GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

S	1 

SENATE BILL 758

Short Title:  Prescription Drug Pricing/Access.	(Publc)

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Sponsors: Senators Blackmon, Sherron, Webster, and Foxx.

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Referred to:  Commerce

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April 19, 1995

A BILL TO BE ENTITLED
AN ACT TO PROHIBIT DISCRIMINATION IN PRESCRIPTION DRUG PRICING, TO PROHIBIT COST SHIFTING BY MANUFACTURERS AND SELLERS OF PHARMACEUTICAL DRUGS, AND TO PROVIDE CONSUMERS THE FREEDOM OF CHOOSING THE PHARMACY AT WHICH TO REDEEM A PRESCRIPTION DRUG BENEFIT.
The General Assembly of North Carolina enacts:
Section 1.  Chapter 75 of the General Statutes is amended by adding a new Article to read:
"ARTICLE 4.
"Prescription Drug Pricing by Manufacturers and Sellers of Drugs.
"§ 75-100.  Purpose.
The purposes of this Article are:
(1)	To promote the compelling interests of the consumers of North Carolina who purchase pharmaceutical drugs and services.
(2)	To prohibit discrimination and cost shifting in the pricing and sale of prescription drugs by manufacturers or sellers of drugs.
(3)	To promote fair competition in the pricing of pharmaceutical products and services, including prescription drugs.
"§ 75-101.  Definitions.
As used in this Article:
(1)	'Buying group' means an entity or association of persons or entities that acts as an agent for its members in negotiating or facilitating prices in sales transactions of drugs between manufacturers and the members of the buying group.
(2)	'Charitable health care provider' means any health care provider exempted from federal taxation by section 501(c)(3) of the Internal Revenue Code that provides health care services to the public, the majority of which services are provided free or at a reduced fee based on the patient's ability to pay.
(3)	'Drug' or 'pharmaceutical product' means any substance subject to section 503(b)(1) of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301-392, as amended.
(4)	'Manufacturer' means any entity that manufactures drugs for sale to purchasers, by direct sales, by sales to a wholesaler or to a buying group, or by indirect sales through a wholesaler, distributor, a buying group, or a pharmacy benefit manager.
(5)	'Pharmacy' means a pharmacy required by Article 4A of Chapter 90 of the General Statutes to be registered with the North Carolina Board of Pharmacy.
(6)	'Pharmacy benefit manager' is an entity that administers a health benefit plan, during the course of which administration it may negotiate prices with manufacturers or sellers for the purchase of drugs ultimately sold and dispensed through the provisions of the health benefit plan administered.
(7)	'Purchaser' means any entity doing business in this State that purchases drugs from a manufacturer or seller, and that sells, dispenses, delivers, or causes to be sold, dispensed, or delivered, drugs directly to consumers in this State.  A wholesaler is a 'purchaser' when it purchases drugs for resale to entities doing business in this State that sell, dispense, deliver, or cause to be sold, dispensed, or delivered, drugs directly to consumers in this State.  'Purchaser' does not include:
a.	The United States Department of Veterans Affairs; the United States Department of Defense; entities covered under section 256b(a)(4) of the Public Health Service Act, as amended, or any other federal, State, or local government program that directly procures pharmaceuticals; and
b.	Charitable health care providers.
(8)	'Seller' means any entity that sells drugs to purchasers.  'Entity' includes, but is not limited to, manufacturers of drugs; wholesalers and distributors of drugs; and buying groups, the primary purpose of which is the purchase of drugs or negotiation of the purchase of drugs for sale, dispensing, or delivery by the members of the buying group.
(9)	'Wholesaler' means any entity other than a manufacturer that sells drugs to purchasers.  'Wholesaler' includes buying groups, the primary purpose of which is the purchase of drugs or negotiation of the purchase price of drugs for sale, resale dispensing, or delivery by the members of the buying group.
"§ 75-102.  Scope of Article.
This Article applies to all transactions involving the sale by manufacturers or sellers of drugs to purchasers doing business in this State, including, but not limited to, wholesalers and buying groups when the transactions cover drugs that are purchased for the sale, dispensing, and delivery to consumers in this State.
"§ 75-103.  Drug pricing.
(a)	A manufacturer or seller shall sell drugs, during the same time period, to all purchasers on the same terms and conditions, whether the sale is a direct transaction between a manufacturer and a purchaser or one in which a manufacturer sells to a purchaser through an agreement or contractual arrangement negotiated or implemented by a buying group or pharmacy benefit manager or implemented by one or more wholesalers.  Rebates, discounts, or similar transactions or mechanisms not otherwise allowed by law shall be considered in determining the terms and conditions of a sale.
(b)	A manufacturer or seller may offer a price reduction or price discount so long as:
(1)	The price reduction or discount is made available to all purchasers, including wholesalers functioning as purchasers, and
(2)	The price reduction or discount is permissible under the State and federal antitrust laws, including, but not limited to, the Robinson-Patman Act, 15 U.S.C. § 13 et seq.
(c)	No manufacturer or seller shall provide price reductions or price discounts to any purchaser based solely on the class of trade to which the purchaser belongs.
(d)	This section applies to the sale, dispensing, or delivery of drugs to purchasers, which drugs are sold, dispensed, or delivered to a purchaser or a purchaser's facility, regardless of where the facility is located.
(e)	Before January 1 of each year, a manufacturer or seller selling drugs to the State, its agencies, or its institutions shall submit to the Secretary of the Department of Human Resources an affidavit stating that it will not engage in conduct prohibited by this section.
(f)	A violation of this Article creates a civil cause of action for damages or injunctive relief in favor of any person, wholesaler, entity, or pharmacy aggrieved by the violation.
(g)	The Attorney General may investigate any allegations of a violation of this Article made by a purchaser or an association or group of purchasers.  If an investigation discloses a violation, the Attorney General may seek an injunction, and he may seek damages caused by a violation.
(h)	The provisions of this Article shall not affect, and are supplementary to, any rights and remedies otherwise provided by law.
"§ 75-104.  Purchase of drugs by State or political subdivisions.
The State or any of its political subdivisions shall not purchase any drugs from a seller or manufacturer that engages in price discrimination prohibited by G.S. 75-103, including a transaction in which a manufacturer or seller sells to the State through a contractual arrangement implemented by one or more wholesalers."
Sec. 2.  Article 51 of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58-51-38.  Consumer access to pharmacy of choice.
(a)	The purposes of this section are:
(1)	To promote the compelling interests of the consumers of North Carolina who purchase pharmaceutical drugs and services.
(2)	To enable residents of this State access to pharmaceutical drugs and services at affordable prices.
(3)	To prohibit restrictions upon a consumer's ability to utilize a drug or prescription benefit under a health benefit plan or insurance policy at the pharmacy of his or her choice, provided he or she pays any difference between the plan benefit and the cost of the drugs.
(4)	To promote fair competition in the selling and dispensing of pharmaceutical products and services, including prescription drugs.
(b)	As used in this section:
(1)	'Drug' or 'pharmaceutical product' means any substance subject to section 503(b)(1) of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301-392, as amended.
(2)	'Health benefit plan' has the same meaning as in G.S. 58-50-110(11), and also means any plan offered by insurers licensed pursuant to Article 51 of Chapter 58 of the General Statutes; any plan offered by hospital, medical, and dental service corporations licensed pursuant to Article 65 of Chapter 58 of the General Statutes; any plan offered by preferred provider arrangements registered pursuant to G.S. 58-50-50 and G.S. 58-50-55; any plan provided by multiple employer welfare arrangements licensed pursuant to Article 49 of Chapter 58 of the General Statutes; and any other employee benefit plan, including, but not limited to State, county, and municipal health benefit plans in which insurance risk is transferred to another party through prepaid, capitated arrangements or other risk-sharing or risk-transferring agreements.
(3)	'Insurer' means any entity that provides or offers a health benefit plan.
(4)	'Pharmacy' means a pharmacy required by Article 4A of Chapter 90 of the General Statutes to be registered with the North Carolina Board of Pharmacy.
(c)	A health benefit plan may provide a benefit for pharmaceutical services, including drugs.  If the health benefit plan provides a pharmaceutical services benefit, the terms of one health benefit plan shall not violate the provisions of this section in the utilization of the benefit or the attempt to establish the level of the reimbursement benefit.
(d)	A health benefit plan that provides a pharmaceutical services benefit shall inform beneficiaries of the plan that any benefit for pharmaceutical services and drugs may be redeemed at any pharmacy without a reduction or offset of the reimbursement under the plan.
