SB2222sam004 95TH GENERAL ASSEMBLY

Sen. John J. Cullerton

Filed: 4/3/2008

09500SB2222sam004 LRB095 18675 RAS 48829 a

AMENDMENT TO SENATE BILL 2222

AMENDMENT NO. ______. Amend Senate Bill 2222, AS AMENDED, by replacing everything after the enacting clause with the following:

"Section 5. The Illinois Insurance Code is amended by changing the heading of Article XXXI 1/2 and Sections 512-1, 512-2, 512-3, 512-4, 512-5, 512-6, 512-7, 512-8, 512-9, and 512-10 and by adding Sections 512-7.5, 512-7.10, 512-11, 512-12, and 512-13 as follows:

(215 ILCS 5/Art. XXXI.5 heading)

ARTICLE XXXI 1/2.

PHARMACEUTICAL BENEFITS MANAGEMENT THIRD PARTY PRESCRIPTION

PROGRAMS

(215 ILCS 5/512-1) (from Ch. 73, par. 1065.59-1)

Sec. 512-1. Short Title. This Article shall be known and may be cited as the "Pharmaceutical Benefits Management Programs Law Third Party Prescription Program Act".

(Source: P.A. 82-1005.)

(215 ILCS 5/512-2) (from Ch. 73, par. 1065.59-2)

Sec. 512-2. Purpose. It is hereby determined and declared that the purpose of this Article is to regulate pharmaceutical benefits management programs certain practices engaged in by third-party prescription program administrators.

(Source: P.A. 82-1005.)

(215 ILCS 5/512-3) (from Ch. 73, par. 1065.59-3)

Sec. 512-3. Definitions. For the purposes of this Article, unless the context otherwise requires, the terms defined in this Article have the meanings ascribed to them herein:

"Covered entity" means any entity that has entered into an agreement, directly or indirectly, with a pharmaceutical benefits manager to provide a pharmaceutical benefits management program. "Covered entity" includes, but is not limited to, a person or entity that has entered into a group contract for health care services with an insurer, Health Maintenance Organization, Limited Health Services Organization or Voluntary Health Services Plan under which the pharmaceutical benefits manager is contractually obligated to provide a pharmaceutical benefits management program.

"Covered individual" means a member, participant, enrollee, contract holder, policy holder, or beneficiary of a covered entity who is provided health coverage by the covered entity. "Covered individual" includes, but is not limited to, a dependent or other person who is provided health coverage though a policy, contract, or plan for a covered individual.

"Director" means the Director of the Division of Insurance of the Department of Financial and Professional Regulation.

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

"Maximum allowable cost" or "MAC" means the maximum per unit reimbursement as established and determined by the pharmaceutical benefits manager for a drug, medical product, or device at the time a claim is processed.

"Pharmaceutical benefits management program" or "program" means any system established by contract or otherwise of (i) providing for the administration of or reimbursement for pharmaceutical services and prescription drug products offered or operated in this State by a PBM for or on behalf of a covered entity or (ii) procuring prescription drugs at a negotiated rate for dispensation to covered individuals by a pharmaceutical benefits manager operating in this State.

"Pharmaceutical benefits manager " or " PBM" means any person, partnership, or corporation that issues or causes to be issued any payment or reimbursement to a provider for services rendered pursuant to a pharmaceutical benefits management program or an entity that procures prescription drugs at a negotiated rate. "Pharmaceutical benefits manager " or " PBM" does not include the Director of Healthcare and Family Services or any agent authorized by the Director of Healthcare and Family Services to reimburse or procure prescription drugs at a negotiated rate pursuant to a program of which the Department of Healthcare and Family Services is the third party.

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

"Pharmacy network provider" means a pharmacist or pharmacy that has a contractual relationship with a health benefit plan or pharmacy benefit manager to provide pharmacist services.

"Pharmacy reimbursement rate" means the amount a PBM pays to a pharmacy or pharmacy network provider for prescription drugs and services provided by the pharmacy or pharmacy network provider to the PBM.

"Rebates" means any valuable consideration or inducement to directly or indirectly affect or influence the dispensing of pharmaceutical drugs, supplies, or services.

(a) "Third party prescription program" or "program" means any system of providing for the reimbursement of pharmaceutical services and prescription drug products offered or operated in this State under a contractual arrangement or agreement between a provider of such services and another party who is not the consumer of those services and products. Such programs may include, but need not be limited to, employee benefit plans whereby a consumer receives prescription drugs or other pharmaceutical services and those services are paid for by an agent of the employer or others.

