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Introduced by   Representatives Heath of Westford, Aswad of Burlington, Atkins of Winooski, Audette of South Burlington, Bohi of Hartford, Botzow of Pownal, Brooks of Montpelier, Chen of Mendon, Connell of Warren, Cross of Winooski, Dakin of Colchester, Darrow of Dummerston, Deen of Westminster, Donovan of Burlington, Dostis of Waterbury, Edwards of Brattleboro, Emmons of Springfield, Fallar of Tinmouth, Fisher of Lincoln, French of Randolph, Gervais of Enosburg, Grad of Moretown, Head of South Burlington, Hummel of Underhill, Hunt of Essex, Jewett of Ripton, Johnson of South Hero, Keenan of St. Albans City, Kenyon of Bradford, Keogh of Burlington, Kiss of Burlington, Kitzmiller of Montpelier, Klein of East Montpelier, Larson of Burlington, Lippert of Hinesburg, Maier of Middlebury, Marek of Newfane, Martin of Springfield, Masland of Thetford, McCullough of Williston, McLaughlin of Royalton, Milkey of Brattleboro, Miller of Shaftsbury, Molloy of Arlington, Monti of Barre City, Nease of Johnson, Nuovo of Middlebury, Obuchowski of Rockingham, Partridge of Windham, Perry of Richford, Pugh of South Burlington, Reese of Pomfret, Rodgers of Glover, Seibert of Norwich, Shand of Weathersfield, Sharpe of Bristol, Smith of Morristown, Starr of Troy, Sweaney of Windsor, Symington of Jericho, Tracy of Burlington, Trombley of Grand Isle and Waite of Pawlet

Referred to Committee on


Subject:  Health; pharmacy benefit managers; prohibition of unfair practices

Statement of purpose:  This bill proposes to regulate pharmacy benefit managers to protect against unfair prescription drug practices.


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

Sec. 1.  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)  “ERISA” means the Employee Retirement Income Security Act of 1974, 29 United States Code, Sections 1001 to 1461 (1988).

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

(5)  “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).

(6)  “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.

(7)  “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 sole 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 dispensation 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 drug for a higher priced prescribed drug.

(2)  The pharmacy benefit manager may not substitute a higher priced generic drug for a lower priced prescribed drug.

(3)  With regard to any other substitutions, the pharmacy benefit manager shall consult with the prescribing health professional, or his or her authorized representative, and shall:

(A)  disclose to the covered individual, the covered entity, and the prescribing health professional or his or her authorized representative the costs of both drugs and any benefit or payment directly or indirectly accruing to the pharmacy benefit manager as a result of the substitution; and

(B)  obtain the approval of the prescribing health professional or his or her authorized representative for the substitution.

(4)  The pharmacy benefit manager shall transfer in full to the covered entity or covered individuals any benefit or payment received in any form by the pharmacy.

(c)  A pharmacy benefit manager that derives any payment or benefit for the dispensation 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 data sales fees, formulary management, educational support, claims processing, and pharmacy network fees charged from retail pharmacies.


A pharmacy benefit manager may not in a contract with a covered entity or a prescription drug manufacturer or labeler accept or agree to an obligation that is inconsistent with the fiduciary duties imposed by subsection 2023(a) of this subchapter, ERISA, or other state or federal law.


Any agreement to waive the provisions of this subchapter is against public policy and void.


(a)  In addition to any other remedy provided by law, the attorney general, a health insurance plan, a beneficiary, or another person aggrieved by a violation of this subchapter may file an action in superior court for injunctive relief and an award of compensatory and punitive damages.  If the superior court concludes that a violation of this subchapter has occurred, it shall 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.

Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont