S.288

Introduced by   Senator Leddy of Chittenden County, Senator Condos of Chittenden County, Senator Gossens of Addison County, Senator Lyons of Chittenden County and Senator Welch of Windsor County

Referred to Committee on

Date:

Subject:  Prescription drugs; programs and practices

Statement of purpose:  This bill proposes to (1) require disclosure of retail drug prices; (2) include over-the-counter drugs on the state’s PDL; (3) amend the Healthy Vermonters prescription drug program; (4) provide the office of the attorney general with investigative power under the disclosure laws applicable to pharmaceutical marketers; (5) require the licensing of PBMs; (6) require the commissioner of personnel to use the state’s preferred drug list in the state employees’ health benefit plan; (7) study and report on expanded access to the 340B federal drug pricing program; (8) study and report on savings generated from purchasing generic rather than brand‑name drugs in state drug assistance programs and in private plans; and (9) require an audit of state contracts with PBMs as they concern the payment of supplemental rebates.

AN ACT RELATING TO STATE PROGRAMS AND POLICIES ON PRESCRIPTION DRUGS

It is hereby enacted by the General Assembly of the State of Vermont:

* * * Retail Drug Price Disclosure * * *

Sec. 1.  33 V.S.A. § 2007 is added to read:

§ 2007.  RETAIL DRUG PRICE DISCLOSURE

With each prescription dispensed, the pharmacist shall disclose to the patient, in writing, the usual and customary price of the prescription and the cost of any payment toward the price required of the patient.

Sec. 2.  EFFECTIVE DATE

Sec. 1 of this act shall take effect July 1, 2004 and apply to a pharmacy on the date thereafter on which the pharmacy updates its computer software program with regard to prescription drug price and patient payment, but in no event later than January 1, 2006.

* * * Over-the-Counter Drug Coverage * * *

Sec. 3.  33 V.S.A. § 1992a is added to read:

§ 1992a.  OVER-THE-COUNTER DRUG COVERAGE

All public pharmaceutical assistance programs shall provide coverage for over-the-counter drugs on the preferred drug list developed under section 1998 of this title.

* * * Healthy Vermonters (Maine Rx Plus) * * *

Sec. 4.  33 V.S.A. § 2003 is amended to read:

§ 2003.  PHARMACY DISCOUNT PLAN

(a)  On or before July 1, 2002, the The commissioner shall implement a pharmacy discount plan, to be known as the “Healthy Vermonters” program, for Vermonters without adequate coverage for prescription drugs.  The provisions of section 1992 of this title shall apply to the commissioner’s authority to administer the pharmacy discount plan established by this section.  The commissioner may establish an enrollment fee in such amount as is necessary to support the administrative costs of the plan.

(b)  The pharmacy discount plan authorized by this section shall include a program implemented as a Section 1115 Medicaid waiver, wherein the state makes a payment toward the cost of the drugs dispensed to individuals enrolled in this program of at least two percent of the cost of each prescription or refill, consistent with the appropriation for the program established by this section.

(c)  The commissioner shall implement the pharmacy discount program authorized by this section without any financial contribution by the state otherwise required by subsection (b) of this section, and without federal waiver approval during such time as federal waiver approval has not been secured.

(d)  As used in this section:

(1)  “Eligible beneficiary” means any individual Vermont resident without adequate coverage:

(A)  who is at least 65 years of age, or is disabled and is eligible for Medicare or Social Security disability benefits, with household income equal to or less than 400 percent of the federal poverty level, as calculated under the rules of the Vermont health access plan, as amended, and any other individual Vermont resident with;

(B)  whose household income is equal to or less than 300 350 percent of the federal poverty level, as calculated under the rules of the Vermont health access plan, as amended; and;

(C)  whose family incurs unreimbursed expenses for prescription drugs that equal five percent or more of family income or whose total unreimbursed medical expenses equal 15 percent or more of family income.

(2)  “Initial discounted cost” means the price of the drug based on the Medicaid fee schedule.

(3)  “Labeler” means an entity or person that receives prescription drugs from a manufacturer or wholesaler and repackages those drugs for later retail sale and that has a labeler code from the federal Food and Drug Administration under 21 Code of Federal Regulations, 207.20 (1999).

(4)  “Participating retail pharmacy” means a retail pharmacy located in this state or another business licensed to dispense prescription drugs in this state that participates in the program according to rules established by the department and provides discounted prices to eligible beneficiaries of the program.

(5)  “Secondary discounted cost” means the price of the drug based on the Medicaid fee schedule, less payment by the state of at least two percent of the Medicaid rate, less the average rebate percentage paid to the Medicaid program by pharmaceutical manufacturers for the prior state fiscal year, as determined by the commissioner.

