SB 134-PHARMACY BENEFITS MANAGER;3RD PARTY ADMIN  3:35:53 PM VICE-CHAIR GIESSEL announced the consideration of SENATE BILL NO. 134 "An Act relating to pharmacy benefits managers; relating to third-party administrators; and providing for an effective date." 3:36:15 PM VICE-CHAIR GIESSEL speaking as sponsor introduced SB 134. She stated SB 134 relates to Third Party Administrators (TPAs). TPAs do business as part of a network related to insurance. TPAs also relate to pharmacy benefit managers often collecting profits from them and then relocating them to use outside of the state of Alaska and sometimes overseas. TPAs are not regulated by the Division of Insurance. SB 134 endeavors to have TPAs regulated for the purpose of transparency and accountability. 3:37:24 PM JANE ROHR, Staff, Senator Cathy Giessel, Alaska State Legislature, Juneau, Alaska, provided the sectional analysis for SB 134: [Original punctuation provided.] Senate Bill 134  Sectional Analysis (vsn A) "An Act relating to pharmacy benefits managers; relating to third-party administrators; and providing for an effective date." Section 1. Amends AS 21.06.120(a): Examination of  insurers. This section adds pharmacy benefits managers to the list of licensed and formerly licensed groups the affairs of which the director may examine. Section 2. Amends AS 21.06.120(d): Examination of  insurers. This section adds third-party administrators and pharmacy benefits managers to the list of groups in which the director may examine through multi-state participation with the National Association of Insurance Commissioners. Section 3. Adds a new subsection to AS 21.06.120:  Examination of insurers. This section adds a new subsection allowing the director to examine third-party administrators or pharmacy benefits managers at any time that the director deems necessary. Section 4. Amends AS 21.06.160(a): Examination  expense. This section removes an exemption for third-party administrators and makes them responsible for paying costs associated with a market conduct examination. 3:37:45 PM MS. ROHR continued with the sectional analysis for SB 134: Section 5. Amends AS 21.27.010(a): License required. This section adds Third-Party Administrators and Pharmacy Benefits Managers to the list of people required to be licensed under this chapter to do business in this state. Section 6. Amends AS 21.27.010(c): License required. This section makes conforming changes by replacing the term "registered" with "licensed" on line 22. This section also replaces the statute number with the verbiage "this chapter" since TPA will now be subject to licensing requirements throughout the chapter Section 7. Adds a new subsection to AS 21.27.010  License required.    This section adds a new subsection (l) clarifying third-party administrators and pharmacy benefits managers are also subject to specific licensing requirements under the AS 21.27.630 21.27.660 (TPA) and AS 21.27.901 21.27.955 (PBM). 3:37:58 PM MS. ROHR continued with the sectional analysis for SB 134: Section 8. Amends AS 21.27.060(d): Examination of  applicants and licensees. This section exempts a compliance officer for a third-party administrator or pharmacy benefits manager from taking an exam from the division before a license is issued. Section 9. Amends AS 21.27.380(b): License renewal,  expiration, and reinstatement. This section pertains to license expiration and adds third-party administrators and pharmacy benefits managers to the list of entities who may not operate in the state with an expired license. 3:38:15 PM MS. ROHR continued with the sectional analysis for SB 134 stating sections 10 through 24 require designated compliance officers to be licensed. She stated that it's required for exempt TPA's to file a certification with a director annually on or before February 1st as well as make conforming changes by replacing registered with licensed. Section 10. Amends AS 21.27.630(a): Registration  required. This section makes conforming changes by replacing the term "registered" with "licensed" on lines 24 and 27. Section 11. Amends AS 21.27.630(b): Registration  required. This section makes conforming changes by replacing the term "registered" with "licensed" on line 30. Section 12. Amends AS 21.27.630(c): Registration  required. This section makes conforming changes by replacing the term "registered" with "licensed" on line 2. This section also replaces the statute number with the verbiage "this chapter" since TPA will now be subject to licensing requirements throughout the chapter. Section 13. Amends AS 21.27.630(d): Registration  required. This section makes conforming changes by replacing the term "registration" with "license" on line 7. This section is about fraudulent use of a name. Section 14. Amends AS 21.27.630(e): Registration  required. This section makes conforming changes by replacing the term "registered" with "licensed" on line 12. This section is about entities must be licensed not the individual. This section also replaces the verbiage "section" with "chapter" since TPA will now be subject to licensing requirements throughout the chapter. Section 15. Amends AS 21.27.630(g): Registration  required. This section makes conforming changes by replacing the term "registered" with "licensed" on line 18. This section pertains to credit unions banks or other financial institutions. Section 16. Amends AS 21.27.630(h): Registration  required.  This section makes conforming changes by replacing the term "registered" with "licensed" on line 24. This section pertains to credit card companies. Section 17. Amends AS 21.27.630(i): Registration  required. This section makes conforming changes by replacing the term "registered" with "licensed" on line 29. This section pertains to ERISA plans which are exempted from licensure. Section 18. Amends AS 21.27.630(j): Registration  required. This section makes conforming changes by replacing the term "registration" with "license" on lines 8 and 9. It also removes duplicative language no longer needed since TPA will be required to be licensed. This section is relating to suspensions and revocations of license. Section 19. Amends AS 21.27.630(k): Registration  required. This section makes conforming changes by replacing the term "registered" with "licensed" on line 12. This section is regarding an exemption for insurers who hold a certificate of authority from the director. Section 20. Amends AS 21.27.630(l): Registration  required. This section makes conforming changes by replacing the term "registered" with "licensed" on lines 15. Adds the requirement that any entity that meets the qualifications of an exempt TPA file a certification with the director annually on or before February 1st of each year. Section 21. Amends AS 21.27.630(m): Registration  required. This section pertains to exempting employees of third- party administrators from licensing requirements and makes conforming changes by replacing the term "registered" with "licensed" on line 22. This section also adds language requiring designated compliance officers to be licensed. Section 22. Amends AS 21.27.640(a): Third-party  administrator qualifications. This section makes conforming changes by replacing the term "registration" with "license" on lines 27 and 28. This section relates to untrustworthy and incompetent licensees. Section 23. Amends AS 21.27.640(b): Third-party  administrator qualifications. This section makes conforming changes by replacing the term "registration" with "license" on line 2 and the term "registrant" with "licensee" on lines 3, 23, and 26. This section lists criteria relating to licensee qualifications   Section 24. Amends AS 21.27.640(d): Third-party  administrator qualifications. This section makes conforming changes by replacing the term "registrant" with "licensee" on lines 1 and 2, the term "registration" with "license" on line 3. This section pertains to license approval by director. 3:38:33 PM MS. ROHR continued with the sectional analysis for SB 134: Section 25. Amends AS 21.27.650(a): Operating  requirements for third-party administrators.  This section makes conforming changes by replacing the term "registered" with "licensed" on line 9. Removes an exemption for a TPA registered in their home state applying for a non-resident Alaska license. By eliminated the exemption, we are now requiring all TPA who are operating in Alaska to be licensed regardless of their resident state status. Section 26. Amends AS 21.27.650(q): Operating  requirements for third-party.  This section makes conforming changes by replacing the term "registration" with "license" on line 17. This section outlines criteria by which a director may revoke a license. Section 27. Amends AS 21.27.901: Registration of  pharmacy benefits managers; scope of business  practice.  This section makes the following conforming changes: • Replaces the term "registration" with "license" in the statute title. • Replaces the term "registered" with "licensed" on page 12, line 30 and page 13, lines 1 and 14. • Replaces the term "registration" with "license" on page 13, lines 8, 11, and 12. 3:38:47 PM MS. ROHR continued with the sectional analysis for SB 134: Section 28. Adds new sections AS 21.27.903, 904.  This section adds 21.27.903 Pharmacy benefits manager qualifications which outlines the following qualifications: ? Disclosures; including information concerning owners, officers, directors and partners, action taken against them by a financial industry regulatory authority (including the government), and criminal prosecution. ? Identified a designated compliance officer. ? A complete application, which includes: o Application fee o Organizational documents, including regulatory documents. o Contact information for the people responsible for the conduct of affairs for the pharmacy benefit manager. o Certified financial documents for the last two years, or for the last year and partial year if the applicant has been in business for less than two years. This section adds 21.27.904 Pharmacy benefit manager required notifications. Outlines that PBMs must notify the director of the following: ? Change of information i.e. place of business, email, address, telephone number. ? Change in compliance officer and contact information. ? Any administrative action taken against the licensee. ? Conviction of misdemeanor or felony. Failure to provide the above information may result in denial, revocation or suspension or license. 3:39:02 PM MS. ROHR continued with the sectional analysis for SB 134: Section 29. Amends AS 21.27.905: Renewal of  registration.    This section makes the following conforming changes: ? Replaces the term "registration" with "license" in the statute title. ? Replaces the term "registration" with "license" on lines 24 and 26. Regarding procedures for biennial renewal of license, and renewal fees established by the director that are self-supporting for the division. Section 30. Adds a new subsection to AS 21.27.905:  Renewal of registration. This section adds a new subsection requiring the licensing fees of pharmacy benefit managers to cover the cost of: ? Salaries and benefits paid to the personnel of the division tasked with enforcement. ? Reasonable technology costs related to the enforcement process of pharmacy benefits manager licensing, including cost of software, hardware and related training for use of said software and hardware. ? Reasonable education and training costs to the division for the enforcing personnel. 3:39:15 PM MS. ROHR continued with the sectional analysis for SB 134: Section 31. Amends AS 21.27.975(15): Definitions.  This section adds "regardless of ownership of the pharmacy benefits manager" to the definition of pharmacy benefits manager. Section 32. Repeals AS 21.27.630(f):    Sec. 21.27.630(f). Registration required. This provision is no longer needed because they now must be licensed rather than registered. Section 33. Sets an effective date for January 1,  2026.  3:39:34 PM VICE-CHAIR GIESSEL asked Ms. Carpenter to review the bill. 3:40:03 PM HEATHER CARPENTER, Deputy Director, Division of Insurance, Department of Commerce Community and Economic Development (DCCED), Juneau, Alaska, provided a review of SB 134 and stated that after the last session, the division closely reviewed House Bill 226, sponsored by Representative Sumner and Senator Giessel. The intent was to strengthen oversight of pharmacy benefit managers (PBMs) and ensure compliance. She said after consulting legal counsel and reviewing statutes, the division determined that a registration framework did not provide the same oversight authority as full licensure. She said SB 134 makes conforming changes to update examination statutes, allowing the division to conduct market exams of PBMs when complaint patterns arise. Previously, PBMs were treated as third-party administrators, were not clearly included in examination statutes, and were sometimes exempt from exam costs, which were instead borne by insurers. SB 134 corrects these issues. She concluded that the legislation is a cleanup measure that aligns Alaska with other states by moving PBMs and third- party administrators from registration to full licensure. This addressed concerns about vertical integration, regulatory confusion, and attempts to circumvent licensure, while also making requirements clearer and easier for licensing staff to administer. 3:42:23 PM SENATOR CLAMAN asked for clarification of the term "vertical integration," including what it means in this context, whether it is a problem, and why, noting that the term can have different meanings for different audiences. 3:42:41 PM MS. CARPENTER replied that the issue with vertical integration is largely a lack of transparency. Insurers may own third-party administrators, pharmacy benefit managers, and pharmacies, sometimes under exemptions that avoid registration. She said this makes it difficult for the division to determine responsibility when complaints arise. Without clear disclosure of ownership and operations, vertical integration can create confusion and hinder effective oversight and accountability. 3:43:51 PM SENATOR CLAMAN explained that in this context, vertical integration creates challenges for the division's oversight. An insurer may own multiple third-party administrators and pharmacies that are not licensed, making it difficult to determine what is happening within the overall organization. He said as a result, the division lacks visibility into the activities of related but unlicensed entities when investigating the insurer. 3:44:20 PM SENATOR TOBIN arrived at the meeting. 3:44:33 PM MS. CARPENTER explained that this is why the division proposed updating the definition of pharmacy benefit manager to include the phrase "regardless of ownership.She said this ensures the division can carry out legislative intent and anticipate how insurers, TPAs, and PBMs might structure themselves to avoid oversight. 3:44:54 PM SENATOR CLAMAN asked whether this proposed change expands the division's regulatory authority, or does it simply ensure that entities providing services in Alaska are clearly subject to the division's existing oversight and regulatory authority. 3:45:15 PM MS. CARPENTER replied that the changes accomplish both goals: they clarify the division's authority to examine pharmacy benefit managers by removing statutory ambiguity, and they expand oversight by eliminating exemptions and moving to full licensure, resulting in more licensed entities and better consumer protection. 3:45:50 PM SENATOR HUGHES referenced Marty Makary's book The Price We Pay, which discusses pharmacy benefit managers, and asked whether SB 134 aligns with those recommendations. She also asked whether the legislation builds on prior PBM reforms and helps rein in the system to improve oversight and control costs. MS. CARPENTER stated that she was not familiar with the book but agreed SB 134 meets that intent. She explained that the statues on examinations and the information the PDM must supply the division, such as the designation of a compliance officer and provisions that ensure registration fees cover oversight costs, provide the division the necessary tools to carry out the legislature's direction. 3:47:19 PM SENATOR HUGHES asked if page 6, line 15 of the sectional analysis, is narrow enough or does there need to be a more detailed explanation. MS. CARPENTER replied that the division has previously worked with legal counsel on the definition of "person," which is broadly defined in Alaska statute to include companies and individuals, such as a compliance officer, and offered to follow up with additional clarification. 3:48:20 PM SENATOR HUGHES commented that the broad definition possibly means every Alaskan. MS. CARPENTER replied that this provision is found in the third- party administrator statutes AS 21.27.630 and applies only to third-party administrators within that chapter. 3:49:06 PM VICE-CHAIR GIESSEL held SB 134 in committee.