80R9076 PB-F

By: Miller H.B. No. 1974

A BILL TO BE ENTITLED

AN ACT

relating to the regulation of pharmacy benefit managers; providing administrative and criminal penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle D, Title 13, Insurance Code, is amended by adding Chapter 4154 to read as follows: CHAPTER 4154. PHARMACY BENEFIT MANAGERS SUBCHAPTER A. GENERAL PROVISIONS

Sec. 4154.001. DEFINITIONS. In this chapter:

(1) "Board" means the Texas State Board of Pharmacy.

(2) "Claims processing service" means an administrative service performed in connection with the processing and adjudication of a claim relating to pharmaceutical services, including making payments to pharmacists and pharmacies.

(3) "Common controlling interest" means that a controlling interest in two persons is held by the same person.

(4) "Controlling interest" means that a person directly or indirectly owns, controls, holds with the power to vote, or holds proxies representing 50 percent or more of the voting interests of another person.

(5) "Labor union" has the meaning assigned by Section 101.051, Labor Code.

(6) "Maintenance drug" means a drug:

(A) prescribed by a health care practitioner who is licensed to prescribe drugs; and

(B) used to treat a medical condition for a period greater than 30 days.

(7) "Multi-source drug" means a drug that is stocked and available from at least three suppliers.

(8) "Other prescription drug or device service" means a service, other than a claims processing service, that is provided directly or indirectly by a pharmacy benefit manager, whether in connection with or separate from claims processing services, including:

(A) negotiating a rebate, discount, other financial incentive, or other arrangement with a drug company;

(B) disbursing or distributing a rebate;

(C) managing or participating in an incentive program or arrangement for the services of a pharmacist;

(D) negotiating or entering into a contractual arrangement with a pharmacist, a pharmacy, or both;

(E) developing drug formularies; and

(F) advertising or promoting claims processing services or other prescription drug or device services.

(9) "Person" means an individual, corporation, organization, trust, partnership, or other legal entity.

(10) "Pharmacist" has the meaning assigned by Section 551.003(28), Occupations Code.

(11) "Pharmacist's service" means a service that is provided by a pharmacist, including drug therapy or another patient care service, as defined by board rules, that is intended to achieve outcomes related to:

(A) curing or preventing a disease;

(B) eliminating or reducing a patient's symptoms; or

(C) arresting or slowing a disease process.

(12) "Pharmacy" has the meaning assigned by Section 551.003(31), Occupations Code.

(13) "Pharmacy benefit manager" means a person and any wholly or partially owned or controlled subsidiary of the person, that provides to third parties claims processing services, other prescription drug or device services, or both services. The term does not include:

(A) a health care facility licensed in this state;

(B) a health care practitioner licensed in this state;

(C) a pharmacy licensed in this state;

(D) an insurer authorized to engage in the business of insurance in this state;

(E) a health maintenance organization that holds a certificate of authority under Chapter 843;

(F) a labor union; or

(G) a consultant who only provides advice as to the selection or performance of a pharmacy benefit manager.

(14) "Single source drug" means a drug other than a multi-source drug.

(15) "Third party" means any person who is not a pharmacy benefit manager. The term does not include:

(A) a person that holds a controlling interest in a pharmacy benefit manager;

(B) a person that shares a common controlling interest with a pharmacy benefit manager; or

(C) a policyholder, insured, member, or enrollee of an insurer authorized to engage in the business of insurance in this state or a health maintenance organization that holds a certificate of authority under Chapter 843, to the extent that claims processing services, other prescription drug or device services, or both services, are provided to the policyholder, insured, member, or enrollee by a person:

(i) in which the insurance company or health maintenance organization holds a controlling interest; or

(ii) that shares common controlling interest with the insurer or health maintenance organization.

(16) "Usual and customary price" means the price that a pharmacist or pharmacy would charge a patient paying cash for the same services provided on the same date to another patient, other than a patient whose reimbursement rates are set by contract.