(b) "Third party program administrator" or "administrator" means any person, partnership or corporation who issues or causes to be issued any payment or reimbursement to a provider for services rendered pursuant to a third party prescription program, but does not include the Director of Healthcare and Family Services or any agent authorized by the Director to reimburse a provider of services rendered pursuant to a program of which the Department of Healthcare and Family Services is the third party.

(Source: P.A. 95-331, eff. 8-21-07.)

(215 ILCS 5/512-4) (from Ch. 73, par. 1065.59-4)

Sec. 512-4. Licensure; application and fees Registration.

(a) No person, partnership, corporation, or other entity may act as a PBM in this State without being licensed by the Division.

(b) Each applicant for licensure must file with the Director the following information and documents:

(1) the name of the company and the state or country under the laws of which the company is organized or authorized;

(2) the title of the Act under or by which the company was incorporated or organized, the date of its incorporation or organization, and, if a corporation, the period of its duration;

(3) an organizational chart describing the relationship between the PBM, its parent organization and any affiliates, including the state or country of domicile and the primary business of each entity;

(4) a list of the names, addresses, official positions, and biographical affidavits of the persons responsible for the conduct of the affairs of the PBM;

(5) sample copies of contracts utilized by the PBM between the PBM and covered entities; if the terms and conditions in such agreements include significant, substantial, or material variations, the filing of one complete sample agreement together with a description of all variable terms and conditions may satisfy this requirement; and

(6) such other information as the Director may reasonably require.

(c) A licensee shall keep current the information required to be disclosed in its application for licensure by reporting all material changes or additions to the Director within 30 days after the end of the month of each change or addition. A material change or addition includes any modification of the information that has a significant effect on the operation of the PBM.

(d) Beginning on January 1, 2009, each PBM doing business in this State must pay to the Director an initial licensure fee of $1,000.00. Thereafter, annually on or before January 1 of each year, a PBM doing business in this State that seeks to renew a PBM license must pay to the Director a renewal fee of $250. All fees collected under this Section shall be deposited into the Insurance Producer Administration Fund. All third party prescription programs and administrators doing business in the State shall register with the Director of Insurance. The Director shall promulgate regulations establishing criteria for registration in accordance with the terms of this Article. The Director may by rule establish an annual registration fee for each third party administrator.

(Source: P.A. 82-1005.)

(215 ILCS 5/512-5) (from Ch. 73, par. 1065.59-5)

Sec. 512-5. Disciplinary grounds; multiple accounts Fiduciary and Bonding Requirements.

(a) The Director may place on probation, suspend, revoke, or refuse to issue or renew a pharmaceutical benefits management program or PBM license or may levy a civil penalty in accordance with this Section or take any combination of actions for any one or more of the following causes:

(1) Providing incorrect, misleading, incomplete, or materially untrue information in the license application.

(2) Violating any provision of this Law or the insurance laws of this or another state or violating any rule, subpoena, or order of the Director of this or another state's insurance commissioner.

(3) Obtaining or attempting to obtain a license through misrepresentation or fraud.

(4) Improperly withholding, misappropriating, or converting any moneys or properties received in the course of doing business.

(5) Intentionally misrepresenting the terms of any contract or agreement between a PBM and a covered entity.

(6 )Having admitted to or been found to have committed any unfair trade practice or fraud.

(7) Using fraudulent, coercive, or dishonest practices or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business in this State or elsewhere.

(8) Having a professional license or registration or its equivalent denied, suspended, or revoked in any other state, province, district, or territory.

(9) Forging a name to an application.

(10) Failing to pay any tax or fee, as required by law.

(b) If the action by the Director is to deny renewal, suspend, or revoke a license or to deny an application for a licensure, the Director shall notify the applicant and advise, in writing, the applicant of the reason for the suspension, revocation, or denial. The applicant or licensee may make written demand upon the Director within 30 days after the date of mailing of notice for a hearing before the Director to determine the reasonableness of the Director's action. The hearing must be held within not fewer than 20 days nor more than 30 days after the mailing of the notice of hearing and shall be held pursuant to the Illinois Administrative Code.

(c) In addition to or instead of any applicable denial, suspension, or revocation of a license, an applicant or licensee may, after hearing, be subject to a civil penalty.

(d) The Director has the authority to enforce the provisions of and impose any penalty or remedy authorized by this Article against any person or PBM who is under investigation for or charged with a violation of this Law or Code even if the license has been surrendered or has lapsed by operation of law.

(e) Upon the suspension, denial, or revocation of a license, the licensee having possession or custody of the license shall promptly deliver it to the Director in person or by mail. The Director shall publish all suspensions, denials, or revocations after the suspension, denial, or revocation becomes final.

(f) A licensee whose license is revoked or applicant whose application is denied pursuant to this Section is ineligible to apply for any pharmaceutical benefits management program or PBM license under this Law for 3 years after the revocation or denial. A pharmaceutical benefits management program or PBM whose license as a pharmaceutical benefits management program or PBM has been revoked, suspended, or denied may not be employed, contracted, or engaged in any related capacity during the time the revocation, suspension, or denial is in effect.

(g) A PBM must inform the Director in a manner acceptable to the Director of a change of address within 30 days after the change. A third party prescription program administrator shall (1) establish and maintain a fiduciary account, separate and apart from any and all other accounts, for the receipt and disbursement of funds for reimbursement of providers of services under the program, or (2) post, or cause to be posted, a bond of indemnity in an amount equal to not less than 10% of the total estimated annual reimbursements under the program.

The establishment of such fiduciary accounts and bonds shall be consistent with applicable State law. If a bond of indemnity is posted, it shall be held by the Director of Insurance for the benefit and indemnification of the providers of services under the third party prescription program.

(h) Any PBM An administrator who operates more than one pharmaceutical benefits management third party prescription program may establish and maintain a separate fiduciary account or bond of indemnity for each such program, or may operate and maintain a consolidated fiduciary account or bond of indemnity for all such programs.

The requirements of this subsection (h) Section do not apply to any pharmaceutical benefits management third party prescription program administered by or on behalf of any insurance company, Health Maintenance Organization, Limited Health Service Organization, or Voluntary Health Services Plan Care Service Plan Corporation or Pharmaceutical Service Plan Corporation authorized to do business in the State of Illinois.

(Source: P.A. 82-1005.)

(215 ILCS 5/512-6) (from Ch. 73, par. 1065.59-6)

Sec. 512-6. Notice. Notice of any change in the terms of a pharmaceutical benefits management third party prescription program, including but not limited to drugs covered, reimbursement rates, co-payments, and dosage quantity, shall be given to each enrolled pharmacy at least 30 days prior to the time it becomes effective.

(Source: P.A. 82-1005.)

(215 ILCS 5/512-7) (from Ch. 73, par. 1065.59-7)

Sec. 512-7. Required program and contractual Contractual provisions.

(a) Any agreement or contract entered into in this State between a PBM the administrator of a program and a pharmacy under a pharmaceutical benefits management program shall include a statement of the method and amount of reimbursement to the pharmacy for services rendered to covered persons enrolled in the program, the frequency of payment by the PBM program administrator to the pharmacy for those services, and a method for the adjudication of complaints and the settlement of disputes between the contracting parties.

(b) Every prescription benefit management program shall (1) A program shall provide an annual period of at least 30 days during which any pharmacy licensed under the Pharmacy Practice Act may elect to participate in the program under the program terms for at least one year. Beginning January 1, 2009, all agreements between a pharmaceutical benefits management program and any other person shall comply with the requirements of this Law. To the extent that any such agreement renewed or extended after December 31, 2008, fails to comply with the requirements of this Law, such requirements shall be deemed to be incorporated into those agreements by operation of law as of the date of the renewal of execution.

(2) If compliance with the requirements of this subsection (b) would impair any provision of a contract between a program and any other person, and if the contract provision was in existence before January 1, 1990, then immediately after the expiration of those contract provisions the program shall comply with the requirements of this subsection (b).

(3) This subsection (b) does not apply if:

(A) the program administrator is a licensed health maintenance organization that owns or controls a pharmacy and that enters into an agreement or contract with that pharmacy in accordance with subsection (a); or

(B) the program administrator is a licensed health maintenance organization that is owned or controlled by another entity that also owns or controls a pharmacy, and the administrator enters into an agreement or contract with that pharmacy in accordance with subsection (a).

(4) This subsection (b) shall be inoperative after October 31, 1992.

(c) (Blank). The program administrator shall cause to be issued an identification card to each person enrolled in the program. The identification card shall include:

(1) the name of the individual enrolled in the program; and

(2) an expiration date if required under the contractual arrangement or agreement between a provider of pharmaceutical services and prescription drug products and the third party prescription program administrator.

(Source: P.A. 95-689, eff. 10-29-07.)

(215 ILCS 5/512-7.5 new)

Sec. 512-7.5. Disclosures.

(a) A PBM or pharmaceutical manufacturer shall provide to a covered entity all appropriate financial and utilization information in aggregate relating to the cost of services to that covered entity. A PBM or pharmaceutical manufacturer providing information under this subsection (a) shall designate that information as confidential. Information designated as confidential by a PBM and provided to a covered entity under this subsection (a) shall not be disclosed by the covered entity to any person without the consent of the PBM or pharmaceutical manufacturer, except that disclosure may be made in a court filing or when authorized by law or ordered by a court of this State for good cause. Any unauthorized disclosure by a PBM or covered entity of information that is protected by the Illinois Trade Secrets Act shall result in a civil penalty of $10,000 per incident and, where disclosure is found to be willful, punitive damages may apply.

(b) A PBM shall disclose to the covered entity all appropriate financial terms and arrangements for remuneration of any kind resulting from arrangements between the PBM and any labeler, including without limitation formulary management and drug-switch programs and specifically excluding any financial terms and arrangements with prescription drug manufacturers, educational support, claims processing, and pharmacy network fees that are charged from retail pharmacies and data sales fees. Any and all information disclosed under this subsection (b) may be designated as confidential. Information designated as confidential by a PBM and provided to a covered entity under this subsection (b) may not be disclosed by the covered entity to any person without the consent of the PBM, except as may be required in a court of law with proper jurisdiction or as authorized by law.

(c) A PBM shall disclose to each covered entity and covered individual, either electronically or in writing and in a manner calculated to be understood by layperson, all of the following information:

(1) The amount of copayment, coinsurance, and deductible associated with each and every tier of covered prescription drugs.

(2) A notice to the covered individual advising the covered individual to contact the PBM before filling or obtaining a refill for a particular prescription drug the covered individual is currently using to determine whether there has been any change in (i) the requirements for obtaining coverage for the drug or (ii) the amount that the covered individual is required to pay out-of-pocket for the drug.

(3) A notice to the covered individual advising the covered individual to consider contacting his or her prescribing provider to determine whether there is an acceptable generic or other alternative prescription drug that can be used to treat the covered individual's disease or medical condition that is available at a lower out-of-pocket level.

(d) Nothing in this Section shall prohibit a pharmacy network provider from advising a covered individual of (i) alternative generic prescription drugs that might be available to the covered individual at a lower out-of-pocket level and (ii) that the covered individual may contact his or her prescribing provider to determine whether there is an acceptable alternative prescription drug that can be used to treat the covered individual's disease or medical condition that is available at a lower out-of-pocket level.

(215 ILCS 5/512-7.10 new)

Sec. 512-7.10. Recoupment. A PBM shall provide the pharmacy or pharmacy network provider a remittance advice which must include an explanation of a recoupment or offset taken by a PBM, if any. The recoupment explanation shall, at a minimum, include the name of the patient, the date of dispensing, the prescription drug or drugs dispensed, the recoupment amount, and the reason for the recoupment or offset. In addition, a PBM shall provide with the remittance advice a telephone number or mailing address to initiate an appeal of the recoupment or offset.

(215 ILCS 5/512-8) (from Ch. 73, par. 1065.59-8)

Sec. 512-8. Cancellation procedures.

(a) The pharmacy benefits manager administrator of a program shall notify all pharmacies enrolled in the program of any cancellation of the coverage of benefits of any group enrolled in the program at least 30 days prior to the effective date of such cancellation. However, if the PBM administrator of a program is not notified at least 45 days prior to the effective date of such cancellation, the PBM administrator shall notify all pharmacies enrolled in the program of the cancellation as soon as practicable after having received notice.

(b) When a program is terminated, all persons enrolled therein shall be so notified by the PBM , and the employer shall make every reasonable effort to gain possession of any plan identification cards in such persons' possession.

