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Introduced by Representative Koch of Barre Town

Referred to Committee on


Subject:  Health; prescription drug programs and practices

Statement of purpose:  This bill proposes to (1) codify, clarify, and amend provisions of the Healthy Vermonters pharmacy discount plan; (2) regulate pharmacy benefit managers to protect against unfair prescription drug practices; (3) require the disclosure of retail prescription drug prices; (4) repeal the sunset provision applicable to the law exempting certain mental health drugs from the prior authorization process; and (5) direct the department of prevention, assistance, transition, and health access to assist Medicare beneficiaries with paying drug costs not covered under the federal Medicare drug benefit.


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

* * * Healthy Vermonters * * *

Sec. 1.  33 V.S.A. § 2003 is amended to read:


(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 or

(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; and

(D)  for whom, for purposes of determining eligibility under this subdivision, the cost of drugs provided under the Healthy Vermonters program is considered an expense incurred by the family.

(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 that is of particular benefit to the public.  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 the federal Social Security Act, Title XIX.  This subsection takes effect on the date the department begins offering prescription drug benefits under the program.

(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.

* * * Unfair Drug Practices * * *

Sec. 2.  33 V.S.A. chapter 19, subchapter 6 is added to read:

Subchapter 6.  Prescription Drug Practices

§ 2021.  Prescription drug practices; COMPLIANCE

Pharmacy benefit managers doing business in this state and contracts for pharmacy benefit management entered into in this state must comply with the requirements of this subchapter.


As used in this subchapter, unless the context otherwise indicates, the following terms have the following meanings:

(1)  “Covered entity” means a nonprofit hospital or medical service organization, insurer, health coverage plan, or health maintenance organization licensed under the laws of this state; a health program administered by the state; or an employer, union, or other group of persons organized in this state that provides health coverage to covered individuals employed or residing in Vermont.  “Covered entity” does not include a health plan that provides coverage only for accidental injury, specified disease, hospital indemnity, Medicare supplemental insurance, disability income, long-term care, or other limited benefit health insurance policies and contracts.

(2)  “Covered individual” means a member, participant, enrollee, contract holder, or policy holder or a 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.

(3)  “Generic drug” means a chemically equivalent copy of a brand name drug with an expired patent.

(4)  “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, 270.20 (1999).

(5)  “Pharmacy benefit management” means the procurement of prescription drugs at a negotiated rate for dispensing 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.

(6)  “Pharmacy benefit manager” 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 for a covered entity and includes mail service pharmacy.



(a)  A pharmacy benefit manager owes a fiduciary duty to a covered entity and shall discharge that duty in accordance with the provisions of state and federal law.  A pharmacy benefit manager shall:

(1)  perform its duties with care, skill, prudence, and diligence and in accordance with the standards of conduct applicable to a fiduciary in an enterprise of a like character and with like aims;

(2)  discharge its duties with respect to the covered entity for the primary purpose of providing benefits to covered individuals and defraying reasonable expenses of administering health plans;

(3)  notify the covered entity in writing of any activity, policy, or practice of the pharmacy benefit manager that directly or indirectly presents any conflict of interest with the duties imposed by this section; and

(4)  provide a covered entity all financial and utilization information requested by the covered entity relating to the provision of benefits to covered individuals through that covered entity and all financial and utilization information relating to services to that covered entity.  A pharmacy benefit manager providing information under this section may designate the material as confidential.  Information designated as confidential by a pharmacy benefit manager and provided to a covered entity under this section may not be disclosed by the covered entity to any person without the consent of the pharmacy benefit manager, except that disclosure may be made in a court filing under section 2024 of this subchapter or when authorized by that section or when ordered by a Vermont court for good cause shown.

(b)  With regard to the dispensing of a substitute prescription drug for a prescribed drug to a covered individual, the following provisions apply:

(1)  The pharmacy benefit manager may substitute a lower priced generic and therapeutically equivalent drug for a higher priced prescribed drug.

(2)  With regard to substitutions in which the substitute drug costs more than the prescribed drug, the substitution must be made for medical reasons that benefit the covered individual and must benefit the covered entity.  If a substitution is being made under this subdivision, the pharmacy benefit manager shall obtain the approval of the prescribing health professional, or his or her authorized representative, after disclosing to the covered individual and the covered entity the cost of both drugs and any benefit or payment directly or indirectly accruing to the pharmacy benefit manager as a result of the substitution.

(3)  The pharmacy benefit manager shall transfer in full to the covered entity any benefit or payment received in any form by the pharmacy benefit manager as a result of a prescription drug substitution under subdivision (1) or (2) of this subsection.

(c)  A pharmacy benefit manager that derives any payment or benefit for the dispensing of prescription drugs within the state based on volume of sales for certain prescription drugs or classes or brands of drugs within the state shall pass that payment or benefit on in full to the covered entity.

(d)  A pharmacy benefit manager shall disclose to the covered entity all financial terms and arrangements for remuneration of any kind that apply between the pharmacy benefit manager and any prescription drug manufacturer or labeler, including formulary management, educational support, claims processing, and pharmacy network fees charged from retail pharmacies and data sales fees.


(a)  In addition to any other remedy provided by law, the attorney general, a covered entity, or a covered individual aggrieved by a violation of this subchapter may file an action in superior court for injunctive relief and an award of compensatory damages.  If the superior court concludes that a violation of this subchapter has occurred, it may award to the prevailing party reasonable costs and attorney’s fees.

(b)  An action by the attorney general under this section is subject to the provisions of this subchapter and the consumer fraud provisions of chapter 63 of Title 9.  Each violation of this subchapter constitutes an unfair practice under section 2453 of Title 9 and is a civil violation for which the attorney general may obtain, in addition to other remedies, injunctive relief and a fine in an amount not to exceed $10,000.00 per violation, plus the costs of suit, including necessary and reasonable investigative costs, reasonable expert fees, and reasonable attorney’s fees.

* * * Retail Price Disclosure * * *

Sec. 3.  33 V.S.A. § 2007 is added to read:


(a)  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.

(b)  This section applies to a pharmacy on July 1, 2004 or when the pharmacy updates its computer software program with regard to prescription drug price and patient payment, whichever is later, but no later than January 1, 2006.

* * * Mental Health Drugs * * *


The sunset provision Sec. 5 of No. 127 of the Acts of the 2001 Adj. Sess. (repealing the law exempting certain mental health drugs from the prior authorization process) is hereby repealed.

* * * Medicare Drug Benefit Donut Hole * * *


The department of prevention, assistance, transition, and health access shall amend Vermont prescription drug programs to conform with the provisions of the federal Medicare Prescription Drug, Improvement, and Modernization Act of 2003 in order to provide financial assistance to Medicare beneficiaries who otherwise would be required to pay 100 percent of the cost of drugs between $2,250.00 and $5,100.00.


This act shall take effect July 1, 2004, except for Sec. 4 which shall take effect upon passage.

Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont