(a) For purposes of this section, the following definitions shall apply:

(1) “Labeler” means a person or entity that receives prescription drugs from a manufacturer or wholesaler and repackages those drugs for later retail sale and who has a labeler code from the federal Food and Drug Administration under Part 207 of Title 21 of the Code of Federal Regulations.

(2) “Proprietary information” means information on pricing, costs, revenue, taxes, market share, negotiating strategies, customers, and personnel that is held by a pharmacy benefit manager and used for its business purposes.

(3) “Purchaser” means a health benefit plan sponsor or other third-party payer with whom a pharmacy benefit manager contracts to provide the administration and management of prescription drug benefits, except for a health care service plan licensed pursuant to Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code.

(b) This section shall apply to pharmacy benefit manager contracts that are entered into, amended, or renewed on or after January 1, 2019.

(c) A pharmacy benefit manager shall exercise good faith and fair dealing.

(d) A pharmacy benefit manager shall notify a purchaser in writing of any activity, policy, or practice of the pharmacy benefit manager that directly or indirectly presents a conflict of interest that interferes with the discharge of the pharmacy benefit manager’s duty to the purchaser to exercise good faith and fair dealing pursuant to subdivision (c).

(e) The pharmacy benefit manager shall, on a quarterly basis, disclose, upon the request of the purchaser, the following information with respect to prescription product benefits specific to the purchaser:

(1) The aggregate wholesale acquisition costs from a pharmaceutical manufacturer or labeler for each therapeutic category of drugs containing three or more drugs, as outlined in the state’s essential health benefits benchmark plan pursuant to Section 1367.005 of the Health and Safety Code.

(2) The aggregate amount of rebates received by the pharmacy benefit manager by therapeutic category of drugs containing three or more drugs, as outlined in the state’s essential health benefits benchmark plan pursuant to Section 1367.005 of the Health and Safety Code. The aggregate amount of rebates shall include any utilization discounts the pharmacy benefit manager receives from a pharmaceutical manufacturer or labeler.

(3) Any administrative fees received from the pharmaceutical manufacturer or labeler.

(4) Whether the pharmacy benefit manager has a contract, agreement, or other arrangement with a pharmaceutical manufacturer to exclusively dispense or provide a drug to a purchaser’s employees, insureds, or enrollees, and the application of all consideration or economic benefits collected or received pursuant to that arrangement.

(5) Prescription drug utilization information for the purchaser’s enrollees or insureds that is not specific to any individual enrollee or insured.

(6) The aggregate of payments, or the equivalent economic benefit, made by the pharmacy benefit manager to pharmacies owned or controlled by the pharmacy benefit manager.

(7) The aggregate of payments made by the pharmacy benefit manager to pharmacies not owned or collected by the pharmacy benefit manager.

(8) The aggregate amount of the fees imposed on, or collected from, network pharmacies or other assessments against network pharmacies, and the application of those amounts collected pursuant to the contract with the purchaser.

(f) The information disclosed pursuant to subdivision (e) shall apply to all retail, mail order, specialty, and compounded prescription products.

(g) Except for utilization information specified in paragraph (5) of subdivision (e), a pharmacy benefit manager is not required to make the disclosures required by subdivision (e) unless and until the purchaser agrees, in writing, to maintain as confidential any proprietary information.

(h) A pharmacy benefit manager shall not impose a penalty or offer an inducement to a purchaser for the purpose of deterring the purchaser from requesting the information set forth in subdivision (e).

(i) A pharmacy benefit manager shall disclose to a pharmacy network provider or its contracting agent any material change to a contract provision that affects the terms of reimbursement, the process for verifying benefits and eligibility, dispute resolution, procedures for verifying drugs included on the formulary, and contract termination at least 30 days before the date of the change to the provision.

(j) A pharmacy benefit manager shall not notify an individual receiving benefits through the pharmacy benefit manager that a pharmacy has been terminated from the pharmacy benefit manager’s network until the notification of termination has been provided to that pharmacy pursuant to subdivision (i).

(k) A pharmacy benefit manager shall not include in a contract with a pharmacy network provider or its contracting agent a provision that prohibits the provider from informing a patient of a less costly alternative to a prescribed medication.

(l) This section shall not apply to the following:

(1) A health care service plan or health insurer, if the health care service plan or health insurer offers, provides, or administers pharmacy benefit management services and if those services are offered, provided, or administered only to enrollees, subscribers, policyholders, or insureds who are also covered by health benefits offered, provided, or administered by that health care service plan or health insurer.

(2) An affiliate, subsidiary, related entity, or contracted medical group of a health care service plan or health insurer that would otherwise qualify as a pharmacy benefit manager, but offers, provides, or administers services only to enrollees, subscribers, policyholders, or insureds who are also covered by health benefits offered, provided, or administered by the health care service plan or health insurer.

(3) A contract authorized by Section 4600.2 of the Labor Code.

(m) The provisions of this section are severable. If any provision of this section or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

(Added by Stats. 2018, Ch. 905, Sec. 2. (AB 315) Effective January 1, 2019.)