Sec. 4154.002. RULES. The commissioner shall adopt rules and standards as necessary to implement this chapter.

Sec. 4154.003. APPLICABILITY OF OTHER PROVISIONS OF CODE. A pharmacy benefit manager is subject to Section 823.457, Subchapter H of Chapter 101, Chapter 541, Subchapter A of Chapter 542, and Chapter 804.

Sec. 4154.004. PHARMACY BENEFIT MANAGER NOT INSURANCE AGENT. (a) A pharmacy benefit manager licensed in any state who accepts an agent's commission for coverage for a risk located in this state and disburses that commission to an agent in this state is not considered an agent for purposes of this title.

(b) The exemption provided by this section does not authorize a pharmacy benefit manager to perform any other act for which a license as an agent is required by law. [Sections 4154.005-4154.050 reserved for expansion] SUBCHAPTER B. CERTIFICATE OF AUTHORITY; LICENSE

Sec. 4154.051. CERTIFICATE OF AUTHORITY REQUIRED; BOARD LICENSE REQUIRED. (a) A person may not act as or represent that the person is a pharmacy benefit manager in this state unless the person is covered by and is engaging in business under a certificate of authority issued by the commissioner under this chapter.

(b) In addition to the certificate of authority issued by the commissioner, a person may not act as or represent that the person is a pharmacy benefit manager in this state unless the person holds a pharmacy benefit manager license issued by the board under Chapter 570, Occupations Code.

(c) A person that holds a certificate of authority under this chapter is not also required to hold a certificate of authority as an administrator under Chapter 4151 to act as a pharmacy benefit manager in this state.

Sec. 4154.052. APPLICATION REQUIREMENTS. (a) An applicant for a certificate of authority under this chapter shall submit an application to the department in the manner prescribed by the commissioner.

(b) An application under this chapter must:

(1) include the information required in an application made under Section 4151.052 and other information as required by the commissioner; and

(2) be accompanied by a $300 application fee.

Sec. 4154.053. FIDELITY BOND REQUIRED. (a) If the commissioner approves an application under Section 4154.052 for a certificate of authority, before the commissioner issues the certificate of authority, the applicant must:

(1) obtain and maintain a fidelity bond that complies with this section; and

(2) submit to the commissioner proof that the applicant has obtained the fidelity bond.

(b) The fidelity bond must protect against an act of fraud or dishonesty by the applicant in exercising the applicant's powers and duties as a pharmacy benefit manager.

(c) The fidelity bond must be equal to at least 10 percent of the amount of money handled by the pharmacy benefit manager during the preceding year or, if no money was handled during the preceding year, 10 percent of the amount of money reasonably estimated to be handled by the pharmacy benefit manager during the calendar year in which the license is issued.

(d) For purposes of this section, the amount of money handled by a person in the person's capacity as pharmacy benefit manager is the greater of the total amount of premiums and contributions received by the pharmacy benefit manager or the total amount of benefits paid by the pharmacy benefit manager in all jurisdictions in which the person acts as a pharmacy benefit manager.

(e) Unless the pharmacy benefit manager and an insurer, health maintenance organization, or benefit plan sponsor agree otherwise in writing, a pharmacy benefit manager is required to obtain and maintain only one fidelity bond for all of the pharmacy benefit manager's activities as a pharmacy benefit manager in this state.

Sec. 4154.054. ISSUANCE OF CERTIFICATE; DURATION OF CERTIFICATE; RENEWAL. (a) The commissioner shall issue a certificate of authority to an applicant that complies with this chapter.

(b) A pharmacy benefit manager is required to hold only one certificate of authority issued under this chapter.

(c) A certificate of authority issued under this chapter is valid for two years from the date of issuance, and may be renewed on submission of a renewal application to the department accompanied by a $300 renewal fee. [Sections 4154.055-4154.100 reserved for expansion] SUBCHAPTER C. DEPARTMENT REGULATION OF PHARMACY BENEFIT MANAGERS

Sec. 4154.101. EXAMINATION OF PHARMACY BENEFIT MANAGER. (a) The commissioner may examine a pharmacy benefit manager with regard to the manager's business in this state.

(b) An examination under this section must include a review of:

(1) each existing written agreement between the pharmacy benefit manager and an insurer, health maintenance organization, or benefit plan sponsor; and

(2) the pharmacy benefit manager's financial statements.

(c) The commissioner may also require an on-site evaluation of the pharmacy benefit manager's personnel and facilities and any books and records of the pharmacy benefit manager relating to the transaction of business by and the financial condition of the pharmacy benefit manager. Before an examiner enters the property of the pharmacy benefit manager, the examiner must notify the pharmacy benefit manager of the date and estimated time of the examination in the manner prescribed by commissioner rule. The examiner shall comply with any operational rules of the pharmacy benefit manager while on the pharmacy benefit manager's property.

(d) The pharmacy benefit manager shall pay a fee to the department not to exceed $500 to cover the costs of an examination under this section.

Sec. 4154.102. ANNUAL STATEMENT. (a) Not later than March 1 of each year, each pharmacy benefit manager shall file with the department an annual statement for the preceding calendar year.

(b) The annual statement must be made on a form and in the manner prescribed by the commissioner, accompanied by a $1,000 filing fee, and must include the number and value of claims for pharmacists' services that are processed by the pharmacy benefit manager for the preceding calendar year for all patients who are residents of this state.

Sec. 4154.103. EXTENSION OF FILING PERIOD. The commissioner may extend, for a period not to exceed 60 days, the time prescribed for the filing of an annual statement or other report or exhibit by a pharmacy benefit manager for good cause.

Sec. 4154.104. ASSESSMENT. (a) In addition to the fees required under this chapter, the commissioner shall annually assess each pharmacy benefit manager holding a certificate of authority under this chapter for the department's expenses in administering this chapter.

(b) The commissioner shall proportionately assess each pharmacy benefit manager under Subsection (a) for its share of the total expenses incurred by the department in administering this chapter in proportion to the business done by all pharmacy benefit managers in this state, as determined by the commissioner by rule.

Sec. 4154.105. CHANGE IN OWNERSHIP. A pharmacy benefit manager must notify the department in writing of any material change in the ownership of the pharmacy benefit manager not later than the fifth day after the effective date of the change of ownership.

Sec. 4154.106. ARBITRATION. (a) The commissioner by rule shall establish a procedure that uses arbitration for resolving disputes arising under contracts entered into by pharmacy benefit managers.

(b) The arbitration procedure adopted under Subsection (a) must include participation by:

(1) pharmacy benefit managers or their representatives;

(2) insurers, health maintenance organizations, or benefit plan sponsors; and

(3) pharmacists. [Sections 4154.107-4154.150 reserved for expansion] SUBCHAPTER D. CONTRACT ISSUES

Sec. 4154.151. STANDARD CONTRACT FORMS REQUIRED. (a) The commissioner, in consultation with the contract advisory panel established under Section 4154.152, shall adopt rules that establish standard contract forms for use by pharmacy benefit managers in entering into contracts with pharmacies and pharmacists and insurers, health maintenance organizations, and benefit plan sponsors.

(b) Except as provided by Section 4154.153, a pharmacy benefit manager that enters into a contract with a pharmacy or pharmacist or insurer, health maintenance organization, or benefit plan sponsor must use a contract form adopted by the commissioner under this section.

(c) The terms of a contract form adopted under this section and entered into by a pharmacy benefit manager and a pharmacy or pharmacist or insurer, health maintenance organization, or benefit plan sponsor may not be subsequently modified unless the modification is agreed to by the pharmacy benefit manager and the pharmacy or the pharmacist or the insurer, health maintenance organization, or benefit plan sponsor.

Sec. 4154.152. PHARMACY BENEFIT MANAGER CONTRACT ADVISORY PANEL. (a) The pharmacy benefit manager contract advisory panel is established as an advisory body to the commissioner. The advisory panel shall advise and make recommendations to the commissioner regarding the adoption of standard contract forms under Section 4154.151.

(b) The advisory panel is composed of nine members appointed jointly by the commissioner and the board as follows:

(1) two members must be attorneys who primarily represent insurers, health maintenance organizations, or benefit plan sponsors;

(2) two members must be pharmacists;

(3) two members must be pharmacy benefit managers who hold certificates of authority under this chapter; and

(4) three members must be public members.

(c) A public member of the advisory panel may not:

(1) receive any compensation from, or be employed directly or indirectly by, a pharmacist, pharmacy benefit manager, health care provider, insurer, health maintenance organization, or benefit plan sponsor;

(2) be a pharmacist or pharmacy benefit manager; or

(3) be a person required to register as a lobbyist under Chapter 305, Government Code, because of the person's activities for compensation on behalf of a profession related to the operation of the advisory panel.

(d) Members of the advisory panel serve without compensation and at the will of the commissioner.

(e) Section 2110.008, Government Code, does not apply to the advisory panel.

Sec. 4154.153. COMMISSIONER APPROVAL OF CONTRACT FORMS. (a) Not later than the 30th day before the date on which a pharmacy benefit manager proposes to use a form in this state, other than a form adopted under Section 4154.151, for a contract entered into with a pharmacy or pharmacist to provide services in this state, the pharmacy benefit manager must file the form with the department.

(b) Each contract form is subject to approval by the commissioner. If the commissioner fails to approve a form before the 31st day after the date on which the form is received by the department, the form is deemed disapproved.

(c) The commissioner by rule shall develop formal criteria for the approval and disapproval of pharmacy benefit manager contract forms under this section.

Sec. 4154.154. CONTRACT TERMS. (a) Each contract entered into by a pharmacy benefit manager under this chapter must:

(1) establish specific times within which the pharmacy benefit manager is required to pay a pharmacy, a pharmacist, or both for services rendered;

(2) include a provision stating that a pharmacy is not liable for the acts or omissions of the pharmacy benefit manager; and

(3) establish the average wholesale price of a prescription drug or device that is used as an index for claim payments.

(b) A pharmacy benefit manager contract may not:

(1) establish basic recordkeeping requirements for a pharmacy or pharmacist that are more stringent than the recordkeeping requirements required by state or federal laws or rules;

(2) require a pharmacy or pharmacist to change a maintenance drug prescribed for a patient unless the prescribing physician orders the change; or

(3) limit the services a pharmacist may provide to a range narrower than the scope of the pharmacist's license to practice pharmacy. [Sections 4154.155-4154.200 reserved for expansion] SUBCHAPTER E. POWERS AND DUTIES OF PHARMACY BENEFIT MANAGERS

Sec. 4154.201. IDENTIFICATION CARDS. (a) Except as provided by commissioner rules, a pharmacy benefit manager shall issue an identification card to each individual covered by a plan that provides pharmacy benefits. The pharmacy benefit manager shall issue the identification card not later than the 30th day after the date the pharmacy benefit manager receives notice that the individual is eligible for the benefits.

(b) The commissioner by rule shall adopt standard information to be included on the identification card. The standard form identification card must include:

(1) the name or logo of the entity administering the pharmacy benefits;

(2) the international identification number assigned by the American National Standards Institute for the entity administering the pharmacy benefits;

(3) the group number applicable to the covered individual;

(4) the effective date of the coverage evidenced by the card;

(5) a telephone number to be used to contact an appropriate person to obtain information relating to the pharmacy benefits provided under the coverage; and

(6) copayment information for generic and brand-name prescription drugs covered by the plan.

Sec. 4154.202. DISCLOSURE OF CERTAIN PATIENT INFORMATION PROHIBITED. (a) A pharmacy benefit manager may not sell a list of patients that contains information through which the identity of an individual patient is disclosed.

(b) A pharmacy benefit manager shall maintain all data that identifies a patient in a confidential manner that prevents disclosure to a third party unless the disclosure is otherwise authorized by law or by the patient.

(c) This section does not prohibit:

(1) general advertising about a specific pharmaceutical product or service; or

(2) the request and receipt by a person of information regarding:

(A) a specific pharmaceutical product or service;

(B) the person's own records or claims; or

(C) the person's dependent's records or claims.

Sec. 4154.203. MEDICATION REIMBURSEMENT COSTS; INDEX. (a) Each pharmacy benefit manager shall use a current nationally recognized benchmark as the basis for reimbursements for medications and products dispensed by pharmacies and pharmacists with whom the pharmacy benefit manager contracts.

(b) For brand-name single source drugs and brand-name multi-source drugs, the pharmacy benefit manager shall use as an index the average wholesale price, as listed in:

(1) First DataBank;

(2) Facts & Comparisons; or

(3) a comparable source recognized by the commissioner, as provided by Subsection (d).

(c) For generic multi-source drugs, maximum allowable costs shall be established by referencing the baseline price, as listed in:

(1) First DataBank;

(2) Facts & Comparisons; or

(3) a comparable source recognized by the commissioner, as provided by Subsection (d).

(d) If a publication specified in Subsection (b) or (c) ceases to be a nationally recognized benchmark for reimbursement for medication and products dispensed by pharmacies and pharmacists, the commissioner may adopt any other current nationally recognized benchmark that is established and published by a person with whom pharmacy benefit managers do not have a financial or business interest or connection.

(e) To be eligible to be reimbursed through a maximum allowable cost price methodology, a product must:

(1) be equivalent and generically interchangeable as provided by state laws related to pharmaceutical products; and

(2) have a United States Food and Drug Administration Orange Book rating of "A" through "B".

(f) If a generic multi-source drug product does not have a baseline price, the drug shall be treated as a brand-name single source drug for the purpose of valuing reimbursement. [Sections 4154.204-4154.250 reserved for expansion] SUBCHAPTER F. PROHIBITED ACTIONS BY PHARMACY BENEFIT MANAGERS

Sec. 4154.251. CERTAIN RETROACTIVE CLAIM ADJUSTMENTS PROHIBITED. (a) A pharmacy benefit manager may not retroactively deny a claim paid by the pharmacy benefits manager for a pharmacist's services or adjust the claim after adjudication of the claim unless:

(1) the original claim was submitted fraudulently;

(2) the payment of the original claim was in error because the pharmacy or pharmacist had already been paid for the pharmacist's services; or

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

(b) A pharmacy benefit manager may not retroactively reverse an acknowledgment of eligibility.

Sec. 4154.252. DECEPTIVE ADVERTISEMENTS OR OFFERS PROHIBITED. A pharmacy benefit manager, or a representative of a pharmacy benefit manager, may not cause or knowingly permit the use of an advertisement, promotion, solicitation, proposal, or offer that is untrue, deceptive, or misleading.

Sec. 4154.253. PROHIBITED ACTIONS AGAINST PHARMACY OR PHARMACIST. A pharmacy benefit manager may not penalize a pharmacy or terminate a contract with a pharmacy solely because the pharmacy or a pharmacist employed by the pharmacy:

(1) files a complaint with the department against the pharmacy benefit manager;

(2) disagrees with the pharmacy benefit manager's decision to deny or limit benefits to an insured, member, or enrollee;

(3) assists an insured, member, or enrollee in seeking reconsideration of the pharmacy benefit manager's decision to deny or limit benefits to the insured, member, or enrollee; or

(4) discusses alternative prescription drugs or devices with an insured, member, or enrollee. [Sections 4154.254-4154.300 reserved for expansion] SUBCHAPTER G. ENFORCEMENT; SANCTIONS

Sec. 4154.301. ENFORCEMENT; RULES. The commissioner shall adopt rules as necessary to enforce this chapter. In adopting rules under this section, the commissioner shall consult and cooperate with the board as necessary to coordinate enforcement of the certificate of authority requirements adopted under this chapter with the license requirements adopted under Chapter 570, Occupations Code.

Sec. 4154.302. COMPLAINTS; INVESTIGATION. (a) The commissioner by rule shall adopt procedures for investigation of complaints concerning the failure of a pharmacy benefit manager to comply with this chapter.

(b) The commissioner shall refer a complaint received under this chapter to the board if the complaint involves:

(1) a pharmacy or a pharmacist or other health care practitioner regulated under Subtitle J, Title 3, Occupations Code; or

(2) an issue regarding patient health or safety.

Sec. 4154.303. DISCIPLINARY ACTIONS. If the commissioner has reason to believe that a violation of this chapter has occurred, the commissioner may:

(1) issue an emergency cease and desist order under Chapter 83 against the pharmacy benefit manager; or

(2) impose any other necessary or appropriate sanction under Chapter 82, including suspension or revocation of the pharmacy benefit manager's certificate of authority.

Sec. 4154.304. ADMINISTRATIVE PENALTY. A person that acts as a pharmacy benefit manager without a certificate of authority issued under this chapter is subject to administrative penalties under Chapter 84. An administrative penalty imposed under this section may not be less than $5,000 or greater than $10,000 for each violation.

Sec. 4154.305. CRIMINAL PENALTY. (a) A pharmacy benefit manager commits an offense if the pharmacy benefit manager knowingly violates this chapter or a commissioner rule adopted under this chapter.

(b) An offense under this section is a misdemeanor punishable by a fine of not less than $500 or more than $5,000.

SECTION 2. Subtitle J, Title 3, Occupations Code, is amended by adding Chapter 570 to read as follows: CHAPTER 570. REGULATION OF PHARMACY BENEFIT MANAGERS SUBCHAPTER A. GENERAL PROVISIONS

Sec. 570.001. DEFINITIONS. In this chapter:

(1) "Commissioner" means the commissioner of insurance.

(2) "Department" means the Texas Department of Insurance.

(3) "Pharmacy benefit manager" has the meaning assigned by Section 4154.001, Insurance Code. [Sections 570.002-570.050 reserved for expansion] SUBCHAPTER B. LICENSE REQUIREMENTS

Sec. 570.051. LICENSE REQUIRED; DEPARTMENT CERTIFICATE OF AUTHORITY REQUIRED. (a) A person may not act as or represent that the person is a pharmacy benefit manager in this state unless the person holds a pharmacy benefit manager license issued by the board under this chapter.

(b) In addition to the license issued by the board under this chapter, a person may not act as or represent that the person is a pharmacy benefit manager in this state unless the person is covered by and is engaging in business under a certificate of authority issued by the commissioner under Chapter 4154, Insurance Code.

Sec. 570.052. LICENSE REQUIREMENTS. (a) The board by rule shall adopt the requirements for an original or renewal license issued under this chapter.

(b) In adopting rules under this section, the board shall consider the requirements adopted by the commissioner under Chapter 4154, Insurance Code.

Sec. 570.053. LICENSE APPLICATION. Each applicant for a license under this chapter shall submit a license application in the manner prescribed by the board, accompanied by a nonrefundable $500 application fee.

Sec. 570.054. INVESTIGATIONS. As the board considers necessary for the protection of the residents of this state, the board may conduct investigations regarding the quality of the services provided by:

(1) a pharmacy benefit manager; or

(2) a pharmacy or pharmacist with whom the pharmacy benefit manager contracts. [Sections 570.055-570.100 reserved for expansion] SUBCHAPTER C. PROHIBITED ACTS

Sec. 570.101. GENERAL PROHIBITED ACTS. A person licensed under this chapter and doing business as a pharmacy benefit manager may not:

(1) intervene in the delivery or transmission of prescriptions from a prescribing health care practitioner to a pharmacy or pharmacist for purposes of influencing the prescribing health care practitioner's choice of therapy;

(2) attempt to influence an insured's, member's, or enrollee's choice of pharmacy or pharmacist; or

(3) change a drug or device prescribed by a health care practitioner without the written consent of the prescribing health care practitioner.

