HB6871 93RD GENERAL ASSEMBLY

LRB093 19271 SAS 45006 b

93RD GENERAL ASSEMBLY
State of Illinois
2003 and 2004
HB6871

Introduced 02/09/04, by David E. Miller

SYNOPSIS AS INTRODUCED:

New Act
30 ILCS 105/5.625 new

Creates the Pharmacy Benefit Management Regulation Act. Establishes the standards and criteria for regulation and licensing of pharmacy benefit management companies. Requires pharmacy benefit management companies to obtain a license from the Director of Insurance and to obtain a certificate of authority from the State Pharmacy Board. Provides for financial examination of those companies. Grants enforcement powers to the Director of Insurance and the State Pharmacy Board. Imposes fees and assessments upon pharmacy benefit management companies. Provides for the fees and assessments to be deposited into the Pharmacy Benefit Company Regulation Fund, a special fund in the State treasury. Amends the State Finance Act to add the Fund to the list of special funds. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT to create the Pharmacy Benefit Management and Regulation Act.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Pharmacy Benefit Management Regulation Act.

Section 5. Purpose and intent. This Act establishes standards and criteria for the regulation and licensing of pharmacy benefit management companies. The purpose of this Act is to promote, preserve, and protect the public health, safety, and welfare by and through effective regulation and licensing of pharmacy benefit management companies.

Section 10. Definitions. For purposes of this Act:

"Board of Pharmacy" or "Board" means the State Board of Pharmacy.

"Cease and desist" is an order of the Board prohibiting a pharmacy benefit manager or pharmacy benefit management company or other person or entity from continuing a particular course of conduct that violates this Act or its rules.

"Director" means the Director of Insurance.

"Enrollee" means an individual who has been enrolled in a pharmacy benefit management plan.

"Insolvent" or "insolvency" means a financial situation in which, based upon the financial information required by this Act for the preparation of the pharmacy benefit management company's annual statement, the assets of the pharmacy benefit management company are less than the sum of all of its liabilities and required reserves.

"Pharmacists services" includes drug therapy and other patient care services provided by a licensed pharmacist intended to achieve outcomes related to the cure or prevention of a disease, elimination or reduction of a patient's symptoms, or arresting or slowing of a disease process as defined in the rules of the Board.

"Pharmacists" means any individual properly licensed as a pharmacist by the Department of Professional Regulation.

"Pharmacy" means any appropriately licensed place within this State where drugs are dispensed and pharmacist services are provided.

"Pharmacy benefits management company" or "PBM" means a business that administers the prescription drug and device portion of health insurance plans on behalf of plan sponsors, such as self-insured employers, insurance companies, unions, and health maintenance organizations.

"Pharmacy benefit management plan" means an arrangement for the delivery of prescription services in which a pharmacy benefit management company undertakes to provide, arrange for, pay for, or reimburse any of the costs of prescription services for an enrollee on a prepaid or insured basis which (i) contains one or more incentive arrangements intended to influence the cost or level of prescription services between the plan sponsor and one or more pharmacies with respect to the delivery of prescription services and (ii) requires or creates benefit payment differential incentives for enrollees to use under contract with the pharmacy benefit management company. A pharmacy benefit plan does not mean an employee welfare benefit plan (as defined in Section 3(1) of the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1002(1)), which is self-insured or self-funded.

Section 15. Certificate of authority.

(a) No person or organization may establish or operate a pharmacy benefit management company in this State to provide pharmacy benefit management plans without obtaining a certificate of authority from the Board. All PBMs providing pharmacy benefit management plans in this State shall obtain a certificate of authority from the Board of pharmacy every 4 years.

An organization or person may apply to the Board to obtain a certificate of authority to establish and operate a PBM in compliance with this Act if the organization obtains from the Director an annual license to do business in this State.

