Chapter 04-602

2004 -- S 2140 SUBSTITUTE B

Enacted 08/05/04

A N A C T

RELATING TO INSURANCE -- PHARMACY FREEDOM OF CHOICE -- FAIR

COMPETITION AND PRACTICES

Introduced By: Senators Polisena, Roberts, Gallo, Paiva-Weed, and Raptakis

Date Introduced: January 22, 2004

It is enacted by the General Assembly as follows:

SECTION 1. Preamble.

WHEREAS, the general assembly seeks to ensure that Rhode Islanders have access to

needed pharmaceuticals; and

WHEREAS, the general assembly is concerned with the impact of the high cost of health

insurance premiums, particularly on small businesses in Rhode Island; and

WHEREAS, employers’ and insurers’ have sought to control health care costs through

negotiation for the best price and quality; and

WHEREAS, this negotiation process with insurers must be fair, open and competitive;

and

WHEREAS, the general assembly hereby seeks to provide businesses purchasing

insurance the choice of an unlimited pharmacy network, if their insurer also offers a limited

network of pharmacies.

SECTION 2. Title 27 of the General Laws entitled "Insurance" is hereby amended by

adding thereto the following chapter:

CHAPTER 29.1

PHARMACY FREEDOM OF CHOICE -- FAIR COMPETITION AND PRACTICES

27-29.1-1. Definitions. – For purposes of this chapter, the following terms shall mean:

(a) “director” shall mean the director of the department of business regulation.

(b) “eligible bidder” shall mean a retail pharmacy, community pharmacy or pharmacy

department registered pursuant to chapter 19 of title 5, irrespective of corporate structure or

number of locations at which it conducts business, located within the geographical service area of

a carrier and willing to bid for participation in a restricted pharmacy network contract.

title 27.

(d) “insured” shall mean any person who is entitled to have pharmacy services paid by an

insurer pursuant to a policy, certificate, contract or agreement of insurance or coverage.

(e) “non-restricted pharmacy network” shall mean a network that permits any pharmacy

to participate on substantially uniform terms and conditions established by an insurer or

pharmacy benefits manager.

(f) “pharmacy benefits manager” shall mean any person or entity that is not licensed in

Rhode Island as an insurer and that develops or manages pharmacy benefits, pharmacy network

contracts, or the pharmacy benefit bid process.

(g) “restricted pharmacy network” shall mean an arrangement for the provision of

pharmaceutical drug services to insureds which under the terms of an insurer’s policy, certificate,

contract or agreement of insurance or coverage requires an insured or creates a financial incentive

for an insured to obtain prescription drug services from one or more participating pharmacies that

have entered into a specific contractual relationship with the carrier.

27-29.1-2. Requirement for availability and accessibility of pharmacy services. – In

accordance with section 23-17.13-3, an insurer must demonstrate to the director of health the

willingness and potential ability to assure that pharmacy services will be provided in a manner to

assure both availability and accessibility of adequate personnel and facilities and in a manner

enhancing availability, accessibility, and continuity of service.

27-29.1-3. Fair competition -- Requirements for carriers offering pharmacy

networks. – (a) An insurer that offers insureds a restricted pharmacy network shall, in soliciting,

arranging, competitively bidding, contracting for, and operating such a network, comply with the

following requirements for the purpose of promoting fair and competitive bidding, regardless of

when the restricted pharmacy network was established.

(1) conduct and complete an open bidding process before March 1, 2005 and at least once

every three (3) years thereafter;

(2) provide notice to eligible bidders of the insurer’s intent to solicit bids for participation

in a restricted pharmacy network;

(3) inform eligible bidders of the date such bids will be solicited;

(4) provide eligible bidders with information on an identical, equal and uniform basis,

including, but not limited to, bid procedure information, financial and utilization information

needed to make an informed competitive bid, criteria to be used in awarding a restricted

pharmacy network contract and proposed contractual requirements for the restricted pharmacy

network;

(5) provide eligible bidders with at least thirty (30) days to prepare and submit bids

between the bid solicitation date and the bid submission deadline;

(6) open all bids: (a) at a previously specified time, which shall not be more than thirty

(30) days after the bid submission deadline; and (b) in a public manner, provided, that certain,

information contained in said bids may be held as confidential from public review consistent with

regulations promulgated by the director regarding the disclosure of proprietary data or

information submitted by any bidders; and

(7) select a successful bidder using solely the criteria provided to eligible bidders

pursuant to subsection 27-29.1-3(a)(4) above, applied in a uniform manner.

(b) An insurer shall neither exclude nor favor any individual pharmacy, or group or class

of pharmacies, in the design of a competitive bid involving restricted or nonrestricted pharmacy

networks in compliance with the requirements of this section. An entity and its affiliates that

assists an insurer in the development of the bid, design, bid specifications or the bid process, or

assists in the review or evaluation of said bids, shall be prohibited from bidding on such a

contract.

27-29.1-4. Mandate to offer a nonrestricted pharmacy network. – Every health care

insurer that delivers or issues for delivery or renews in this state a contract, plan, or policy that

provides coverage for pharmaceuticals delivered on an outpatient basis through a restricted

pharmacy network, shall:

(a) also offer insurance purchasers an optional benefit plan that includes a nonrestricted

pharmacy network; and

(b) subject to a determination by the US Department of Health and Human Services'

Centers for Medicare and Medicaid Services on the consistency of this subsection with Medicare

law and related regulations, offer only nonrestricted pharmacy networks in any Medicare

Supplement or Medicare+Choice Plans.

27-29.1-5. Participation of independent community pharmacies. – Any pharmacies

licensed in the state of Rhode Island that are not owned or controlled, directly or indirectly by an

entity that owns pharmacies licensed in two (2) or more jurisdictions other than Rhode Island,

which are not participating in an insurer's restricted pharmacy network contract shall nevertheless

have the right to provide prescription drug services to the insurer's insureds and be paid by the

insurer as if the pharmacy were participating in the insurer’s restricted pharmacy network,

provided that such non-network independent pharmacies agree:

(1) to accept as the insurer’s payments in full the price required of pharmacies in the

insurer’s restricted pharmacy network;

(2) to bill to the insured up to and not in excess of any copayment, coinsurance,

deductible, other amount required of an insured by the insurer, or for other uncovered services;

(3) to be reimbursed on the same methodological basis, including, but not limited to,

capitation or other risk-sharing methodology, as required of pharmacies, in the insurer’s restricted

pharmacy network;

(4) to participate in the insurer’s utilization review and quality assurance programs,

including utilization and drug management reports as required of pharmacies in the carrier’s

restricted pharmacy network;

(5) to provide computerized online eligibility determinations and claims submissions as

required of pharmacies in the insurer’s restricted pharmacy network;

(6) to participate in the insurer’s satisfaction surveys and complaint resolution programs

for its insureds;

(7) to protect the insurer’s proprietary information and an insured’s confidentiality and

privacy;

(8) to abide by the insurer’s performance standards with respect to waiting times, fill

rates and inventory management, including formulary restrictions;

(9) to comply with the insurer’s claims audit provisions; and

(10) to certify, using audit results or accountant statements, the fiscal soundness of the

non-network pharmacy.

An insurer may waive any of the aforementioned agreements in arranging for the

provision of pharmaceutical drug benefits to insureds through a non-network pharmacy. An

insurer shall not impose any agreements, terms or conditions on any non-network independent

community pharmacy, or on any association of pharmacies, which are more restrictive than those

required of pharmacies in the insurer’s restricted pharmacy network. The failure of a non-network

pharmacy to abide by the aforementioned agreements may, at the option of the insurer, serve as

the basis for cancellation of the non-network pharmacy’s participation.

27-29.1-6. Applicability and allowances. – (a) Nothing in this section shall preclude an

insurer from entering into an agreement to allow non-network providers, other than independent

community pharmacies, the ability to participate with the insurer's plans under terms and

conditions set forth by the insurer.

(b) The provisions of this chapter shall not apply to arrangements for the provision of

pharmaceutical drug benefits to insureds between an insurer or a pharmacy benefits manager, and

a mail order pharmacy, or a hospital-based pharmacy which is not a retail pharmacy.

benefits to insureds through a restricted pharmacy network nor any other arrangement for the

provision of prescription drug benefits.

27-29.1-7. Regulation of pharmacy benefits managers. – Pharmacy benefits managers

shall be included within the definition of third-party administrator under chapter 27-20.7 and shall

be regulated as such. The annual report filed by third-party administrators with the department of

business regulation shall include: contractual language that provides a complete description of the

financial arrangements between the third-party administrator and each of the insurers covering

benefit contracts delivered in Rhode Island; and if the third-party administrator is owned by or

affiliated with another entity or entities, it shall include an organization chart and brief description

which shows the relationships among all affiliates within a holding company or otherwise

affiliated. Such reporting shall be in a format required by the director and filed with the

department as a public record as defined and regulated under chapter 38-2.

27-29.1-8. Enforcement. – The department of business regulation shall have authority to

enforce the provisions of sections 27-29.1-3 -- 27-29.1-7, subject to the provisions of chapter 42-

35.

27-29.1-9. Severability. – If any provision of sections 27-29.1-1 -- 27-29.1-8, or the

application of those sections to any person or circumstances is held in invalid, the invalidity shall

not affect other provisions or applications of sections 27-29.1-1 -- 27-29.1-8 which can be given

effect without the invalid provision or application; to this end the provisions of sections 27-29.1-1

-- 27-29.1-8 are declared to be severable.

27-29.1-10. Costs of enforcement. – (a) The total cost of the enforcement of sections

27-29.1-3 and 27-29.1-8 shall be borne by the pharmacy benefits manager(s) and/or the insurer(s)

against whom the complaint is made on an equal basis and shall include the following expenses:

(1) One hundred fifty percent (150%) of the total salaries and benefits paid to the

personnel of the department of business regulation engaged in the enforcement less any salary

reimbursement;

(2) All reasonable technology costs related to the enforcement process. Technology costs

shall include the actual cost of software and hardware utilized in the enforcement process and the

cost of training personnel in the proper use of the software or hardware;

(3) All necessary and reasonable education and training costs incurred by the state to

maintain the proficiency and competence of the enforcing personnel. All these costs shall be

incurred in accordance with the appropriate state of Rhode Island regulations, guidelines and

procedures.

27-29.1-11. Evaluation report. – The health insurance commissioner, pursuant to

section 42-14.5-1, shall evaluate the impact of nonrestricted pharmacy networks on health

insurance costs in Rhode Island and shall submit report of findings to the joint legislative

committee on health care oversight on or before May 1, 2005.

SECTION 3. This act shall take effect upon passage.

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LC01091/SUB B

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