81R7761 PB-F
 
  By: Isett H.B. No. 1696
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the regulation of pharmacy benefit managers and to
  payment of claims to pharmacies and pharmacists.
         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)  "Covered entity" means a nonprofit hospital or
  medical services corporation, a health insurer, a health benefit
  plan, a health maintenance organization, a health program
  administered by a state agency in the capacity of provider of health
  coverage, or an employer, labor union, or other group of persons
  organized in this state that provides health coverage. The term
  does not include:
                     (A)  a self-funded health coverage plan that is
  exempt from state regulation under the Employee Retirement Income
  Security Act of 1974 (29 U.S.C. Section 1001 et seq.);
                     (B)  a plan issued for health coverage for federal
  employees; or
                     (C)  a health benefit plan that provides coverage
  only for accidental injury or a specified disease, a hospital
  indemnity plan, a Medicare supplement plan, a disability income
  plan, a long-term care plan, or any other limited benefit health
  insurance policy or contract.
               (2)  "Covered individual" means a member, participant,
  enrollee, contract holder, policyholder, or beneficiary of a
  covered entity who is provided health coverage by the covered
  entity. The term includes a dependent or other individual who
  receives health coverage through a policy, contract, or plan for a
  covered individual.
               (3)  "Pharmacy benefit management" means
  administration or management of prescription drug benefits
  provided by a covered entity under the terms and conditions of a
  contract between a pharmacy benefit manager and the covered entity.
               (4)  "Pharmacy benefit manager" has the meaning
  assigned by Section 4151.151. The term includes a person acting on
  behalf of a pharmacy benefit manager in a contractual or employment
  relationship in the performance of pharmacy benefit management
  services for a covered entity. The term does not include:
                     (A)  a health insurer that holds a certificate of
  authority to engage in the business of insurance in this state if
  the health insurer or any subsidiary provides pharmacy benefit
  management services exclusively to its own insureds; or
                     (B)  a public self-funded pool or a private single
  employer self-funded plan that provides pharmacy benefits or
  pharmacy benefit management services directly to its
  beneficiaries.
         Sec. 4154.002.  RULES. The commissioner may adopt rules and
  standards as necessary to implement this chapter.
  [Sections 4154.003-4154.050 reserved for expansion]
  SUBCHAPTER B.  REGULATION OF PHARMACY BENEFIT MANAGERS
         Sec. 4154.051.  APPLICABILITY. This chapter applies to each
  pharmacy benefit manager that provides claims processing services,
  other prescription drug or device services, or both claims
  processing services and other prescription drug or device services
  to covered individuals who are residents of this state.
         Sec. 4154.052.  CERTIFICATE OF AUTHORITY AS ADMINISTRATOR
  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 as a third-party administrator issued under Chapter 4151.
         (b)  Chapter 4151 applies to a pharmacy benefit manager.
         Sec. 4154.053.  PERFORMANCE OF DUTIES; GOOD FAITH; CONFLICT
  OF INTEREST.  (a)  In operating as a pharmacy benefit manager, a
  pharmacy benefit manager shall exercise good faith and fair dealing
  in the performance of contractual obligations toward a covered
  entity.
         (b)  A pharmacy benefit manager shall notify a covered entity
  in writing of any activity, policy, practice, ownership interest,
  or affiliation of the pharmacy benefit manager that may present a
  conflict of interest.
         Sec. 4154.054.  REQUIREMENTS REGARDING CONTACTING COVERED
  INDIVIDUALS.  Except as otherwise provided by the terms of the
  contract with a covered entity, a pharmacy benefit manager may not
  contact a covered individual without the express written permission
  of the covered entity.
         Sec. 4154.055.  DISPENSING OF SUBSTITUTE PRESCRIPTION DRUG
  FOR PRESCRIBED DRUG.  (a)  A pharmacy benefit manager may request
  the substitution of a lower priced generic and therapeutically
  equivalent drug for a higher priced prescribed drug only as
  provided by this section. The pharmacy benefit manager must obtain
  the approval of the prescribing practitioner before requesting any
  substitution under this section.
         (b)  If the net cost to the covered individual or covered
  entity of the substituted drug exceeds the cost of the prescribed
  drug, the substitution may be made only for medical reasons that
  benefit the covered individual.
