SB1828sam002 94TH GENERAL ASSEMBLY

Sen. Dale A. Righter

Filed: 4/12/2005

09400SB1828sam002 LRB094 11306 RAS 44629 a

AMENDMENT TO SENATE BILL 1828

AMENDMENT NO. ______. Amend Senate Bill 1828 by replacing everything after the enacting clause with the following:

"Section 1. Short title. This Act may be cited as the Pharmacy Benefit Manager and Solvency Protection Act.

Section 5. Purpose; intent. The purpose of this Act is to establish standards and criteria for the regulation, solvency, and certification of pharmacy benefit managers. This Act is designed to promote, preserve, and protect the public health, safety, and welfare by and through effective regulation, solvency requirements, and certification of pharmacy benefit managers.

Section 10. Definitions. In this Act:

"Covered entity" means a non-profit hospital or medical service corporation, health insurer, health benefit plan, or health maintenance organization; a health program administered by a department or the State in the capacity of provider of health coverage; or an employer, labor union, or other group of persons organized in the State that provides health coverage to covered individuals who are employed or reside in the State. "Covered entity" does not include a self-funded plan that is exempt from State regulation pursuant to the federal Employee Retirement Income Security Act (ERISA), a plan issued for coverage for federal employees, or a health plan that provides coverage only for accidental injury, specified disease, hospital indemnity, medicare supplement, disability income, long-term care, or other limited benefit health insurance policies and contracts.

"Covered person" means a member, policyholder, subscriber, enrollee, beneficiary, dependent, or other individual participating in a health benefit plan.

"Department" means the Department of Financial and Professional Regulation.

"Health benefit plan" means a policy, contract, certificate, or agreement offered or issued by a health carrier to provide, deliver, arrange for, pay for, or reimburse any of the costs of health care services including prescription drug benefits.

"Multi-source drug" means a drug that is stocked and is available from 3 or more suppliers.

"Pharmacist" means any individual properly licensed as a pharmacist by the State Board of Pharmacy of the Department of Financial and Professional Regulation.

"Pharmacy" has the meaning given to that term in the Pharmacy Practice Act of 1987.

"Pharmacy benefits management" means (i) the procurement of prescription drugs at a negotiated rate for dispensation within this State to covered persons, (ii) the administration or management of prescription drug benefits provided by a covered entity for the benefit of covered persons, or (iii) any of the following services provided with regard to the administration of pharmacy benefits:

(1) Mail service pharmacy.

(2) Claims processing, retail network management, and payment of claims to pharmacies for prescription drugs dispensed to covered persons.

(3) Clinical formulary development and management services.

(4) Rebate contracting and administration.

(5) Patient compliance programs.

(6) Disease management programs involving prescription drug utilization.

"Pharmacy benefits manager" or "PBM" means a person, business, or other entity that performs pharmacy benefits management. "Pharmacy benefits manager" or "PBM" includes a person or entity acting for a PBM in a contractual or employment relationship in the performance of pharmacy benefits management for a covered entity and includes mail service pharmacies.

"Practice of pharmacy" has the meaning given to the term in the Pharmacy Practice Act of 1987.

"Secretary" means the Secretary of Financial and Professional Regulation.

Section 15. Applicability and scope. This Act shall apply to a PBM that provides claims processing services, other prescription drug or device services, or both, to covered persons who are residents of this State.

Section 20. Certificate of authority to act as a PBM.

(a) No person or organization shall act or operate as a PBM in this State without a valid certificate of authority issued by the Department. The failure of any person to hold a certificate while acting as a PBM shall subject that person to a fine of not less than $5,000 and not more than $10,000 for each violation.

(b) Each person seeking a certificate of authority to act as a PBM shall file with the Department an application for a certificate of authority upon a form to be furnished by the Department. This application shall include or be accompanied by all of the following:

(1) All basic organizational documents of the PBM, such as the articles of incorporation, articles of association, bylaws, partnership agreement, trade name certificate, trust agreement, shareholder agreement, and other applicable documents and all amendments to these documents.

(2) A filing fee of $5,000.

(3) Any other information the Secretary may require.

(c) Any person or entity that fits the definition of a "PBM" on the effective date of this amendatory Act of the 94th General Assembly shall have 90 days in which to obtain a certificate of authority from the Department in order to continue to validly operate in this State.

Section 25. Disclosure of ownership or affiliation.

(a) Each PBM shall disclose to the Department any ownership interest or affiliation of any kind with (i) any insurance company responsible for providing benefits directly or through reinsurance to any plan for which the PBM provides services or (ii) any parent companies, subsidiaries, and other entities or businesses relative to the provision of pharmacy services, other prescription drug or device services, or a pharmaceutical manufacturer.

(b) The PBM must notify the Department in writing within 5 calendar days of any material change in its ownership.

Section 30. Maintenance, access, and confidentiality of records; financial examination.

(a) Every PBM shall maintain, for the duration of the written agreement and for 2 years thereafter, books and records of all transactions between the PBM, insurers, covered persons, pharmacists, and pharmacies.

(b) The Department shall have access to books and records maintained by the PBM for the purposes of examination, audit, and inspection. All information contained in these books and records shall be confidential. However, the Department may use the information in any proceeding instituted against the PBM or insurer.

(c) In the case of State contracts only, the Secretary shall conduct periodic financial examinations of every PBM in this State to ensure an appropriate level of regulatory oversight. The PBM shall pay the cost of the examination which shall be deposited in a special fund to provide all expenses for the regulation, supervision, and examination of all entities subject to regulation under this Act.

Section 35. Disclosure of incentive arrangements or programs. In the case of State contracts only, the PBM shall disclose all incentive arrangements or programs, such as rebates, discounts, disbursements, or any other similar financial program or arrangement relating to income or consideration received or negotiated, directly or indirectly, with any pharmaceutical company, that relates to prescription drug or device services, including, at a minimum, information on the formula or other method for calculation and amount of the incentive arrangements, rebates, or other disbursements, the identity of the associated drug or device, and the dates and amounts of the disbursements.

Section 40. Contract requirements and prohibitions.

(a) A PBM shall not require a pharmacist or pharmacy to participate in one contract in order to participate in another contract. The PBM shall not exclude an otherwise qualified pharmacist or pharmacy from participation in a particular network solely because that pharmacist or pharmacy declined to participate in another plan or network managed by the PBM.

(b) All agreements shall provide that when the PBM receives payment for the services of the pharmacist or pharmacy that the PBM shall act as a fiduciary of the pharmacy or pharmacist who provided the services. The PBM shall distribute said funds in accordance with the time frames set forth in this Act.

Section 45. PBM prohibited practices.

(a) The insurer and the PBM may not discriminate with respect to participation in the network or reimbursement as to any pharmacist or pharmacy that is acting within the scope of his or her license or certification.

(b) The PBM may not transfer a health benefit plan to another payment network unless it receives written authorization from the insurer.

(c) No PBM may mandate basic record keeping by any pharmacist or pharmacy that is more stringent than required by State or federal laws or regulations.

Section 50. Termination of agreements.

(a) A pharmacist or pharmacy may not be terminated from the network or penalized by a PBM solely because of filing a complaint, grievance, or appeal as permitted under this Act.

(b) A pharmacist or pharmacy may not be terminated from the network or penalized because it expresses disagreement with the PBM's decision to deny or limit benefits to a covered person or because the pharmacist or pharmacy assists a covered person in seeking reconsideration of the PBM's decision or because the pharmacist or pharmacy discusses alternative medications.

(c) Before terminating a pharmacy from the network, the PBM must give the pharmacy or pharmacist a written explanation of the reason for the termination at least 30 days prior to the termination date, unless the termination is based on (i) the loss of the pharmacy's license to practice pharmacy or cancellation of professional liability insurance or (ii) a conviction of fraud.

Section 55. Medication costs; use of index required.

(a) PBMs shall use a current and nationally recognized benchmark for medications and products, which must be determined as follows:

(1) For brand or single source products, the Average Wholesale Price (AWP) as listed in First Data Bank (Hearst publications) or Facts & Comparisons (formerly Medispan) correct and current on the date of service provided shall be used as an index.

(2) For generic drug or multi-source products, Maximum Allowable Cost (MAC) shall be established by referencing First Data Bank (Hearst publications) or Facts & Comparisons (formerly Medispan) Baseline Price (BLP). Only products that are compliant with pharmacy laws as equivalent and generically interchangeable with a federal FDA Orange Book rating of "A-B" will be reimbursed from a MAC price methodology. If a multi-source product has no BLP price, then it shall be treated as a single source branded drug for the purpose of determining reimbursement.

(b) The same National Drug Code shall be used for all reimbursements, billings, and record keeping within the same transaction.

Section 60. Claim denials and adjustments; audits.

(a) Within 3 business days after a price increase notification by a manufacturer or supplier, the PBM must adjust its payments to the pharmacist or pharmacy consistent with the price increase.

(b) Claims paid by the PBM shall not be retroactively denied or adjusted after 7 days from adjudication of such claims, except as provided in subsection (d) of this Section. In no case shall acknowledgement of eligibility be retroactively reversed.

(c) The PBM may retroactively deny or adjust in the event of any of the following:

(1) The original claim was submitted fraudulently.

(2) The original claim payment was incorrect because the provider was already paid for services rendered.

(3) The services were not rendered by the pharmacist or pharmacy.

(d) The PBM may not require extrapolation audits as a condition of participating in the contract, network, or program.

(e) The PBM shall not recoup any moneys that it believes are due as a result of the audit by setoff until the pharmacist or pharmacy has the opportunity to review the PBM's findings and concurs with the results.

Section 65. Complaint process.

(a) The Department shall adopt procedures for formal investigation of complaints concerning the failure of a pharmacy benefits manager to comply with this Act.

(b) The Department shall investigate a complaint filed under this Act that involves a professional or patient health or safety issue.

(c) The Department shall investigate complaints that involve a business or financial issue.

Section 70. PBM responsibilities to the covered entity. A PBM shall disclose, upon request of the covered entity, all financial terms and arrangements for remuneration of any kind that apply between the PBM and any prescription drug manufacturer or labeler, including, without limitation, rebates, formulary management programs, educational support, claims processing, and pharmacy network fees that are charged from retail pharmacies and data sales fees.

Section 75. Pharmacy Benefits Management Fund. The Pharmacy Benefits Management Fund is created as a special fund in the State Treasury. All fees, fines, assessments, and penalties received under this Act shall be deposited into the Pharmacy Benefits Management Fund. This Fund shall be used exclusively for the administration and enforcement of this Act.

Section 80. Assessment.

(a) The expense of administering this Act shall be assessed annually by the Board against all PBMs operating in this State. The assessment shall be in proportion to the business done in this State.

(b) The Department shall give each PBM notice of the assessment, which shall be paid to the Board on or before April 1 of each year.

(c) If an assessment is not paid by the prescribed date, the amount of any assessment, plus a penalty, is due and the certificate of the defaulting PBM may be revoked or suspended by the Department until the assessment and any penalty has been paid.

Section 90. Rulemaking; Secretary. The Secretary may adopt rules necessary to carry out the provisions of this Act. These rules may include the definition of terms, the use of prescribed forms, reporting requirements, prohibited practices, and enforcement procedures. The rules shall be subject to review in accordance with general rules of administrative rulemaking and review of rules.

Section 95. Rulemaking; Department. The Department shall, by rule, define the enforcement process that shall be implemented under this Act, including grounds for certificate revocation, fines, suspension, and reinstatement, and shall adopt rules concerning unfair trade practices, protections for privacy and confidentiality of covered persons, and the prohibition of discrimination and false and misleading advertising.

Section 100. Severability. The provisions of this Act are severable under Section 1.31 of the Statute on Statutes.

Section 900. The State Finance Act is amended by adding Section 5.640 and by changing Section 8g as follows:

(30 ILCS 105/5.640 new)

Sec. 5.640. The Pharmacy Benefits Management Fund.

(30 ILCS 105/8g)

Sec. 8g. Fund transfers.

(a) In addition to any other transfers that may be provided for by law, as soon as may be practical after the effective date of this amendatory Act of the 91st General Assembly, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $10,000,000 from the General Revenue Fund to the Motor Vehicle License Plate Fund created by Senate Bill 1028 of the 91st General Assembly.

(b) In addition to any other transfers that may be provided for by law, as soon as may be practical after the effective date of this amendatory Act of the 91st General Assembly, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $25,000,000 from the General Revenue Fund to the Fund for Illinois' Future created by Senate Bill 1066 of the 91st General Assembly.

(c) In addition to any other transfers that may be provided for by law, on August 30 of each fiscal year's license period, the Illinois Liquor Control Commission shall direct and the State Comptroller and State Treasurer shall transfer from the General Revenue Fund to the Youth Alcoholism and Substance Abuse Prevention Fund an amount equal to the number of retail liquor licenses issued for that fiscal year multiplied by $50.

