State of Illinois
2017 and 2018


Introduced , by Rep. Marcus C. Evans, Jr.


See Index

    Amends the Illinois Insurance Code. Provides procedures for conducting pharmacy audits under the Third Party Prescription Programs Article. Prohibits an audit entity from using extrapolation to calculate penalties or amounts to be charged back, unless otherwise required by federal requirements. Defines terms. Contains provisions concerning notice of an audit, confidentiality, records, audit reporting, compensation, interest accrual, and appeal of a final audit report. Makes other changes. Provides that all entities providing prescription drug coverage shall permit and apply a prorated daily cost-sharing rate to prescriptions that are dispensed by a pharmacy for less than a 30-day supply if the prescriber or pharmacist indicates the fill or refill could be in the best interest of the patient or is for the purpose of synchronizing the patient's chronic medications. Provides that no entity providing prescription drug coverage shall deny coverage for the dispensing of any drug prescribed for the treatment of a chronic illness that is made in accordance with a plan among the insured, the prescriber, and a pharmacist to synchronize the refilling of multiple prescriptions for the insured. Provides that no entity providing prescription drug coverage shall use payment structures incorporating prorated dispensing fees determined by calculation of the days' supply of medication dispensed. Provides that dispensing fees shall be determined exclusively on the total number of prescriptions dispensed. Provides that the Department of Insurance and the Director shall have the authority to enforce the provisions of the Act and impose financial penalties. Effective immediately.

LRB100 10263 SMS 20449 b






HB3607LRB100 10263 SMS 20449 b

1    AN ACT concerning regulation.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Illinois Insurance Code is amended by
5changing Section 512-3 and by adding Sections 512-11, 512-12,
6and 512-13 as follows:
7    (215 ILCS 5/512-3)  (from Ch. 73, par. 1065.59-3)
8    Sec. 512-3. Definitions. For the purposes of this Article,
9unless the context otherwise requires, the terms defined in
10this Article have the meanings ascribed to them herein:
11    "Audit" means an audit that is conducted by an auditing
12entity either (i) at a location other than the location of the
13pharmacist or pharmacy, including an audit that is performed at
14the offices of the auditing entity during which the pharmacist
15or pharmacy provides requested documents for review by physical
16copy or by microfiche, disk, or other electronic media; or (ii)
17at the physical business address of the pharmacy where the
18claim was adjudicated.
19    "Auditing entity" means a person or company that performs a
20pharmacy audit, including a plan sponsor, covered entity,
21pharmacy benefits manager, managed care organization, or third
22party administrator.
23    "Business day" means any day of the week, excluding



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1Saturday, Sunday, and any legal holiday.
2    "Concurrent review" means a review of a prescription claim
3that occurs at the time of, or subsequent to the adjudication
4of, the claim that provides information to the pharmacy that is
5relevant to the claim, including, but not limited to, mandatory
6or optional edits to the claim.
7    "Covered entity" means a member, participant, enrollee,
8contract holder, or policy holder providing pharmacy benefits
9to a covered individual under a health coverage plan insurance
10policy pursuant to a contract administered by a pharmacy
11benefits manager.
12    "Covered individual" means a member, participant,
13enrollee, contract holder or policy holder, or beneficiary of a
14covered entity who is provided health coverage by the covered
15entity. The term includes a dependent or other person provided
16health coverage through the policy or contract of a covered
18    "Department" means the Department of Insurance.
19    "Extrapolation" means the practice of inferring a
20frequency of dollar amount of overpayments, underpayments,
21invalid claims, or other errors on any portion of claims
22submitted, based on the frequency of dollar amount of
23overpayments, underpayments, invalid claims, or other errors
24actually measured in a sample of claims.
25    "Network" means a pharmacy or group of pharmacies that
26agree to provide prescription services to covered individuals



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1on behalf of a covered entity or group of covered entities in
2exchange for payment for its services by a pharmacy benefits
3manager or pharmacy services administration organization.
4"Network" includes a pharmacy that generally dispenses
5outpatient prescriptions to covered individuals or dispenses
6particular types of prescriptions, provides pharmacy services
7to particular types of covered individuals, or dispenses
8prescriptions in particular health care settings, including
9networks of specialty, institutional, or long-term care
11    "Pharmacist" has the meaning ascribed to that term in the
12Pharmacy Practice Act.
13    "Pharmacy" has the meaning ascribed to that term in the
14Pharmacy Practice Act.
15    "Pharmacy audit" means an audit, conducted on-site by or on
16behalf of an auditing entity, of any records of a pharmacy for
17prescription or nonproprietary drugs dispensed by a pharmacy to
18a covered individual.
19    "Pharmacy benefits manager" or "PBM" means a person,
20business, or other entity that performs pharmacy benefits
21management for covered entities.
22    "Pharmacy record" means any record stored electronically
23or as a physical copy by a pharmacy that relates to the
24provision of prescription or nonproprietary drugs or pharmacy
25services or other component of pharmacist care that is included
26in the practice of pharmacy.



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1    "Pharmacy services administration organization" means any
2entity that contracts with a pharmacy to assist with third
3party payer interactions and that may provide a variety of
4other administrative services, including contracting with PBMs
5on behalf of pharmacies and managing pharmacies' claims
6payments from third party payers.
7    (a) "Third party prescription program" or "program" means
8any system of providing for the reimbursement of pharmaceutical
9services and prescription drug products offered or operated in
10this State under a contractual arrangement or agreement between
11a provider of such services and another party who is not the
12consumer of those services and products. Such programs may
13include, but need not be limited to, employee benefit plans
14whereby a consumer receives prescription drugs or other
15pharmaceutical services and those services are paid for by an
16agent of the employer or others.
17    (b) "Third party program administrator" or "administrator"
18means any person, partnership or corporation who issues or
19causes to be issued any payment or reimbursement to a provider
20for services rendered pursuant to a third party prescription
21program, but does not include the Director of Healthcare and
22Family Services or any agent authorized by the Director to
23reimburse a provider of services rendered pursuant to a program
24of which the Department of Healthcare and Family Services is
25the third party.
26(Source: P.A. 95-331, eff. 8-21-07.)



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1    (215 ILCS 5/512-11 new)
2    Sec. 512-11. Medication synchronization. All entities
3providing prescription drug coverage shall permit and apply a
4prorated daily cost-sharing rate to prescriptions that are
5dispensed by a pharmacy for less than a 30-day supply if the
6prescriber or pharmacist indicates the fill or refill could be
7in the best interest of the patient or is for the purpose of
8synchronizing the patient's chronic medications.
9    No entity providing prescription drug coverage shall deny
10coverage for the dispensing of any drug prescribed for the
11treatment of a chronic illness that is made in accordance with
12a plan among the insured, the prescriber, and a pharmacist to
13synchronize the refilling of multiple prescriptions for the
15    No entity providing prescription drug coverage shall use
16payment structures incorporating prorated dispensing fees
17determined by calculation of the days' supply of medication
18dispensed. Dispensing fees shall be determined exclusively on
19the total number of prescriptions dispensed.
20    The provisions of this Section shall not apply to a
21supplemental insurance policy, including a life care contract,
22accident-only policy, specified-disease policy, hospital
23policy providing a fixed daily benefit only, Medicare
24supplement policy, long-term care policy, or short-term major
25medical policy of 6 months or less in duration or any other



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1supplemental policy.
2    (215 ILCS 5/512-12 new)
3    Sec. 512-12. Audit of pharmacy records.
4    (a) An entity conducting a pharmacy audit under this
5Article shall conform to the following requirements:
6        (1) Except as otherwise provided by federal or State
7    law, an auditing entity conducting a pharmacy audit may
8    have access to a pharmacy's previous audit report only if
9    the report was prepared by that auditing entity.
10        (2) Information collected during a pharmacy audit
11    shall be confidential by law, except that the auditing
12    entity conducting the pharmacy audit may share the
13    information with the pharmacy benefits manager and the
14    covered entity for which the pharmacy audit is being
15    conducted.
16        (3) The auditing entity conducting a pharmacy audit may
17    not compensate an employee or contractor with which an
18    auditing entity contracts to conduct a pharmacy audit
19    solely based on the amount claimed or the actual amount
20    recouped by the pharmacy being audited.
21        (4) The auditing entity shall provide the pharmacy
22    being audited with at least 14 calendar days' prior written
23    notice before conducting a pharmacy audit. If a delay is
24    requested by the pharmacy, the pharmacy shall provide
25    notice to the PBM within 72 hours after receiving notice of



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1    the audit.
2        (5) The auditing entity may not initiate or schedule a
3    pharmacy audit during the first 5 business days of any
4    month without the express consent of the pharmacy.
5        (6) The auditing entity shall accept paper or
6    electronic signature logs that document the delivery of
7    prescription or nonproprietary drugs and pharmacist
8    services to a health plan beneficiary or the beneficiary's
9    caregiver or guardian.
10        (7) The auditing entity shall provide to the
11    representative of the pharmacy, prior to leaving the
12    pharmacy at the conclusion of the on-site portion of the
13    pharmacy audit, a complete list of pharmacy records
14    reviewed.
15        (8) A pharmacy audit that involves clinical judgment
16    shall be conducted by or in consultation with an
17    Illinois-licensed pharmacist.
18        (9) A pharmacy audit may not cover:
19            (i) a period of more than 24 months after the date
20        a claim was submitted by the pharmacy to the pharmacy
21        benefits manager or covered entity, unless a longer
22        period is required by law; or
23            (ii) more than 250 prescriptions; however, a
24        refill does not constitute a separate prescription for
25        the purposes of this subparagraph.
26        (10) The auditing entity may not use extrapolation to



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1    calculate penalties or amounts to be charged back or
2    recouped unless otherwise required by federal requirements
3    or federal plans.
4        (11) The auditing entity may not include dispensing
5    fees in the calculation of overpayments unless a
6    prescription is considered a misfill. As used in this
7    paragraph, "misfill" means a prescription that was not
8    dispensed, a prescription error, a prescription where the
9    prescriber denied the authorization request, or a
10    prescription where an extra dispensing fee was charged.
11        (12) A pharmacy may do any of the following when a
12    pharmacy audit is performed:
13            (i) Use verifiable statements or records,
14        including, but not limited to, medication
15        administration records of a nursing home, assisted
16        living facility, hospital, or health care practitioner
17        with prescriptive authority, to validate the pharmacy
18        record and delivery.
19            (ii) Use any valid prescription, including, but
20        not limited to, medication administration records,
21        facsimiles, electronic prescriptions, electronically
22        stored images of prescriptions, electronically created
23        annotations, or documented telephone calls from the
24        prescribing health care practitioner or practitioner's
25        agent, to validate claims in connection with
26        prescriptions, changes in prescriptions, or refills of



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1        prescription or nonproprietary drugs. Documentation of
2        an oral prescription order that has been verified by
3        the prescribing health care practitioner shall meet
4        the provisions of this subparagraph for the initial
5        audit review.
6    (b) An auditing entity shall provide the pharmacy with a
7written report of the pharmacy audit and shall comply with the
8following requirements:
9        (1) A preliminary pharmacy audit report must be
10    delivered to the pharmacy or its corporate parent within 30
11    calendar days after the completion of the pharmacy audit.
12    The preliminary report shall include contact information
13    for the auditing entity that conducted the pharmacy audit
14    and an appropriate and accessible point of contact,
15    including the contact's telephone number, facsimile
16    number, e-mail, and auditing firm, so that audit results,
17    discrepancies, and procedures can be reviewed. The
18    preliminary pharmacy audit report shall include, but not be
19    limited to, claim-level information for any discrepancy
20    found and total dollar amount of claims subject to
21    recovery.
22        (2) A pharmacy shall be allowed 30 calendar days
23    following receipt of the preliminary audit report to
24    respond to the findings of the preliminary report.
25        (3) A final audit report shall be delivered to the
26    pharmacy or its corporate parent not later than 30 calendar



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1    days after any responses from the pharmacy or corporate
2    parent are received by the auditing entity. The final audit
3    report may be delivered electronically. The auditing
4    entity shall issue a final pharmacy audit report that
5    includes replying to any responses provided to the auditing
6    entity by the pharmacy or corporate parent.
7    (c) A pharmacy may not be subject to a charge-back or
8recoupment for a concurrent review or, in the case of an audit,
9a clerical or recordkeeping error in a required document or
10record, including a typographical error, scrivener's error, or
11computer error, unless the error resulted in overpayment to the
13    (d) An auditing entity conducting a pharmacy audit or
14person acting on behalf of the entity may not withhold payment
15or charge-back, recoup, or collect penalties from a pharmacy
16until the time period to file an appeal of a final pharmacy
17audit report has passed or the appeals process has been
18exhausted, whichever is later.
19    (e) No interest shall accrue for any party during the audit
20period, beginning with the notice of the pharmacy audit and
21ending with the conclusion of the appeals process.
22    (f) A PBM may not recover payment of claims from the
23pharmacy that are identified through the audit process to be
24the responsibility of another payer. The PBM must reconcile
25directly with the other payer for any monies owed without
26requiring the pharmacy to reverse and rebill the original claim



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1in the retail setting.
2    (g) A pharmacy may appeal a final audit report in
3accordance with the procedures established by the entity
4conducting the pharmacy audit.
5    (h) The provisions of this Section do not apply to an
6investigative audit of pharmacy records if:
7        (1) fraud, waste, abuse, or other intentional
8    misconduct is evidenced by physical review or review of
9    claims data or statements; or
10        (2) other investigative methods provide evidence that
11    a pharmacy is or has been engaged in criminal wrongdoing,
12    fraud, or other intentional or willful misrepresentation.
13    (i) This Section does not supersede any audit requirements
14established by federal law.
15    (215 ILCS 5/512-13 new)
16    Sec. 512-13. Enforcement.
17    (a) Enforcement of this Article shall be the responsibility
18of the Department and the Director.
19    (b) The Director shall have the authority to adopt any
20rules necessary for the implementation and administration of
21this Article.
22    (c) The Director shall take action or impose penalties to
23bring non-complying entities into full compliance with this
24Article. Any violation of this Article may subject a
25non-complying entity to financial penalties not less than



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1$1,000 per violation.
2    Section 99. Effective date. This Act takes effect upon
3becoming law.



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2 Statutes amended in order of appearance
3    215 ILCS 5/512-3from Ch. 73, par. 1065.59-3
4    215 ILCS 5/512-11 new
5    215 ILCS 5/512-12 new
6    215 ILCS 5/512-13 new