(c) Any person who intentionally uses a program identification card to obtain services from a pharmacy after having received notice of the cancellation of his benefits shall be guilty of a Class C misdemeanor. Persons shall be liable to the PBM program administrator for all monies paid by the PBM program administrator for any services received pursuant to any improper use of the identification card.

(Source: P.A. 82-1005.)

(215 ILCS 5/512-9) (from Ch. 73, par. 1065.59-9)

Sec. 512-9. Denial of Payment.

(a) No PBM administrator shall deny payment to any pharmacy for covered pharmaceutical services or prescription drug products rendered as a result of the misuse, fraudulent or illegal use of an identification card unless such identification card had expired, been noticeably altered, or the pharmacy was notified of the cancellation of such card. In lieu of notifying pharmacies which have a common ownership, the PBM administrator may notify a party designated by the pharmacy to receive such notice, in which case, notification shall not become effective until 5 calendar days after the designee receives notification.

(b) No PBM program administrator may withhold any payment to any pharmacy for covered pharmaceutical services or prescription drug products beyond the time period specified in the payment schedule provisions of the agreement, except for individual claims for payment which have been returned to the pharmacy as incomplete or illegible. Such returned claims shall be paid if resubmitted by the pharmacy to the PBM program administrator with the appropriate corrections made.

(c) No PBM may deny a claim for payment for filling a prescription from a network pharmacy provider that exceeds the MAC, unless the PBM advises the network pharmacy provider how to obtain the particular drug at the MAC rate.

(Source: P.A. 82-1005.)

(215 ILCS 5/512-10) (from Ch. 73, par. 1065.59-10)

Sec. 512-10. Failure to obtain licensure Register. Any pharmaceutical benefits management third party prescription program or PBM that administrator which operates without a license certificate of registration or fails to register with the Director and pay the fee prescribed by this Article shall be construed to be an unauthorized insurer as defined in Article VII of this Code and shall be subject to all penalties contained therein.

The provisions of the Article shall apply to all new programs established on or after January 1, 1983. Existing programs shall comply with the provisions of this Article on the anniversary date of the programs that occurs on or after January 1, 1983.

(Source: P.A. 82-1005.)

(215 ILCS 5/512-11 new)

Sec. 512-11. Examination of business and affairs.

(a) The Director may, when and as often as the Director deems it reasonably necessary to protect the interests of the public, examine the business and affairs of any licensed PBM.

(b) Licensees shall maintain for a period of 5 years copies of all documents, books, records, accounts, papers, and any or all computer or other recordings relating to the licensee's business and affairs of operating a pharmaceutical benefit management program.

(c) Every licensee or person from whom information is sought, including all officers, directors, employees and agents of any licensee or person from whom information is sought, shall provide to the examiners timely, convenient, and free access at all reasonable hours at the licensee's or person's offices to all books, records, accounts, papers, documents, assets, and computer or other recordings relating to the property, assets, business, and affairs of the licensee being examined. The officers, directors, employees, and agents of the licensee or person shall facilitate the examination and aid in the examination so far as it is in their power to do so. The refusal of a licensee, through its officers, directors, employees, or agents, to submit to examination or to comply with any reasonable written request of the Director shall be grounds for suspension, revocation, or denial of issuance or renewal of any license or authority held by the licensee pursuant to this Law.

(d) The Director or his or her designee shall have the power to issue subpoenas, administer oaths, and examine under oath any person as to any matter pertinent to the examination. Upon the failure or refusal of a person to obey a subpoena, the Director may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence.

(e) When making an examination under this Law, the Director may retain attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists as examiners. The costs of retaining the examiners, including their work, travel, and living expenses shall be borne by the licensee that is the subject of the examination.

(215 ILCS 5/512-12 new)

Sec. 512-12. Fines and penalties. In addition to or instead of any applicable denial, suspension, or revocation of a license issued under this Law, a licensee may, after a hearing, be subject to a civil penalty of up to $500,000 for each cause of denial, suspension, or revocation.

Any licensee or other person who willfully or repeatedly fails to observe or who otherwise violates any of the provisions of this Law or this Code or any rule adopted or final order entered thereunder shall, by civil penalty, forfeit to the Division a sum not to exceed $5,000. Each day during which a violation occurs constitutes a separate offense.

(215 ILCS 5/512-13 new)

Sec. 512-13. Rulemaking. The Director shall have the authority to adopt any rules necessary for the implementation and administration of this Article.".