SB1382 - 561R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Title 20, chapter 25, article 2, Arizona Revised Statutes, is amended by adding sections 20-3333, 20-3334, 20-3335 and 20-3336, to read:

START_STATUTE20-3333. Pharmacy benefit manager; certificate of authority; department; rules

A. A pharmacy benefit manager shall apply for, obtain and maintain a valid certificate of authority to operate as a pharmacy benefit manager in this state. A certificate of authority is renewable biennially and is nontransferable.

B. A pharmacy benefit manager that applies for a certificate of authority shall submit to the director both of the following:

1. An application in a form and manner prescribed by the director. An officer or individual who is responsible for the conduct of the activities of the pharmacy benefit manager shall sign the application and verify that the contents of the application and any attachments are correct. The application form shall include the following:

(a) A copy of all basic organizational documents of the pharmacy benefit manager, including the articles of incorporation, bylaws, articles of association and trade name certificate, any other similar documents and all amendments to the documents.

(b) A copy of a power of attorney that is duly executed by the pharmacy benefit manager if the pharmacy benefit manager is not domiciled in this state and that appoints a director, the director's successors in office and the director's authorized deputies as the power of attorney for the pharmacy benefit manager in this state that may receive service of process.

(c) The names, addresses, official positions and professional qualifications of each individual who is responsible for the conduct of the activities of the pharmacy benefit manager.

(d) A copy of recent financial statements showing the pharmacy benefit manager's assets, liabilities and sources of financial support that the director determines are sufficient to show that the pharmacy benefit manager is financially viable. If a pharmacy benefit manager's financial statements are prepared by an independent public accountant, a copy of the most recent regular financial statement satisfies this requirement unless the director determines that additional or more recent financial information is necessary.

(e) A description of the pharmacy benefit manager and its services, facilities and personnel.

(f) A document in which the pharmacy benefit manager confirms that its business practices and each ongoing contract comply with this article and all laws of this state.

2. An application fee prescribed by the director.

C. Within thirty days after any significant modification of the information submitted with the application for a certificate of authority, the pharmacy benefit manager shall file a notice of modification with the director.

D. The director may refuse to issue a certificate of authority if the director determines that the pharmacy benefit manager either:

1. is not financially viable.

2. had a pharmacy benefit manager certificate of authority or license denied or revoked for cause in another state or any individual responsible for the conduct of the activities of the pharmacy benefit manager had a license denied or revoked for cause in another state.

E. The director may issue a cease and desist order if the pharmacy benefit manager does not hold a valid certificate of authority. The director may deny, suspend or revoke a pharmacy BENEFIT manager's certificate of authority if the director finds, after notice and opportunity for hearing, that any of the following applies:

1. The pharmacy benefit manager violated any rule or order of the director or any law of this state applicable to a pharmacy benefit manager.

2. The pharmacy benefit manager refused to be examined or to produce its accounts, records and files for examination or audit, or if any individual responsible for the conduct of the activities of the pharmacy benefit manager refused to provide information with respect to its activities or refused to perform any other legal obligation required by the director.

3. The pharmacy benefit manager has, without just cause, refused to pay proper claims or perform services arising under its contract or has, without just cause, caused covered persons or enrollees to accept less than the amount due to enrollees or covered persons, which may result in an enrollee or a covered person procuring legal counsel to bring a lawsuit against the pharmacy benefit manager or a payor that it represents to secure full payment or settlement of claims.

4. The pharmacy benefit manager is required under this section to have a certificate of authority and fails at any time to meet any qualification for which issuance of a certificate of authority could have been refused had the failure existed at the time of issuance and been known to the director, unless the director issued a certificate of authority with knowledge of the ground for disqualification and had the authority to waive it.

5. Any individual who is responsible for the conduct of the activities of the pharmacy benefit manager is convicted of or enters a plea of guilty or no contest to a felony.

6. The pharmacy benefit manager's certificate of authority or license has been suspended or revoked in another state.

F. If a pharmacy benefit manager's certificate of authority is suspended or restricted, the director may allow the operation of the pharmacy benefit manager for a limited time not to exceed sixty days. the director may allow a pharmacy benefit manager whose certificate of authority has been suspended or restricted to operate for a period that exceeds sixty days if the director determines that the continued operation of the pharmacy benefit manager is in the beneficial interests of the covered persons by ensuring minimal disruptions to the continuity of care. A pharmacy benefit manager whose certificate of authority has been suspended or restricted is subject to a fine each month, as determined by the director in an amount not to exceed $20,000 per month, until the pharmacy benefit manager remedies the violation.

G. The director may revoke the certificate of authority if the pharmacy benefit manager has been operating under a suspended certificate of authority for a period of more than sixty days.

H. For the purposes of this section, a pharmacy benefit manager has the same rights to notice and a hearing prescribed in title 41, chapter 6, article 10.

I. The director may investigate officers, directors and owners of a pharmacy benefit manager to comply with this section.

J. To renew a certificate of authority, a pharmacy benefit manager shall submit to the director all of the following:

1. A renewal application in a form and manner prescribed by the director. An officer or authorized representative of the pharmacy benefit manager shall sign the application and verify that the contents of the renewal form are correct.

2. A renewal schedule and a fee prescribed by the director.

3. A retail pharmacy benefit manager network adequacy report as prescribed in section 20-3334.

K. A pharmacy benefit manager's certificate of authority expires by operation of law if a complete renewal application and fee is not received by the due date as established in rule.

L. if a pharmacy benefit manager and an insurer enter into a contractual agreement, the pharmacy benefit manager shall comply with the laws and rules that govern the contractual agreement as of the date of issuance of the certificate of authority.

M. A pharmacy benefit manager shall comply with the records retention schedules as prescribed in rule and section 20-3336.

N. The director may adopt rules to implement this section. END_STATUTE

START_STATUTE20-3334. Retail pharmacy benefit manager network adequacy; report; waiver

A. A pharmacy benefit manager shall provide a reasonably adequate and accessible retail pharmacy benefit manager network for the distribution of prescription drugs for a health care plan that provides convenient enrollee access to pharmacies within a reasonable distance from an enrollee's residence, as determined by the director. For the purposes of this subsection, retail pharmacy benefit manager network does not include a mail-order pharmacy or specialty pharmacy.

B. A pharmacy benefit manager shall submit to the director a retail pharmacy benefit manager network adequacy report that describes the retail pharmacy benefit manager network and the retail pharmacy benefit manager network’s accessibility in this state. The report must categorize the network by urban, suburban and rural geographic areas and applicable zip codes.

C. if the pharmacy benefit manager is unable to meet the network adequacy requirements under subsection A of this section, a pharmacy benefit manager may apply for a waiver. To apply for a waiver, a pharmacy benefit manager must submit an application in a form and manner prescribed by the director that does both of the following:

1. Demonstrates with specific data why the pharmacy benefit manager is not able to meet the network adequacy requirements under subsection A of this section.

2. Includes information as to the steps that the pharmacy benefit manager has taken and will take to address network adequacy.

D. A waiver under subsection C of this section expires after two years. If a pharmacy benefit manager seeks a renewal of the waiver, the director must consider the steps taken by the pharmacy benefit manager to address network adequacy before granting another waiver. END_STATUTE

START_STATUTE20-3335. Pharmacy benefit manager audit

A. The director may examine or audit relevant books and records of a pharmacy benefit manager that provide claims processing services or other drug or device services for a health care plan to determine if the pharmacy benefit manager is in compliance with this article.

B. All of the following apply to the INFORMATION or data that is obtained during an examination, audit or investigation:

1. The information is considered and treated as proprietary and confidential.

2. The information is not a public record and is exempt from title 39, chapter 1.

3. The information is to be used only for the purpose of ensuring a pharmacy benefit manager’s compliance with this article. END_STATUTE

START_STATUTE20-3336. Records retention; schedule

A. The director shall establish a retention schedule for all records, books, documentation and other data on file with the department related to the enforcement of this article.

B. The director shall not order the destruction or other disposal of any record, book, document or other data that is:

1. Required by law to be maintained.

2. kept on file with the department until ten years have passed.

3. Filed during the director's administration or administrations. END_STATUTE

Sec. 2. Effective date

This act is effective from and after December 31, 2024.