A BILL TO BE ENTITLED
AN ACT to establish the pharmacy benefits manager regulation transparency act of 2005 to ensure proper regulation of those individuals or entities whose actions affect north carolina citizens' access to prescription drugs.
The General Assembly of North Carolina enacts:
SECTION 1.  Article 50 of Chapter 58 is amended by adding the following new Part to read:
"Part 6. Pharmacy Benefits Manager Regulation Transparency Act of 2005.
"§ 58‑50‑157.  Title; intent.
This Part shall be known as the 'Pharmacy Benefits Manager Regulation Transparency Act of 2005', and is intended to protect the public, safety, and welfare by ensuring that individuals and entities whose actions affect North Carolina citizens' access to prescription drugs are properly regulated.
"§ 58‑50‑158.  Definitions.
The following definitions shall apply in this Part:
(1)	Board. – The North Carolina Board of Pharmacy as created in G.S. 90‑85.6.
(2)	Commissioner. – The Commissioner of the North Carolina Department of Insurance.
(3)	Claims processing services. – Administrative services performed in connection with the processing and adjudication of a claim for prescription drug or device benefits provided by or on behalf of a health benefit plan.
(4)	Covered person. – A member, policyholder, subscriber, enrollee, beneficiary, dependent, or other individual participating in a health benefit plan.
(5)	Department. – The North Carolina Department of Insurance.
(6)	Health benefit plan. – An accident and health insurance policy or certificate; a nonprofit hospital or medical service corporation contract; a health maintenance organization subscriber contract; a health program administered by a department or the State in the capacity of provider of health coverage; a plan provided by a multiple employer welfare arrangement; or a plan provided by another benefit arrangement, to the extent permitted by the Employee Retirement Income Security Act of 1974, as amended, or by any waiver of or other exception to the Act provided under federal law, federal common law or regulation. However, 'health benefit plan' does not mean any of the following kinds of insurance:
a.	Accident.
b.	Credit.
c.	Disability income.
d.	Long‑term or nursing home care.
e.	Medicare supplement.
f.	Specified disease.
g.	Dental or vision.
h.	Coverage issued as a supplement to liability insurance.
i.	Workers' compensation.
j.	Medical payments under automobile or homeowners insurance.
k.	Insurance under which benefits are payable with or without regard to fault and that is statutorily required to be contained in any liability policy or equivalent self‑insurance.
l.	Hospital income or indemnity.
(7)	Pharmaceutical manufacturer. – An entity registered with the United States Food and Drug Administration as an entity to manufacturer prescription drugs.
(8)	Pharmacy. – Any place where prescription drugs are dispensed or compounded under G.S. 90‑85.3(q) or G.S. 90‑85.21A.
(9)	Pharmacy benefit management. – The procurement of prescription drugs at a negotiated rate for dispensing within this State to a covered person, the administration or management of prescription drug benefits provided by a health benefit plan for the benefit of a covered person, or any of the following services provided with regard to the administration of those services:
a.	Claims processing, retail network management and payment of claims to pharmacies for prescription drugs dispensed to covered individuals.
b.	The development of a clinical formulary of prescription drugs to be covered by a health benefit plan, including the determination of the applicability of co‑payments to specific prescription drugs.
c.	The dispensing of prescription drugs through the United States Postal Service or similar service.
d.	Prescription drug rebate contracting and administration.
e.	Patient compliance, therapeutic intervention, and generic substitution programs.
f.	Disease management programs involving prescription drug utilization.
(10)	Pharmacy benefits manager. – A person who, or business or other entity that, performs pharmacy benefit management. The term includes a person or entity acting for a pharmacy benefits manager in a contractual or employment relationship in the performance of pharmacy benefit management for a health benefit plan and includes the dispensing of a prescription drug by an out‑of‑state pharmacy as permitted under G.S. 90‑85.21A.
(11)	Pharmacy provider services. – A pharmacy or pharmacist providing services regulated by the Board as the practice of pharmacy.
(12)	Practice of pharmacy. – The term as defined in G.S. 90‑85.3(r).
(13)	Prescription drug. – The term as defined in G.S. 90‑85.3(s).
"§ 58‑50‑159.  Certificate of authority.
(a)	No person shall act, offer to act, or hold himself or herself out as providing pharmacy benefit management in this State without a valid pharmacy benefits manager license issued by the Commissioner. Licenses shall be renewed annually.
(b)	Each application for the issuance or renewal of a license shall be made upon a form prescribed by the Commissioner and shall be accompanied by a nonrefundable filing fee of five hundred dollars ($500.00) along with evidence of maintenance of a fidelity bond, errors and omissions liability insurance, or other security, of a type and in an amount to be determined by rules adopted by the Commissioner. Applications for licensure shall include or be accompanied by the following information and documents:
(1)	All organizational documents of the pharmacy benefits manager, including any articles of incorporation, articles of association, partnership agreement, trade name certificate, or trust agreement, any other applicable documents, and all amendments to these documents.
(2)	The bylaws, rules, regulations, or similar documents regulating the internal affairs of the pharmacy benefits manager.
(3)	The names, addresses, official positions, and professional qualifications of the individuals who are responsible for the conduct of affairs of the pharmacy benefits manager, including all:  (i) members of the board of directors, board of trustees, executive committee, or other governing board or committee; (ii) the principal officers in the case of a corporation or the partners or members in the case of a partnership or association; (iii) all shareholders holding directly or indirectly ten percent (10%) or more of the voting securities of the pharmacy benefits manager; and (iv) any other person who exercises control or influence over the affairs of the pharmacy benefits manager.
(4)	Annual financial statements or reports for the two most recent years that prove that the applicant is solvent and any other information the Commissioner may require to review the current financial condition of the applicant.
(5)	A general description of the business operations, including information on staffing levels and activities proposed in this State and nationwide. The description shall provide details setting forth the pharmacy benefits manager's capability for providing a sufficient number of experienced and qualified personnel in the areas of pharmacy benefits manager services.
(6)	A Certificate of Compliance issued by the Board indicating that the pharmacy benefits manager's plan of operation is consistent with the Pharmacy Practice Act under Article 4A of Chapter 90 of the General Statutes, including G.S. 90‑85.21 and G.S. 90‑85.21A and any rules adopted under that Act.
(7)	The name and address of the registered agent for service of process in this State.
(8)	A detailed description of the claims processing services, pharmacy services, insurance services, other prescription drug or device services, audit procedures for network pharmacies, or other administrative services to be provided.
(9)	All incentive arrangements or programs, such as prescription drug 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 drugs, 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 prescription drug, and dates and amounts of those disbursements.
(10)	Any ownership interest or affiliation of any kind with any health benefit plan responsible for providing benefits directly or through reinsurance to any plan for which the pharmacy benefits manager provides services or any parent companies, subsidiaries and other entities or businesses relative to the provision of pharmacy service, other prescription drug or device services, or a pharmaceutical manufacturer or its assignee.
(11)	Any agreement or practice to bill a health benefit plan for prescription drugs at a cost higher than the pharmacy benefits manager pays a pharmacy provider for providing pharmacy services.
(12)	Any agreement to sell prescription drug data, including data concerning the prescribing practices of the health care providers in this State.
(13)	A signed statement that the pharmacy benefits manager shall comply with the provisions of Chapter 58 of the General Statutes in providing pharmacy benefits management in this State to the same extent as that of any health benefit plan.
(c)	The Commissioner shall have the authority to adopt rules to ensure the performance of duties under this section.
"§ 58‑50‑160.  Maintenance records; access; confidentiality; financial examination.
(a)	Every pharmacy benefits manager shall maintain for the duration of the written agreement and for two years thereafter books and records of all transactions between pharmacy benefits managers, health benefit plans, covered persons, and pharmacies.
(b)	The Department shall have access to books and records maintained by a pharmacy benefits manager for the purposes of examination, audit, and inspection. The information contained in those books and records is not a public record under Chapter 132 of the General Statutes. However, the Department may use this information in any proceeding instituted against a pharmacy benefits manager or health benefit plan for violations of this section.
(c)	The Commissioner shall conduct periodic financial examinations of every pharmacy benefits manager in this State to ensure an appropriate level of regulatory oversight necessary to protect the public health, safety, and welfare of consumers of prescription drugs. The pharmacy benefits manager shall pay a fee for the examination, which fee shall be deposited in escrow to provide all expenses for the regulation, supervision, and examination of all entities subject to regulation under this section.
"§ 58‑50‑161.  Disclosure.
(a)	A pharmacy benefits manager shall satisfy the following disclosure requirements to health benefit plans:
(1)	A pharmacy benefits manager that derives any payment or benefit for providing pharmacy benefits management from a drug manufacturer, distributor, or assignee based on volume or any other measurement of sales, prescribing, or dispensing of certain prescription drugs or classes or brands of drugs within this State shall fully disclose to the health benefit plan the amount of those payments and benefits received and the amount of the payments and benefits retained by the pharmacy benefits manager.
(2)	A pharmacy benefits manager shall provide to a health benefit plan all financial utilization information requested by a health benefit plan relating to the provision of benefits to participants on behalf of that health benefit plan relating to services provided to or on behalf of that health benefit plan.
(b)	A violation of this section constitutes an unfair method of competition or unfair and deceptive trade practice under G.S. 58‑63‑10 and G.S. 75‑1.1.
"§ 58‑50‑162.  Contracts; approval of agreements required; prohibited provisions.
(a)	A health benefit plan shall not enter into an agreement with a person or entity to provide pharmacy benefit management unless the person or entity has obtained a pharmacy benefits manager license pursuant to G.S. 58‑50‑159(a). No pharmacy benefits manager shall provide pharmacy benefit management for a health benefit plan without a written agreement between the pharmacy benefits manager and the health benefit plan. The written agreement shall be retained as part of the official records of both the health benefit plan and the pharmacy benefits manager for the duration of the agreement and for five years thereafter. The agreement shall contain a provision that the pharmacy benefits manager is subject to all provisions of Article 51 of Chapter 58 of the General Statutes to the extent those requirements apply to access to prescription drugs.
(b)	A pharmacy benefits manager shall not require a pharmacy to serve a specific health benefit plan in order for a pharmacy to serve a separate health benefit plan. A pharmacy benefits manager shall not discriminate against a pharmacy from participating in a particular network to serve a specific health benefit plan or plans solely because the pharmacy declined to participate in another health benefit plan or network managed by the pharmacy benefits manager.
(c)	Each pharmacy benefits manager shall file with the Commissioner a copy of the pharmacy benefits manager's standard contract with a pharmacy to provide pharmacy provider services in this State before providing pharmacy benefit management in this State. If the Commissioner notifies, in writing, the pharmacy benefits manager filing the standard contract that the contract does not comply with the requirements of law, specifying the reasons for his opinion, it shall be unlawful thereafter for that pharmacy benefits manager to provide pharmacy benefit management or contract with a pharmacy to provide pharmacy provider services in this State. The action of the Commissioner in this regard shall be subject to review by any court of competent jurisdiction. However, nothing in this Part shall be construed to give jurisdiction to any court not already having jurisdiction.
(d)	Each pharmacy benefits manager shall annually, on or before the first day of March of each year, file in the office of the Commissioner the following information from the previous calendar year:
(1)	The number of and reasons for grievances received from covered persons regarding pharmacy benefit management. The report shall include the number of covered lives, total number of grievances categorized by reason for the grievance, the number of grievances referred to the second-level grievance review, the number of grievances resolved at each level and their resolution, and a description of the actions that are being taken to correct the problems that have been identified through grievances received. Every pharmacy benefits manager shall file with the Commissioner, as part of the pharmacy benefits manager's annual grievance report, a certificate of compliance stating that the carrier has established and follows, for each of the lines of business, grievance procedures that comply with G.S. 58‑50‑62.
(2)	For each health benefit plan for which the pharmacy benefits manager provides pharmacy benefit management, the health benefit plan's formularies, restricted access drugs, or devices as defined in G.S. 58‑3‑221, or prior approval requirements for obtaining prescription drugs, whether a particular drug or therapeutic class of drugs is excluded from its formulary, and the circumstances under which a nonformulary drug may be covered.
(e)	The written agreement between a health benefit plan and the pharmacy benefits manager shall not provide that a pharmacy is responsible for the actions of the health benefit plan or the pharmacy benefits manager. A pharmacy permit holder shall have a lien against the health benefit plan or pharmacy benefits manager for services rendered under a contract with a pharmacy to provide pharmacy provider services for which the covered individuals of the health benefit plan received pharmacy provider services.
(f)	In accordance with G.S. 58‑51‑37, each pharmacy benefits manager shall make available a valid and enforceable written contract to be signed by an authorized representative of the pharmacy stating that the pharmacy intends to participate in a network of pharmacy providers to serve a specific health benefit plan. A pharmacy shall not be deemed to be under contract with the pharmacy benefits manager to provide pharmacy provider services absent a contract. The act of a pharmacy submitting a prescription drug claim to a pharmacy benefits manager shall not be deemed to meet the requirements of this subsection.
