OLR Bill Analysis

sSB 445 (File 519, as amended by Senate "A")*

AN ACT CONCERNING FAIRNESS IN PHARMACY AND PHARMACY BENEFITS MANAGER CONTRACTS.

SUMMARY

This bill includes numerous provisions affecting hospitals and health systems, health care providers, and health carriers (e.g., insurers and HMOs). Specifically, it:

1. prohibits certain pharmacy services contracts from containing a provision prohibiting or penalizing a pharmacist's disclosure of certain information (e.g., therapeutic alternatives or less expensive purchasing methods) to an individual purchasing prescription medication ( 1);

2. allows indirect purchasers to recover against drug manufacturers for antitrust violations, and allows defendants to avoid duplicative liability if they can prove that the alleged overcharge was passed on by someone else ( 2);

3. prohibits contracts between a health care provider and certain vendors or agents a health carrier (e.g., insurer or HMO) retains from prohibiting disclosure of (a) billed or allowed amounts, reimbursement rates, or out-of-pocket costs or (b) data related to the all-payer claims database ( 3);

4. makes changes to hospital electronic health record (EHR) requirements, such as specifically requiring hospitals to send or receive EHRs if requested by a patient or provider under certain conditions ( 4);

5. modifies patient notification and annual reporting requirements concerning facility fees charged by hospitals and health systems for outpatient services provided at hospital-based facilities ( 5);

6. specifies that the current exception from limits on allowable facility fees applies only to off-site emergency departments that are provider-based entities authorized under Medicare to bill for emergency procedures (see BACKGROUND) ( 5); and

7. expands the definition of, and exceptions to, a “surprise bill” ( 6).

The bill also makes various minor, technical, and conforming changes.

*Senate Amendment “A” replaces the original bill (File 519) and adds the provisions on antitrust cases against drug manufacturers, contracts between health care providers and health carriers, surprise billing, facility fees, and hospital electronic health records.

EFFECTIVE DATE: October 1, 2017, except that the provision on (1) antitrust violations takes effect upon passage and (2) surprise billing takes effect January 1, 2018.

1 – PHARMACY SERVICES CONTRACTS

Prohibited Provisions

Starting January 1, 2018, the bill prohibits a pharmacy services contract entered into between a (1) pharmacist or pharmacy and (2) health carrier (e.g., insurer or HMO) or pharmacy benefits manager from containing a provision prohibiting or penalizing (e.g., increased utilization review, reduced payments, or other financial disincentives) a pharmacist's disclosure of certain information to an individual purchasing prescription medication.

The bill specifies that such information includes (1) the prescription's cost to the individual or (2) availability of any therapeutically equivalent alternative medications or alternative, less expensive methods of purchasing the prescription, including paying the cash price.

Limits on Prescription Payments

Starting January 1, 2018, the bill prohibits a health carrier or pharmacy benefits manager from requiring an individual to pay for a covered prescription medication in an amount greater than the lesser of the (1) applicable copayment, (2) allowable claim amount (i.e., the amount the health carrier or pharmacy benefits manager agreed to pay the pharmacy for the prescription), or (3) amount an individual would pay for the drug if he or she paid without using an insurance plan or other source of drug benefits or discounts.

Violations and Enforcement

A contract that violates the bill's provisions is void and unenforceable. The bill specifies that any contract provision rendered invalid or unenforceable does not affect remaining provisions. The bill also makes any general business practice that violates its provisions an unfair trade practice under the Connecticut Unfair Trade Practices Act (see BACKGROUND).

The bill also grants the insurance commissioner authority to enforce its provisions and audit pharmacy services contracts for compliance.

2 – ANTITRUST CASES AGAINST DRUG MANUFACTURERS

The bill makes two related changes concerning antitrust cases against companies that sell, distribute, or otherwise dispose of drugs or medical devices (e.g., drug manufacturers).

It allows purchasers of these products who did not buy directly from the defendant company (indirect purchasers) to recover against the defendant for an antitrust violation (see BACKGROUND, Related Case). The bill does so by prohibiting such a defendant from raising the defense that it did not deal directly with the person on whose behalf the case was brought.

But the bill allows a defendant, in order to avoid duplicative liability related to an alleged overcharge, to prove that all or part of the overcharge was passed on by someone else in the chain of manufacture, production, or distribution of the drug or device. The bill specifies that the defendant may attempt to prove this as a partial or complete defense.

The bill applies to antitrust cases brought by the attorney general in the name of the state as “parens patriae” on behalf of (1) particular state residents (including class actions) or (2) the state as a whole or a political subdivision of it. It also applies to cases seeking treble damages for antitrust violations that damaged the business or property of the state or any person, including a consumer.

3 – CONTRACTS BETWEEN HEALTH CARE PROVIDERS AND HEALTH CARRIERS

The bill clarifies that a contract between a health care provider and a health carrier cannot contain a provision that prohibits disclosure of (1) billed or allowed amounts, reimbursement rates, or out-of-pocket costs or (2) any data related to the all-payer claims database, and that such information may be used to help consumers and institutional purchasers make informed health care choices and price comparisons.

Starting October 1, 2017, the bill extends the same prohibition to a contract between a health care provider and a health carrier or any agent or vendor the provider retains to provide data or analytical services to evaluate and manage health care services to the health carrier's plan participants.

Under the bill, a contract that violates its provisions is void and unenforceable. Any contract provision rendered invalid or unenforceable does not affect remaining provisions.

4 – HOSPITAL EXCHANGE OF ELECTRONIC HEALTH RECORDS

Existing law requires each licensed hospital, to the fullest extent practicable, to use its EHR system to enable the secure two-way exchange of patient EHRs with other licensed providers who (1) have a system that can exchange these records and (2) provide health care services to a patient whose records are being exchanged.

The bill specifically requires hospitals to provide for such exchange of records. It requires hospitals, to the fullest extent practicable, to send or receive an EHR upon the request of a patient or the patient's health care provider, as long as:

1. the transfer or receipt would be secure, not violate any state or federal law or regulation, and not constitute an identifiable and legitimate security or privacy risk, and

2. for requests from a provider, the patient consents to and has authorized the exchange.

Under the bill, if the hospital believes that such a record transfer would be illegal or present an identifiable and legitimate risk to security or privacy, it must promptly notify the requesting party.

The bill also specifically adds patient admission and transfer records to the definition of “electronic health record” for these purposes.

Current law specifies that the law's provisions on hospital EHR exchange do not require a hospital to pay for any new or additional information technology, equipment, hardware, or software when needed to enable this exchange. The bill specifies that hospitals also are not required to install, construct, or build any such items for this purpose.

The bill also makes minor and technical changes.

As under the existing provisions on hospitals' EHR exchange:

1. a hospital is deemed to have satisfied the bill's requirements if it connects to and actively participates in the Statewide Health Information Exchange, once it becomes operational; and

2. a hospital's failure to take all reasonable steps to comply with the bill constitutes evidence of health information blocking, which is an unfair trade practice (see BACKGROUND).

5 – FACILITY FEES

Definitions

Current law defines a “hospital-based facility” as a facility that is wholly or partly owned or operated by a hospital or health system where hospital or professional medical services are provided. The bill specifies that “facility operated in part by a hospital or health system” includes facilities where such services are provided for which the hospital or health system charges a facility fee pursuant to a professional services or other type of agreement.

Patient Notification Requirements

Notice Contents. Under current law, a hospital or health system that charges a facility fee must notify patients receiving outpatient services in writing about their potential financial liability. The notice must provide additional information if the hospital or health care system provides outpatient services at a facility that (1) uses current procedural terminology evaluation and management (CPT E/M) codes for outpatient services and (2) expects to charge a separate fee for professional medical services.

The bill modifies the information that must be provided in all such notices to include a telephone number the patient may call for more information, including an estimate of the facility fee likely to be charged based on the scheduled professional medical services.

As under current law, the above notice requirements do not apply to Medicare and Medicaid patients or those receiving services under a workers' compensation plan.

Scheduling Services. The bill requires hospital-based facilities, when scheduling services for which a facility fee may be charged, to inform the patient that (1) the facility is part of a hospital or health system and the name of the hospital or health system; (2) the facility may charge a facility fee in addition to, and separate from, the provider's professional fee; and (3) a patient covered by an insurance policy may contact their insurer for additional information regarding such charges and fees, including his or her liability.

Posting Notice. Under current law, hospital-based facilities must prominently display a written notice in locations that are readily accessible and visible to patients (e.g., patient waiting areas). The notice must inform patients that (1) the facility is part of a hospital or health system and (2) if the facility charges a facility fee, patients may incur a greater financial liability than if the facility was not hospital-based. The bill also requires the notice to include the name of the hospital or health system the facility is part of.

Limits on Allowable Facility Fees

Current law prohibits hospitals, health systems, and hospital-based facilities from collecting a facility fee (1) for outpatient services that use a current CPT E/M code and are provided at a hospital-based facility, other than a hospital emergency department, that is not on a hospital campus and (2) from uninsured patients for outpatient services, other than those provided in off-site emergency departments, that exceeds the Medicare facility fee rate.

Under the bill, the exception to the prohibition for emergency departments applies only if the department is a provider-based entity authorized under Medicare to bill for emergency procedures (see BACKGROUND).

Annual Report

Current law requires hospitals and health systems to report to the Department of Public Health, by July 1 annually, on facility fees charged or billed during the preceding calendar year. The bill requires the report to include the name and location of each facility that provides services for which a facility fee is charged or billed, instead of only those facilities that the hospital or health system owns or operates.

6 – SURPRISE BILLING

Surprise Bill Definition and Exceptions

The bill expands the definition of, and exceptions to, a “surprise bill.”

Under current law, a surprise bill is a bill for non-emergency health care services rendered by an out-of-network provider (1) at an in-network facility or (2) during a service or procedure performed by an in-network provider or previously approved by the health carrier and which the covered person did not knowingly elect to receive from an out-of-network provider. And under current law, a bill is not a surprise bill if it is for health care services received by an insured when (1) an in-network health care provider was available and (2) the insured knowingly elected to obtain such services from the out-of-network provider.

The bill instead defines a surprise bill as a bill for non-emergency health care services rendered by an out-of-network provider (1) at an in-network facility, (2) during a service or procedure performed by an in-network provider, (3) during a service or procedure previously approved by the carrier, or (4) upon the referral of an in-network provider to an out-of-network clinical laboratory. It specifies that a bill is not a surprise bill when (1) an in-network provider was available or made available and (2) the insured knowingly and voluntarily consented, in writing, to obtain out-of-network services and acknowledged, in writing, that such services might not be covered by his or her health care plan.

Emergency Services Billing

The bill allows a health carrier and an out-of-network emergency services provider to agree to a different, rather than a greater, reimbursement than the law specifies. By law, a carrier must reimburse an out-of-network provider who renders emergency services to an insured person the greater of the (1) amount the insured person's health care plan would pay if the services were rendered by an in-network provider; (2) usual, customary, and reasonable rate; or (3) amount Medicare reimburses for the services.

BACKGROUND

Antitrust Related Case

In a 2002 case, the state Supreme Court held that indirect purchasers could not recover under the existing antitrust statutes. The plaintiff, an end user licensee of a software product purchased at a retail store, had alleged that the product manufacturer had a monopoly on the market and thus violated antitrust laws. The court examined legislative history and guidance from federal law and held that under the existing state antitrust law, only consumers who purchased directly from a company could bring an antitrust case against that company (Vacco v. Microsoft Corporation, 260 Conn. 59 (2002)).

Antitrust Law

The Connecticut Antitrust Act prohibits a contract or conspiracy in restraint of trade or that seeks to monopolize a market. Among other things, this includes contracts or conspiracies to fix prices, control the production of a good, divide markets, or refuse to deal with third parties (CGS 35-24 et seq.).

Health Information Blocking

By law, “health information blocking” is defined as knowingly:

1. interfering with, or engaging in business practices or other conduct reasonably likely to interfere with, the ability of patients, providers, or other authorized persons to access, exchange, or use EHRs or

2. using an EHR system to both (a) steer patient referrals to affiliated providers and (b) prevent or unreasonably interfere with referrals to non-affiliated providers.

Health information blocking does not include legitimate referrals between providers participating in an accountable care organization or similar value-based collaborative care model.

Health information blocking is an unfair trade practice (see below). The law specifies that health information blocking by a hospital is subject to a $5,000 penalty for a willful violation as set forth in the unfair practices law (CGS 19a-904d).

Medicare Provider-Based Entities

Under the federal Centers for Medicare and Medicaid Services “provider-based status” rules, Medicare will reimburse for facility fees paid to a hospital-based facility (such as a group practice owned by the hospital) meeting certain requirements but not at physicians' offices not affiliated with a hospital.

A facility or practice has provider-based status and thus can bill for facility fees if it has a relationship with the main provider (i.e., the hospital) concerning a range of issues, such as licensure, clinical and financial integration with the hospital, public awareness, and billing practices. The regulations specify payment recovery procedures if a hospital inappropriately treats a facility as provider-based (42 CFR 413.65).

Connecticut Unfair Trade Practices Act (CUTPA)

The law prohibits businesses from engaging in unfair and deceptive acts or practices. CUTPA allows the consumer protection commissioner to issue regulations defining what constitutes an unfair trade practice, investigate complaints, issue cease and desist orders, order restitution in cases involving less than $10,000, enter into consent agreements, ask the attorney general to seek injunctive relief, and accept voluntary statements of compliance. It also allows individuals to sue. Courts may issue restraining orders; award actual and punitive damages, costs, and reasonable attorney's fees; and impose civil penalties of up to $5,000 for willful violations and $25,000 for violation of a restraining order.

COMMITTEE ACTION

Public Health Committee

Joint Favorable Substitute

Yea

26

Nay

0

(03/27/2017)

Judiciary Committee

Joint Favorable

Yea

33

Nay

2

(05/09/2017)