093_HB0520

 
                                     LRB093 06109 JLS 06214 b

 1        AN  ACT  to  create  the  Pharmacy Benefit Management and
 2    Regulation Act.

 3        Be it enacted by the People of  the  State  of  Illinois,
 4    represented in the General Assembly:

 5        Section  1.  Short  title.  This  Act may be cited as the
 6    Pharmacy Benefit Management Regulation Act.

 7        Section 5.  Purpose  and  intent.  This  Act  establishes
 8    standards  and  criteria  for the regulation and licensing of
 9    pharmacy benefit management companies. The  purpose  of  this
10    Act  is  to promote, preserve, and protect the public health,
11    safety, and welfare by and through effective  regulation  and
12    licensing of pharmacy benefit management companies.

13        Section 10.  Definitions. For purposes of this Act:
14        "Board  of  Pharmacy" or "Board" means the State Board of
15    Pharmacy.
16        "Cease and desist" is an order of the Board prohibiting a
17    pharmacy  benefit  manager  or  pharmacy  benefit  management
18    company  or  other  person  or  entity  from   continuing   a
19    particular  course  of  conduct that violates this Act or its
20    rules.
21        "Director" means the Director of Insurance.
22        "Enrollee" means an individual who has been enrolled in a
23    pharmacy benefit management plan.
24        "Insolvent" or "insolvency" means a  financial  situation
25    in  which,  based  upon the financial information required by
26    this  Act  for  the  preparation  of  the  pharmacy   benefit
27    management  company's  annual  statement,  the  assets of the
28    pharmacy benefit management company are less than the sum  of
29    all of its liabilities and required reserves.
30        "Pharmacists  services"  includes  drug therapy and other
 
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 1    patient care  services  provided  by  a  licensed  pharmacist
 2    intended   to   achieve  outcomes  related  to  the  cure  or
 3    prevention of  a  disease,  elimination  or  reduction  of  a
 4    patient's  symptoms,  or  arresting  or  slowing of a disease
 5    process as defined in the rules of the Board.
 6        "Pharmacists" means any individual properly licensed as a
 7    pharmacist by the Department of Professional Regulation.
 8        "Pharmacy" means any appropriately licensed place  within
 9    this  State where drugs are dispensed and pharmacist services
10    are provided.
11        "Pharmacy benefits management company" or "PBM"  means  a
12    business  that  administers  the prescription drug and device
13    portion of health insurance plans on behalf of plan sponsors,
14    such as self-insured employers, insurance companies,  unions,
15    and health maintenance organizations.
16        "Pharmacy  benefit  management plan" means an arrangement
17    for the delivery of prescription services in which a pharmacy
18    benefit management company  undertakes  to  provide,  arrange
19    for,  pay  for, or reimburse any of the costs of prescription
20    services for an enrollee on a prepaid or insured basis  which
21    (i)  contains  one or more incentive arrangements intended to
22    influence the cost or level of prescription services  between
23    the  plan  sponsor and one or more pharmacies with respect to
24    the delivery of prescription services and  (ii)  requires  or
25    creates benefit payment differential incentives for enrollees
26    to  use  under  contract with the pharmacy benefit management
27    company. A pharmacy benefit plan does not  mean  an  employee
28    welfare  benefit  plan  (as  defined  in  Section 3(1) of the
29    Employee Retirement Income Security Act of  1974,  29  U.S.C.
30    1002(1)), which is self-insured or self-funded.

31        Section 15.  Certificate of authority.
32        (a)  No person or organization may establish or operate a
33    pharmacy  benefit management company in this State to provide
 
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 1    pharmacy  benefit  management  plans  without   obtaining   a
 2    certificate  of  authority from the Board. All PBMs providing
 3    pharmacy benefit management plans in this State shall  obtain
 4    a certificate of authority from the Board of pharmacy every 4
 5    years.
 6        An  organization  or  person  may  apply  to the Board to
 7    obtain a certificate of authority to establish and operate  a
 8    PBM  in  compliance with this Act if the organization obtains
 9    from the Director an annual license to do  business  in  this
10    State.
11        (b)  The  Board  may suspend or revoke any certificate of
12    authority issued to a  pharmacy  benefit  management  company
13    under  this  Act  or deny an application for a certificate of
14    authority if it finds that:
15             (1)  the  pharmacy  benefit  management  company  is
16        operating significantly in  contravention  of  its  basic
17        organizational document;
18             (2)  the  pharmacy  benefit  management company does
19        not arrange for pharmacists services;
20             (3)  the pharmacy  benefit  management  company  has
21        failed     to  meet  the  requirements  for issuance of a
22        certificate of authority as set forth in this Act;
23             (4)  the  pharmacy  benefit  management  company  is
24        unable to fulfill its obligation to  furnish  pharmacists
25        services   as   required   under   its  pharmacy  benefit
26        management plan;
27             (5)  the pharmacy benefit management company  is  no
28        longer  financially  responsible  and  may  reasonably be
29        expected  to  be  unable  to  meet  its  obligations   to
30        enrollees or prospective enrollees;
31             (6)  the pharmacy benefit management company, or any
32        person  on its behalf, has advertised or merchandised its
33        services in  an  untrue,  misrepresentative,  misleading,
34        deceptive, or unfair manner;
 
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 1             (7)  the continued operation of the pharmacy benefit
 2        management company would be hazardous to its enrollees;
 3             (8)  the  pharmacy  benefit  management  company has
 4        failed to file an annual statement with the Director in a
 5        timely manner; or
 6             (9)  the pharmacy  benefit  management  company  has
 7        otherwise failed to substantially comply with this Act.
 8        (c)  When  the  certificate  of  authority  of a pharmacy
 9    benefit management company is revoked, the organization shall
10    proceed, immediately following  the  effective  date  of  the
11    order of revocation, to wind up its affairs and shall conduct
12    no further business except as may be essential to the orderly
13    conclusion  of the affairs of the organization. The Board may
14    permit such further operation  of  the  organization  as  the
15    Board may find to be in the best interest of enrollees to the
16    end   that  the  enrollees  will  be  afforded  the  greatest
17    practical opportunity to obtain pharmacists services.

18        Section 20.  License.
19        (a) The Director shall not issue an annual license to  do
20    business  in this State to any PBM providing pharmacy benefit
21    management plans until he  is  satisfied  that  the  pharmacy
22    benefit management company:
23             (1)  has  paid all fees, taxes, and charges required
24        by law;
25             (2)  has made any deposit required by this Act;
26             (3)  has   the   minimum   capital    and    surplus
27        requirements specified by the Director;
28             (4)  has  filed  a financial statement or statements
29        and any reports, certificates,  or  other  documents  the
30        Director   considers  necessary  to  secure  a  full  and
31        accurate  knowledge  of   its   affairs   and   financial
32        condition;
33             (5)  is  solvent and its financial condition, method
 
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 1        of operation, and manner of doing business are such as to
 2        satisfy the Director that it can meet its obligations  to
 3        all enrollees; and
 4             (6)  has    otherwise    complied   with   all   the
 5        requirements of law.
 6        (b)  This license shall be in addition to the certificate
 7    of authority required by the Board. A  nonrefundable  license
 8    application  fee of $500 shall accompany each application for
 9    a license to transact the business in  this  State.  The  fee
10    shall be collected by the Director and paid directly into the
11    Pharmacy  Benefit Company Regulation Fund to provide expenses
12    for the  regulation,  supervision,  and  examination  of  all
13    entities subject to regulation under this Act.
14        The  license  shall  be  signed by the Director or a duly
15    authorized agent of the Director and shall expire on the next
16    June 30 after the date on which it becomes effective.
17        (c)  All PBMs providing pharmacy benefit management plans
18    shall obtain an  annual  renewal  of  its  license  from  the
19    Director. The Director may refuse to renew the license of any
20    pharmacy  benefit management company or may renew the license
21    subject to any restrictions  considered  appropriate  by  the
22    Director,  if  he  or  she  finds  an  impairment of required
23    capital and surplus or if it finds that the pharmacy  benefit
24    management  company  has not satisfied all the conditions set
25    forth in this Act. The Director shall not fail to  renew  the
26    license   of  any  pharmacy  benefit  management  company  to
27    transact business in this State without giving  the  pharmacy
28    benefit  management  company 10 days' notice and giving it an
29    opportunity to be heard. The hearing may be informal, and the
30    Director and the  pharmacy  benefit  management  company  may
31    waive the required notice.

32        Section 25.  Annual statement.
33        (a)  A PBM providing pharmacy management benefit plans in
 
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 1    this  State shall file a statement with the Director annually
 2    by March 1. The statement shall be verified  by  at  least  2
 3    principal  officers  and  shall  cover the preceding calendar
 4    year. A pharmacy benefit management company shall also send a
 5    copy of the statement to the Board.
 6        (b)  The statement shall be on forms  prescribed  by  the
 7    Director and shall include:
 8             (1)  a  financial  statement  of  the  organization,
 9        including  its balance sheet and income statement for the
10        preceding year;
11             (2)  the number of persons enrolled during the year,
12        the number of enrollees as of the end of  the  year,  and
13        the number of enrollments terminated during the year; and
14             (3)  any   other   information   relating   to   the
15        operations  of  the  pharmacy  benefit management company
16        required by the Director pursuant to this Act.
17        (c)  If  the  pharmacy  benefit  management  company   is
18    audited   annually   by   an   independent  certified  public
19    accountant, a copy of the certified  audit  report  shall  be
20    filed annually with the Director by June 30.
21        (d)  The  Director may extend the time prescribed for any
22    pharmacy  benefit  management  company  for   filing   annual
23    statements or other reports or exhibits of any for good cause
24    shown.  However,  the  Director shall not extend the time for
25    filing annual  statements  beyond  60  days  after  the  time
26    prescribed  by  subsection  (a)  of  this Section. A pharmacy
27    benefit management company that  fails  to  file  its  annual
28    statement within the time prescribed by this Section may have
29    its  licensed  revoked  by the Director or its certificate of
30    authority revoked or suspended by the Board until the  annual
31    statement is filed.

32        Section 30.  Financial examination.
33        (a)  Instead  of  or in addition to making his or her own
 
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 1    financial  examination  of  a  pharmacy  benefit   management
 2    company,  the  Director  may accept the report of a financial
 3    examination of other  person  responsible  for  the  pharmacy
 4    benefit  management companies under the laws of another state
 5    certified by  the  insurance  supervisory  official,  similar
 6    regulatory  agency,  or the state health supervisory official
 7    of another state.
 8        (b)  The Director shall coordinate financial examinations
 9    of a PBM that provides pharmacy management benefit  plans  in
10    this  State  to  ensure  an  appropriate  level of regulatory
11    oversight and to avoid any undue  duplication  of  effort  or
12    regulation.  The  pharmacy  benefit  management company being
13    examined shall pay the cost of the examination. The  cost  of
14    the  examination shall be deposited into the Pharmacy Benefit
15    Company Regulation Fund, a special fund created in the  State
16    treasury.  Moneys  in  the  Fund  shall  be  used  to pay the
17    expenses of administering this Act.

18        Section 35.  Assessment.
19        (a)  The expense of administering this Act, including the
20    cost incurred  by  the  Director  and  the  Board,  shall  be
21    assessed  annually  by the Board against all pharmacy benefit
22    management  companies  operating  in   this   State.   Before
23    determining  the assessment, the Board shall request from the
24    Director an estimate of  all  expenses  for  the  regulation,
25    supervision,  and  examination  of  all  entities  subject to
26    regulation  under  this  Act.  The  assessment  shall  be  in
27    proportion to the business done in this State.
28        (b)  All fees assessed under this Act  and  paid  to  the
29    Board  shall  be  deposited into the Pharmacy Benefit Company
30    Regulation Fund.
31        (c)  The  Board  shall  assess  each   pharmacy   benefit
32    management  company  annually for its just share of expenses.
33    The assessment shall be in proportion to the business done in
 
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 1    this State. The Board shall provide the  Director  an  amount
 2    from  the  Pharmacy  Benefit Company Regulation Fund to cover
 3    all expenses incurred by  the  Director  for  the  regulation
 4    under this Act.
 5        (d)  The   Board   shall   give   each  pharmacy  benefit
 6    management company notice of the assessment, which  shall  be
 7    paid  to  the  Board  on  or  before  March 1 of each year. A
 8    pharmacy benefit management company that  fails  to  pay  the
 9    assessment  on or before the date prescribed shall be subject
10    to a penalty imposed by the Board. The penalty shall  be  10%
11    of the assessment and interest for the period between the due
12    date and the date of full payment. If a payment is made in an
13    amount  later found to be in error, the Board shall (i) if an
14    additional  amount  is  due,  notify  the  company   of   the
15    additional  amount  and  the company shall pay the additional
16    amount within 14 days after the date of the notice or (ii) if
17    an overpayment is made, order a refund.
18        If an assessment made under this Act is not paid  to  the
19    Board  by  the prescribed date, the amount of the assessment,
20    penalty, and interest may be recovered  from  the  defaulting
21    company  in  an action brought at the request of the Board by
22    the Attorney General made in the name and for the use of  the
23    State  in the appropriate circuit court after 10 days' notice
24    to  the  company.  The  certificate  of  authority   of   any
25    defaulting  company to transact business in this State may be
26    revoked or suspended by the  Board  until  it  has  paid  the
27    assessment.

28        Section  40.  PBM  contracts. A PBM that contracts with a
29    pharmacy  or  pharmacist  to  provide  pharmacists   services
30    through  a  pharmacy  management  plan  for enrollees in this
31    State shall file the contract with the Board 30  days  before
32    the  execution  of the contract. The contract shall be deemed
33    approved unless the Board disapproves the contract within  30
 
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 1    days  after  filing  with  the Board. Disapproval shall be in
 2    writing and set forth the reasons for disapproval. A copy the
 3    disapproval  shall  be  delivered  to  the  PBM.  The  Board,
 4    consistent with its responsibility for protecting the  public
 5    interest,  shall develop formal criteria for the approval and
 6    disapproval of PBM contracts.

 7        Section 45.  Enforcement.
 8        (a)  The Board shall  develop  formal  investigation  and
 9    compliance  procedures  with  respect  to  complaints by plan
10    sponsors, pharmacists, and enrollees concerning  the  failure
11    of  a  pharmacy  benefit  management  company or the pharmacy
12    benefit manager to comply with the provisions of this Act. If
13    the Board has reason to believe that there is a violation  of
14    this  Act, it shall issue and serve upon the pharmacy benefit
15    management company or the pharmacy benefit manager  concerned
16    a  statement  of  the charges and a notice of a hearing to be
17    held at a time and place fixed in the notice, which shall not
18    be less than 30 days after notice is served. The notice shall
19    require  the  pharmacy  benefit  management  company  or  the
20    pharmacy benefit manager to show cause why  an  order  should
21    not  be  issued  directing  the alleged offender to cease and
22    desist from the  violation.  At  the  hearing,  the  pharmacy
23    benefit  management  company  or the pharmacy benefit manager
24    shall have an opportunity to be heard and to show  cause  why
25    an  order should not be issued requiring the pharmacy benefit
26    management company or the pharmacy benefit manager  to  cease
27    and desist from the violation.
28        (b)  The  Board  may  make  an examination concerning the
29    quality  of  services  of  any  pharmacy  benefit  management
30    company  and  providers  with  whom  the   pharmacy   benefit
31    management   company  has  contracts,  agreements,  or  other
32    arrangements pursuant to its pharmacy benefit management plan
33    as often as the Board deems necessary for the  protection  of
 
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 1    the  interests  of  the  people  of  this State. The pharmacy
 2    benefit management company being examined shall pay the  cost
 3    of the examination.

 4        Section 50.  Prohibited practices.
 5        (a)  A   pharmacy   benefit  management  company  or  its
 6    representative may not cause or knowingly permit the  use  of
 7    (i)   advertising   that   is   untrue  or  misleading,  (ii)
 8    solicitation that is untrue or misleading, or (iii) any  form
 9    of evidence of coverage that is deceptive.
10        (b)  A   pharmacy   benefit  management  company,  unless
11    licensed as an insurer, may not use in its  name,  contracts,
12    or  literature  (i) any of the words "insurance", "casualty",
13    "surety", or "mutual" or (ii) any other words descriptive  of
14    the  insurance,  casualty,  or surety business or deceptively
15    similar to the  name  or  description  of  any  insurance  or
16    fidelity and surety insurer doing business in this State.
17        (c)  A   pharmacy  benefit  management  company  may  not
18    discriminate on the basis of  race,  creed,  color,  sex,  or
19    religion  in the selection of pharmacies for participation in
20    the organization.
21        (d)  A  pharmacy  benefit  management  company  may   not
22    unreasonably    discriminate    against    pharmacists   when
23    contracting for pharmacist services.

24        Section 55.  Disclosures. All of the following  shall  be
25    provided  to  the  pharmacy  benefit company's enrollees of a
26    pharmacy benefit management plan at the time of enrollment or
27    at the  time  the  contract  is  issued  and  shall  be  made
28    available upon request or at least annually:
29             (1)  A  list  of  the  names  and  locations  of all
30        affiliated providers.
31             (2)  A description of  the  service  area  or  areas
32        within   which  the  pharmacy  benefit  company  provides
 
                            -11-     LRB093 06109 JLS 06214 b
 1        prescription services.
 2             (3)  A  description  of  the  method  of   resolving
 3        complaints of covered persons, including a description of
 4        any  arbitration  procedure if complaints may be resolved
 5        through a specified arbitration agreement.
 6             (4)  Notice that  the  pharmacy  benefit  management
 7        company  is  subject  to regulation in this State by both
 8        the  State  Board  of  Pharmacy  and  the   Director   of
 9        Insurance.
10             (5)  A prominent notice included within the evidence
11        of  coverage,  providing substantially the following: "If
12        you have any questions regarding an appeal  or  grievance
13        concerning  the  pharmacist  services  that you have been
14        provided, which have not been satisfactorily addressed by
15        your plan, you may contact the  State  Pharmacy  Board.".
16        The  notice  shall  also  provide the toll-free telephone
17        number, mailing address, and electronic mail  address  of
18        the State Board of Pharmacy.

19        Section  60.  Privacy.  An enrollee in a pharmacy benefit
20    management plan has the right to privacy and  confidentiality
21    in pharmacist services. This right may be expressly waived in
22    writing by the enrollee or the enrollee's guardian.

23        Section 65.  Insolvency.
24        (a)  If  a  pharmacy  benefit  management company becomes
25    insolvent or ceases to be a company  in  this  State  in  any
26    assessable  or  license year, the company shall remain liable
27    for the payment of the assessment for the period in which  it
28    operated  as  a  pharmacy  benefit management company in this
29    State.
30        (b)  In the event of an insolvency of a pharmacy  benefit
31    management  company,  the  Director  may,  after  notice  and
32    hearing,  levy  an  assessment on pharmacy benefit management
 
                            -12-     LRB093 06109 JLS 06214 b
 1    companies  licensed  to  do  business  in  this  State.   The
 2    assessments shall be paid quarterly to the Director, and upon
 3    receipt  by  the  Director  shall be paid over into an escrow
 4    account in the Pharmacy Benefit Company Regulation Fund. This
 5    escrow account shall be solely for the benefit  of  enrollees
 6    of an insolvent pharmacy benefit management company.

 7        Section  95.  Severability.   The  provisions of this Act
 8    are severable under Section 1.31 of the Statute on Statutes.

 9        Section 97.  The State Finance Act is amended  by  adding
10    Section 5.595 as follows:

11        (30 ILCS 105/5.595 new)
12        Sec.  5.595.  The  Pharmacy  Benefit  Company  Regulation
13    Fund.