(b) The Board may suspend or revoke any certificate of authority issued to a pharmacy benefit management company under this Act or deny an application for a certificate of authority if it finds that:

(1) the pharmacy benefit management company is operating significantly in contravention of its basic organizational document;

(2) the pharmacy benefit management company does not arrange for pharmacists services;

(3) the pharmacy benefit management company has failed to meet the requirements for issuance of a certificate of authority as set forth in this Act;

(4) the pharmacy benefit management company is unable to fulfill its obligation to furnish pharmacists services as required under its pharmacy benefit management plan;

(5) the pharmacy benefit management company is no longer financially responsible and may reasonably be expected to be unable to meet its obligations to enrollees or prospective enrollees;

(6) the pharmacy benefit management company, or any person on its behalf, has advertised or merchandised its services in an untrue, misrepresentative, misleading, deceptive, or unfair manner;

(7) the continued operation of the pharmacy benefit management company would be hazardous to its enrollees;

(8) the pharmacy benefit management company has failed to file an annual statement with the Director in a timely manner; or

(9) the pharmacy benefit management company has otherwise failed to substantially comply with this Act.

(c) When the certificate of authority of a pharmacy benefit management company is revoked, the organization shall proceed, immediately following the effective date of the order of revocation, to wind up its affairs and shall conduct no further business except as may be essential to the orderly conclusion of the affairs of the organization. The Board may permit such further operation of the organization as the Board may find to be in the best interest of enrollees to the end that the enrollees will be afforded the greatest practical opportunity to obtain pharmacists services.

Section 20. License.

(a) The Director shall not issue an annual license to do business in this State to any PBM providing pharmacy benefit management plans until he is satisfied that the pharmacy benefit management company:

(1) has paid all fees, taxes, and charges required by law;

(2) has made any deposit required by this Act;

(3) has the minimum capital and surplus requirements specified by the Director;

(4) has filed a financial statement or statements and any reports, certificates, or other documents the Director considers necessary to secure a full and accurate knowledge of its affairs and financial condition;

(5) is solvent and its financial condition, method of operation, and manner of doing business are such as to satisfy the Director that it can meet its obligations to all enrollees; and

(6) has otherwise complied with all the requirements of law.

(b) This license shall be in addition to the certificate of authority required by the Board. A nonrefundable license application fee of $500 shall accompany each application for a license to transact the business in this State. The fee shall be collected by the Director and paid directly into the Pharmacy Benefit Company Regulation Fund to provide expenses for the regulation, supervision, and examination of all entities subject to regulation under this Act.

The license shall be signed by the Director or a duly authorized agent of the Director and shall expire on the next June 30 after the date on which it becomes effective.

(c) All PBMs providing pharmacy benefit management plans shall obtain an annual renewal of its license from the Director. The Director may refuse to renew the license of any pharmacy benefit management company or may renew the license subject to any restrictions considered appropriate by the Director, if he or she finds an impairment of required capital and surplus or if it finds that the pharmacy benefit management company has not satisfied all the conditions set forth in this Act. The Director shall not fail to renew the license of any pharmacy benefit management company to transact business in this State without giving the pharmacy benefit management company 10 days' notice and giving it an opportunity to be heard. The hearing may be informal, and the Director and the pharmacy benefit management company may waive the required notice.

Section 25. Annual statement.

(a) A PBM providing pharmacy management benefit plans in this State shall file a statement with the Director annually by March 1. The statement shall be verified by at least 2 principal officers and shall cover the preceding calendar year. A pharmacy benefit management company shall also send a copy of the statement to the Board.

(b) The statement shall be on forms prescribed by the Director and shall include:

(1) a financial statement of the organization, including its balance sheet and income statement for the preceding year;

(2) the number of persons enrolled during the year, the number of enrollees as of the end of the year, and the number of enrollments terminated during the year; and

(3) any other information relating to the operations of the pharmacy benefit management company required by the Director pursuant to this Act.

