H. B. 4656
(By Delegate Perdue)
[Introduced February 20, 2006; referred to the
Committee on Health and Human Resources then Finance.]
A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §33-25G-1, §33-25G-
2, §33-25G-3, §33-25G-4, §33-25G-5, §33-25G-6, §33-25G-7,
§33-25G-8, §33-25G-9, §33-25G-10, §33-25G-11, §33-25G-12,
§33-25G-13 and §33-25G-14, all relating to pharmacy benefit
managers; requiring licensure, providing requirements for
license application; defining terms; requiring certain
disclosures; establishing fees; requiring retention of
records; providing for annual statement; authorizing access
to records; establishing special revenue account; providing
for confidentiality of information; establishing penalties
for violations; authorizing promulgation of rules; requiring
annual report to the Legislature and Governor; and setting
effective date.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated, §33-25G-1, §33-25G-2, §33-25G-3, §33-25G-4, §33-25G-5, §33-25G-6, §33-25G-7, §33-
25G-8, §33-25G-9, §33-25G-10, §33-25G-11, §33-25G-12, §33-25G-13
and §33-25G-14, all to read as follows:
PHARMACY BENEFIT MANAGER LICENSING AND REGULATION
§33-25G-1. Short title and purpose.
(a) This article may be cited as the "Pharmacy Benefit
Manager Licensing and Regulation Act."
(b) The purpose of this Act is to establish standards and
criteria for the licensing and regulation of pharmacy benefit
managers. This Act is designed to promote, preserve, and protect
the public health, safety, and welfare by and through licensing
and effective regulation of pharmacy benefit managers.
§33-25G-2. Definitions.
As used in this article, unless the context otherwise
indicates, the following terms have the following meanings:
(1) "Commissioner" means the insurance commissioner of West
Virginia;
(2) "Covered entity" means a nonprofit hospital or medical
service corporation, health insurer, health benefit plan or
health maintenance organization licensed pursuant to the
provisions of article twenty-five-a of this chapter; a health
program administered by the department or the State in the
capacity of provider of health coverage; or an employer, labor
union or other group of persons organized in the state that
provides health coverage to covered individuals who are employed or reside in the State. "Covered entity" does not include a
self-funded plan that is exempt from state regulation pursuant to
ERISA, health plan that provides coverage only for accidental
injury, specified disease, hospital indemnity, medicare
supplement, disability income, long-term care or other limited
benefit health insurance policies and contracts.
(3) "Covered person" means a member, participant, enrollee,
contract holder or policy holder or beneficiary of a covered
entity who is provided health coverage by the covered entity.
"Covered individual" includes a dependent or other person
provided health coverage through a policy, contract or plan for
a covered individual.
(4) "Pharmacy benefit management" means the procurement of
prescription drugs at a negotiated rate for dispensation within
this state to covered individuals, the administration or
management of prescription drug benefits provided by a covered
entity for the benefit of covered individuals or any of the
following services provided with regard to the administration of
pharmacy benefits:
(A) Mail service pharmacy;
(B) Claims processing, retail network management and payment
of claims to pharmacies for prescription drugs dispensed to
covered individuals;
(C) Clinical formulary development and management services;
(D) Rebate contracting and administration;
(E) Certain patient compliance, therapeutic intervention and
generic substitution programs; and
(F) Disease management programs.
(5) "Pharmacy benefit manager" or "PBM" means an entity
that performs pharmacy benefit management. "Pharmacy benefit
manager" includes a person or entity acting for a pharmacy
benefit manager in a contractual or employment relationship in
the performance of pharmacy benefit management services,
including mail service pharmacy.
§33-25G-3. Applicability and scope.
This act shall apply to a pharmacy benefit manager that
provides claims processing services, other prescription drug or
device services, or both to covered persons who are residents of
this state.
§33-25G-4. Licensing requirement.
(a) No person or organization shall act or operate as a
pharmacy benefit manager in this state without obtaining a
certificate of licensure from the Commissioner. Renewal shall
occur annually thereafter.
(b) Each person or organization seeking licensure shall file
an application, furnished by the Commissioner, which shall
include, but not be limited to the following:
(1) All basic organizational documents, including the
articles of incorporation, articles of association, bylaws,
partnership agreement, trade name certification, trust agreement, shareholder agreement and other applicable documents, including
amendments;
(2) The names, addresses, official positions and
professional qualifications of the individuals who are
responsible for the conduct of the affairs of the pharmacy
benefit manager, including all members of the board of directors,
board of trustees, executive committee, other governing board or
committee, the principal officers in the case of a corporation,
the partners or members in the case of a partnership or
association and any other person who exercises control or
influence over the affairs of the pharmacy benefit manager;
(3) Annual audited statements for the most recent year, or
such other information as the Commissioner may require in order
to review the current financial condition of the applicant;
(4) If the applicant is not currently acting as a pharmacy
benefit manager, a statement of the amounts and sources of funds
available for organization expenses and the proposed arrangements
for reimbursement and compensation of incorporators for other
principals;
(5) The name and address of the agent for service of process
in the state;
(6) A detailed description of the claims processing
services, pharmacy services, insurance services, other
prescription drug or device services, audit procedures for
network pharmacies or other administrative services to be provided;
(7) Any other information the Commissioner may require; and
(8) A filing fee of two hundred dollars.
(c) The applicant shall make available for inspection by
the Commissioner, copies of all contracts with insurers,
pharmaceutical manufacturers or other persons utilizing the
services of the pharmacy benefit manager for pharmacy benefit
management services.
(d) The Commissioner may withhold or revoke a license if it
is determined that the pharmacy benefit manager or any principal
thereof is not financially sound or has had a license revoked or
denied for cause in any state.
(e) The commissioner may require a surety bond in such
amount and in such form as he or she deems appropriate to ensure
the financial solvency of the pharmacy benefit manager.
§33-25G-5.
Disclosure of ownership or affiliation and certain
agreements.
(a) Each pharmacy benefit manager shall disclose to the
Commissioner any ownership interest or affiliation of any kind
with any insurance company responsible for providing benefits
directly or through reinsurance to any plan for which the
pharmacy benefit manager provides services or any parent
companies, subsidiaries and other entities or businesses relative
to the provision of pharmacy services, other prescription drug or
device services or a pharmaceutical manufacturer.
(b) A pharmacy benefit manager must notify the Commissioner
in writing within thirty days of any material change in its
ownership.
(c) A pharmacy benefit manager shall disclose the following
agreements, and any changes thereto, within thirty days of such
change:
(1) All incentive arrangement or programs such as rebates,
discounts, disbursements, or any other similar financial program
or arrangement relating to income or consideration received or
negotiated, directly or indirectly, with any pharmaceutical
company, that relates to prescription drug or device services,
including at a minimum, information on the formula or other
method for calculation and amount of the incentive arrangements,
rebates or other disbursements, the identity of the associated
drug or device and the dates and amounts of such disbursements;
(2) Any agreement with a pharmaceutical manufacturer to
share manufacturer rebates and discounts with the pharmacy
benefit manager or to pay money or other economic benefits to the
pharmacy benefit manager;
(3) Any agreement or practice to bill a health plan for
prescription drugs at a cost higher than the pharmacy benefit
manager pays the pharmacy;
(4) Any agreement to share revenue with a mail order or
internet pharmacy company; and
(5) Any agreement to sell prescription drug data including data concerning the prescribing practices of the health care
providers in the state.
§33-25G-6. Maintenance of records; access; confidentiality;
financial examination.
(a) A pharmacy benefit manager shall maintain all books and
records of all transactions between the pharmacy benefit manager,
insurers and covered entities for three years beyond the
termination of the contract period, unless any other law
prescribes a greater time period.
(b) The Commissioner shall have access to books and records
maintained by the pharmacy benefit manager for the purposes of
examination, audit and inspection.
(c) The Commissioner may conduct examinations of any
pharmacy benefit manager in this state whenever he or she deems
necessary to ensure an appropriate level of regulatory oversight.
The pharmacy benefit manager shall pay the cost of the
examination which shall be deposited into the special revenue
fund, created in section nine of this article, to provide all
expenses for the regulation under this Act.
(d) In conducting examinations pursuant to this section, the
commissioner shall have the same powers set forth in subsection
(h), section nine, article two of this chapter.
§33-25G-7. Annual statement and filing fee required.
(a) Each pharmacy benefit manager with a license shall file
with the commissioner an annual audited statement on or before the first day of June. The statement shall be in such form and
contain such matters as the Commissioner prescribes and shall
include the filing fee of two hundred dollars. The statement
must include the total number of persons subject to management by
the pharmacy benefit manager during the previous year, or portion
thereof, and the dollar value of the claims processed.
(b) The statement shall disclose all incentive arrangements
or programs such as rebates, discounts, disbursements, or any
other similar financial program or arrangement relating to income
or consideration received or negotiated, directly or indirectly,
with any pharmaceutical company, that relates to prescription
drug or device services, including at a minimum information on
the formula or other method for calculation and amount of the
incentive arrangements, rebates or other disbursements, the
identity of the associated drug or device and the dates and
amounts of such disbursements.
§33-25G-8. Confidentiality of submitted information.
Any information submitted in compliance with this article
that the pharmacy benefit manager believes is proprietary
information shall be clearly marked as such. The commissioner
shall only be entitled to disclose such information in accordance
with state and federal law.
§33-25G-9. Special revenue account.
There is hereby created in the state treasury a special
revenue account, designated the "Pharmacy Benefit Managers Licensure Fund", which shall be an interest bearing account and
may be invested in the manner permitted by the provisions of
article six, chapter twelve of this code, with the interest
income a proper credit to the fund. The account shall contain
any funds received by the commissioner pursuant to this article
and any funds appropriated by the Legislature. The commissioner
may expend funds received in the Pharmacy Benefit Managers
Licensure Fund only for the purposes of administration of this
article.
§33-25G-10. Unauthorized business.
The unauthorized conduct of the business of a pharmacy
benefit manager shall be treated as unauthorized insurance
business and shall be subject to the same criminal and civil
penalties as provided in article forty-four of this chapter for
violation of the unauthorized insurers act.
§33-25G-11. Violations.
The provisions of section eleven, article three of this
chapter shall apply to any violations of this article by a
pharmacy benefit manager.
§33-25G-12. Promulgation of rules.
The commissioner may promulgate rules, including emergency
rules, pursuant to the provisions of article three, chapter
twenty-nine-a of this code to implement the provisions of this
article, and such rules may include the establishment of fees.
§33-25G-13. Commissioners reporting requirements.
On or before the first day of January, two thousand eight,
and every year thereafter, the commissioner shall submit a report
to the Legislature and the governor detailing the implementation
of the licensure process and the information collected. All
information contained in the report shall be de-identified or
reported as aggregate data only. The report shall include, but
not be limited to, the following information:
(1) The number of pharmacy benefit managers licensed in this
state;
(2) The number of persons in this state served by the
pharmacy benefit manager annually;
(3) The number of contracts to provide services in this
state;
(4) The aggregate amount of rebates, discounts or
disbursements received from pharmaceutical manufacturers;
(5) The aggregate amount of rebates, discounts or
disbursements returned to the client; and
(6) Any other information the commissioner deems necessary
to report.
§33-25G-14. Effective date.
Any pharmacy benefit manager doing business within this
state shall obtain a license as required in section four of this
article within 120 days from the effective date of this Act.
Article 25G is new; therefore, strike-throughs and underscoring have been omitted.