         (c)  A pharmacy benefit manager may not substitute an
  equivalent prescribed drug contrary to a prescription drug order
  that prohibits a substitution.
         Sec. 4154.056.  DUTIES TO PHARMACY NETWORK PROVIDER.  (a)  A
  pharmacy benefit manager may not require a pharmacy network
  provider to comply with recordkeeping provisions more stringent
  than those required by other state law or rule or by federal law or
  regulation.
         (b)  If a pharmacy benefit manager receives notice from a
  covered entity of termination of the covered entity's contract, the
  pharmacy benefit manager shall notify, not later than the 10th
  business day after the date of the notice, each pharmacy network
  provider affected by the termination of the effective date of the
  termination.
         (c)  Not later than the third business day after the date of a
  price increase notification by a manufacturer or supplier, a
  pharmacy benefit manager shall adjust its payment to the pharmacy
  network provider in a manner consistent with the price increase.
         SECTION 2.  Section 843.002, Insurance Code, is amended by
  adding Subdivision (9-a) to read as follows:
               (9-a)  "Extrapolation" means a mathematical process or
  technique used by a health maintenance organization or pharmacy
  benefit manager that administers pharmacy claims for a health
  maintenance organization in the audit of a pharmacy or pharmacist
  to estimate audit results or findings for a larger batch or group of
  claims not reviewed by the health maintenance organization or
  pharmacy benefit manager.
         SECTION 3.  Section 843.338, Insurance Code, is amended to
  read as follows:
         Sec. 843.338.  DEADLINE FOR ACTION ON CLEAN CLAIMS. Except
  as provided by Sections [Section] 843.3385 and 843.339, not later
  than the 45th day after the date on which a health maintenance
  organization receives a clean claim from a participating physician
  or provider in a nonelectronic format or the 30th day after the date
  the health maintenance organization receives a clean claim from a
  participating physician or provider that is electronically
  submitted, the health maintenance organization shall make a
  determination of whether the claim is payable and:
               (1)  if the health maintenance organization determines
  the entire claim is payable, pay the total amount of the claim in
  accordance with the contract between the physician or provider and
  the health maintenance organization;
               (2)  if the health maintenance organization determines
  a portion of the claim is payable, pay the portion of the claim that
  is not in dispute and notify the physician or provider in writing
  why the remaining portion of the claim will not be paid; or
               (3)  if the health maintenance organization determines
  that the claim is not payable, notify the physician or provider in
  writing why the claim will not be paid.
         SECTION 4.  Section 843.339, Insurance Code, is amended to
  read as follows:
         Sec. 843.339.  DEADLINE FOR ACTION ON [CERTAIN] PRESCRIPTION
  CLAIMS; PAYMENT. (a)  A [Not later than the 21st day after the date
  a] health maintenance organization, or a pharmacy benefit manager
  that administers pharmacy claims for the health maintenance
  organization, that affirmatively adjudicates a pharmacy claim that
  is electronically submitted, [the health maintenance organization]
  shall pay the total amount of the claim through electronic funds
  transfer not later than the 14th day after the date on which the
  claim was affirmatively adjudicated.
         (b)  A health maintenance organization, or a pharmacy
  benefit manager that administers pharmacy claims for the health
  maintenance organization, that affirmatively adjudicates a
  pharmacy claim that is not electronically submitted, shall pay the
  total amount of the claim not later than the 21st day after the date
  on which the claim was affirmatively adjudicated.
         SECTION 5.  Section 843.340, Insurance Code, is amended by
  adding Subsections (f) and (g) to read as follows:
         (f)  A health maintenance organization or a pharmacy benefit
  manager that administers pharmacy claims for the health maintenance
  organization may not use extrapolation to complete the audit of a
  provider who is a pharmacist or pharmacy. A health maintenance
  organization or a pharmacy benefit manager that administers
  pharmacy claims for the health maintenance organization may not
  require extrapolation audits as a condition of participation in the
  health maintenance organization's contract, network, or program
  for a provider who is a pharmacist or pharmacy.