(c) If the pharmacy benefit management company is audited annually by an independent certified public accountant, a copy of the certified audit report shall be filed annually with the Director by June 30.

(d) The Director may extend the time prescribed for any pharmacy benefit management company for filing annual statements or other reports or exhibits of any for good cause shown. However, the Director shall not extend the time for filing annual statements beyond 60 days after the time prescribed by subsection (a) of this Section. A pharmacy benefit management company that fails to file its annual statement within the time prescribed by this Section may have its licensed revoked by the Director or its certificate of authority revoked or suspended by the Board until the annual statement is filed.

Section 30. Financial examination.

(a) Instead of or in addition to making his or her own financial examination of a pharmacy benefit management company, the Director may accept the report of a financial examination of other person responsible for the pharmacy benefit management companies under the laws of another state certified by the insurance supervisory official, similar regulatory agency, or the state health supervisory official of another state.

(b) The Director shall coordinate financial examinations of a PBM that provides pharmacy management benefit plans in this State to ensure an appropriate level of regulatory oversight and to avoid any undue duplication of effort or regulation. The pharmacy benefit management company being examined shall pay the cost of the examination. The cost of the examination shall be deposited into the Pharmacy Benefit Company Regulation Fund, a special fund created in the State treasury. Moneys in the Fund shall be used to pay the expenses of administering this Act.

Section 35. Assessment.

(a) The expense of administering this Act, including the cost incurred by the Director and the Board, shall be assessed annually by the Board against all pharmacy benefit management companies operating in this State. Before determining the assessment, the Board shall request from the Director an estimate of all expenses for the regulation, supervision, and examination of all entities subject to regulation under this Act. The assessment shall be in proportion to the business done in this State.

(b) All fees assessed under this Act and paid to the Board shall be deposited into the Pharmacy Benefit Company Regulation Fund.

(c) The Board shall assess each pharmacy benefit management company annually for its just share of expenses. The assessment shall be in proportion to the business done in this State. The Board shall provide the Director an amount from the Pharmacy Benefit Company Regulation Fund to cover all expenses incurred by the Director for the regulation under this Act.

(d) The Board shall give each pharmacy benefit management company notice of the assessment, which shall be paid to the Board on or before March 1 of each year. A pharmacy benefit management company that fails to pay the assessment on or before the date prescribed shall be subject to a penalty imposed by the Board. The penalty shall be 10% of the assessment and interest for the period between the due date and the date of full payment. If a payment is made in an amount later found to be in error, the Board shall (i) if an additional amount is due, notify the company of the additional amount and the company shall pay the additional amount within 14 days after the date of the notice or (ii) if an overpayment is made, order a refund.

If an assessment made under this Act is not paid to the Board by the prescribed date, the amount of the assessment, penalty, and interest may be recovered from the defaulting company in an action brought at the request of the Board by the Attorney General made in the name and for the use of the State in the appropriate circuit court after 10 days' notice to the company. The certificate of authority of any defaulting company to transact business in this State may be revoked or suspended by the Board until it has paid the assessment.

Section 40. PBM contracts. A PBM that contracts with a pharmacy or pharmacist to provide pharmacists services through a pharmacy management plan for enrollees in this State shall file the contract with the Board 30 days before the execution of the contract. The contract shall be deemed approved unless the Board disapproves the contract within 30 days after filing with the Board. Disapproval shall be in writing and set forth the reasons for disapproval. A copy the disapproval shall be delivered to the PBM. The Board, consistent with its responsibility for protecting the public interest, shall develop formal criteria for the approval and disapproval of PBM contracts.

Section 45. Enforcement.