(6)  “Vermonter without Without adequate coverage” includes eligible beneficiaries with no coverage for prescription drugs, and eligible beneficiaries whose annual maximum coverage limit under their health benefit plan has been reached.

(e)  Drugs covered by the Healthy Vermonters program shall include only drugs that are on the Medicaid preferred drug list as established and revised from time to time by the department.

(f)  Beginning January 1, 2005, a participating retail pharmacy shall offer beneficiaries the initial discounted price.  No later than October 1, 2005, a participating retail pharmacy shall offer beneficiaries the secondary discounted price, if available.

(g)  The Vermont board of pharmacy shall adopt rules requiring disclosure by participating retail pharmacies to eligible beneficiaries of the amount of savings provided as a result of the program.  The rules must consider and protect information that is proprietary in nature.  The department may not impose transaction charges under this program on pharmacies that submit claims or receive payments under the program.  Pharmacies shall submit claims to the department to verify the amount charged to eligible beneficiaries under the program.  On a weekly or biweekly basis, the department must reimburse pharmacies for the difference between the initial discounted price and the secondary discounted price provided to eligible beneficiaries.

(h)  The names of drug manufacturers and labelers who do and do not enter into rebate agreements under this program are public information.  The department shall release this information to health care providers and the public on a regular basis and shall publicize participation by manufacturers and labelers.  The department shall impose prior authorization requirements in the Medicaid program, as permitted by law, to the extent the department determines it is appropriate to do so in order to encourage manufacturer and labeler participation in the program and so long as the additional prior authorization requirements remain consistent with the goals of the Medicaid program and the requirements of Title XIX of the federal Social Security Act.

(i)  The commissioner shall establish, by rule, a process to resolve discrepancies in rebate amounts claimed by manufacturers, labelers, pharmacies, and the department.

(j)  Annually, the department shall report the enrollment and financial status of the program to the health access oversight committee by September 1, and to the legislature by January 1.

(k)  The department shall undertake outreach efforts to build public awareness of the program and maximize enrollment.  The department may adjust the requirements and terms of the program to accommodate any new federally funded prescription drug programs.

(l)  The department may contract with a third party or third parties to administer any or all components of the program, including outreach, eligibility, claims, administration, and rebate recovery and redistribution.

(m)  The department shall administer the program and other medical and pharmaceutical assistance programs under this title in a manner advantageous to the programs and enrollees.  In implementing this section, the department may coordinate the other programs and this program and may take actions to enhance efficiency, reduce the cost of prescription drugs, and maximize benefits to the programs and enrollees, including providing the benefits of this program to enrollees in other programs.

(n)  The department may adopt rules to implement the provisions of this section.

(o)  The department may seek any waivers of federal law, rule, or regulation necessary to implement the provisions of this section.

Sec. 5.  EFFECTIVE DATE

Sec. 4 of this act shall take effect July 1, 2004, except that subsection 2003(h) of Title 33, requiring public disclosure of manufacturers and labelers entering into rebate agreements and certain prior authorization requirements under Medicaid, shall take effect on the date the department begins offering prescription drug benefits under the program.

* * *  Attorney General Investigative Power * * *

Sec. 6.  33 V.S.A. § 2005(b) is amended to read:

(b) The attorney general may bring an action in Washington superior court for injunctive relief, costs, and attorneys fees, and to impose on a pharmaceutical manufacturing company that fails to disclose as required by subsection (a) of this section a civil penalty of no more than $10,000.00 per violation.  Each unlawful failure to disclose shall constitute a separate violation.  The attorney general may issue civil investigative demands and otherwise investigate alleged violations of subsection (a) of this section pursuant to 9 V.S.A. § 2460.

* * * PBM Licensing * * *

Sec. 7.  18 V.S.A. chapter 221, subchapter 9 is added to read:

Subchapter 9.  Pharmacy Benefit Managers

§ 9471.  DEFINITIONS

As used in this subchapter:

(1)  “Beneficiary” means an individual who has been enrolled in a health insurance plan in which coverage of prescription drugs is administered by a pharmacy benefit manager.

(2)  “Commissioner” means the commissioner of banking, insurance, securities, and health care administration.

(3)  “Health insurance plan” means a health benefit plan offered, administered, or issued by a health insurer doing business in Vermont.

(4)  “Health insurer” is defined by subdivision 9402(7) of this title.  The term includes:

(A)  The state of Vermont and any agent or instrumentality of the state that offers, administers, or provides financial support to state government employees.

(B)  Medicaid, the Vermont health access plan, the VScript pharmaceutical assistance program, and any other public health care assistance program.

(C)  To the extent permitted by federal law, any self-insured health benefit plan that offers health care coverage to Vermont beneficiaries.

(5)  “Pharmacy benefit management plan” means an arrangement for the delivery of prescription services in which a pharmacy benefit manager undertakes to provide, arrange for, pay for, or reimburse any of the costs of prescription services for a beneficiary.

(6)  “Pharmacy benefits manager” means a business that administers the prescription drug or device portion of health insurance plans through a pharmacy benefit management plan on behalf of a health insurance plan.

§ 9472.  PHARMACY BENEFIT MANAGER; LICENSE REQUIRED

(a)  No person shall act as a pharmacy benefit manager or administer a pharmacy benefit management plan in this state without obtaining an annual license from the commissioner.

(b)  The commissioner may suspend or revoke any license issued to a pharmacy benefit manager under this subchapter or deny an application for a license if the commissioner finds that the pharmacy benefit manager or any officer, employee, or agent of the pharmacy benefit manager has failed to satisfy any of the following requirements.  A pharmacy benefit manager shall:

(1)  Fulfill its fiduciary obligations to health insurance plans and health insurance plan beneficiaries in accordance with the provisions of section 9473 of this title.

(2)  File an annual disclosure statement and secure prior approval of contracts in accordance with the provisions of section 9474 of this title.

(3)  Pay all fees, taxes, and charges required by law.

(4)  File a financial statement or statements and any reports, certificates, or other documents the commissioner considers necessary to secure a full and accurate knowledge of its affairs and financial condition.

(5)  Remain solvent, and its financial condition, method of operation, and manner of doing business shall remain such as to satisfy the commissioner that it can meet its obligations to health insurance plans and all beneficiaries.

(6)  Comply with all the requirements of law, the provisions of this subchapter, and the rules adopted pursuant to this subchapter.

(c)  A nonrefundable license application fee of $500.00 shall accompany each application for a license to transact business in this state.  The fee shall be collected by the commissioner and paid directly into the pharmacy benefit management regulation special fund established and administered under subchapter 5 of chapter 7 of Title 32 for the purpose of defraying expenses for the regulation, supervision, and examination of all entities subject to regulation under this subchapter.

(d)  The license required by this section shall be signed by the commissioner or a duly authorized agent of the commissioner and shall expire on the next June 30 after the date on which it becomes effective.

(e)  All pharmacy benefit managers offering or providing pharmacy benefit management plans shall obtain an annual renewal of their license from the commissioner.  The commissioner may refuse to renew the license of any pharmacy benefit manager or may renew the license, subject to any conditions or restrictions deemed by the commissioner to be needed to carry out the purposes of this subchapter, if the commissioner finds that the pharmacy benefit manager has violated any of the requirements for licensure established in subsection (b) of this section.  The commissioner shall not fail to renew the license of any pharmacy benefit manager without giving the pharmacy benefit manager notice and an opportunity to be heard in accordance with the provisions of 3 V.S.A. chapter 25 (Administrative Procedure Act).

(f)  The commissioner may adopt such rules as are necessary to carry out the purposes of this subchapter.

§ 9473.  FIDUCIARY OBLIGATIONS OF PHARMACY BENEFIT

MANAGERS

A pharmacy benefit manager shall at all times discharge its obligations to health insurance plans and health insurance plan beneficiaries in compliance with the standards of conduct applicable to a “fiduciary” under the Employee Retirement Income Security Act of 1974.  In so doing, a pharmacy benefit manager shall:

(1)  Discharge its duties with respect to health insurance plans and health insurance plan beneficiaries solely in the interest of such plans and beneficiaries, and for the exclusive purpose of providing benefits to such plans and beneficiaries and defraying reasonable expenses of administering health insurance plan and health insurance plan beneficiary benefits. 

(2)  Discharge its duties with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent fiduciary acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.

(3)  Discharge its duties in accordance with the contract governing the health insurance plan prescription drug coverage, insofar as such contract is consistent with the provisions of this law and of the Employee Retirement Income Security Act of 1974.

(4)  Provide any and all information requested by health insurance plans so as to ensure that such plans are able to ascertain all material activities being undertaken on their behalf or on behalf of health insurance plan beneficiaries.

(5)  Notify health insurance plans in writing of any proposed or ongoing activity that involves, directly or indirectly, any conflict of interest as contemplated by the standards applicable to a “fiduciary” under the Employee Retirement Income Security Act of 1974.

