Signed by Governor Gavin Newsom

Vote Smart's Synopsis:

Vote to concur with House amendments and pass a bill that prohibits pharmacy benefit managers from requiring the use of only an affiliated pharmacy and from discriminating against non-affiliated pharmacies in connection with dispensing drugs.

Highlights:

• Requires the pharmacy benefit manager to notify the purchaser if any activity poses a conflict of interest with the manager's duty to exercise good faith and fair dealing (Sec. 1).

• Requires the pharmacy benefit manager to disclose the following every quarter (Sec. 1):

• The aggregate wholesale acquisition cost for therapeutic categories of three or more drugs;

• The aggregate amount of rebates by therapeutic category;

• Any administrative fees received from manufacturer;

• Any contract or agreement with the pharmaceutical employer to exclusively provide drug to purchasers employees, insured, or enrolees;

• Prescription drug utilization information for purchasers enrollees not specific to any enrollee;

• Aggregate of payments made by the pharmacy benefit manager to pharmacies controlled or not controlled by them; and

• The aggregate amount of fees imposed on network pharmacies.

• Prohibits the pharmacy benefit manager from imposing a penalty that would prevent them from requesting information they are entitled to under this act (Sec. 1).

• Requires pharmacy benefit managers to disclose to the pharmacy network provider any material change that would affect the terms of reimbursement at least 30 days before the change (Sec. 1).

• Prohibits pharmacy benefit managers from including in a contract with a pharmacy network provider a provision that prohibits the provider from informing a patient of a less costly alternative to a prescribed medication (Sec. 1).

• Prohibits the health care service plan from calculating enrollees' cost sharing at an amount that exceeds the actual rate paid by the plan for prescription drugs (Sec. 2).

• Requires pharmacy benefit managers to submit financial statements to the Department of Managed Healthcare within 120 days of the close of the fiscal year (Sec. 4).

• Requires the pharmacy benefit manager to submit its quarterly unaudited financial statement within 45 days of the close of each quarter (Sec. 4).

• Authorizes the director to reject financial reports and requires pharmacy benefit managers to correct deficiencies within 30 days of receipt (Sec. 4). 

• Authorizes the director to make rules and regulations regarding the disclosure of financial statements (Sec. 4).

• Requires financial records to be maintained confidentially by the department (Sec. 4).

• Restricts corporate financial records, applications, and provisions exempt from the public records act from being disclosed (Sec. 5).

• Authorizes the Attorney General to investigate and prosecute any legal claims related to this article (Sec. 5).

• Establishes that the pharmacy benefit manager has the duty to be fair and truthful while acting in the payer's best interest (Sec. 6)

• Authorizes the department to conduct periodic surveys and examinations of a pharmacy benefit manager (Sec. 7).

• Prohibits pharmacy benefit managers from discriminating against non-affiliated pharmacies in relation to dispensing drugs (Sec. 8).

• Prohibits pharmacy benefit managers from doing the following (Sec. 9):

• Require a plan participant to only utilize the affiliated pharmacy;

• Financially induce a plan participant to transfer prescriptions to an affiliated pharmacy;

• Require a nonaffiliated pharmacy to transfer prescriptions to an affiliated pharmacy;

• Mislead a plan participant that they are required to have their prescription at an affiliated pharmacy; and

• Deny a nonaffiliated contract pharmacy the opportunity to participate in a pharmacy benefit manager network.

• Prohibits a contract between a nonaffiliated pharmacy and a pharmacy benefit manager from prohibiting offering the delivery of prescription drugs by mail or the delivery to the patient by an employee of the pharmacy (Sec. 10). 

• Requires the pharmacy benefit manager to use a passthrough pricing model and direct 100 percent of all rebates to the payer (Sec. 11).

• Establishes a fine ranging from $1,000 to $7,500 for each violation of this article (Sec. 14).

Full Bill Text

Vote Smart's Synopsis:

Vote to amend and pass a bill that prohibits pharmacy benefit managers from requiring the use of only an affiliated pharmacy and from discriminating against non-affiliated pharmacies in connection with dispensing drugs.

Highlights:

• Requires the pharmacy benefit manager to notify the purchaser if any activity poses a conflict of interest with the manager's duty to exercise good faith and fair dealing (Sec. 1).

• Requires the pharmacy benefit manager to disclose the following every quarter (Sec. 1):

• The aggregate wholesale acquisition cost for therapeutic categories of three or more drugs;

• The aggregate amount of rebates by therapeutic category;

• Any administrative fees received from manufacturer;

• Any contract or agreement with the pharmaceutical employer to exclusively provide drug to purchasers employees, insured, or enrolees;

• Prescription drug utilization information for purchasers enrollees not specific to any enrollee;

• Aggregate of payments made by the pharmacy benefit manager to pharmacies controlled or not controlled by them; and

• The aggregate amount of fees imposed on network pharmacies.

• Prohibits the pharmacy benefit manager from imposing a penalty that would prevent them from requesting information they are entitled to under this act (Sec. 1).

• Requires pharmacy benefit managers to disclose to the pharmacy network provider any material change that would affect the terms of reimbursement at least 30 days before the change (Sec. 1).

• Prohibits pharmacy benefit managers from including in a contract with a pharmacy network provider a provision that prohibits the provider from informing a patient of a less costly alternative to a prescribed medication (Sec. 1).

• Prohibits the health care service plan from calculating enrollees' cost sharing at an amount that exceeds the actual rate paid by the plan for prescription drugs (Sec. 2).

• Requires pharmacy benefit managers to submit financial statements to the Department of Managed Healthcare within 120 days of the close of the fiscal year (Sec. 4).

• Requires the pharmacy benefit manager to submit its quarterly unaudited financial statement within 45 days of the close of each quarter (Sec. 4).

• Authorizes the director to reject financial reports and requires pharmacy benefit managers to correct deficiencies within 30 days of receipt (Sec. 4). 

• Authorizes the director to make rules and regulations regarding the disclosure of financial statements (Sec. 4).

• Requires financial records to be maintained confidentially by the department (Sec. 4).

• Restricts corporate financial records, applications, and provisions exempt from the public records act from being disclosed (Sec. 5).

• Authorizes the Attorney General to investigate and prosecute any legal claims related to this article (Sec. 5).

• Establishes that the pharmacy benefit manager has the duty to be fair and truthful while acting in the payer's best interest (Sec. 6)

• Authorizes the department to conduct periodic surveys and examinations of a pharmacy benefit manager (Sec. 7).

• Prohibits pharmacy benefit managers from discriminating against non-affiliated pharmacies in relation to dispensing drugs (Sec. 8).

• Prohibits pharmacy benefit managers from doing the following (Sec. 9):

• Require a plan participant to only utilize the affiliated pharmacy;

• Financially induce a plan participant to transfer prescriptions to an affiliated pharmacy;

• Require a nonaffiliated pharmacy to transfer prescriptions to an affiliated pharmacy;

• Mislead a plan participant that they are required to have their prescription at an affiliated pharmacy; and

• Deny a nonaffiliated contract pharmacy the opportunity to participate in a pharmacy benefit manager network.

• Prohibits a contract between a nonaffiliated pharmacy and a pharmacy benefit manager from prohibiting offering the delivery of prescription drugs by mail or the delivery to the patient by an employee of the pharmacy (Sec. 10). 

• Requires the pharmacy benefit manager to use a passthrough pricing model and direct 100 percent of all rebates to the payer (Sec. 11).

• Establishes a fine ranging from $1,000 to $7,500 for each violation of this article (Sec. 14).

Full Bill Text