(a) The Board shall develop formal investigation and compliance procedures with respect to complaints by plan sponsors, pharmacists, and enrollees concerning the failure of a pharmacy benefit management company or the pharmacy benefit manager to comply with the provisions of this Act. If the Board has reason to believe that there is a violation of this Act, it shall issue and serve upon the pharmacy benefit management company or the pharmacy benefit manager concerned a statement of the charges and a notice of a hearing to be held at a time and place fixed in the notice, which shall not be less than 30 days after notice is served. The notice shall require the pharmacy benefit management company or the pharmacy benefit manager to show cause why an order should not be issued directing the alleged offender to cease and desist from the violation. At the hearing, the pharmacy benefit management company or the pharmacy benefit manager shall have an opportunity to be heard and to show cause why an order should not be issued requiring the pharmacy benefit management company or the pharmacy benefit manager to cease and desist from the violation.

(b) The Board may make an examination concerning the quality of services of any pharmacy benefit management company and providers with whom the pharmacy benefit management company has contracts, agreements, or other arrangements pursuant to its pharmacy benefit management plan as often as the Board deems necessary for the protection of the interests of the people of this State. The pharmacy benefit management company being examined shall pay the cost of the examination.

Section 50. Prohibited practices.

(a) A pharmacy benefit management company or its representative may not cause or knowingly permit the use of (i) advertising that is untrue or misleading, (ii) solicitation that is untrue or misleading, or (iii) any form of evidence of coverage that is deceptive.

(b) A pharmacy benefit management company, unless licensed as an insurer, may not use in its name, contracts, or literature (i) any of the words "insurance", "casualty", "surety", or "mutual" or (ii) any other words descriptive of the insurance, casualty, or surety business or deceptively similar to the name or description of any insurance or fidelity and surety insurer doing business in this State.

(c) A pharmacy benefit management company may not discriminate on the basis of race, creed, color, sex, or religion in the selection of pharmacies for participation in the organization.

(d) A pharmacy benefit management company may not unreasonably discriminate against pharmacists when contracting for pharmacist services.

Section 55. Disclosures. All of the following shall be provided to the pharmacy benefit company's enrollees of a pharmacy benefit management plan at the time of enrollment or at the time the contract is issued and shall be made available upon request or at least annually:

(1) A list of the names and locations of all affiliated providers.

(2) A description of the service area or areas within which the pharmacy benefit company provides prescription services.

(3) A description of the method of resolving complaints of covered persons, including a description of any arbitration procedure if complaints may be resolved through a specified arbitration agreement.

(4) Notice that the pharmacy benefit management company is subject to regulation in this State by both the State Board of Pharmacy and the Director of Insurance.

(5) A prominent notice included within the evidence of coverage, providing substantially the following: "If you have any questions regarding an appeal or grievance concerning the pharmacist services that you have been provided, which have not been satisfactorily addressed by your plan, you may contact the State Pharmacy Board.". The notice shall also provide the toll-free telephone number, mailing address, and electronic mail address of the State Board of Pharmacy.

Section 60. Privacy. An enrollee in a pharmacy benefit management plan has the right to privacy and confidentiality in pharmacist services. This right may be expressly waived in writing by the enrollee or the enrollee's guardian.

Section 65. Insolvency.

(a) If a pharmacy benefit management company becomes insolvent or ceases to be a company in this State in any assessable or license year, the company shall remain liable for the payment of the assessment for the period in which it operated as a pharmacy benefit management company in this State.

(b) In the event of an insolvency of a pharmacy benefit management company, the Director may, after notice and hearing, levy an assessment on pharmacy benefit management companies licensed to do business in this State. The assessments shall be paid quarterly to the Director, and upon receipt by the Director shall be paid over into an escrow account in the Pharmacy Benefit Company Regulation Fund. This escrow account shall be solely for the benefit of enrollees of an insolvent pharmacy benefit management company.

Section 95. Severability. The provisions of this Act are severable under Section 1.31 of the Statute on Statutes.

Section 97. The State Finance Act is amended by adding Section 5.625 as follows:

(30 ILCS 105/5.625 new)

Sec. 5.625. The Pharmacy Benefit Company Regulation Fund.

Section 999. Effective date. This Act takes effect upon becoming law.