Requires pharmacy benefit managers to get state licenses

Existing law, the Knox-Keene Health Care Service Plan Act of 1975 (the Knox-Keene Act), a violation of which is a crime, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care. The Knox-Keene Act requires a pharmacy benefit manager under contract with a health care service plan to, among other things, register with the Department of Managed Health Care. Existing law provides for the regulation of health insurers by the Department of Insurance.

This bill would additionally require a pharmacy benefit manager, as defined, to apply for a license from the Department of Insurance to operate as a pharmacy benefit manager no later than January 1, 2027. The bill would establish application qualifications and requirements, and would require initial license and renewal fees to be collected into the newly created Pharmacy Benefit Manager Account in the Insurance Fund, to be available to the department for use, upon appropriation by the Legislature, as specified, for costs related to licensing and regulating pharmacy benefit managers.

This bill would require a pharmacy benefit manager to file with the department at specified annual intervals 2 reports, one of which discloses product benefits specific to the purchaser, and the other of which includes information about categories of drugs and the pharmacy benefit manager’s contracts and revenues. The bill would specify that the contents of the reports are not to be disclosed to the public. The bill would require the department, at specified annual intervals, to prepare 2 reports based on the reports submitted by pharmacy benefit managers, and would require the department to post its reports on the department’s internet website.

This bill would impose specified duties on pharmacy benefit managers and requirements for pharmacy benefit manager services and pharmacy benefit manager contracts. The bill would require a pharmacy benefit manager to disclose to the Department of Insurance all types of fees it receives and how the fees are calculated.

The bill would make a violation of the above-specified provisions subject to specified civil penalties. The bill would establish various filing and service requirements when a proceeding is brought for a violation of specified requirements by a pharmacy benefit manager. The bill would create the Pharmacy Benefit Manager Fines and Penalties Account in the General Fund, into which fines and administrative penalties would be deposited.

Existing law requires a health care service plan contract or health insurance policy that provides coverage for outpatient prescription drugs to cover medically necessary prescription drugs and subjects those policies to certain limitations on cost sharing and the placement of drugs on formularies. Existing law limits the maximum amount an enrollee or insured may be required to pay at the point of sale for a covered prescription drug to the lesser of the applicable cost-sharing amount or the retail price, and requires that payment apply to the applicable deductible. Existing law requires a plan or insurer that reports rate information to report specified prescription drug information to the relevant department no later than October 1 of each year.

This bill would prohibit a health care service plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2025, that provides prescription drug coverage from calculating an enrollee’s or insured’s cost sharing at an amount that exceeds the actual rate paid for the prescription drug, and would require a health care service plan contract to include specified cost-sharing provisions. The bill would require a plan or insurer to include additional information in its annual prescription drug data reporting, including the aggregate amount of rebates received by the pharmacy benefit manager for each drug. By expanding the scope of a crime under the Knox-Keene Act, the bill would impose a state-mandated local program.

This bill would declare that it would not narrow, abrogate, or otherwise alter the authority of the Attorney General to maintain or restore competitive, fair, and honest markets and prosecute state and federal antitrust and unfair competition violations, among other violations, and would declare that the provisions of this bill are severable.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.