(d) The payments to programs required under subsection (d) of Section 28.1 of the Horse Racing Act of 1975 shall be made, pursuant to appropriation, from the special funds referred to in the statutes cited in that subsection, rather than directly from the General Revenue Fund.

Beginning January 1, 2000, on the first day of each month, or as soon as may be practical thereafter, the State Comptroller shall direct and the State Treasurer shall transfer from the General Revenue Fund to each of the special funds from which payments are to be made under Section 28.1(d) of the Horse Racing Act of 1975 an amount equal to 1/12 of the annual amount required for those payments from that special fund, which annual amount shall not exceed the annual amount for those payments from that special fund for the calendar year 1998. The special funds to which transfers shall be made under this subsection (d) include, but are not necessarily limited to, the Agricultural Premium Fund; the Metropolitan Exposition Auditorium and Office Building Fund; the Fair and Exposition Fund; the Standardbred Breeders Fund; the Thoroughbred Breeders Fund; and the Illinois Veterans' Rehabilitation Fund.

(e) In addition to any other transfers that may be provided for by law, as soon as may be practical after the effective date of this amendatory Act of the 91st General Assembly, but in no event later than June 30, 2000, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $15,000,000 from the General Revenue Fund to the Fund for Illinois' Future.

(f) In addition to any other transfers that may be provided for by law, as soon as may be practical after the effective date of this amendatory Act of the 91st General Assembly, but in no event later than June 30, 2000, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $70,000,000 from the General Revenue Fund to the Long-Term Care Provider Fund.

(f-1) In fiscal year 2002, in addition to any other transfers that may be provided for by law, at the direction of and upon notification from the Governor, the State Comptroller shall direct and the State Treasurer shall transfer amounts not exceeding a total of $160,000,000 from the General Revenue Fund to the Long-Term Care Provider Fund.

(g) In addition to any other transfers that may be provided for by law, on July 1, 2001, or as soon thereafter as may be practical, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $1,200,000 from the General Revenue Fund to the Violence Prevention Fund.

(h) In each of fiscal years 2002 through 2004, but not thereafter, in addition to any other transfers that may be provided for by law, the State Comptroller shall direct and the State Treasurer shall transfer $5,000,000 from the General Revenue Fund to the Tourism Promotion Fund.

(i) On or after July 1, 2001 and until May 1, 2002, in addition to any other transfers that may be provided for by law, at the direction of and upon notification from the Governor, the State Comptroller shall direct and the State Treasurer shall transfer amounts not exceeding a total of $80,000,000 from the General Revenue Fund to the Tobacco Settlement Recovery Fund. Any amounts so transferred shall be re-transferred by the State Comptroller and the State Treasurer from the Tobacco Settlement Recovery Fund to the General Revenue Fund at the direction of and upon notification from the Governor, but in any event on or before June 30, 2002.

(i-1) On or after July 1, 2002 and until May 1, 2003, in addition to any other transfers that may be provided for by law, at the direction of and upon notification from the Governor, the State Comptroller shall direct and the State Treasurer shall transfer amounts not exceeding a total of $80,000,000 from the General Revenue Fund to the Tobacco Settlement Recovery Fund. Any amounts so transferred shall be re-transferred by the State Comptroller and the State Treasurer from the Tobacco Settlement Recovery Fund to the General Revenue Fund at the direction of and upon notification from the Governor, but in any event on or before June 30, 2003.

(j) On or after July 1, 2001 and no later than June 30, 2002, in addition to any other transfers that may be provided for by law, at the direction of and upon notification from the Governor, the State Comptroller shall direct and the State Treasurer shall transfer amounts not to exceed the following sums into the Statistical Services Revolving Fund:

(k) In addition to any other transfers that may be provided for by law, as soon as may be practical after the effective date of this amendatory Act of the 92nd General Assembly, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $2,000,000 from the General Revenue Fund to the Teachers Health Insurance Security Fund.

(k-1) In addition to any other transfers that may be provided for by law, on July 1, 2002, or as soon as may be practical thereafter, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $2,000,000 from the General Revenue Fund to the Teachers Health Insurance Security Fund.

(k-2) In addition to any other transfers that may be provided for by law, on July 1, 2003, or as soon as may be practical thereafter, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $2,000,000 from the General Revenue Fund to the Teachers Health Insurance Security Fund.

(k-3) On or after July 1, 2002 and no later than June 30, 2003, in addition to any other transfers that may be provided for by law, at the direction of and upon notification from the Governor, the State Comptroller shall direct and the State Treasurer shall transfer amounts not to exceed the following sums into the Statistical Services Revolving Fund:

(l) In addition to any other transfers that may be provided for by law, on July 1, 2002, or as soon as may be practical thereafter, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $3,000,000 from the General Revenue Fund to the Presidential Library and Museum Operating Fund.

(m) In addition to any other transfers that may be provided for by law, on July 1, 2002 and on the effective date of this amendatory Act of the 93rd General Assembly, or as soon thereafter as may be practical, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $1,200,000 from the General Revenue Fund to the Violence Prevention Fund.

(n) In addition to any other transfers that may be provided for by law, on July 1, 2003, or as soon thereafter as may be practical, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $6,800,000 from the General Revenue Fund to the DHS Recoveries Trust Fund.

(o) On or after July 1, 2003, and no later than June 30, 2004, in addition to any other transfers that may be provided for by law, at the direction of and upon notification from the Governor, the State Comptroller shall direct and the State Treasurer shall transfer amounts not to exceed the following sums into the Vehicle Inspection Fund:

(p) On or after July 1, 2003 and until May 1, 2004, in addition to any other transfers that may be provided for by law, at the direction of and upon notification from the Governor, the State Comptroller shall direct and the State Treasurer shall transfer amounts not exceeding a total of $80,000,000 from the General Revenue Fund to the Tobacco Settlement Recovery Fund. Any amounts so transferred shall be re-transferred from the Tobacco Settlement Recovery Fund to the General Revenue Fund at the direction of and upon notification from the Governor, but in any event on or before June 30, 2004.

(q) In addition to any other transfers that may be provided for by law, on July 1, 2003, or as soon as may be practical thereafter, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $5,000,000 from the General Revenue Fund to the Illinois Military Family Relief Fund.

(r) In addition to any other transfers that may be provided for by law, on July 1, 2003, or as soon as may be practical thereafter, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $1,922,000 from the General Revenue Fund to the Presidential Library and Museum Operating Fund.

(s) In addition to any other transfers that may be provided for by law, on or after July 1, 2003, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $4,800,000 from the Statewide Economic Development Fund to the General Revenue Fund.

(t) In addition to any other transfers that may be provided for by law, on or after July 1, 2003, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $50,000,000 from the General Revenue Fund to the Budget Stabilization Fund.

(u) On or after July 1, 2004 and until May 1, 2005, in addition to any other transfers that may be provided for by law, at the direction of and upon notification from the Governor, the State Comptroller shall direct and the State Treasurer shall transfer amounts not exceeding a total of $80,000,000 from the General Revenue Fund to the Tobacco Settlement Recovery Fund. Any amounts so transferred shall be retransferred by the State Comptroller and the State Treasurer from the Tobacco Settlement Recovery Fund to the General Revenue Fund at the direction of and upon notification from the Governor, but in any event on or before June 30, 2005.

(v) In addition to any other transfers that may be provided for by law, on July 1, 2004, or as soon thereafter as may be practical, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $1,200,000 from the General Revenue Fund to the Violence Prevention Fund.

(w) In addition to any other transfers that may be provided for by law, on July 1, 2004, or as soon thereafter as may be practical, the State Comptroller shall direct and the State Treasurer shall transfer the sum of $6,445,000 from the General Revenue Fund to the Presidential Library and Museum Operating Fund.

(x) In addition to any other transfers that may be provided for by law, on January 15, 2005, or as soon thereafter as may be practical, the State Comptroller shall direct and the State Treasurer shall transfer to the General Revenue Fund the following sums:

From the State Crime Laboratory Fund, $200,000;

From the State Police Wireless Service Emergency Fund, $200,000;

From the State Offender DNA Identification System Fund, $800,000; and

From the State Police Whistleblower Reward and Protection Fund, $500,000.

(y) No transfers shall be made to the General Revenue Fund from the Pharmacy Benefits Management Fund.

(Source: P.A. 92-11, eff. 6-11-01; 92-505, eff. 12-20-01; 92-600, eff. 6-28-02; 93-32, eff. 6-20-03; 93-648, eff. 1-8-04; 93-839, eff. 7-30-04; 93-1067, eff. 1-15-05.)

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