S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   1705
 
                        2019-2020 Regular Sessions
 
                             I N  S E N A T E
 
                             January 15, 2019
                                ___________
 
 Introduced by Sen. SEPULVEDA -- read twice and ordered printed, and when
   printed to be committed to the Committee on Insurance
 
 AN ACT to amend the insurance law, in relation to implementing the phar-
   macy benefit manager transparency act
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. The insurance law is amended by adding a new article  6  to
 read as follows:
                                 ARTICLE 6
                 PHARMACY BENEFIT MANAGER TRANSPARENCY ACT
 SECTION 601. SHORT TITLE.
         602. DEFINITIONS.
         603. RESPONSIBILITY TO COVERED ENTITIES.
         604. PHARMACY BENEFIT MANAGER TRANSPARENCY.
         605. REPORT PUBLICATION.
         606. COMPLIANCE AND ENFORCEMENT.
         607. RULEMAKING AUTHORITY.
   §  601.  SHORT  TITLE. THIS ARTICLE SHALL BE KNOWN AND MAY BE CITED AS
 THE "PHARMACY BENEFIT MANAGER TRANSPARENCY ACT".
   § 602. DEFINITIONS. FOR THE PURPOSES OF THIS  ARTICLE,  THE  FOLLOWING
 DEFINITIONS SHALL APPLY:
   (1)  "COVERED  ENTITY"  MEANS  A NONPROFIT HOSPITAL OR MEDICAL SERVICE
 ORGANIZATION, INSURER,  HEALTH  COVERAGE  PLAN,  OR  HEALTH  MAINTENANCE
 ORGANIZATION LICENSED IN THE STATE; A HEALTH PROGRAM ADMINISTERED BY THE
 SUPERINTENDENT OR THE STATE IN THE CAPACITY OF PROVIDER OF HEALTH COVER-
 AGE; 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.
   (2)  "COVERED  INDIVIDUAL"  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. THIS INCLUDES A

