BILL REQ. #:  H-4883.1 

READ FIRST TIME 02/03/06.   

     AN ACT Relating to protection against unfair prescription drug practices by pharmacy benefit managers; and adding a new chapter to Title 19 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   DEFINITIONS. The definitions in this section apply throughout this chapter, unless the context clearly requires otherwise.
     (1) "Covered entity" means a health plan as defined in RCW 48.43.005(19), a health carrier as defined in RCW 48.43.005(18), a state purchased health care program as defined in RCW 41.05.011(2), the Washington state health insurance pool as established in RCW 48.41.040, 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 policyholder 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 contract or health plan for a covered individual.
     (3) "Generic drug" means a chemically equivalent copy of a brand-name drug with an expired patent.
     (4) "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 C.F.R. Sec. 270.20 (1999). "Labeler" does not mean a person or entity that repackages drugs for use of its participants, members, or enrollees or pharmacy operations of any integrated delivery system undertaken for the benefit of patients obtaining care through that system.
     (5) "Pharmacy benefits management" means the procurement of prescription drugs at a negotiated rate for dispensation within Washington 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 order 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.
     (6) "Pharmacy benefits manager" means an entity that performs pharmacy benefits management. "Pharmacy benefits manager" includes a person or entity acting for a pharmacy benefits manager in a contractual or employment relationship in the performance of pharmacy benefits management for a covered entity and includes mail order pharmacy. "Pharmacy benefit manager" does not include a health carrier as defined in RCW 48.43.005(18) if the health carrier provides or administers pharmacy benefits management to its insureds, participants, members, or enrollees, or pharmacy operations of any integrated delivery system undertaken for the benefit of patients obtaining care through that system.

NEW SECTION.  Sec. 2   PRESCRIPTION DRUG PRACTICES. All pharmacy benefit managers, and any contract for pharmacy benefits management entered into in this state or by a covered entity in this state, must comply with this chapter.

NEW SECTION.  Sec. 3   REQUIRED PRACTICES. (1) A pharmacy benefits manager owes a fiduciary duty to a covered entity and must discharge that duty in accordance with state and federal law.
     (2) A pharmacy benefits manager shall 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.
     (3) A pharmacy benefits manager shall discharge its duties with respect to the covered entity for the primary purpose of providing benefits to covered individuals and defraying reasonable expenses of administering health plans.
     (4) A pharmacy benefits manager shall notify the covered entity in writing of any activity, policy, or practice of the pharmacy benefits manager that directly or indirectly presents any conflict of interest with the duties imposed by this section.
     (5) A pharmacy benefits manager shall provide to a covered entity all financial and utilization information requested by the covered entity relating to providing benefits to covered individuals through that covered entity and all financial and utilization information relating to services to that covered entity. A pharmacy benefits manager providing information under this section may designate that material as confidential. Information designated as confidential by a pharmacy benefits 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 benefits manager, except that disclosure may be made in a court filing under the consumer protection act, chapter 19.86 RCW, or when authorized by chapter 19.86 RCW or ordered by a court for good cause shown.
     (6) With regard to the dispensation of a substitute prescription drug for a prescribed drug to a covered individual, the provisions in this subsection apply when a pharmacy benefits manager derives any payment or benefit related to the price or cost of a drug dispensed through a pharmacy benefits management contract.
     (a) The pharmacy benefits manager may substitute a lower-priced generic or therapeutically equivalent drug for a higher-priced prescribed drug as authorized in chapter 69.41 RCW.
     (b) The pharmacy benefits manager may substitute a higher-priced drug for a lower-priced prescribed drug on behalf of a person enrolled in a state-purchased health care program, as defined in RCW 41.05.011, when the drug substituted for the prescribed drug is a preferred drug on the Washington state preferred drug list established under RCW 70.14.050.
     (c) With regard to substitutions other than those authorized in (b) of this subsection in which the substitute drug costs more than the prescribed drug, the substitution must be made for medical reasons that benefit the covered individual. If a substitution is being made under this subsection, the pharmacy benefits manager shall obtain the approval of the prescribing health professional or that person's authorized representative after disclosing to the covered individual and the covered entity the cost of both drugs and any benefit or payment directly or indirectly accruing to the pharmacy benefits manager as a result of the substitution.
     (d) The pharmacy benefits manager shall disclose in full to the covered entity any benefit or payment received in any form by the pharmacy benefits manager as a result of a prescription drug substitution under this subsection.
     (7) A pharmacy benefits manager who 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 must disclose that payment or benefit in full to the covered entity.
     (8) A pharmacy benefits manager shall disclose to the covered entity all financial terms and arrangements for remuneration of any kind that apply between the pharmacy benefits manager and any prescription drug manufacturer or labeler, including, without limitation, formulary management and drug-switch programs, educational support, claims processing and pharmacy network fees that are charged from retail pharmacies, and data sales fees.
     (9) The agreement between a pharmacy benefits manager and a covered entity must include a provision allowing the covered entity to have audited the pharmacy benefits manager's books, accounts, and records, including deidentified utilization information, as necessary to confirm that the benefit of a payment received by the pharmacy benefits manager is being shared as required by the contract.

NEW SECTION.  Sec. 4   WAIVERS. Any waiver by a covered entity of the provisions of this act is contrary to public policy and shall be unenforceable and void.

NEW SECTION.  Sec. 5   ENFORCEMENT. (1) The legislature finds that the practices covered by this chapter are matters vitally affecting the public interest for the purpose of applying the consumer protection act, chapter 19.86 RCW. A violation of this chapter is not reasonable in relation to the development and preservation of business and is an unfair or deceptive act in trade or commerce and an unfair method of competition for the purpose of applying the consumer protection act, chapter 19.86 RCW.
     (2) The enforcement provisions of subsection (1) of this section relate to state law only and are not intended to create an alternative enforcement mechanism under the federal employee retirement income security act of 1974 or any other federal law.

NEW SECTION.  Sec. 6   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 7   CAPTIONS NOT LAW. Captions used in this act are not any part of the law.

NEW SECTION.  Sec. 8   Sections 1 through 7 of this act constitute a new chapter in Title 19 RCW.