"§ 58‑50‑163.  Prohibited practices of pharmacy benefits manager.
(a)	A pharmacy benefits manager shall not intervene in the delivery of transmission of prescriptions from the prescriber to the pharmacist or pharmacy for the purpose of:
(1)	Influencing the prescriber's choice of therapy.
(2)	Influencing the patient's choice of pharmacist or pharmacy.
(3)	Altering the prescription information, including switching the prescribed drug without the express authorization of the prescriber.
(b)	No agreement shall mandate that a pharmacy permit holder change a covered person's prescription unless the prescribing physician and the covered person authorize the pharmacist to make the change.
(c)	A health benefit plan or a pharmacy benefits manager shall not discriminate with respect to participation in the network or reimbursement as to any pharmacy that is acting within the scope of the pharmacy's license or certification.
(d)	A pharmacy benefits manager shall not discriminate when contracting with a pharmacy on the basis of co‑payments or days of supply. A contract shall apply the same coinsurance, co‑payment, and deductible to covered drug prescriptions filled by any pharmacy, including a mail-order pharmacy or pharmacist who participates in the network.
(e)	A pharmacy benefits manager shall not discriminate when advertising pharmacies participating in a pharmacy benefits manager's network of pharmacies under contract to provide pharmacy benefit management. Any list of participating pharmacies shall be complete and all inclusive of all pharmacies under written agreement with a pharmacy benefits manager to provide pharmacy provider services to a person covered under a specific health benefit plan.
(f)	No pharmacy benefits manager shall mandate basic record keeping by any pharmacist or pharmacy that is more stringent than required by State or federal laws or regulations.
(g)	A violation of this section constitutes an unfair method of competition or unfair and deceptive trade practice under G.S. 58‑63‑10 and G.S. 75‑1.1.
(h)	For purposes of 29 U.S.C.§ 1144(b)(2)(A), it is the intent of this State that G.S. 58‑51‑37 regulate insurance.
(i)	A pharmacy benefits manager shall not reverse payment for pharmacy services once the claim for those pharmacy services has been approved by the pharmacy benefits manager unless the pharmacy benefits manager can demonstrate by substantial evidence that the claim was fraudulently submitted by the pharmacy.
(j)	A pharmacy benefits manager shall not violate G.S. 58‑3‑225 in paying a pharmacy for pharmacy provider services. A pharmacy shall not be required to continue to provide pharmacy provider services to covered persons of a health benefit plan being provided pharmacy benefit management when the pharmacy has not received payment for previously providing those services in accordance with G.S. 58‑3‑225.
(k)	Before increasing the amount to a pharmacy permit holder to process a prescription drug claim, each pharmacy benefits manager shall file with the Commissioner the amount to be charged for that service. In no event shall the pharmacy benefits manager increase the fee by an amount to exceed ten percent (10%) in any calendar year. Each filing shall become effective on the date specified in the filing, but not earlier than 210 days from the date the filing is received by the Commissioner. A filing shall be open to public inspection immediately upon submission to the Commissioner. In ensuring compliance, the Commissioner may require the filing of supporting data, including:
(1)	The pharmacy benefits manager's interpretation of any statistical data relied upon in determining the processing fee.
(2)	Any descriptions of the methods employed in setting the processing fee rates.
(3)	The total number and dollar amount of paid claims.
(4)	The cost to the pharmacy benefits manager to process a prescription drug claim.
"§ 58‑50‑164.  Disclosure to covered persons; authorization for substitutions.
(a)	When the services of a pharmacy benefits manager are used, the pharmacy benefits manager shall provide a written notice approved by the health benefit plan and the Department to covered persons advising them of the identity of, and relationship among, the pharmacy benefits manager, the covered person, and the health benefit plan.
(b)	The notice shall contain a statement advising the covered person that the pharmacy benefits manager is regulated by the Department and has the right to file a complaint, appeal, or grievance with the Department concerning the pharmacy benefits manager. The notice shall include the toll‑free telephone number, mailing address, and electronic mail address of the Department.
(c)	The notice shall conform to G.S. 58‑35‑25, and the pharmacy benefits manager shall provide a copy of the notice to the Department and each pharmacist or pharmacy participating in the network."
SECTION 2.  This act is effective when it becomes law.