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.