S.B. No. 704
 
 
 
 
AN ACT
  relating to the regulation of pharmacy benefit managers and mail
  order pharmacies.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Chapter 2158, Government Code, is amended by
  adding Subchapter H to read as follows:
  SUBCHAPTER H. PURCHASE OF PHARMACY BENEFIT MANAGER SERVICES
         Sec. 2158.401.  DEFINITION; APPLICABILITY. (a)  In this
  subchapter, "state agency" means a board, commission, department,
  office, or other agency in the executive, legislative, or judicial
  branch of state government that is created by the constitution or a
  statute of this state, including an institution of higher education
  as defined by Section 61.003, Education Code.
         (b)  This subchapter applies in relation to a state agency
  contract or proposed contract for pharmacy benefit manager services
  without regard to whether the contract or proposed contract is
  otherwise subject to this subtitle.
         Sec. 2158.402.  REQUIRED DISCLOSURE. (a)  A state agency on
  request of another state agency shall disclose information relating
  to the amounts charged by a pharmacy benefit manager for pharmacy
  benefit manager services provided under a prescription drug program
  and other requested pricing information related to a contract for
  pharmacy benefit manager services. A state agency shall provide
  information requested under this section not later than the 30th
  day after the date the information is requested.
         (b)  Subsection (a) does not require a state agency to
  disclose information the agency is specifically prohibited from
  disclosing under a contract with a pharmacy benefit manager
  executed before September 1, 2009.
         (c)  A contract entered, amended, or extended on or after
  September 1, 2009, may not contain a provision that prohibits a
  state agency from disclosing under this subchapter information on
  the amounts charged by a pharmacy benefit manager for pharmacy
  benefit manager services provided under a prescription drug program
  or from disclosing under this subchapter other pricing information
  related to the contract.
         Sec. 2158.403.  CONFIDENTIALITY.  The information received
  by a state agency under this subchapter may not be disclosed to a
  person outside of the state agency or its agents.
         SECTION 2.  Subchapter B, Chapter 1369, Insurance Code, is
  amended by adding Section 1369.0551 to read as follows:
         Sec. 1369.0551.  STUDY. (a)  The department shall conduct a
  study to evaluate the ways in which pharmacy benefit managers use
  prescription drug information to manage therapeutic drug
  interchange programs and other drug substitution recommendations
  made by pharmacy benefit managers or other similar entities. The
  study must include information regarding pharmacy benefit
  managers:
               (1)  intervening in the delivery or transmission of a
  prescription from a prescribing health care practitioner to a
  pharmacist for purposes of influencing the prescribing health care
  practitioner's choice of therapy;
               (2)  recommending that a prescribing health care
  practitioner change from the originally prescribed medication to
  another medication, including generic substitutions and
  therapeutic interchanges;
               (3)  changing a drug or device prescribed by a health
  care practitioner without the consent of the prescribing health
  care practitioner;
               (4)  changing a patient cost-sharing obligation for the
  cost of a prescription drug or device, including placing a drug or
  device on a higher formulary tier than the initial contracted
  benefit level; and
               (5)  removing a drug or device from a group health
  benefit plan formulary without providing proper enrollee notice.
         (b)  Not later than August 1, 2010, the department shall
  submit to the governor, the lieutenant governor, the speaker of the
  house of representatives, and the appropriate standing committees
  of the legislature a report regarding the results of the study
  required by Subsection (a), together with any recommendations for
  legislation.
         (c)  This section expires September 1, 2010.
         SECTION 3.  Subchapter B, Chapter 1551, Insurance Code, is
  amended by adding Section 1551.067 to read as follows:
         Sec. 1551.067.  PHARMACY BENEFIT MANAGER CONTRACTS. (a)  In
  awarding a contract to provide pharmacy benefit manager services
  under this chapter, the board of trustees is not required to select
  the lowest bid but must select a contract that meets the criteria
  established by this section.
         (b)  The contract must state that:
               (1)  the board of trustees is entitled to audit the
  pharmacy benefit manager to verify costs and discounts associated
  with drug claims, pharmacy benefit manager compliance with contract
  requirements, and services provided by subcontractors;
               (2)  the audit must be conducted by an independent
  auditor in accordance with established auditing standards; and
               (3)  to conduct the audit, the board of trustees and the
  independent auditor are entitled access to information related to
  the services and the costs associated with the services performed
  under the contract, including access to the pharmacy benefit
  manager's facilities, records, contracts, medical records, and
  agreements with subcontractors.
         (c)  The contract must define the information that the
  pharmacy benefit manager is required to provide to the board of
  trustees concerning the audit of the retail, independent, and mail
  order pharmacies performing services under the contract and
  describe how the results of these audits must be reported to the
  board of trustees, including how often the results must be
  reported. The contract must state whether the pharmacy benefit
  manager is required to return recovered overpayments to the board
  of trustees.
         (d)  The contract must state that any audit of a mail order
  pharmacy owned by the pharmacy benefit manager must be conducted by
  an independent auditor selected by the board of trustees in
  accordance with established auditing standards.
         SECTION 4.  Section 1551.224, Insurance Code, is amended to
  read as follows:
         Sec. 1551.224.  MAIL ORDER REQUIREMENT FOR PRESCRIPTION DRUG
  COVERAGE PROHIBITED. (a)  The board of trustees or a health
  benefit plan under this chapter that provides benefits for
  prescription drugs may not require a participant in the group
  benefits program to purchase a prescription drug through a mail
  order program.
         (b)  Except as provided by Subsection (c), the [The] board of
  trustees or a health benefit plan shall require that a participant
  who chooses to obtain a prescription drug through a retail pharmacy
  or other method other than by mail order pay a deductible,
  copayment, coinsurance, or other cost-sharing obligation to cover
  the additional cost of obtaining a prescription drug through that
  method rather than by mail order.
         (c)  The board of trustees or a health benefit plan may not
  require a participant who obtains a multiple-month supply of a
  prescription drug from a retail pharmacy under Section 1560.003 to
  pay a deductible, copayment, coinsurance, or other cost-sharing
  obligation that differs from the amount the participant pays for a
  multiple-month supply of that drug through a mail order program.
         SECTION 5.  Subtitle H, Title 8, Insurance Code, is amended
  by adding Chapter 1560 to read as follows:
  CHAPTER 1560. DELIVERY OF PRESCRIPTION DRUGS BY MAIL
         Sec. 1560.001.  DEFINITIONS. In this chapter:
               (1)  "Community retail pharmacy" means a pharmacy that
  is licensed as a Class A pharmacy under Chapter 560, Occupations
  Code.
               (2)  "Mail order pharmacy" means a pharmacy that is
  licensed under Chapter 560, Occupations Code, and that primarily
  delivers prescription drugs to an enrollee through the United
  States Postal Service or a commercial delivery service.
         Sec. 1560.002.  APPLICABILITY OF CHAPTER. This chapter
  applies only to a health benefit plan that provides benefits for
  medical or surgical expenses incurred as a result of a health
  condition, accident, or sickness, including an individual, group,
  blanket, or franchise insurance policy or insurance agreement, a
  group hospital service contract, or an individual or group evidence
  of coverage or similar coverage document that is offered or
  administered by:
               (1)  the Teacher Retirement System of Texas under
  Chapter 1575 or 1579; or
               (2)  the Employees Retirement System of Texas under
  Chapter 1551.
         Sec. 1560.003.  MULTIPLE-MONTH SUPPLY OF PRESCRIPTION DRUG.
  (a)  In this section, "multiple-month supply" means a supply for 60
  or more days.
         (b)  Notwithstanding any other law, an issuer of a health
  benefit plan that provides pharmacy benefits to enrollees must
  allow an enrollee to obtain from a community retail pharmacy a
  multiple-month supply of any prescription drug under the same terms
  and conditions applicable when the prescription drug is obtained
  from a mail order pharmacy, if the community retail pharmacy agrees
  to accept reimbursement on exactly the same terms and conditions
  that apply to a mail order pharmacy.
         (c)  This section does not require:
               (1)  the issuer of a health benefit plan to contract
  with:
                     (A)  a retail pharmacy that does not agree to
  accept reimbursement on exactly the same terms and conditions that
  apply to a mail order pharmacy; or
                     (B)  more than one mail order pharmacy; or
               (2)  a community retail pharmacy to:
                     (A)  provide a multiple-month supply of a
  prescription drug under the same terms and conditions applicable
  when the prescription drug is obtained from a mail order pharmacy;
  or
                     (B)  agree to accept reimbursement on exactly the
  same terms and conditions that apply to a mail order pharmacy.
         Sec. 1560.004.  PRESCRIPTION DRUG REIMBURSEMENT RATES.
  (a)  An issuer of a health benefit plan that provides pharmacy
  benefits to enrollees shall reimburse pharmacies participating in
  the health plan using prescription drug reimbursement rates, for
  both brand name and generic prescription drugs, that are based on a
  current and nationally recognized benchmark index that includes
  average wholesale price and maximum allowable cost.
         (b)  Regardless of whether a pharmacy is a mail order
  pharmacy or a community retail pharmacy, an issuer of a health
  benefit plan shall use the same benchmark index, including the same
  average wholesale price, maximum allowable cost, and national
  prescription drug codes, to reimburse all pharmacies participating
  in the health benefit plan.
         SECTION 6.  Subchapter C, Chapter 1575, Insurance Code, is
  amended by adding Section 1575.110 to read as follows:
         Sec. 1575.110.  PHARMACY BENEFIT MANAGER CONTRACTS. (a)  In
  awarding a contract to provide pharmacy benefit manager services
  under this chapter, the trustee is not required to select the lowest
  bid but must select a contract that meets the criteria established
  by this section.