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD05277-01-9

 S. 1705                             2
 
 DEPENDENT OR OTHER PERSON PROVIDED HEALTH  COVERAGE  THROUGH  A  POLICY,
 CONTRACT, OR PLAN FOR A COVERED INDIVIDUAL.
   (3)  "PHARMACY BENEFIT MANAGER" MEANS AN ENTITY THAT CONTRACTS WITH OR
 IS EMPLOYED BY A HEALTH BENEFIT PLAN,  STATE  AGENCY,  INSURER,  MANAGED
 CARE  ORGANIZATION, OR OTHER THIRD-PARTY PAYOR FOR THE ADMINISTRATION OR
 MANAGEMENT OF PRESCRIPTION DRUG BENEFITS PROVIDED BY  A  COVERED  ENTITY
 FOR THE BENEFIT OF COVERED INDIVIDUALS.
   (4)   "WHOLESALE   ACQUISITION  COST"  MEANS  THE  LIST  PRICE  FOR  A
 PRESCRIPTION DRUG, EXCLUDING ANY DISCOUNTS, REBATES,  OR  REDUCTIONS  IN
 PRICE,  AS  REPORTED  IN THE MOST RECENT EDITIONS OF THE WHOLESALE PRICE
 GUIDES OR  OTHER  PUBLICATIONS  OF  DRUG  PRICING  DATA  A  MANUFACTURER
 PROVIDES  TO WHOLESALERS OR DISTRIBUTORS IN THE UNITED STATES, AS SPECI-
 FIED IN 42 U.S.C. 23 § 1395W-3A(C)(6)(B).
   § 603. RESPONSIBILITY TO COVERED  ENTITIES.  (1)  A  PHARMACY  BENEFIT
 MANAGER SHALL EXERCISE GOOD FAITH AND FAIR DEALING IN THE PERFORMANCE OF
 ITS  CONTRACTUAL  OBLIGATIONS TO A COVERED ENTITY, AND SHALL PERFORM ITS
 DUTIES WITH CARE, SKILL, PRUDENCE, DILIGENCE, AND PROFESSIONALISM.
   (2) A PHARMACY BENEFIT MANAGER SHALL NOTIFY A COVERED ENTITY IN  WRIT-
 ING  OF  ANY  ACTIVITY,  POLICY, PRACTICE, OWNERSHIP INTEREST, OR AFFIL-
 IATION OF THE PHARMACY BENEFIT  MANAGER  THAT  PRESENTS  A  CONFLICT  OF
 INTEREST THAT INTERFERES WITH THE REQUIREMENTS IMPOSED BY THIS ARTICLE.
   §  604. PHARMACY BENEFIT MANAGER TRANSPARENCY. (1) EACH PHARMACY BENE-
 FIT MANAGER UNDER CONTRACT WITH A COVERED ENTITY  SHALL  SUBMIT  TO  THE
 COVERED ENTITY AND TO THE SUPERINTENDENT NO LATER THAN FEBRUARY FIRST OF
 EACH YEAR THE FOLLOWING INFORMATION FOR THE IMMEDIATELY PRECEDING CALEN-
 DAR YEAR RELATIVE TO SUCH CONTRACT:
   (A)  THE WHOLESALE ACQUISITION COST FOR EACH DRUG ON ITS FORMULARY AND
 THE TOTAL NUMBER OF PRESCRIPTIONS THAT WERE DISPENSED.
   (B) THE AMOUNT OF REBATES, DISCOUNTS, AND PRICE CONCESSIONS  THAT  THE
 PHARMACY  BENEFIT  MANAGER  RECEIVED FOR EACH DRUG ON ITS FORMULARY. THE
 AMOUNT OF REBATES SHALL INCLUDE ANY UTILIZATION DISCOUNTS  THE  PHARMACY
 BENEFIT MANAGER RECEIVES FROM A MANUFACTURER.
   (C)  THE AMOUNT OF REBATES, DISCOUNTS, AND PRICE CONCESSIONS DESCRIBED
 IN PARAGRAPH (B) OF THIS  SUBSECTION  THAT  WERE  PASSED  THROUGH  TO  A
 COVERED  ENTITY, AND THE AMOUNT THAT WERE RETAINED BY THE PHARMACY BENE-
 FIT MANAGER, FOR EACH DRUG ON ITS FORMULARY.
   (D) THE AMOUNT OF ANY FEE, ADMINISTRATIVE OR OTHERWISE, RECEIVED  FROM
 A MANUFACTURER.
   (E)  THE NATURE, TYPE, AND AMOUNT OF ALL OTHER PAYMENTS THAT THE PHAR-
 MACY BENEFIT MANAGER RECEIVES, DIRECTLY OR INDIRECTLY, FROM  A  MANUFAC-
 TURER  IN  CONNECTION WITH A DRUG SWITCH PROGRAM, A FORMULARY MANAGEMENT
 PROGRAM, A  MAIL  SERVICE  PHARMACY,  EDUCATIONAL  SUPPORT,  DATA  SALES
 RELATED TO A COVERED INDIVIDUAL, OR ANY OTHER FUNCTION.
   (F) THE AMOUNT OF ANY REIMBURSEMENTS THE PHARMACY BENEFIT MANAGER PAYS
 TO CONTRACTING PHARMACIES, AND THE NEGOTIATED PRICE COVERED ENTITIES PAY
 THE PHARMACY BENEFIT MANAGER, FOR EACH DRUG ON ITS FORMULARY.
   (G) ANY OTHER INFORMATION AS DEEMED NECESSARY BY THE SUPERINTENDENT.
   (2)  THE  INFORMATION  DISCLOSED  PURSUANT  TO  SUBSECTION ONE OF THIS
 SECTION SHALL INCLUDE ALL RETAIL, MAIL ORDER, SPECIALTY, AND  COMPOUNDED
 PRESCRIPTION PRODUCTS.
   (3) INFORMATION SUBMITTED UNDER THIS SECTION SHALL BE CONFIDENTIAL AND
 SHALL  NOT  BE  DISCLOSED  TO  ANY  PERSON  BY THE SUPERINTENDENT OR THE
 COVERED ENTITY RECEIVING THE INFORMATION. SUCH INFORMATION SHALL NOT  BE
 DEEMED A PUBLIC RECORD OF THE SUPERINTENDENT.
   §  605. REPORT PUBLICATION. (1) IN ORDER TO ALLOW PATIENTS AND EMPLOY-
 ERS TO COMPARE THE ABILITY OF PHARMACY  BENEFIT  MANAGERS  TO  NEGOTIATE

 S. 1705                             3
 
 REBATES,  DISCOUNTS,  AND  PRICE  CONCESSIONS  AND  THE  AMOUNT  OF SUCH
 REBATES, DISCOUNTS, AND PRICE CONCESSIONS THAT  ARE  PASSED  THROUGH  TO
 PLAN  SPONSORS,  AND TO ALLOW COVERED ENTITIES TO EVALUATE THE NATURE OF
 THE RELATIONSHIP BETWEEN PHARMACY BENEFIT MANAGERS AND MANUFACTURERS AND
 THE  EFFECTIVENESS  OF  PHARMACY  BENEFIT MANAGERS IN REDUCING COSTS FOR
 COVERED ENTITIES AND THEIR BENEFICIARIES, NO LATER THAN  FEBRUARY  FIRST
 OF EACH YEAR, THE SUPERINTENDENT SHALL ISSUE A REPORT TO BE PUBLISHED ON
 THE SUPERINTENDENT'S WEBSITE AGGREGATING THE INFORMATION RECEIVED BY ALL
 PHARMACY BENEFIT MANAGERS UNDER THIS SECTION FOR THE PRECEDING YEAR.
   (2)  THE SUPERINTENDENT SHALL ENSURE THAT THE INFORMATION DESCRIBED IN
 SUBSECTION ONE OF THIS SECTION IS REPORTED IN A MANNER THAT PREVENTS THE
 DISCLOSURE OF THE IDENTITY OF A SPECIFIC  PHARMACY  BENEFIT  MANAGER,  A
 COVERED  ENTITY, PRICES CHARGED FOR PRESCRIPTION DRUGS OR ANY ASSOCIATED
 REBATES, DISCOUNTS OR PRICE CONCESSIONS WITH RESPECT  TO  AN  INDIVIDUAL
 DRUG OR AN INDIVIDUAL PLAN, OR ANY INFORMATION THAT IDENTIFIES A PRODUCT
 OR MANUFACTURER.
   (3)  ON OR BEFORE FEBRUARY FIRST OF EACH YEAR THE SUPERINTENDENT SHALL
 ANALYZE THE INFORMATION SUBMITTED BY PHARMACY BENEFIT MANAGERS  PURSUANT
 TO  THIS ARTICLE AND PRODUCE AN ADDITIONAL REPORT TO BE PUBLISHED ON THE
 SUPERINTENDENT'S WEBSITE ON THE IMPACT OF PHARMACY BENEFIT  MANAGERS  ON
 THE COST, ADMINISTRATION, AND AVAILABILITY OF PRESCRIPTION DRUGS.
   (4) THE SUPERINTENDENT SHALL SUBMIT THE REPORT AND ANY RECOMMENDATIONS
 FOR  PROPOSED LEGISLATION OR FURTHER ACTION BY THE STATE PURSUANT TO THE
 REPORT'S FINDINGS TO THE TEMPORARY PRESIDENT OF THE SENATE, THE  SPEAKER
 OF  THE  ASSEMBLY  AND  THE GOVERNOR ON OR BEFORE FEBRUARY FIRST OF EACH
 YEAR.
   § 606. COMPLIANCE AND ENFORCEMENT.  (1)  ALL  CONTRACTS  FOR  PHARMACY
 BENEFIT  MANAGEMENT ENTERED INTO IN THIS STATE OR BY A COVERED ENTITY IN
 THIS STATE SHALL COMPLY WITH THE REQUIREMENTS OF THIS ARTICLE.
   (2) THE SUPERINTENDENT IS RESPONSIBLE  FOR  THE  ENFORCEMENT  OF  THIS
 ARTICLE  AND MAY REASONABLY EXAMINE AND INVESTIGATE TO ENSURE COMPLIANCE
