KRS 304.17A-162: Identification of sources used to calculate drug product

reimbursement -- Process to appeal disputes over maximum allowable cost

pricing -- Adjustment of maximum allowable cost and drug product

reimbursement -- Duties of pharmacy benefit manager.

(1) A pharmacy benefit manager shall:

(a) Identify to contracted pharmacies the sources used by the pharmacy benefit

manager to calculate the drug product reimbursement paid for covered drugs

available under the pharmacy health benefit plan administered by the

pharmacy benefit manager; and

(b) Establish a process for contracted pharmacies, pharmacy services

administration organizations, or group purchasing organizations to appeal and

resolve disputes regarding the maximum allowable cost pricing. The proce ss

shall include the following provisions:

1. The right to appeal shall be limited to sixty (60) days following the

initial claim;

2. The appeal shall be investigated and resolved by the pharmacy benefit

manager within ten (10) calendar days;

3. The pharmacy benefit manager shall respond to all appeals in a manner

approved by the department;

4. If the appeal is denied, the pharmacy benefit manager shall provide the

reason for the denial and identify the national drug code of a drug

product and source where it may be purchased from a licensed

wholesaler by contracted pharmacies at a price at or below the maximum

allowable cost; and

5. If an appeal is granted, the provisions of subsection (2) of this section

shall apply.

(2) If a price update is warranted as a result of an appeal granted under subsection (1) of

this section, the pharmacy benefit manager shall:

(a) Make the change in the maximum allowable cost to the initial date of service

the appealed drug was dispensed;

(b) Adjust the maximum allowable cost o f the drug for the appealing pharmacy

and for all other contracted pharmacies in the network of that pharmacy

benefit manager that filled a prescription for patients covered under the same

health benefit plan to the initial date of service the appealed dru g was

dispensed;

(c) Individually notify all other contracted pharmacies in the network of that

pharmacy benefit manager that a retroactive maximum allowable cost

adjustment has been made as a result of a granted appeal effective to the initial

date of service the appealed drug was dispensed;

(d) Adjust the drug product reimbursement for contracted pharmacies that

resubmit claims to reflect the adjusted maximum allowable cost if applicable

to their contract;

(e) Allow the appealing pharmacy and all other contracted pharmacies in the

network that filled prescriptions for patients covered under the same health

benefit plan to reverse and resubmit claims and receive payment based on the

adjusted maximum allowable cost from the initial date of service the appealed

drug was dispensed; and

(f) Make retroactive price adjustments in the next payment cycle.

(3) For every drug for which the pharmacy benefit manager establishes a maximum

allowable cost to determine the drug p roduct reimbursement, the pharmacy benefit

manager shall make available to all contracted pharmacies information identifying

the national drug pricing compendia or sources used to obtain the drug price data in

a manner established by administrative regulations promulgated by the department.

(4) For every drug for which the pharmacy benefit manager establishes a maximum

allowable cost to determine the drug product reimbursement, the pharmacy benefit

manager shall make available to all contracted pharmacies i n a manner established

by administrative regulations promulgated by the department the comprehensive list

of drugs subject to maximum allowable cost and the actual maximum allowable

cost for each drug.

(5) For every drug for which the pharmacy benefit mana ger establishes a maximum

allowable cost to determine the drug product reimbursement, the pharmacy benefit

manager shall make available to the department, upon request, information that is

needed to resolve an appeal. If the department is unable to obtain information from

the pharmacy benefit manager that is necessary to resolve the appeal, the appeal

shall be granted to the appealing pharmacy.

(6) For every drug for which the pharmacy benefit manager establishes a maximum

allowable cost to determine the dr ug product reimbursement, the pharmacy benefit

manager shall review and make necessary adjustments to the maximum allowable

cost for every drug at least every seven (7) calendar days and shall immediately

utilize the updated maximum allowable cost in calculating the payments made to all

contracted pharmacies.

(7) For every drug for which the pharmacy benefit manager establishes a maximum

allowable cost to determine the drug product reimbursement, the pharmacy benefit

manager shall make available to all cont racted pharmacies in a manner established

by administrative regulations promulgated by the department weekly updates to the

list of drugs subject to maximum allowable cost and the actual maximum allowable

cost for each drug.

(8) For every drug for which th e pharmacy benefit manager establishes a maximum

allowable cost to determine the drug product reimbursement, the pharmacy benefit

manager shall ensure that drugs subject to maximum allowable costs are:

(a) Generally available for purchase by pharmacists an d pharmacies in Kentucky

from a national or regional wholesaler licensed in Kentucky by the Kentucky

Board of Pharmacy;

(b) Not obsolete, temporarily unavailable, or listed on a drug shortage list; and

(c) 1. Drugs that have an "A" or "B" rating in the mos t recent version of the

United States Food and Drug Administration's Approved Drug Products

with Therapeutic Equivalence Evaluations, also known as the Orange

Book; or

2. Drugs rated "NR" or "NA" or have a similar rating by a nationally

recognized reference.

(9) For every drug for which the pharmacy benefit manager establishes a maximum

allowable cost to determine the drug product reimbursement, the pharmacy benefit

manager shall ensure that reimbursement for a drug subject to maximum allowable

cost is based solely on that drug and drugs that are therapeutically equivalent if the

therapeutically equivalent drugs are listed in the most recent version of the United

States Food and Drug Administration Approved Drug Products with Therapeutic

Equivalence Evaluations, also known as the Orange Book.

(10) For every drug for which the pharmacy benefit manager establishes a maximum

allowable cost to determine the drug product reimbursement, the pharmacy benefit

manager shall ensure that reimbursement for a "B" rated dr ug subject to maximum

allowable cost is based solely on that drug and drugs that are not therapeutically

equivalent to a "B" rating in the most recent version of the United States Food and

Drug Administration Approved Drug Products with Therapeutic Equival ence

Evaluations, also known as the Orange Book.

(11) For every drug for which the pharmacy benefit manager establishes a maximum

allowable cost to determine the drug product reimbursement, the pharmacy benefit

manager shall ensure that reimbursement for a "NR" or "NA" drug with a similar

rating by a nationally recognized reference subject to maximum allowable cost is

based solely on that drug and other drugs with a "NR" or "NA" rating or similar

rating by a nationally recognized reference that meets criter ia for therapeutic

equivalence used in the United States Food and Drug Administration Approved

Drug Products with Therapeutic Equivalence Evaluations, also known as the

Orange Book.

(12) For every drug for which the pharmacy benefit manager establishes a m aximum

allowable cost to determine the drug product reimbursement, the pharmacy benefit

manager shall ensure that reimbursement for a drug subject to maximum allowable

cost is based solely on that drug if there is no other therapeutically equivalent drug.

(13) For every drug for which the pharmacy benefit manager establishes a maximum

allowable cost to determine the drug product reimbursement, the pharmacy benefit

manager shall ensure that reimbursement for a drug subject to maximum allowable

cost is not based on a drug that is obsolete, temporarily unavailable, listed on a drug

shortage list, or that cannot be lawfully substituted.