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ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
AMENDED
pharmacy benefits; coverage; exemptions
Purpose
Prohibits a pharmacy benefit manager (PBM) from limiting or excluding coverage of a prescription drug for any medically-stable, covered individual on a specific prescription drug if outlined conditions are met. Establishes a prescription coverage exemption determination process.
Background
The Department of Insurance and Financial Institutions (DIFI) regulates and monitors insurance companies and professionals operating in Arizona to protect the public and help ensure that these entities follow Arizona and federal laws (Ariz. Const. art. 15 § 5). Beginning January 1, 2025, PBMs must apply and pay a fee to DIFI for a valid certificate of authority to operate as a PBM who performs services for a health plan subject to state jurisdiction (A.R.S. § 20-3333).
A PBM is a person, business or entity that, either directly or through an intermediary, manages the prescription drug coverage provided by a contracted insurer or other third-party payor, including the processing and payment of claims for prescription drugs, the performance of drug utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to prescription drug coverage, contracting with network pharmacies and controlling the cost of covered prescription drugs (A.R.S. § 20-3321).
PBMs are charged with: 1) updating price and drug information for each list that the PBM maintains; 2) making the sources used to determine maximum allowable cost pricing available to each network pharmacy at the beginning of a contract or upon renewal; 3) establishing a process for network pharmacies to appeal its reimbursement for any drug subject to maximum allowable cost pricing; and 4) allowing a contracted pharmacy services organization to file an appeal of a drug on behalf of the organization's contracted pharmacies (A.R.S. § 20-3331).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
PBM Prescription Drug Coverage
1. Prohibits a PBM, if the PBM enters into an agreement with a health care insurer (insurer) to provide PBM services, from limiting or excluding coverage of a prescription drug for any covered individual who is medically stable on a specific prescription drug as determined by the covered individual's prescribing health care professional, if:
a) the drug was previously approved by the PBM or insurer for coverage for the covered individual; and
b) the covered individual continues to be an enrollee of the insurer that the PBM has contracted with to provide PBM services.
2. Prohibits a PBM, for the purposes of the prohibition on limiting or excluding a medically stable individual's prescription drug, from:
a) limiting or reducing the maximum coverage of prescription drug benefits;
b) increasing cost sharing for a covered prescription drug;
c) moving a prescription drug to a more restrictive formulary tier; or
d) removing a prescription drug from a formulary unless either:
i. the U.S. Food and Drug Administration (FDA) revokes approval for or removes a prescription drug from the prescription drug market; or
ii. the prescription drug manufacturer notifies the FDA of a manufacturing discontinuation or potential discontinuation.
3. Requires a PBM, if the PBM enters into an agreement with an insurer to provide PBM services, to continue coverage of a covered medically stable individual's prescription drug through the last day of the covered individual's plan year.
4. Requires a PBM or insurer to provide written notice of the removal from, or an increase in the cost sharing for, any prescription drug on the drug formulary to each impacted covered individual at least 60 days before the plan year ends.
5. Requires the notice to set forth the process by which the covered individual's health care professional may request authorization for the continued use of a nonformulary prescription drug if the medical prescriber determines that the covered individual:
a) has previously been approved by the covered individual's PBM or insurer to be treated by the current specific prescription drug or drug regimen; and
b) is medically stable on the current nonformulary drug.
Prescription Drug Formulary
6. Requires hospital, medical, dental and optometric service corporations with a prescription drug benefit plan that uses a drug formulary to approve an alternative prescription drug when the subscriber has previously been approved to receive a nonformulary prescription drug by the current or previous insurer or PBM and:
a) the subscriber is medically stable on the drug as determined by the prescribing health care professional; and
b) the prescribing health care professional continues to prescribe the drug for the subscriber's covered medical condition.
7. Requires a written denial to contain information about how a subscriber may appeal the denial.
8. Allows a subscriber or the subscriber's authorized representative to appeal any determination to deny coverage.
9. Deems a formulary exemption authorization in effect until the end of the subscriber's plan year.
10. Requires a formulary exemption approval to be in writing and delivered to the subscriber and the subscriber's treating health care professional.
Prescription Coverage Exemption Determination Process
11. Requires an insurer, PBM or utilization review agent that is contracted to provide PBM services for the insurer to provide a covered individual and prescribing health care professional with access to a clear and convenient process to request a coverage exemption determination.
12. Allows an insurer, PBM or utilization review agent to use its existing medical exceptions process to satisfy the prescription coverage exemption determination requirement, if the existing process is consistent with the prescribed requirements.
13. Requires an insurer, PBM or utilization review agent to respond to a coverage exemption determination request within 72 hours, unless exigent circumstances exist in which case the insurer, PBM or utilization review agent must respond within 24 hours.
14. Requires a coverage exemption to be granted for a covered, as prescribed.
Miscellaneous
15. Grants the Director of DIFI, if an insurer, PBM or utilization review agent violates the prescription drug coverage and determination process requirements, the authority to take any enforcement action against the insurer, PBM or utilization review agent.
16. Specifies that the prescription drug coverage and determination process requirements do not:
a) prevent a health care professional from prescribing another drug covered by the carrier, insurer or PBM that the health care professional deems medically necessary for the covered individual;
b) prevent an insurer or PBM from adding a prescription drug to its formulary or removing a prescription drug from its formulary, if the drug manufacturer has removed the drug for sale in the United States; or
c) prevent an insurer or PBM from making any formulary changes for patients that are not currently stable on a previously approved prescription drug.
17. Specifies that a policy that is issued or renewed by a disability insurer does not include a policy that provides limited benefit coverage.
18. Defines terms.
19. Applies the newly established drug coverage and determination process requirements to contracts entered into, amended, extended or renewed beginning January 1, 2025.
20. Makes technical and conforming changes.
21. Becomes effective on the general effective date.
Amendments Adopted by the Finance and Commerce Committee
1. Modifies the prescription coverage exemption determination process.
2. Requires a PBM or insurer to provide notice of the removal from, or an increase in the cost sharing for, any prescription drug on the drug formulary to each impacted covered individual at least 60 days before the plan year ends and requires the notice to set forth the process by which the covered individual's health care professional may request authorization for the continued use of a nonformulary prescription drug.
3. Requires hospital, medical, dental and optometric service corporations with a prescription drug benefit plan that uses a drug formulary to approve an alternative prescription drug when the subscriber has previously been approved to receive a nonformulary prescription drug by the current or previous insurer or PBM and:
a) the subscriber is medically stable on the drug as determined by the prescribing health care professional; and
b) the prescribing health care professional continues to prescribe the drug for the subscriber's covered medical condition.
4. Allows a subscriber or their authorized representative to appeal a determination to deny coverage and deems a formulary exemption authorization in effect until the end of the subscriber's plan year.
5. Specifies that the prescription drug coverage and determination process requirements do not prevent an insurer or PBM from making any formulary changes for patients that are not currently stable on a previously approved prescription drug.
6. Makes technical and conforming changes.
Amendments Adopted by the Appropriations Committee
· The Appropriations Committee adopted a strike-everything amendment relating to PBMs (APPROP Striker Memo).
Senate Action
FICO 2/12/24 DPA 7-0-0
Prepared by Senate Research
February 26, 2024
MG/cs