health insurance; pharmacy; reimbursement rates

HB4124 - 572R - I Ver

REFERENCE TITLE:
health insurance; pharmacy; reimbursement rates

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

HB 4124

Introduced by

Representative
Austin

AN
ACT

amending title 20, chapter 25, article 2,
arizona revised statutes, by adding sections 20-3337, 20-3337.01,
20-3337.02, 20-3337.03, 20-3337.04 and 20-3337.05; relating to pharmacy benefit
managers.

(TEXT OF BILL BEGINS ON NEXT PAGE)

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 20-3337, 20-3337.01,
20-3337.02, 20-3337.03, 20-3337.04 and 20-3337.05, to read:

START_STATUTE
20-3337.

Pharmacy benefit managers; reimbursement rates; definitions

A. A pharmacy benefit manager or a
person acting on behalf of a pharmacy benefit manager may not reimburse a
pharmacy or PHARMACIST in this state in an amount less than the acquisition
cost for the covered drug, device or service.� This subsection applies only to
reimbursements for a contracted pharmacist or local pharmacy.

B. For claims that are submitted by a
local pharmacy to a pharmacy benefit manager that administers claims on behalf
of a health plan, A PHARMACY BENEFIT MANAGER, not including the department of
administration, SHALL adopt ALL OF THE FOLLOWING REQUIREMENTS:

1. A reimbursement formula using
either the national average drug acquisition costs or, with the department's
prior written approval, an alternative prescription drug pricing benchmark that
results in claim payment errors that are both comparable to or less than the
national average drug acquisition costs in terms of frequency and smaller than
the national average drug acquisition costs in terms of magnitude.

2. A reimbursement formula using an
adjustment factor that, based on claims experience data available to the
pharmacy benefit manager, is reasonably expected to result in a claim payment
error rate of not more than two percent per drug as identified by the drug's
national drug code.

3. An appeal PROCESS for pharmacists
to challenge claim payment errors that meets the following requirements:

(
a
) A network
pharmacy contract that is executed by and between a PHARMACY benefit manager
and a pharmacy located in this state must contain a provision expressly
acknowledging that if a pharmacy's reimbursement for any covered drug or device
is less than the pharmacy's acquisition cost for that drug or device, the
pharmacy may appeal the reimbursement and, if successful, receive additional
payment so that the total reimbursement is equal to the pharmacy's demonstrated
acquisition cost. THe PHARMACY benefit manager shall direct the pharmacy to the
pharmacy benefit manager's electronic and written appeal locations.

(
b
) An appeal
may be filed for a period of fifteen days after the applicable date of payment.

(
c
) If an
appeal is filed with the pharmacy benefit manager, the pharmacy must include a
written invoice from the wholesaler that includes the drug name, national drug
code number, purchase date and cost of the drug.

(
d
) If a claim
payment error occurred, the pharmacy benefit manager must make an additional
payment to the pharmacy to increase the reimbursement amount to the ACQUISITION
cost.

(
e
) The
pharmacy benefit manager individually notifies all pharmacies using the same
customary supplier or wholesaler that a claim payment error occurred and that
the pharmacy may reverse and resubmit the claim to correct the claim payment
error.� The pharmacy benefit manager makes retroactive price adjustments in the
next payment cycle.

(
f
) If a
pharmacy benefit manager determines that a claim payment error did not occur,
the pharmacy benefit manager shall provide the pharmacy or pharmacist with an
explanation of why the payment was upheld, including a specific documentation
of the acquisition cost on the date of service.� The pharmacy benefit manager
shall provide the explanation electronically or in writing through customary
means of communication between the pharmacy benefit manager and the pharmacy or
pharmacist. �The explanation shall also include a notice in at least ten point
font stating that if the pharmacy or pharmacist disagrees with the decision,
the pharmacy or pharmacist may file a complaint with the Department.

C. For the purposes of this section:

1. "Acquisition cost" means
the set of National Average Drug Acquisition Costs as calculated by the Centers
for Medicare and Medicaid Services and reflected in the most recently released
public file.

2. "Adjustment factor"
means a percentage-based change to the prescription drug pricing benchmark,
such as average wholesale price or national average drug acquisition cost, that
is applied uniformly across a class of drugs.

3. "Claim payment error"
means a pharmacy or PHARMACIST claim payment amount that fails to REIMBURSE at
or above acquisition cost.

4. "Local pharmacy" means a
pharmacy as defined in the North American Industry Classification system code
456110 that is domiciled in this state and that has fewer than ten retail
outlets UNDER common ownership or control.

5. "Reimbursement formula"
means a prescription drug reimbursement calculation INVOLVING an ingredient
price, calculated based on a prescription drug pricing benchmark plus an
adjustment factor, and a professional dispensing fee.
END_STATUTE

START_STATUTE
20-3337.01.

Pharmacy benefit managers; negotiations; rebates; fee disclosure;
definitions

A. A pharmacy benefit manager may
negotiate but may not retain any portion of rebates that the pharmacy benefit
manager RECEIVEs from a drug manufacturer.� All manufacturer rebates shall be
passed through to the plan sponsor as shared savings in the form of lower
premiums, reduced cost-sharing, including reduced copays, coinsurance or
deductibles for prescription drugs, or to provide BROADER drug coverage.� The
specific allocation of rebates and how the rebates are shared with plan members
must be identified in the plan SPONSOR'S plan design and contract terms.

B. In a contract between the pharmacy
benefit manager and the insurer or health plan the pharmacy benefit manager
must disclose clearly and in writing all pharmacy benefit management fees.

C. On or before December 31 of each
calendar year, each pharmacy benefit manager shall certify under oath to the
department that the pharmacy benefit manager fully complied with this section
for the prior calendar year.� The chief financial officer of the pharmacy
benefit manager shall sign the certification and the certification is subject
to audit and penalty for false statements.

D. The department may review the
compensation program of a pharmacy benefit manager or person acting on BEHALF
of a pharmacy benefit manager with a health INSURANCE issuer, pharmacy services
administrative organization, pharmacy or pharmacist or any person acting on
behalf of the health insurance issuer, pharmacy services administrative
organization, pharmacy or pharmacist, to ensure that the reimbursement for
drugs, devices and services that is paid to the pharmacy or PHARMACIST is fair
and REASONABLE.

E. Information provided to the
department pursuant to subsection E of this section and specifically identified
as confidential by the pharmacy benefit manager, including the terms and
conditions of any contract and other proprietary information, is confidential
and is not subject to disclosure except that, the department may disclose
confidential information to insurance departments of other states or for any
adjudicatory hearing or court proceeding invoked by the department pursuant to
this section.

F. For the purposes of this section:

1. "Compensation program"
means both of the following:

(
a
) Negotiated
price concessions including base price concessions, that:

(
i
) are labeled
as a rebate or otherwise, reasonable estimates of any price protection rebates
and performance-based price concessions that may accrue directly or INDIRECTLY
to the health insurance issuer or plan or any other party on behalf of the
health insurance issuer or plan, including a pharmacy benefit manager, during
the coverage year.�

(
ii
) May come
from a pharmaceutical manufacturer, dispensing pharmacy or other party in
connection with the dispensing or administration of a prescription drug.

(
b
) Reasonable
estimates, as determined by the department, of any negotiated price
concessions, fees and other administrative costs that are passed through, or
that are reasonably anticipated to be passed through, to the health insurance
issuer or plan and that serve to reduce the health insurance issuer's or plan's
liabilities for a prescription drug.

2. "Health insurance
issuer":

(
a
) means an
entity that offers health insurance coverage through a plan, policy or
certificate of insurance subject to this title.

(
b
) Includes a
health MAINTENANCE organization.

3. "Pharmacy Benefit Management
fee" means a fee that is paid by an insurer or HEALTH plan to a pharmacy
benefit manager for pharmacy benefit management services.

4. "Rebates":

(
a
) Means all
rebates, discounts and other price concessions based on the use of a
prescription drug and paid by the manufacturer or other party other than an
enrollee, directly or indirectly, to the pharmacy benefit manager after the
claim has been adjudicated at the pharmacy.

(
b
) Includes a
reasonable estimate of any volume-based discount or other discounts as
determined by the department.
END_STATUTE

START_STATUTE
20-3337.02.

Pharmacy benefit managers; annual transparency reports; written
notice of wholesale acquisition drug cost increase; power to examine books and
records; definitions

A. On March 1 of each year a pharmacy
benefit manager that is issued a certificate of authority by the department
shall submit a transparency report as a condition of maintaining the
certificate of authority.� The transparency report must contain data from the
prior calendar year relating to the following information for each of the
pharmacy benefit manager's contractual or other relationships with a health
benefit plan or health insurance issuer:

1. THe total amount of all rebates
that the pharmacy benefit manager received from pharmaceutical manufacturers.

2. The total amount of all
administrative fees that the pharmacy benefit manager received.

3. The total amount of all negotiated
price concessions, including base price concessions, reasonable estimates of
any price protection rebates other than manufacturer rebates and
performance-based price concessions.

4. The total amount of all rebates
passed to enrollees at the point-of-sale of a prescription drug.

5. The total amount of all
reimbursement paid to network pharmacies in this state, specifically identified
by local pharmacy and nonlocal pharmacy.

6. The total amount of all specialty
drug rebates that the pharmacy benefit manager received.

7. The total number of other services
provided by the PHARMACY benefit manager or its AFFILIATES or SUBSIDIARIES in
addition to PRESCRIPTION drugs. THe total amount reported shall include
identification of the service, the number of services provided, by WHOM the
services were provided and the dollar AMOUNT relative to the provision of the
services.

8. The complete corporate vertical
INTEGRATION structure of all components related to the pharmacy benefit manager
including the insurer, pharmacy benefit manager, group PURCHASING organization,
manufacturer, wholesale distributor, special or mail-order pharmacy,
retail or long-term care pharmacy and provider.

B. The transparency report must be
made available in a form that does not disclose the identity of a specific
health benefit plan, the prices charged for specific drugs or classes of drugs
or the amount of any rebates provided for specific drugs or classes of drugs.

C. Within sixty days after receiving
the transparency report, the department shall publish the transparency report
on the department's website in a location that is designated for pharmacy
benefit manager information.

D. The pharmacy benefit manager and
the department may not publish or disclose any information that would reveal
the identity of a specific health benefit plan, the prices charged for a
specific drug or class of drugs or the amount of any rebates provided for a
specific drug or class of drugs.� The information that is described in this
subsection is protected from disclosure as confidential and proprietary
information and is not a public record pursuant to title 39, chapter 1.

E. A pharmaceutical drug manufacturer
shall provide notice within thirty days after increasing the wholesale
acquisition drug cost of a brand name drug by more than fifteen percent per
wholesale acquisition cost unit during any twelve-month period, or generic or
biosimilar drug with a significant price increase as determined by the
department, in any twelve-month period or introducing a new drug for
distribution in this state when the wholesale acquisition cost is greater than
the amount that causes the drug to be considered a specialty drug under the
Medicare Part D program. The manufacturer shall also report to the department
SPECIFIC information about the drug that is subject to a price increase and an
explanation of the increase, including whether it is in response to any rebate
or formulary requirement.

F. The information required pursuant
to this section must be submitted in a format determined by the department.

G. The department may examine the
books or records of a pharmacy benefit manager to determine the accuracy of the
transparency report.� The department may access any information the department
considers necessary to determine the accuracy of the transparency report
including individual amounts paid by a health insurance ISSUER to the pharmacy
benefit manager for drugs, devices or services provided by a pharmacist or
pharmacy, and the individual AMOUNT that a pharmacy benefit manager paid to a
pharmacist or pharmacy for the same drug, device or service.� This subsection
does not limit the authority of the department to examine or audit the books or
records of a pharmacy benefit manager.

H. For the purposes of this section:

1. "Acquisition cost" has
the same meaning prescribed in section 20-3337.

2. "Health
benefit plan" or "health insurance coverage":

(
a
) means services consisting of medical care that is
provided directly through insurance, reimbursement or other means.

(
b
) Includes
items and services paid for as medical care under any HOSPITAL or medical
service policy or certificate, HOSPITAL or medical service plan contract,
preferred provider organization contract or health MAINTENANCE organization
contact that is offered by a health insurance issuer.

(
c
) does not
include excepted benefits.

3. "Health insurance
issuer" has the same meaning prescribed in section 20-3337.01.

4. "Local pharmacy" has the
same meaning prescribed in section 20-3337.

5. "Specialty Drug" means a
drug that meets all of the following criteria:

(
a
) The drug is
used to treat and is prescribed for a person with a complex, chronic or rare
medical condition that is progressive, may be debilitating or fatal if left
untreated or undertreated or for which there is no known cure.

(
b
) The drug is
not routinely stocked at a majority of pharmacies within this state.

(
c
) THe drug
has special handling, storage, inventory or distribution requirements.

(
d
) Patients
receiving the drug require complex education and treatment MAINTENANCE,
including complex dosing, intensive monitoring or clinical oversight.

END_STATUTE

START_STATUTE
20-3337.03.

Rate pricing; spread pricing; pharmacy steering; prohibitions;
definitions

A. A pharmacy benefit manager in this
state may not:

1. Conduct or participate in
effective rate pricing or spread pricing.

2. Directly or indirectly engage in
patient steering to a pharmacy in which the pharmacy benefit manager maintains
an ownership interest or control.� A pharmacy benefit manager is prohibited
from retaliation or attempts to influence the patient to use an alternate
pharmacy.

B. For the purposes of this section:

1. "Effective rate pricing"
means any payment reduction for pharmacist or pharmacy services by a pharmacy
benefit manager UNDER a reconciliation process for direct or indirect
remuneration fees, a brand or generic effective rate of reimbursement or any
other reduction or aggregate reduction of payment.

2. "Patient steering"
includes any communication by a pharmacy benefit manager through data mining or
other similar PROCESS of any patient information that is generated or obtained
throughout the prescription filling process at any pharmacy, including
contacting the patient verbally or in writing to directly or indirectly
influence the patient or provide the patient with the option to use an
alternate pharmacy that is a preferred carve-out or is in a strategic
relationship with the pharmacy benefit manager or in which the pharmacy benefit
manager maintains an ownership interest or control or contracts with to process
prescriptions on its behalf.

3. "Pharmacy Benefit Management
fee" has the same meaning prescribed in section 20-3337.01.

4. "Spread pricing" means
any AMOUNT that is charged or claimed by a pharmacy benefit manager for a
prescription drug and that exceeds the AMOUNT paid by the pharmacy benefit
manager to the pharmacist or pharmacy for the dispensing of the prescription
drug, minus a pharmacy benefit management fee.
END_STATUTE

START_STATUTE
20-3337.04.

Violations; enforcement; pharmacy benefit manager enforcement
fund

A. A violation of section 20-3337,
20-3337.01, 20-3337.02 or 20-3337.03 is an unlawful practice under
section 44-1522.� The attorney general may investigate and take appropriate
action pursuant to title 44, chapter 10, article 7.

B. The pharmacy benefit manager
enforcement fund is established consisting of Any monies collected as a result
of a violation of this article.� The department shall administer the fund.�
Monies in the fund are subject to legislative appropriation.� Monies in the
fund shall be used for the department's and attorney general's expenditures
that are necessary to enforce this article.� At the end of each fiscal year,
any unexpended monies shall be returned to the policyholders pursuant to a
program that is established by the department and the attorney general.

END_STATUTE

START_STATUTE
20-3337.05.

Pharmacy benefit manager monitoring advisory council; members;
meetings

A. A pharmacy benefit manager
monitoring advisory council is established in the department that consists of
the following members:

1. The director of the department of
insurance and financial institutions, or the director's designee.

2. The attorney general or the
attorney general's designee.

3. The Director of the Department of
Health Services or the director's designee.

4. A pharmacist who works for a
pharmacy that is part of a multilocation retail pharmacy business and who is
appointed by the arizona state board of pharmacy.

5. An independent pharmacist who is
appointed by the Arizona state board of pharmacy.

6. An employee of a pharmacy benefit
manager who is licensed by the Arizona state board of pharmacy pursuant to
title 32, chapter 18.� The employee must have responsibility for and experience
in daily administrative functions of the business practices of the pharmacy
benefit manager.

7. The governor or the governor's
designee.

8. THe chairperson of the Senate
finance committee or its successor committee, or the chairperson's designee,
who shall serve as the chairperson of the council.

9. The Chairperson of the House of
representatives health and human services COmmittee or its successor committee,
or the CHAIRperson'S designee, who shall serve as vice chairperson of the
council.

B. The members of the pharmacy
benefit manager monitoring advisory council serve at the pleasure of the
respective appointing authorities described in subsection A of this section.�
Five members constitute a quorum for the transaction of all business.� THe
chairperson shall set a time and place for regular meetings of the pharmacy
benefit manager monitoring advisory council.� The pharmacy benefit manager
monitoring advisory council shall meet at least quarterly and establish
policies necessary to carry out its duties.� expenses for the administrative
staffing of the pharmacy benefit manager monitoring advisory council shall be
paid with the licensing fees paid by pharmacy benefit managers and may be
transferred BETWEEN state AGENCIES by memorandums of understanding.
END_STATUTE

Sec. 2.
Effective date

This act is effective from and after
December 31, 2026.