         (b)  The contract must state that:
               (1)  the trustee is entitled to audit the pharmacy
  benefit manager to verify costs and discounts associated with drug
  claims, pharmacy benefit manager compliance with contract
  requirements, and services provided by subcontractors;
               (2)  the audit must be conducted by an independent
  auditor in accordance with established auditing standards; and
               (3)  to conduct the audit, the trustee and the
  independent auditor are entitled access to information related to
  the services and the costs associated with the services performed
  under the contract, including access to the pharmacy benefit
  manager's facilities, records, contracts, medical records, and
  agreements with subcontractors.
         (c)  The contract must define the information that the
  pharmacy benefit manager is required to provide to the trustee
  concerning the audit of the retail, independent, and mail order
  pharmacies performing services under the contract and describe how
  the results of these audits must be reported to the trustee,
  including how often the results must be reported. The contract must
  state whether the pharmacy benefit manager is required to return
  recovered overpayments to the trustee.
         (d)  The contract must state that any audit of a mail order
  pharmacy owned by the pharmacy benefit manager must be conducted by
  an independent auditor selected by the trustee in accordance with
  established auditing standards.
         SECTION 7.  Subchapter B, Chapter 1579, Insurance Code, is
  amended by adding Section 1579.057 to read as follows:
         Sec. 1579.057.  PHARMACY BENEFIT MANAGER CONTRACTS. (a)  In
  awarding a contract to provide pharmacy benefit manager services
  under this chapter, the trustee is not required to select the lowest
  bid but must select a contract that meets the criteria established
  by this section.
         (b)  The contract must state that:
               (1)  the trustee is entitled to audit the pharmacy
  benefit manager to verify costs and discounts associated with drug
  claims, pharmacy benefit manager compliance with contract
  requirements, and services provided by subcontractors;
               (2)  the audit must be conducted by an independent
  auditor in accordance with established auditing standards; and
               (3)  to conduct the audit, the trustee and the
  independent auditor are entitled access to information related to
  the services and the costs associated with the services performed
  under the contract, including access to the pharmacy benefit
  manager's facilities, records, contracts, medical records, and
  agreements with subcontractors.
         (c)  The contract must define the information that the
  pharmacy benefit manager is required to provide to the trustee
  concerning the audit of the retail, independent, and mail order
  pharmacies performing services under the contract and describe how
  the results of these audits must be reported to the trustee,
  including how often the results must be reported. The contract must
  state whether the pharmacy benefit manager is required to return
  recovered overpayments to the trustee.
         (d)  The contract must state that any audit of a mail order
  pharmacy owned by the pharmacy benefit manager must be conducted by
  an independent auditor selected by the trustee in accordance with
  established auditing standards.
         SECTION 8.  Subchapter B, Chapter 1601, Insurance Code, is
  amended by adding Section 1601.064 to read as follows:
         Sec. 1601.064.  PHARMACY BENEFIT MANAGER CONTRACTS. (a)  In
  awarding a contract to provide pharmacy benefit manager services
  under this chapter, a system is not required to select the lowest
  bid but must select a contract that meets the criteria established
  by this section.
         (b)  The contract must state that:
               (1)  the system is entitled to audit the pharmacy
  benefit manager to verify costs and discounts associated with drug
  claims, pharmacy benefit manager compliance with contract
  requirements, and services provided by subcontractors;
               (2)  the audit must be conducted by an independent
  auditor in accordance with established auditing standards; and
               (3)  to conduct the audit, the system and the
  independent auditor are entitled access to information related to
  the services and the costs associated with the services performed
  under the contract, including access to the pharmacy benefit
  manager's facilities, records, contracts, medical records, and
  agreements with subcontractors.
         (c)  The contract must define the information that the
  pharmacy benefit manager is required to provide to the system
  concerning the audit of the retail, independent, and mail order
  pharmacies performing services under the contract and describe how
  the results of these audits must be reported to the system,
  including how often the results must be reported. The contract must
  state whether the pharmacy benefit manager is required to return
  recovered overpayments to the system.
         (d)  The contract must state that any audit of a mail order
  pharmacy owned by the pharmacy benefit manager must be conducted by
  an independent auditor selected by the system in accordance with
  established auditing standards.
         SECTION 9.  Sections 1551.067, 1575.110, 1579.057, and
  1601.064, Insurance Code, as added by this Act, apply only to a
  contract with a pharmacy benefit manager executed or renewed on or
  after the effective date of this Act.
         SECTION 10.  Chapter 1560, Insurance Code, as added by this
  Act, and Section 1551.224, Insurance Code, as amended by this Act
  apply only to a health benefit plan that is delivered, issued for
  delivery, or renewed on or after January 1, 2010. A health benefit
  plan that is delivered, issued for delivery, or renewed before
  January 1, 2010, is covered by the law in effect at the time the
  health benefit plan was delivered, issued for delivery, or renewed,
  and that law is continued in effect for that purpose.
         SECTION 11.  This Act takes effect September 1, 2009.
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 704 passed the Senate on
  April 22, 2009, by the following vote: Yeas 30, Nays 0; and that
  the Senate concurred in House amendments on May 30, 2009, by the
  following vote: Yeas 30, Nays 1.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 704 passed the House, with
  amendments, on May 20, 2009, by the following vote: Yeas 134,
  Nays 0, three present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor