# Title 26.1 — Insurance

## Chapter 26.1-27.1 — Pharmacy Benefits Management

### § 26.1-27.1-01. Definitions.

In this chapter, unless the context otherwise requires:
1. "Covered entity" means a nonprofit hospital or a medical service corporation; a health
insurer; a health benefit plan; a health maintenance organization; a health program
administered by the state in the capacity of provider of health coverage; or a labor
union, or other entity organized in the state which provides health coverage to covered
individuals who are employed or reside in the state. The term does not include a plan
issued for coverage for federal employees; or a health plan that provides coverage
only for accidental injury, specified disease, hospital indemnity, Medicare supplement,
disability income, long-term care, or other limited-benefit health insurance policies or
contracts that do not include prescription drug coverage.
2. "Covered individual" means a member, a participant, an enrollee, a contractholder, a
policyholder, or a beneficiary of a covered entity who is provided health coverage by
the covered entity. The term includes a dependent or other individual provided health
coverage through a policy, contract, or plan for a covered individual.
3. "De-identified information" means information from which the name, address,
telephone number, and other variables have been removed in accordance with
requirements of title 45, Code of Federal Regulations, part 164, section 512,
subsections (a) or (b).
4. "Labeler" means a person that has been assigned a labeler code by the federal food
and drug administration under title 21, Code of Federal Regulations, part 207,
section 20, and that receives prescription drugs from a manufacturer or wholesaler
and repackages those drugs for later retail sale.
5. "Payment received by the pharmacy benefits manager" means the aggregate amount
of the following types of payments:
a. A rebate collected by the pharmacy benefits manager or a rebate aggregator
which is allocated to a covered entity, or retained by the pharmacy benefits
manager;
b. An administrative fee collected from the manufacturer in consideration of an
administrative service provided by the pharmacy benefits manager to the
manufacturer;
c. A pharmacy network fee, pharmacy price concessions, and any other financial
payment made by a pharmacy to a pharmacy benefits manager; and
d. Any other fee or amount collected by the pharmacy benefits manager from a
manufacturer or labeler for a drug switch program, formulary management
program, mail service pharmacy, educational support, data sales related to a
covered individual, or any other administrative function.
6. "Pharmacy benefits management" means the procurement of prescription drugs at a
negotiated rate for dispensation within this state to covered individuals; the
administration or management of prescription drug benefits provided by a covered
entity for the benefit of covered individuals; or the providing of any of the following
services with regard to the administration of the following pharmacy benefits:
a. Claims processing, pharmacy network management, and payment of claims to a
pharmacy for prescription drugs dispensed to a covered individual;
b. Clinical formulary development and management services; or
c. Rebate contracting and administration.
7. "Pharmacy benefits manager" means a person who performs pharmacy benefits
management, as a third party, under a contract or other financial arrangement with a
covered entity. The term does not include a health benefit plan that manages or directs
its own pharmacy benefits.
8. "Rebate" means a retrospective reimbursement of a monetary amount by a
manufacturer under a manufacturer's discount program with a pharmacy benefits
manager for drugs dispensed to a covered individual.

9. "Utilization information" means de-identified information regarding the quantity of drug
prescriptions dispensed to members of a health plan during a specified time period.
### § 26.1-27.1-02. Licensing - Terms and fee - Application.

1. A person may not establish or operate as a pharmacy benefits manager in this state
without first obtaining a license from the commissioner under this section. A person
violating this subsection is guilty of a class C felony.
2. A person applying for a pharmacy benefits manager license shall submit an application
to the commissioner. The commissioner shall make an application form available on its
website which includes a request for the following information:
a. The identity, address, electronic mail address, and telephone number of the
applicant;
b. The name, business address, electronic mail address, and telephone number of
the contact person for the applicant;
c. If applicable, the federal employer identification number for the applicant; and
d. Any other information the commissioner considers necessary and appropriate to
establish the qualifications to receive a license as a pharmacy benefits manager
to complete the licensure process.
3. The term of licensure is one year from April thirtieth through March thirty-first.
4. The pharmacy benefits manager shall pay an annual renewal fee no later than April
thirtieth.
5. The applicant shall submit the fee with the initial application or renewal application for
licensure. The initial application fee and renewal fee are nonrefundable.
6. Each application for a license, and subsequent renewal for a license, must be
accompanied by evidence of financial responsibility in an amount of one million
dollars.
7. Upon receipt of a completed application, evidence of financial responsibility, and fee,
the commissioner shall review each application and issue a license if the applicant is
qualified in accordance with the provisions of this section and the rules promulgated by
the commissioner under this section. The commissioner may require additional
information or submissions from an applicant and may obtain any documents or
information reasonably necessary to verify the information contained in the application.
8. The license may be in paper or electronic form. The license is nontransferable, and
must prominently list the expiration date.
### § 26.1-27.1-03. Disclosure requirements.

1. A pharmacy benefits manager shall disclose to the commissioner any ownership
interest of any kind with:
a. Any insurance company responsible for providing benefits directly or through
reinsurance to any plan for which the pharmacy benefits manager provides
services.
b. Any parent company, subsidiary, or other organization that is related to the
provision of pharmacy services, the provision of other prescription drug or device
services, or a pharmaceutical manufacturer.
2. A pharmacy benefits manager shall notify the commissioner in writing within five
business days of any material change in the pharmacy benefits manager's ownership.
### § 26.1-27.1-04. Prohibited practices.

1. A pharmacy benefits manager shall comply with sections 19-02.1-01, 19-02.1-02,
19-02.1-14.2, 19-02.1-16, 19-02.1-16.1, 19-02.1-16.2, 19-02.1-16.3, 19-02.1-16.4,
19-02.1-16.5, and 19-02.1-16.6 in chapter 19-02.1.
2. A pharmacy benefits manager may not require a pharmacist or pharmacy to participate
in one contract in order to participate in another contract. The pharmacy benefits
manager may not exclude an otherwise qualified pharmacist or pharmacy from

participation in a particular network if the pharmacist or pharmacy accepts the terms,
conditions, and reimbursement rates of the pharmacy benefits manager's contract.
3. A pharmacy benefits manager shall offer pharmacy contracts that are opt-in contracts
with at least thirty days to respond and signatures must be obtained from the
pharmacy or an entity contracting on behalf of the pharmacy.
4. A pharmacy may opt-out of a pharmacy benefits managers contract by providing at
least a ninety-day notice.
### § 26.1-27.1-05. Contents of pharmacy benefits management agreement - Requirements.

1. A pharmacy benefits manager shall offer to a covered entity options for the covered
entity to contract for services that must include:
a. A transaction fee without a sharing of a payment received by the pharmacy
benefits manager;
b. A combination of a transaction fee and a sharing of a payment received by the
pharmacy benefits manager; or
c. A transaction fee based on the covered entity receiving all the benefits of a
payment received by the pharmacy benefits manager.
2. The agreement between the pharmacy benefits manager and the covered entity must
include a provision allowing the covered entity to have audited the pharmacy benefits
manager's books, accounts, and records, including de-identified utilization information,
as necessary to confirm that the benefit of a payment received by the pharmacy
benefits manager is being shared as required by the contract.
### § 26.1-27.1-06. Examination of insurer-covered entity.

1. During an examination of a covered entity as provided for in chapter 26.1-03, 26.1-17,
or 26.1-18.1, the commissioner shall examine any contract between the covered entity
and a pharmacy benefits manager and any related record to determine if the payment
received by the pharmacy benefits manager which the covered entity received has
been applied toward reducing the covered entity's rates or has been distributed to
covered individuals.
2. To facilitate the examination, the covered entity shall disclose annually to the
commissioner the benefits of the payment received by the pharmacy benefits manager
received under any contract and shall describe the manner in which the payment
received by the pharmacy benefits manager is applied toward reducing rates or is
distributed to covered individuals.
3. Any information disclosed to the commissioner under this section is considered a trade
secret under chapter 47-25.1. This section does not prevent the disclosure of a final
order issued against a pharmacy benefits manager. Such order is an open record.
### § 26.1-27.1-07. Rulemaking authority.

The commissioner shall adopt rules as necessary to implement this chapter.
### § 26.1-27.1-08. Enforcement.

1. All powers granted to the commissioner under title 26.1 and chapter 28-32 are
available in enforcing chapter 26.1-27.1, including subpoena power.
2. This section does not limit the attorney general from investigating and prosecuting
violations of the law.
3. This section does not prohibit the commissioner, state board of pharmacy, or
department of health and human services from collaborating through joint exercise of
common powers agreements.
### § 26.1-27.1-09. Administrative penalties.

1. A pharmacy benefits manager found to be in violation of this chapter or any rules
adopted under this chapter is subject to:
a. A monetary penalty of up to ten thousand dollars per violation;

b. Suspension or revocation of license; and
c. A civil penalty of up to fifty thousand dollars for a second or subsequent violation.
2. The commissioner may require a pharmacy benefits manager to provide restitution to
affected covered entities, pharmacies, or individuals for losses incurred as a result of
the violation.
3. A pharmacy benefits manager subject to penalties under this section is entitled to a
hearing conducted in accordance with chapter 28-32.
### § 26.1-27.1-10. Proceedings by commissioner - Service of process - Procedure.

The commissioner shall serve process upon any licensee in any action or proceeding
instituted by the commissioner under this chapter by electronic mail to the electronic mail
address maintained in section 26.1-27.1-02 or by United States mail to the licensee at the
licensee's last-known address of record or principal place of business. Service of process under
this section is complete upon electronic mailing or United States mailing.
### § 26.1-27.1-11. Pharmacy benefit manager enforcement fund - State board of pharmacy

wholesaler and virtual wholesaler license fees - Revenue deposits or transfers. (Expired
effective July 1, 2029)
The pharmacy benefit manager enforcement fund is a special fund in the state treasury. The
fund consists of moneys transferred to or deposited in the fund by legislative action and moneys
transferred to or deposited in the fund by the state board of pharmacy. The state board of
pharmacy may deposit or transfer up to six hundred dollars of every eligible wholesaler license
fee and every virtual wholesaler license fee collected by the board under section 43-15.3-12 to
the pharmacy benefit manager enforcement fund. Moneys in the fund are available to the
insurance commissioner, subject to legislative appropriations, for enforcing the provisions of this
chapter.
