharmacy benefits manager denies a network pharmacy's appeal, the 04 pharmacy benefits manager shall provide the network pharmacy with the 05 (1) reason for the denial; 06 (2) national drug code of an equivalent multi-source generic drug that 07 has been purchased by another network pharmacy located in the state at a price that is 08 equal to or less than the pharmacy benefits manager's list price within seven days after 09 the network pharmacy appeals the claim; and 10 (3) name of a pharmaceutical wholesaler who operates in the state in 11 which the drug may be acquired by the challenging network pharmacy. 12 (e) A network pharmacy may request review by the director of an adverse 13 decision from a pharmacy benefits manager within 30 calendar days after receiving 14 the decision. The parties may present all relevant information to the director for the 15 director's review. 16 (f) The director shall enter an order within 30 calendar days after the date that 17 the network pharmacy submits the request for review that 18 (1) grants the network pharmacy's appeal and directs the pharmacy 19 benefits manager to make an adjustment to the disputed claim; 20 (2) denies the network pharmacy's appeal; or 21 (3) directs other actions considered fair and equitable. 22 (g) The director shall provide a copy of the decision to both parties within 23 seven calendar days after the decision is issued. 24 Sec. 21.27.955. Definitions. In AS 21.27.901 - 21.27.955, 25 (1) "audit" means an official examination and verification of accounts 26 and records; 27 (2) "claim" means a request from a pharmacy or pharmacist to be 28 reimbursed for the cost of filling or refilling a prescription for a drug or for providing 29 a medical supply or device; 30 (3) "extrapolation" means the practice of inferring a frequency or 31 dollar amount of overpayments, underpayments, invalid claims, or other errors on any
01 portion of claims submitted, based on the frequency or dollar amount of 02 overpayments, underpayments, invalid claims, or other errors actually measured in a 03 sample of claims; 04 (4) "list" means the list of multi-source generic drugs for which a 05 predetermined reimbursement amount has been established such as a maximum 06 allowable cost or maximum allowable cost list or any other list of prices used by a 07 pharmacy benefits manager; 08 (5) "multi-source generic drug" means any covered outpatient 09 prescription drug that the United States Food and Drug Administration has determined 10 is pharmaceutically equivalent or bioequivalent to the originator or name brand drug 11 and for which there are at least two drug products that are rated as therapeutically 12 equivalent under the United States Food and Drug Administration's most recent 13 publication of "Approved Drug Products with Therapeutic Equivalence Evaluations"; 14 (6) "network pharmacy" means a pharmacy that provides covered 15 health care services or supplies to an insured or a member under a contract with a 16 network plan to act as a participating provider; 17 (7) "pharmacy" has the meaning given in AS 08.80.480; 18 (8) "pharmacy acquisition cost" means the amount that a 19 pharmaceutical wholesaler or distributor charges for a pharmaceutical product as listed 20 on the pharmacy's invoice; 21 (9) "pharmacy benefits manager" means a person that contracts with a 22 pharmacy on behalf of an insurer to process claims or pay pharmacies for prescription 23 drugs or medical devices and supplies or provide network management for 24 pharmacies; 25 (10) "recoupment" means the amount that a pharmacy must remit to a 26 pharmacy benefits manager when the pharmacy benefits manager has determined that 27 an overpayment to the pharmacy has occurred. 28 * Sec. 2. The uncodified law of the State of Alaska is amended by adding a new section to 29 read: 30 APPLICABILITY. (a) This Act applies to audits of pharmacies conducted by 31 pharmacy benefits managers and contracts with pharmacy benefits managers entered into on
01 or after the effective date of sec. 1 of this Act. 02 (b) In this section, "pharmacy" and "pharmacy benefits manager" have the meanings 03 given in AS 21.27.955, added by sec. 1 of this Act. 04 * Sec. 3. The uncodified law of the State of Alaska is amended by adding a new section to 05 read: 06 TRANSITIONAL PROVISIONS: REGULATIONS. The division of insurance may 07 adopt regulations necessary to implement the changes made by this Act. The regulations take 08 effect under AS 44.62 (Administrative Procedure Act), but not before the effective date of the 09 law implemented by the regulation. 10 * Sec. 4. The uncodified law of the State of Alaska is amended by adding a new section to 11 read: 12 REVISOR'S INSTRUCTIONS. The revisor of statutes is requested to renumber 13 AS 21.27.900 as AS 21.27.990. The revisor of statutes is requested to change "AS 21.27.900" 14 to "AS 21.27.990" in AS 21.36.475(c)(2) and (4) and AS 21.97.900(26). 15 * Sec. 5. Section 3 of this Act takes effect immediately under AS 01.10.070(c). 16 * Sec. 6. Except as provided in sec. 5 of this Act, this Act takes effect January 1, 2017.