         (g)  A health maintenance organization or a pharmacy benefit
  manager that administers pharmacy claims for the health maintenance
  organization that performs an on-site audit under this chapter of a
  provider who is a pharmacist or pharmacy shall provide the provider
  reasonable notice of the audit and accommodate the provider's
  schedule to the greatest extent possible. The notice required
  under this subsection must be in writing and must be sent by
  certified mail to the provider not later than the 15th day before
  the date on which the on-site audit is scheduled to occur.
         SECTION 6.  Section 843.344, Insurance Code, is amended to
  read as follows:
         Sec. 843.344.  APPLICABILITY OF SUBCHAPTER TO ENTITIES
  CONTRACTING WITH HEALTH MAINTENANCE ORGANIZATION. This subchapter
  applies to a person, including a pharmacy benefit manager, with
  whom a health maintenance organization contracts to:
               (1)  process or pay claims;
               (2)  obtain the services of physicians and providers to
  provide health care services to enrollees; or
               (3)  issue verifications or preauthorizations.
         SECTION 7.  Subchapter J, Chapter 843, Insurance Code, is
  amended by adding Sections 843.354, 843.355, and 843.356 to read as
  follows:
         Sec. 843.354.  DEPARTMENT ENFORCEMENT OF PHARMACY CLAIMS.
  (a)  Notwithstanding any other provision of this subchapter, a
  dispute regarding payment of a claim to a provider who is a
  pharmacist or pharmacy shall be resolved as provided by this
  section.
         (b)  A provider who is a pharmacist or pharmacy may submit a
  complaint to the department alleging noncompliance with the
  requirements of this subchapter by a health maintenance
  organization, a pharmacy benefit manager that administers pharmacy
  claims for the health maintenance organization, or another entity
  that contracts with the health maintenance organization as provided
  by Section 843.344. A complaint must be submitted in writing or by
  submitting a completed complaint form to the department by mail or
  through another delivery method. The department shall maintain a
  complaint form on the department's Internet website and at the
  department's offices for use by a complainant.
         (c)  After investigation of the complaint by the department,
  the commissioner shall determine the validity of the complaint and
  shall enter a written order. In the order, the commissioner shall
  provide the health maintenance organization and the complainant
  with:
               (1)  a summary of the investigation conducted by the
  department;
               (2)  written notice of the matters asserted, including
  a statement:
                     (A)  of the legal authority, jurisdiction, and
  alleged conduct under which an enforcement action is imposed or
  denied, with a reference to the statutes and rules involved; and
                     (B)  that, on request to the department, the
  health maintenance organization and the complainant are entitled to
  a hearing conducted by the State Office of Administrative Hearings
  in the manner prescribed by Section 843.355 regarding the
  determinations made in the order; and
               (3)  a determination of the denial of the allegations
  or the imposition of penalties against the health maintenance
  organization.
         (d)  An order issued under Subsection (c) is final in the
  absence of a request by the complainant or health maintenance
  organization for a hearing under Section 843.355.
         (e)  If the department investigation substantiates the
  allegations of noncompliance made under Subsection (b), the
  commissioner, after notice and an opportunity for a hearing as
  described by Subsection (c), shall require the health maintenance
  organization to pay penalties as provided by Section 843.342.
         Sec. 843.355.  HEARING BY STATE OFFICE OF ADMINISTRATIVE
  HEARINGS; FINAL ORDER. (a)  The State Office of Administrative
  Hearings shall conduct a hearing regarding a written order of the
  commissioner under Section 843.354 on the request of the
  department. A hearing under this section is subject to Chapter
  2001, Government Code, and shall be conducted as a contested case
  hearing.
         (b)  After receipt of a proposal for decision issued by the
  State Office of Administrative Hearings after a hearing conducted
  under Subsection (a), the commissioner shall issue a final order.
         (c)  If it appears to the department, the complainant, or the
  health maintenance organization that a person or entity is engaging
  in or is about to engage in a violation of a final order issued under
  Subsection (b), the department, the complainant, or the health
  maintenance organization may bring an action for judicial review in
  district court in Travis County to enjoin or restrain the
  continuation or commencement of the violation or to compel
  compliance with the final order.  The complainant or the health
  maintenance organization may also bring an action for judicial
  review of the final order.
         Sec. 843.356.  LEGISLATIVE DECLARATION. It is the intent of
  the legislature that the requirements contained in this subchapter
  regarding payment of claims to providers who are pharmacists or
  pharmacies apply to all health maintenance organizations and
  pharmacy benefit managers unless otherwise prohibited by federal
  law.
         SECTION 8.  Section 1301.001, Insurance Code, is amended by
  amending Subdivision (1) and adding Subdivision (1-a) to read as
  follows:
               (1)  "Health care provider" means a practitioner,
  institutional provider, or other person or organization that
  furnishes health care services and that is licensed or otherwise
  authorized to practice in this state. The term includes a
  pharmacist and a pharmacy. The term does not include a physician.
               (1-a)  "Extrapolation" means a mathematical process or
  technique used by an insurer or pharmacy benefit manager that
  administers pharmacy claims for an insurer in the audit of a
  pharmacy or pharmacist to estimate audit results or findings for a
  larger batch or group of claims not reviewed by the insurer or
  pharmacy benefit manager.
         SECTION 9.  Section 1301.103, Insurance Code, is amended to
  read as follows:
         Sec. 1301.103.  DEADLINE FOR ACTION ON CLEAN CLAIMS. Except
  as provided by Sections 1301.104 and [Section] 1301.1054, not later
  than the 45th day after the date an insurer receives a clean claim
  from a preferred provider in a nonelectronic format or the 30th day
  after the date an insurer receives a clean claim from a preferred
  provider that is electronically submitted, the insurer shall make a
  determination of whether the claim is payable and:
               (1)  if the insurer determines the entire claim is
  payable, pay the total amount of the claim in accordance with the
  contract between the preferred provider and the insurer;
               (2)  if the insurer determines a portion of the claim is
  payable, pay the portion of the claim that is not in dispute and
  notify the preferred provider in writing why the remaining portion
  of the claim will not be paid; or
               (3)  if the insurer determines that the claim is not
  payable, notify the preferred provider in writing why the claim
  will not be paid.
         SECTION 10.  Section 1301.104, Insurance Code, is amended to
  read as follows:
         Sec. 1301.104.  DEADLINE FOR ACTION ON CERTAIN PHARMACY
  CLAIMS; PAYMENT.  (a) An  [Not later than the 21st day after the date
  an] insurer, or a pharmacy benefit manager that administers
  pharmacy claims for the insurer under a preferred provider benefit
  plan, that affirmatively adjudicates a pharmacy claim that is
  electronically submitted, [the insurer] shall pay the total amount
  of the claim through electronic funds transfer not later than the
  14th day after the date on which the claim was affirmatively
  adjudicated.
         (b)  An insurer, or a pharmacy benefit manager that
  administers pharmacy claims for the insurer under a preferred
  provider benefit plan, that affirmatively adjudicates a pharmacy
  claim that is not electronically submitted, shall pay the total
  amount of the claim not later than the 21st day after the date on
  which the claim was affirmatively adjudicated.
         SECTION 11.  Section 1301.105, Insurance Code, is amended by
  adding Subsections (e) and (f) to read as follows:
         (e)  An insurer or a pharmacy benefit manager that
  administers pharmacy claims for the insurer may not use
  extrapolation to complete the audit of a preferred provider that is
  a pharmacist or pharmacy. An insurer may not require extrapolation
  audits as a condition of participation in the insurer's contract,
  network, or program for a preferred provider that is a pharmacist or
  pharmacy.
         (f)  An insurer or a pharmacy benefit manager that
  administers pharmacy claims for the insurer that performs an
  on-site audit of a preferred provider that is a pharmacist or
  pharmacy shall provide the provider reasonable notice of the audit
  and accommodate the provider's schedule to the greatest extent
  possible. The notice required under this subsection must be in
  writing and must be sent by certified mail to the preferred provider
  not later than the 15th day before the date on which the on-site
  audit is scheduled to occur.
         SECTION 12.  Section 1301.109, Insurance Code, is amended to
  read as follows:
         Sec. 1301.109.  APPLICABILITY TO ENTITIES CONTRACTING WITH
  INSURER. This subchapter applies to a person, including a pharmacy
  benefit manager, with whom an insurer contracts to:
               (1)  process or pay claims;
               (2)  obtain the services of physicians and health care
  providers to provide health care services to insureds; or
               (3)  issue verifications or preauthorizations.
         SECTION 13.  Subchapter C-1, Chapter 1301, Insurance Code,
  is amended by adding Sections 1301.139, 1301.140, and 1301.141 to
  read as follows:
         Sec. 1301.139.  DEPARTMENT ENFORCEMENT OF PHARMACY CLAIMS.
  (a)  Notwithstanding any other provision of this subchapter, a
  dispute regarding payment of a claim to a preferred provider who is
  a pharmacist or pharmacy shall be resolved as provided by this
  section.
         (b)  A preferred provider who is a pharmacist or pharmacy may
  submit a complaint to the department alleging noncompliance with
  the requirements of this subchapter by an insurer, a pharmacy
  benefit manager that administers pharmacy claims for the insurer,
  or another entity that contracts with the insurer as provided by
  Section 1301.109. A complaint must be submitted in writing or by
  submitting a completed complaint form to the department by mail or
  through another delivery method. The department shall maintain a
  complaint form on the department's Internet website and at the
  department's offices for use by a complainant.
         (c)  After investigation of the complaint by the department,
  the commissioner shall determine the validity of the complaint and
  shall enter a written order. In the order, the commissioner shall
  provide the insurer and the complainant with:
               (1)  a summary of the investigation conducted by the
  department;
               (2)  written notice of the matters asserted, including
  a statement:
                     (A)  of the legal authority, jurisdiction, and
  alleged conduct under which an enforcement action is imposed or
  denied, with a reference to the statutes and rules involved; and
                     (B)  that, on request to the department, the
  insurer and the complainant are entitled to a hearing conducted by
  the State Office of Administrative Hearings in the manner
  prescribed by Section 1301.140 regarding the determinations made in
  the order; and
               (3)  a determination of the denial of the allegations
  or the imposition of penalties against the insurer.
         (d)  An order issued under Subsection (c) is final in the
  absence of a request by the complainant or insurer for a hearing
  under Section 1301.140.
         (e)  If the department investigation substantiates the
  allegations of noncompliance made under Subsection (b), the
  commissioner, after notice and an opportunity for a hearing as
  described by Subsection (c), shall require the insurer to pay
  penalties as provided by Section 1301.137.
         Sec. 1301.140.  HEARING BY STATE OFFICE OF ADMINISTRATIVE
  HEARINGS; FINAL ORDER.  (a)  The State Office of Administrative
  Hearings shall conduct a hearing regarding a written order of the
  commissioner under Section 1301.139 on the request of the
  department. A hearing under this section is subject to Chapter
  2001, Government Code, and shall be conducted as a contested case
  hearing.
         (b)  After receipt of a proposal for decision issued by the
  State Office of Administrative Hearings after a hearing conducted
  under Subsection (a), the commissioner shall issue a final order.
         (c)  If it appears to the department, the complainant, or the
  insurer that a person or entity is engaging in or is about to engage
  in a violation of a final order issued under Subsection (b), the
  department, the complainant, or the insurer may bring an action for
  judicial review in district court in Travis County to enjoin or
  restrain the continuation or commencement of the violation or to
  compel compliance with the final order.  The complainant or the
  insurer may also bring an action for judicial review of the final
  order.
         Sec. 1301.141.  LEGISLATIVE DECLARATION. It is the intent
  of the legislature that the requirements contained in this
  subchapter regarding payment of claims to preferred providers who
  are pharmacists or pharmacies apply to all insurers and pharmacy
  benefit managers unless otherwise prohibited by federal law.
         SECTION 14.  The change in law made by this Act applies only
  to a claim submitted by a provider to a health maintenance
  organization or an insurer on or after the effective date of this
  Act. A claim submitted before the effective date of this Act is
  governed by the law as it existed immediately before that date, and
  that law is continued in effect for that purpose.
         SECTION 15.  The change in law made by this Act applies only
  to a contract between a pharmacy benefit manager and an insurer or
  health maintenance organization entered into or renewed on or after
  January 1, 2010. A contract entered into or renewed before January
  1, 2010, is governed by the law as it existed immediately before the
  effective date of this Act, and that law is continued in effect for
  that purpose.
         SECTION 16.  This Act takes effect September 1, 2009.