Sec. 570.102. LICENSE TO PRACTICE PHARMACY REQUIRED. Unless a person licensed under this chapter and doing business as a pharmacy benefit manager also holds a license to practice pharmacy issued by the board under Chapter 558, the person may not:

(1) provide pharmaceutical care or patient counseling;

(2) interpret or evaluate a prescription drug order;

(3) participate in prescription drug or device selection, administration, or regimen review;

(4) dispense or distribute drug orders or products; or

(5) perform a specific act of drug therapy for an insured, member, or enrollee. [Sections 570.103-570.150 reserved for expansion] SUBCHAPTER D. ENFORCEMENT

Sec. 570.151. ENFORCEMENT; RULES. The board shall adopt rules as necessary to enforce this chapter. In adopting rules under this section, the board shall consult and cooperate with the commissioner as necessary to coordinate enforcement of the license requirements adopted under this chapter with the certificate of authority requirements adopted under Chapter 4154, Insurance Code.

Sec. 570.152. COMPLAINTS; INVESTIGATION. (a) The board by rule shall adopt procedures under Chapter 555 for investigation of complaints concerning the failure of a pharmacy benefit manager to comply with this chapter.

(b) The board shall refer a complaint received under this chapter to the commissioner if the complaint involves an issue regarding the business operations or finances of the pharmacy benefit manager.

Sec. 570.153. DISCIPLINARY ACTIONS. If the board has reason to believe that a violation of this chapter has occurred, the board may, after notice and hearing:

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

(2) take any other necessary or appropriate action under this subtitle, including suspension or revocation of the pharmacy benefit manager's license.

SECTION 3. Section 4151.001(1), Insurance Code, is amended to read as follows:

(1) "Administrator" means a person who, in connection with annuities or life, health, and accident benefits, other than [including] pharmacy benefits, collects premiums or contributions from or adjusts or settles claims for residents of this state. The term does not include:

(A) a person described by Section 4151.002; or

(B) a pharmacy benefit manager regulated under Chapter 4154.

SECTION 4. Subchapter D, Chapter 4151, Insurance Code, is repealed.

SECTION 5. (a) This section applies only to a person who:

(1) on the effective date of this Act, holds a certificate of authority issued under Chapter 4151, Insurance Code; and

(2) immediately before the effective date of this Act is operating as a pharmacy benefit manager under that chapter.

(b) Notwithstanding any other provision of this Act, a person to whom this section applies is entitled to an initial certificate of authority under Chapter 4154, Insurance Code, as added by this Act, if the person applies to the commissioner of insurance in writing not later than March 1, 2008. The person is not required to comply with the application requirements adopted under Subchapter B, Chapter 4154, Insurance Code, as added by this Act, if the commissioner of insurance determines that the person is in compliance with the application and fidelity bond requirements imposed under Subchapter B, Chapter 4151, Insurance Code.

(c) The commissioner of insurance shall adopt rules as necessary to implement this section.

(d) This section expires July 1, 2008.

SECTION 6. A person is not required to hold a certificate of authority under Chapter 4154, Insurance Code, as added by this Act, or a license under Chapter 570, Occupations Code, as added by this Act, to operate as a pharmacy benefit manager in this state until January 1, 2008.

SECTION 7. (a) The commissioner of insurance shall adopt rules as necessary to implement Chapter 4154, Insurance Code, as added by this Act, not later than December 31, 2007.

(b) The Texas State Board of Pharmacy shall adopt rules as necessary to implement Chapter 570, Occupations Code, as added by this Act, not later than December 31, 2007.

SECTION 8. (a) Except as provided by Subsection (b) of this section, this Act takes effect September 1, 2007.

(b) Sections 4154.051, 4154.304, and 4154.305, Insurance Code, and Section 570.051, Occupations Code, take effect January 1, 2008.