§ 9474.  ANNUAL STATEMENT; PRIOR APPROVAL OF CONTRACTS

(a)  Each pharmacy benefit manager providing pharmacy benefit management plans in this state shall file a statement with each health insurance plan and with the commissioner annually by March 1.  The statement shall be verified by at least two principal officers and shall cover the preceding calendar year.  The annual statement shall be on forms prescribed by the commissioner, and shall include:

(1)  A financial statement of the organization, including its balance sheet and income statement for the preceding year.

(2)  The number of persons enrolled during the year, the number of enrollees as of the end of the year, and the number of enrollments terminated during the year.

(3)  Any other information relating to the operations of the pharmacy benefit manager required by the commissioner pursuant to this subchapter.

(b)  A pharmacy benefit manager shall not enter into a contract with a health insurance plan unless the commissioner first determines, upon application by  the pharmacy benefit manager on a form and in a manner approved by the commissioner, that the pharmacy benefit manager has disclosed to the health insurance plan any of the following agreements and practices, and that the commissioner has determined that the contract and any such agreement and practice promotes the medical and financial interests of the health insurance plan and the beneficiaries of the health insurance plan.  The pharmacy benefit manager shall disclose:

(1)  Any agreement with a pharmaceutical manufacturer to favor the manufacturer’s products over a competitor’s products, or to place the manufacturer’s drug on the pharmacy benefit manager’s preferred list or formulary, or to switch the drug prescribed by the patient’s health care provider with a drug agreed to by the pharmacy benefit manager and the manufacturer.

(2)  Any agreement with a pharmaceutical manufacturer to share manufacturer rebates and discounts with the pharmacy benefit manager, or to pay “soft money” or other economic benefits to the pharmacy benefit manager.

(3)  Any agreement or practice to bill Vermont health benefit plans 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.

(5)  Any agreement to sell prescription drug data concerning Vermont beneficiaries, or data concerning the prescribing practices of the health care providers of Vermont beneficiaries.

(6)  Any corporate or other organizational or governing affiliation between the pharmacy benefit manager and a pharmaceutical manufacturer.

(7)  Any other agreement of the pharmacy benefit manager with a pharmaceutical manufacturer, or with wholesale and retail pharmacies, affecting the cost of pharmacy benefits provided to Vermont beneficiaries.

(c)  A contract filed under this section shall be deemed approved unless the commissioner disapproves such contract within 30 days after filing with the commissioner.  Disapproval shall be in writing, stating the reasons therefor and a copy thereof delivered to the pharmacy benefit manager.

§ 9475.  ASSESSMENT

(a)  The expenses of administering this subchapter, including the cost incurred by the commissioner, shall be assessed annually by the commissioner against all pharmacy benefit managers operating in this state.  Before determining the assessment, the commissioner shall provide an estimate of all expenses for the regulation, supervision, and examination of all entities subject to regulation under this chapter.  The assessment shall be in proportion to the business done in this state.

(b)  All fees and assessments under this subchapter and paid to the commissioner shall be deposited in the pharmacy benefit management regulation special fund established and administered under subchapter 5 of chapter 7 of Title 32 for the purpose of defraying the expenses for the regulation, supervision, and examination of all entities subject to regulation under this subchapter.

(c)  The commissioner shall give each pharmacy benefit manager notice of the assessment, which shall be paid to the department annually on or before March 1.  Any pharmacy benefit manager that fails to pay the assessment on or before the date prescribed in this subsection shall be subject to a penalty imposed by the commissioner.  The penalty shall be ten percent of the assessment and interest for the period between the due date and the date of full payment.  If a payment is made in an amount later found to be in error, the commissioner shall:

(1)  If an additional amount is due, notify the company of the additional amount and the company shall pay the additional amount within 14 days of the date of the notice.

(2)  If an overpayment is made, order a refund.

(d)  If an assessment made under this subchapter is not paid to the commissioner by the prescribed date, the amount of the assessment, penalty, and interest may be recovered from the defaulting company on motion of the commissioner made in the name and for the use of the state in the appropriate superior court after ten days’ notice to the company.  The license of any defaulting pharmacy benefit manager to transact business in this state may be revoked or suspended by the commissioner until the manager has paid such assessment.

§ 9476.  ENFORCEMENT

In addition to any other remedy provided by law, a health insurance plan or a plan beneficiary aggrieved by a violation of this subchapter or a rule adopted under this subchapter may file an action in superior court for injunctive relief and an award of compensatory and punitive damages.  The superior court may award to the health insurance plan or plan beneficiary who prevails in an action under this section reasonable costs and attorney’s fees.

* * * Joint Purchasing within Vermont * * *

Sec. 8.  33 V.S.A. § 1998 is amended to read:

§ 1998.  PHARMACY BEST PRACTICES AND COST CONTROL

              PROGRAM ESTABLISHED

(a)  The commissioner of prevention, assistance, transition, and health access shall establish a pharmacy best practices and cost control program designed to reduce the cost of providing prescription drugs, while maintaining high quality in prescription drug therapies.  The program shall include:

(1)  A preferred list of covered prescription drugs that identifies preferred choices within therapeutic classes for particular diseases and conditions, including generic alternatives and over-the-counter drugs.

(A)  The commissioner, and the commissioner of banking, insurance, securities, and health care administration shall implement the preferred drug list as a uniform, statewide preferred drug list by encouraging all health benefit plans in this state to participate in the program.

(B)  The commissioner of personnel shall use the preferred drug list in the state employees health benefit plan only if participation in the program will provide economic and health benefits to the state employees health benefit plan and to beneficiaries of the plan, and only if agreed to through the bargaining process between the state of Vermont and the authorized representatives of the employees of the state of Vermont.  The provisions of this subdivision do not authorize the actuarial pooling of the state employees health benefit plan with any other health benefit plan, unless otherwise agreed to through the bargaining process between the state of Vermont and the authorized representatives of the employees of the state of Vermont.

* * *

* * * Expanding Use of 340B Programs * * *

Sec. 9.  33 V.S.A. § 2008 is added to read:

§ 2008.  FEDERAL DISCOUNT PROGRAMS; STUDY

The commissioner shall study and by January 1, 2005 report to the governor, the senate and house committees on health and welfare, and the health access oversight committee on the feasibility of providing discounted prescription drugs to Vermont’s most vulnerable patient populations through the use of Section 340B of the federal Public Health Service Act, 42 United States Code, Section 256b (1999).  The commissioner shall work with other state agencies, representatives of state employees, and representatives of health care providers and facilities in the state to provide the following information:

(1)  A description of all health care providers and facilities in the state potentially eligible for designation as “covered entities” under Section 340B, including without limitation all hospitals eligible as disproportionate share hospitals; recipients of grants from the United States Public Health Service; federally qualified health centers; federally qualified look-alikes; state‑operated AIDS drug assistance programs; Ryan White CARE Act Title I, Title II, and Title III programs; tuberculosis, black lung, family planning, and sexually transmitted disease clinics; hemophilia treatment centers; public housing primary care clinics; and clinics for homeless people.

(2)  A listing of potential applications of Section 340B and the potential benefits to public, private, and third-party payors for prescription drugs, including:

(A)  application to inmates and employees in youth correctional facilities, county jails, and state prisons;

(B)  maximizing the use of Section 340B within state-funded managed care plans;

(C)  including Section 340B providers in state bulk purchasing initiatives; and

(D)  using sole source contracts with Section 340B providers to furnish high-cost chronic care drugs.

(3)  Discounts available through Section 340B contracts, including estimated cost savings to the state as a result of retail mark-up avoidance, negotiated subceiling prices, and coordination with the Medicaid program in order to minimize costs to the program and to other purchasers of prescription drugs.

(4)  The resources available to potential applicants for designation as covered entities for the application process, establishing a Section 340B program, restructuring the health care system, or other methods of lowering the cost of prescription drugs.  The resources must include state and federal agencies and private philanthropic grants to be used for the purposes of this section.

* * * Study on Savings * * *

Sec. 10.  REPORT ON PRESCRIPTION DRUG SAVINGS

The commissioner of prevention, assistance, transition, and health access shall conduct a study to demonstrate any savings achieved through the use of generic instead of brand-name drugs in state and, to the extent possible, private drug assistance plans.  The findings of the study shall be reported to the health access oversight committee and the senate and house committees on health and welfare by January 1, 2005.

* * * Auditing PBM Contracts * * *

Sec. 11.  AUDITING PBM CONTRACTS

The commissioner of prevention, assistance, transition, and health access and the commissioner of personnel, in consultation with the commissioner of banking, insurance, securities, and health care administration and the state auditor, shall develop a pharmacy benefits manager audit plan.  The purpose of the audit plan is to ensure that pharmacy claims and rebates are being paid accurately and appropriately.  Accordingly, the audit shall include a performance audit, contract compliance audit, rebate audit, and pharmacy claims analysis and audit.  The audit plan shall include a cost estimate for hiring an independent auditor, options for keeping the cost of the audit down, for example, by partnering with other health benefit plans within or outside the state, as well as recommendations regarding possible revenue sources to cover the cost of implementing the audit plan.  The audit plan shall be detailed in a report submitted to the health access oversight committee and the senate and house committees on health and welfare by September 1, 2004.