46th legislature - STATE OF NEW MEXICO - first session, 2003

RELATING TO PRESCRIPTION DRUGS; CREATING THE PHARMACY BENEFITS MANAGER REGULATION ACT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. SHORT TITLE.--This act may be cited as the "Pharmacy Benefits Manager Regulation Act".

Section 2. DEFINITIONS.--As used in the Pharmacy Benefits Manager Regulation Act:

A. "board" means the board of pharmacy;

B. "claims processing services" means the administrative services performed in connection with the processing and adjudication of claims relating to pharmacist services, including, but not limited to, making payments to pharmacists and pharmacies;

C. "maintenance drug" means a drug prescribed by a prescribing practitioner authorized to prescribe drugs and used to treat a medical condition for a period greater than thirty days;

D. "multi-source drug" means a drug that is stocked and available from three or more suppliers;

E. "other prescription drug or device services" means services other than claims processing services, provided directly or indirectly by a pharmacy benefits manager, whether in connection with or separate from claims processing services, including:

(1) negotiating rebates, discounts or other financial incentives and arrangements with drug companies;

(2) disbursing or distributing rebates;

(3) managing or participating in incentive programs or arrangements for pharmacist services;

(4) negotiating or entering into contractual arrangements with pharmacists or pharmacies;

(5) developing formularies;

(6) designing prescription benefit programs; or

(7) advertising or promoting claims processing services or other prescription drug or device services;

F. "pharmacist" means an individual licensed as a pharmacist by the board;

G. "pharmacist services" means the practice of pharmacy or the scope of practice of a pharmacist as defined in the Pharmacy Act;

H. "pharmacy" means a licensed place of business where drugs are compounded or dispensed and pharmacist services are provided;

I. "pharmacy benefits manager" means a person or business and a wholly or partially owned or controlled subsidiary of a pharmacy benefits manager that provides claims processing services or other prescription drug or device services to third parties but does not include licensed health care facilities, pharmacies, licensed health care professionals, insurance companies, unions or health maintenance organizations;

J. "single-source drug" means a drug that is not a multi-source drug;

K. "superintendent" means the superintendent of insurance; and

L. "usual and customary price" means the price that a pharmacist or pharmacy would have charged a patient, excluding a patient for whom reimbursement rates are set by contract, for the same service on the same date.

Section 3. CERTIFICATE OF AUTHORITY.--

A. A person or organization shall not establish or operate as a pharmacy benefits manager without a certificate of authority from the superintendent in accordance with the Pharmacy Benefits Manager Regulation Act and applicable federal and state laws.

B. A pharmacy benefits manager doing business in the state shall obtain a certificate of authority from the superintendent within one hundred twenty days of the effective date of the Pharmacy Benefits Manager Regulation Act and every two years thereafter.

C. A nonrefundable application fee of three hundred dollars ($300) shall accompany each application for a certificate of authority and each application for renewal of a certificate of authority.

D. The superintendent shall not issue a certificate of authority to a pharmacy benefits manager unless the pharmacy benefits manager:

(1) holds a current license to transact business in the state;

(2) is ready and able to arrange for pharmacist services in the state;

(3) meets the requirements of and the rules adopted pursuant to the Pharmacy Benefits Manager Regulation Act; and

(4) is in compliance with applicable state and federal laws and rules.

E. The superintendent may suspend or revoke a certificate of authority issued to a pharmacy benefits manager, deny an application for a certificate of authority to an applicant or deny an application for renewal of a certificate of authority if:

(1) the pharmacy benefits manager is operating materially in contravention of:

(a) its application or other information submitted as a part of its application for a certificate of authority or renewal of its certificate of authority; or

(b) a condition imposed by the superintendent with respect to the issuance or renewal of its certificate of authority;

(2) the pharmacy benefits manager does not arrange for pharmacist services;

(3) the pharmacy benefits manager has failed to continuously meet or substantially comply with the requirements for issuance of a certificate of authority;

(4) the continued operation of the pharmacy benefits manager adversely affects the public health and safety; or

(5) the pharmacy benefits manager has failed to substantially comply with applicable state or federal laws or rules.

F. If the certificate of authority of a pharmacy benefits manager is revoked, the manager shall proceed, immediately following the effective date of the order of revocation, to wind up its affairs and conduct no further business except as may be essential to the orderly conclusion of its affairs. The superintendent may permit further operation of the pharmacy benefits manager if the superintendent finds it to be in the best interest of patients to obtain pharmacist services.

Section 4. RULES.--

A. The board may adopt rules not inconsistent with the Pharmacy Benefits Manager Regulation Act regulating pharmacy benefits managers with respect to professional, public health and safety issues.