 WITH THE PROVISIONS HEREIN.
   (3)  THE  SUPERINTENDENT  SHALL  ADOPT  PROCEDURES  FOR  INVESTIGATING
 COMPLAINTS  OF  NONCOMPLIANCE  WITH  THIS ARTICLE. IF THE SUPERINTENDENT
 FINDS A PHARMACY BENEFIT MANAGER HAS FAILED TO COMPLY WITH  ANY  OF  THE
 PROVISIONS  OF  THIS  ARTICLE,  THE SUPERINTENDENT MAY, AFTER NOTICE AND
 OPPORTUNITY FOR A HEARING, IMPOSE ONE OR MORE SANCTIONS AS DEEMED APPRO-
 PRIATE OR NECESSARY TO BRING NON-COMPLYING ENTITIES  INTO  FULL  COMPLI-
 ANCE, INCLUDING, BUT NOT LIMITED TO:
   (A)  REVOKING  OR  SUSPENDING  A  LICENSE ISSUED TO A PHARMACY BENEFIT
 MANAGER, OR DENYING AN APPLICATION FOR A RENEWAL OF A LICENSE;
   (B) IMPOSING A PERIOD OF PROBATION BEST ADAPTED TO PROTECT THE  PUBLIC
 HEALTH AND SAFETY AND FOR ANY REHABILITATION;
   (C)  IMPOSING  AN  ADMINISTRATIVE FINE NOT TO EXCEED TWO HUNDRED FIFTY
 DOLLARS FOR EACH VIOLATION OR INSTANCE OF NONCOMPLIANCE;
   (D) ASSESSING COSTS TO BE PAID BY THE PHARMACY BENEFIT MANAGER; OR
   (E) IMPOSING RESTRICTIONS ON THE SCOPE OF OPERATION  OF  THE  PHARMACY
 BENEFIT MANAGER IN THE STATE.
   (4)  IN  ADDITION  TO  SANCTIONS  FOR  NONCOMPLIANCE  AS  DESCRIBED IN
 SUBSECTION THREE OF THIS SECTION, IF A PHARMACY BENEFIT MANAGER FAILS TO
 SUBMIT TO THE SUPERINTENDENT THE INFORMATION REQUIRED UNDER SECTION  SIX
 HUNDRED  FOUR  OF THIS ARTICLE BY THE SPECIFIED DATE, THE SUPERINTENDENT
 MAY IMPOSE AGAINST THE PHARMACY BENEFIT MANAGER AN ADMINISTRATIVE PENAL-
 TY OF NOT MORE THAN TWO HUNDRED FIFTY DOLLARS FOR EACH DAY OF SUCH FAIL-
 URE.

 S. 1705                             4
 
   (5) ANY MONEY COLLECTED, AS  ADMINISTRATIVE  PENALTIES  OR  OTHERWISE,
 PURSUANT TO THIS SECTION MUST BE USED BY THE SUPERINTENDENT TO COVER THE
 COSTS OF IMPLEMENTATION AND ENFORCEMENT OF THIS ARTICLE.
   §  607.  RULEMAKING AUTHORITY. THE SUPERINTENDENT SHALL PROMULGATE AND
 ADOPT RULES AND REGULATIONS TO EFFECTUATE THE PURPOSES AND PROVISIONS OF
 THIS ARTICLE. THE RULES AND REGULATIONS SHALL BE SUBJECT  TO  REVIEW  IN
 ACCORDANCE WITH GENERAL RULES OF ADMINISTRATIVE RULEMAKING AND REVIEW OF
 REGULATIONS IN THIS STATE.
   § 2. This act shall take effect immediately.