(e)	A health benefit plan shall not promote one pharmacy or group of pharmacies or one source over any other pharmacy, pharmacies, or sources for pharmaceutical benefits to be redeemed under a health benefit plan.
(f)	The beneficiary of a health benefit plan providing a pharmaceutical services benefit may utilize or redeem the pharmaceutical services benefit, without direct or indirect restriction or financial coercion by the health benefit plan, its administrator, the beneficiary's employer, or any other person or entity having a financial stake in the plan.
(g)	The pharmacy shall, without restriction by any person, plan, or entity, establish its charge or price for selling and dispensing pharmaceutical products and services, including drugs.  There shall be no restriction or coercion, direct or indirect, not otherwise permitted by law on the establishment of the pharmacy's selling price.
(h)	If the price for the pharmaceutical services or prescription drug is higher than the prescription benefit under a health benefit plan, the beneficiary shall be responsible for paying or arranging to pay the pharmacy for this difference at the time of the purchase of the pharmaceutical service or drug.
(i)	If for any reason reliable information regarding a health benefit plan beneficiary's deductible or copay is not available at the time of the purchase transaction, the beneficiary shall be responsible for paying or making arrangements to pay for the services or drugs at the time of the transaction.
(j)	An entity that provides a health benefit plan shall not directly or indirectly influence or attempt to influence the price established by the pharmacy for pharmaceutical services, including drugs.
(k)	Penalties. –
(1)	Any health benefit plan that violates this section shall be subject to an administrative fine imposed by the Commissioner of Insurance pursuant to Chapter 150B of the General Statutes of no less than one thousand dollars ($1,000) per violation and no more than fifty thousand dollars ($50,000).  This penalty is in addition to sanctions of revocation, suspension, or refusal to renew license pursuant to G.S. 58-3-100.
(2)	A violation of this section creates a civil cause of action for damages or injunctive relief in favor of any person, wholesaler, entity, or pharmacy aggrieved by the violation.
(3)	The Attorney General shall bring actions to enforce the provisions of this section and to prevent further violations.
(4)	The Commissioner of Insurance shall not approve any health benefit plan providing pharmaceutical services benefits that does not conform to this section.
(5)	Any provision in the health benefit plan that is executed, delivered, or renewed, or otherwise contracted for in this State that is contrary to any provision of this section shall, to the extent of the conflict, be void.
(6)	It is a violation of this section for any insurer or any person to provide any health benefit plan providing for pharmaceutical services and drugs to residents of this State that does not conform to the provisions of this section.
(7)	The provisions of any pharmacy provider contract between a person subject to the provisions of this section and a pharmacist licensed under Article 4A of Chapter 90 of the General Statutes that are not in compliance with the provisions of this section shall be null and void.
(8)	The Commissioner of Insurance shall investigate the failure of a health benefit plan or an entity that provides a health benefit plan to comply with the provisions of this section.  Upon good cause shown, the Commissioner shall issue a cease and desist order instructing the plan or person responsible for the health benefit plan to bring the plan into compliance.  The Commissioner of Insurance shall impose an administrative fine of ten thousand dollars ($10,000) per day for failure to bring the benefit plan into compliance.  If a licensed insurer, health maintenance organization, or hospital, medical, or dental service corporation is the subject of a cease and desist order and continues to be in noncompliance with this section, the continued noncompliance shall result in the suspension or revocation of its licensure pursuant to G.S. 58-2-70."
Sec. 3.  If any provision of this act or the application of this act to any person or circumstance is held invalid, the other provisions or applications of this act shall be given effect without the invalid provisions or applications.
Sec. 4.  Existing health benefit plans that are subject to the provisions of G.S. 58-51-38, as enacted in Section 2 of this act, shall be brought into compliance with the provisions of G.S. 58-51-38 by December 31, 1995.  On January 1, 1996, the Commissioner of Insurance shall revoke the approval of any health benefit plan that the Commissioner of Insurance had previously approved that does not comply with the provisions of G.S. 58-51-38.  No health benefit plan shall be marketed, sold, or contracted for after January 1, 1996, that includes a benefit plan that does not comply with the provisions of G.S. 58-51-38.
Sec. 5.  This act becomes effective October 1, 1995.