Bill Analysis — Senate Bill 257, Medication Cost Transparency Act (April 26, 2021)

Summary

Bill analysis of Senate Bill 257, Medication Cost Transparency Act, for the Senate Health Care committee, dated April 26, 2021. It states the bill would require pharmacy benefits managers (PBMs) to be licensed, restrict PBMs from prohibiting pharmacies from taking certain actions, and establish rules for claim overpayments and PBM networks. A new licensure section would set an initial application fee of $2,000 and annual renewal fees of $1,500. The bill would also increase the Commissioner's ability to take enforcement action against PBMs. It would be effective October 1, 2021, and apply to contracts entered into, renewed, or amended on or after that date.

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Full text

SENATE BILL 257:
Medication Cost Transparency Act.
2021-2022 General Assembly
Committee: Senate Health Care. If favorable, re-refer to Date: April 26, 2021
Commerce and Insurance. If favorable, re-refer
to Rules and Operations of the Senate
Introduced by: Sens. Perry, Britt, Johnson Prepared by: Jason Moran-Bates
Analysis of: First Edition Committee Staff

OVERVIEW: Senate Bill 257 would require pharmacy benefits managers (PBMs) to be licensed. It
would add to the consumer protections in G.S. 58-56A-3, restrict PBMs from prohibiting pharmacies
from taking certain actions, and establish rules for claim overpayments and PBM networks. It would
also increase the Commissioner's ability to take enforcement action against PBMs.
BILL ANALYSIS:
Section 1.(a) would recodify G.S. 58-56A-10 as G.S. 58-56A-30.
Section 1.(b) would make several changes, including the addition of new sections, to Article 56A.
• G.S. 58-56A-1. Definitions, an existing section, would add new definitions for "claim," "claims
processing service," "maximum allowable cost list," "out-of-pocket costs," "pharmacy services
administration organization," "pharmacist services," and "pharmacy benefits manager affiliate."
The existing definition of "health benefit plan" would be referenced to a different statute, but the
State Health Plan would remain excluded from the definition.
• G.S. 58-56A-2. Licensure, a new section, would prohibit PBMs from operating without a license.
The initial application fee would be $2,000, and annual renewal fees would be $1,500. Applicants
would have to provide corporate and financial documents to the Department of Insurance as part
of the application process. This section would also establish procedures for the Department to
deny license applications.
• G.S. 58-56A-3. Consumer protections, an existing section, would be amended to extend its
current consumer protection provisions. Under the new language, PBMs could not prohibit
pharmacies from charging a shipping and handling fee for mailed prescriptions, as long as the
insured is notified about the fee.
• G.S. 58-56A-4 Pharmacy and pharmacist protections, an existing section, would be
extensively amended. It would:
o Prohibit PBMs from charging fees not on the remittance form or agreed to in advance by
then pharmacy.
o Allow pharmacists to refuse to fill prescriptions if they believed the prescription was not
in the patient's best interest, or if there were a question about the validity of the
prescription.

Legislative Analysis
Jeffrey Hudson
Division
Director S257-SMBC-47(e1)-v-3 919-733-2578
This bill analysis was prepared by the nonpartisan legislative staff for the use of legislators in their deliberations and does not constitute an official statement of legislative intent.
Senate Bill 257
Page 2

o PBMs would be prohibited from preventing pharmacies from dispensing any drug,
including specialty drugs, and from retaliating against pharmacies.
o Retroactive denials or reductions of paid claims would be prohibited in most
circumstances.
o PBMs would retain the right to recover overpayments.
• G.S. 58-56A-5. Maximum allowable cost price, an existing section, would be amended to
prohibit PBMs from including dispensing fees in the maximum allowable cost price. PBMs would
also be required to establish a procedure for pharmacies to appeal PBMs' reimbursement
decisions.
• G.S. 58-56A-15. Pharmacy benefits manager networks, a new section, would create new rules
for PBM networks.
o All network pharmacies must be able to participate on the same terms, without benefit
differentials.
o Pharmacies that are members of pharmacy service administration organizations that enter
into contracts with PBMs would be entitled to receive a copy of the contract provisions
applicable to the pharmacy.
o Payments due a pharmacy must be paid even if the pharmacy is terminated from the
network.
• G.S. 58-56A-20. Pharmacy benefits manager affiliate disclosure; sharing of data, a new
section, would prevent PBMs from sharing information in a manner that violated HIPAA.
• G.S. 58-56A-25. Enforcement, a new section, would allow the Commissioner to examine the
affairs of any PBM. The Commissioner could retain the professionals necessary to conduct the
exam, and PBMs would bear the cost of the examinations. None of the information disclosed
during the examination would be a public record under Chapter 132. Violations of Article 56A
would be subject to penalties, including revocation of licensure.
• G.S. 58-56A-30. Civil Penalties for violations; administrative procedure, an existing section,
would be amended to allow the Commissioner to petition a court to compel a PBM to pay
restitution to (i) pharmacies harmed by the PBM's violation of Article 56A or (ii) the Department
of Insurance.
• G.S. 58-56A-45. Rules, a new section, would give the Commission the power to adopt rules
necessary to implement the provisions of Article 56A.
Sections 2 and 3 of the bill would make conforming changes to G.S. 58-2-40 (the powers of the
Commissioner of Insurance) and G.S. 58-56-2 (third party administrators definitions), respectively.
EFFECTIVE DATE: The bill would be effective October 1, 2021, and apply to contracts entered into,
renewed, or amended on or after that date.

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