B. The superintendent may adopt rules not inconsistent with the Pharmacy Benefits Manager Regulation Act regulating pharmacy benefits managers with regard to business and financial issues.

Section 5. ANNUAL STATEMENT.--

A. A pharmacy benefits manager doing business in this state shall file a statement with the superintendent annually by March 1. The statement shall be verified by at least two principal officers of the pharmacy benefits manager and shall cover the preceding calendar year.

B. The statement shall be on forms prescribed by the superintendent and shall include:

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

(2) the number and dollar value of claims for pharmacist services processed by the pharmacy benefits manager during the preceding calendar year with respect to patients who are residents of this state; and

(3) other information relating to the operations of the pharmacy benefits manager required by the superintendent.

C. If a pharmacy benefits manager is audited annually by an independent certified public accountant, a copy of each certified audit report shall be promptly filed with the superintendent.

D. The superintendent may extend the time prescribed for a pharmacy benefits manager for filing annual statements or other reports or exhibits for good cause shown, provided that the superintendent may not extend the time for filing an annual statement beyond sixty days after the time prescribed in this section. Until the annual statement is filed, the superintendent may revoke or suspend the certificate of authority of a pharmacy benefits manager that fails to file its annual statement within the time prescribed by this section.

Section 6. FINANCIAL EXAMINATION.--

A. The superintendent shall regularly conduct a financial examination of each pharmacy benefits manager doing business in this state pursuant to a schedule and in a manner established by rule. The examination shall verify:

(1) the financial ability of the pharmacy benefits manager to meet its full obligations to pharmacies and pharmacists;

(2) information submitted to the superintendent as a part of an application for a certificate of authority or renewal of a certificate of authority; and

(3) compliance with the Pharmacy Benefits Manager Regulation Act.

B. In lieu of, or in addition to, making the financial examination of a pharmacy benefits manager, the superintendent may accept the report of a financial examination of the pharmacy benefits manager under the laws of another state certified by its insurance superintendent, similar regulatory agency or state health agency, to the extent that the report of financial examination covers the minimum requirements specified in Subsection A of this section.

C. The superintendent shall coordinate financial examinations of pharmacy benefits managers to ensure an appropriate level of regulatory oversight and to avoid undue duplication of effort or regulation. The pharmacy benefits manager being examined shall pay the cost of the examination. The cost of the examination shall be deposited in the pharmacy benefits manager fund to provide expenses for the regulation, supervision and examination pursuant to the Pharmacy Benefits Manager Regulation Act.

Section 7. ASSESSMENT.--

A. Except as provided in Subsection C of this section, the expense of administering the Pharmacy Benefits Manager Regulation Act incurred by the superintendent shall be assessed annually by the superintendent against all pharmacy benefits managers operating in this state.

B. The superintendent shall assess each pharmacy benefits manager annually for its share of the estimated expenses of the insurance division of the public regulation commission in proportion to the business done in this state, as determined by the superintendent in the superintendent's reasonable discretion.

C. The superintendent shall give each pharmacy benefits manager notice of the assessment, which shall be paid to the superintendent before March 2 of each year. A pharmacy benefits manager that fails to pay the assessment before March 2 of each year shall be subject to a fine equal to ten percent of the assessment plus interest for the period between the due date and the date of full payment.

D. The certificate of authority of a defaulting pharmacy benefits manager may be revoked or suspended by the superintendent until the pharmacy benefits manager has paid the assessment.

E. All fees assessed pursuant to the Pharmacy Benefits Manager Regulation Act and paid to the superintendent shall be deposited in the pharmacy benefits manager fund.

F. If a pharmacy benefits manager becomes insolvent or ceases to do business in this state in an assessable year, the pharmacy benefits manager shall remain liable for the payment of the assessment for the period in which it operated as a pharmacy benefits manager in this state.

Section 8. PHARMACY BENEFITS MANAGER CONTRACTS.--

A. A pharmacy benefits manager that contracts with a pharmacy or pharmacist to provide pharmacist services in this state shall first inform the pharmacy or pharmacist in writing of the number of, and other relevant information concerning, patients to be served by the pharmacy or pharmacist under the contract. There shall be a separate contract with each pharmacy or pharmacist for each of the pharmacy benefits manager's provider networks. Contracts providing for indemnity of the pharmacy or pharmacist shall be separate from contracts providing for cash discounts. A pharmacy benefits manager shall not require that a pharmacy or pharmacist participate in one contract in order to participate in another contract.

B. Each pharmacy benefits manager shall provide contracts to the pharmacies and pharmacists that are written in plain English, using terms that will be generally understood by the general public.

C. A contract between a pharmacy benefits manager and a pharmacy or pharmacist shall provide specific time limits for the pharmacy benefits manager to pay the pharmacy or pharmacist for pharmacist services rendered.

D. A pharmacy benefits manager contract shall not mandate that any pharmacy or pharmacist change a patient's maintenance drug unless the prescribing practitioner so orders.

E. In handling money received by the pharmacy benefits manager for pharmacist services, the pharmacy benefits manager acts as a fiduciary of the pharmacy or pharmacist who provided the pharmacist services. A pharmacy benefits manager shall distribute all money the pharmacy benefits manager receives for pharmacist services to the pharmacy and the pharmacist who provided the pharmacist services and shall do so within a time established by the superintendent. A pharmacy benefits manager that contracts with a pharmacy or pharmacist to provide pharmacist services in this state shall file the contract forms with the superintendent thirty days before the execution of the contract. The contract forms shall be deemed approved unless the superintendent disapproves the contract forms within thirty days after filing with the superintendent. Disapproval shall be in writing, stating the reasons for the disapproval, and a copy shall be delivered to the pharmacy benefits manager. The superintendent shall develop formal criteria for the approval and disapproval of pharmacy benefits manager contract forms.

F. A pharmacy benefits manager that initiates an audit of a pharmacy or pharmacist under the contract shall limit the audit to methods and procedures that are recognized as fair and equitable for both the pharmacy benefits manager and the pharmacy or pharmacist. Extrapolation calculations in an audit are prohibited. A pharmacy benefits manager may not recoup any money due from an audit by setoff from future remittances until the results of the audit are finalized.

G. Before terminating a pharmacy or pharmacist from a pharmacy benefits manager's provider network, the pharmacy benefits manager shall give the pharmacy or pharmacist a written explanation of the reason for the termination thirty days before the actual termination unless the termination is taken in reaction to:

(1) loss of certificate of authority;

(2) loss of professional liability insurance; or

(3) conviction of fraud or misrepresentation.

H. A pharmacy or pharmacist shall not be held responsible for acts or omissions of a pharmacy benefits manager. A pharmacy benefits manager shall not be held responsible for the acts or omissions of a pharmacy or pharmacist.

Section 9. ENFORCEMENT.--

A. Enforcement of the Pharmacy Benefits Manager Regulation Act shall be the responsibility of the board and the superintendent. The board or the superintendent shall take action to bring a non-complying pharmacy benefits manager into full compliance with the Pharmacy Benefits Manager Regulation Act or shall terminate the pharmacy benefits manager's certificate of authority. The board and the superintendent shall each adopt procedures for formal investigation of complaints concerning the failure of a pharmacy benefits manager to comply with the Pharmacy Benefits Manager Regulation Act.

B. The superintendent may refer a complaint received under the Pharmacy Benefits Manager Regulation Act to the board if the complaint involves a professional or patient health or safety issue. The board may refer a complaint received to the superintendent if the complaint involves a business or financial issue.

C. If the board or the superintendent has reason to believe that there may have been a violation of the Pharmacy Benefits Manager Regulation Act, the board or superintendent shall issue and serve upon the pharmacy benefits manager a statement of the charges and a notice of a hearing. The hearing shall be held at a time and place fixed in the notice, and not be less than thirty days after the notice is served. At the hearing, the pharmacy benefits manager shall have an opportunity to be heard and to show cause why the board or the superintendent should not:

(1) issue a cease and desist order against the pharmacy benefits manager; or

(2) take other action, including termination of the pharmacy benefits manager's certificate of authority.

D. The board may conduct an investigation concerning the quality of services of a pharmacy benefits manager or a pharmacy or pharmacist with which the pharmacy benefits manager has a contract, as the board deems necessary for the public health and safety.

Section 10. MEDICATION REIMBURSEMENT COSTS.--

A. Pharmacy benefits managers shall use a current nationally recognized benchmark to base reimbursements for medications and products dispensed by pharmacies or pharmacists with whom the pharmacy benefits manager contracts as follows:

(1) for brand single-source drugs and brand multi-source drugs, either the average wholesale price as listed in First Data Bank or Facts and Comparisons shall be used as an index;

(2) for generic multi-source drugs, maximum allowable costs shall be established by referencing the baseline price as listed in either First Data Bank or Facts and Comparisons;

(3) only products that are in compliance with pharmacy laws as equivalent and generically interchangeable with a United States food and drug administration orange book rating of A-B may be reimbursed from a maximum allowable cost price methodology; and

(4) if a generic multi-source drug product has no baseline price, it shall be treated as a brand single-source drug for the purpose of valuing reimbursement.

B. If the publications specified in Subsection A of this section cease to be nationally recognized benchmarks used to base reimbursement for medications and products dispensed by pharmacies and pharmacists, other current nationally recognized benchmarks, as are then current and in effect, may be utilized so long as the benchmark is established and published by a person or business with which no pharmacy benefits manager has a financial or business interest or connection.

Section 11. PROHIBITED PRACTICES.--

A. A pharmacy benefits manager, or representative of a pharmacy benefits manager, shall not cause or knowingly permit the use of an advertisement, promotion, solicitation, proposal or offer that is untrue, deceptive or misleading.

B. A pharmacy benefits manager shall not discriminate on the basis of race, creed, color, gender or religion in the selection of pharmacies or pharmacists with whom the pharmacy benefits manager contracts.

C. A pharmacy benefits manager shall not unreasonably discriminate against or between pharmacies or pharmacists.

D. A pharmacy benefits manager shall be entitled to access a pharmacy's or pharmacist's usual and customary price only for comparison to specific claims for payment made by the pharmacy or pharmacist to the pharmacy benefits manager. Usual and customary pricing is confidential, and any other use or disclosure by the pharmacy benefits manager is prohibited. A pharmacy benefits manager shall not, directly or indirectly, overtly or covertly, in cash or in kind, receive or accept a rebate, kickback or special payment, favor or advantage of any valuable consideration or inducement for influencing or switching a patient's drug product unless the rebate, kickback, payment, favor, valuable consideration or inducement is specified in a written contract that has been filed with the superintendent.

E. Claims for pharmacist services paid by a pharmacy benefits manager may not be retroactively denied or adjusted after adjudication of the claims, unless:

(1) the original claim was submitted fraudulently;

(2) the original claim payment was incorrect because the pharmacy or pharmacist had already been paid for the pharmacist services; or

(3) the pharmacist services were not, in fact, rendered by the pharmacy or pharmacist.

F. An acknowledgment of eligibility shall not be retroactively reversed.

G. A pharmacy benefits manager shall not terminate a contract with a pharmacy or pharmacist, or terminate, suspend or otherwise limit the participation of a pharmacy or pharmacist in a pharmacy benefits manager's provider network because the pharmacy or pharmacist:

(1) expresses disagreement with the pharmacy benefits manager's decision to deny or limit benefits to a patient;

(2) discusses with a patient an aspect of the patient's medical condition or treatment alternatives;

(3) makes personal recommendations regarding selecting a pharmacy benefits manager based on the pharmacist's personal knowledge of the health needs of the patient;

(4) protests or expresses disagreement with a decision, policy or practice of the pharmacy benefits manager;

(5) has in good faith communicated with or advocated on behalf of any patient related to the needs of the patient regarding the method by which the pharmacy or pharmacist is compensated for services provided under the contract with the pharmacy benefits manager;

(6) complains to the board or superintendent that the pharmacy benefits manager has failed to comply with the Pharmacy Benefits Manager Regulation Act; or

(7) asserts rights under the contract with the pharmacy benefits manager.

H. Termination of a contract between a pharmacy benefits manager and a pharmacy or pharmacist or termination of a pharmacy or pharmacist from a pharmacy benefits manager's provider network shall not release the pharmacy benefits manager from the obligation to make a payment due to the pharmacy or pharmacist for pharmacist services rendered.

I. A pharmacy benefits manager shall not intervene in the delivery or transmission of prescriptions from the prescriber to the pharmacist or pharmacy to:

(1) influence the prescriber's choice of therapy;

(2) influence the patient's choice of pharmacist or pharmacy; or

(3) alter the prescription information, including switching the prescribed drug without the express written authorization of the prescriber.

J. A pharmacy benefits manager shall not engage in or interfere with the practice of medicine or intervene in the practice of medicine between prescribing practitioners and their patients.

K. A pharmacy benefits manager shall not engage in any activity that violates a provision of the Pharmacy Benefits Manager Regulation Act.

Section 12. FUND CREATED.--The "pharmacy benefits manager fund" is created in the state treasury. Fees and penalties assessed pursuant to the Pharmacy Benefits Manager Regulation Act shall be deposited in the fund. The insurance division of the public regulation commission shall administer the fund. Money in the fund shall not revert to the general or other fund. Money in the fund may be expended pursuant to vouchers signed by the superintendent on warrants signed by the secretary of finance and administration.

Section 13. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2003.