PA 17-241—sSB 445

Public Health Committee

Judiciary Committee

AN ACT CONCERNING CONTRACTS BETWEEN A PHARMACY AND A PHARMACY BENEFITS MANAGER, THE BIDIRECTIONAL EXCHANGE OF ELECTRONIC HEALTH RECORDS AND THE CHARGING OF FACILITY FEES BY A HOSPITAL OR HEALTH SYSTEM

SUMMARY: This act makes numerous changes 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 prohibiting or penalizing a pharmacist's disclosure of certain information about therapeutic alternatives or cost to an individual purchasing prescription medication ( 1);

2. allows (a) indirect purchasers to recover from drug manufacturers for antitrust violations and (b) 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 carrier (e.g., insurer or HMO) and a health care provider or certain vendors or agents a provider 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); and

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

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

EFFECTIVE DATE: October 1, 2017, except upon passage for the antitrust provisions.

1 — PHARMACY SERVICES CONTRACTS

Prohibited Provisions

Starting January 1, 2018, the act prohibits a pharmacy services contract between a pharmacist or pharmacy and health carrier 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.

Specifically, such a contract cannot prohibit or penalize the disclosure of the (1) 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 act prohibits a health carrier or pharmacy benefits manager from requiring an individual to pay more for a covered prescription medication 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

Any provision of a contract that violates the act is void and unenforceable, but a contract provision rendered invalid or unenforceable does not affect remaining provisions. The act also makes any general business practice that violates its provisions an unfair trade practice under the Connecticut Unfair Trade Practices Act (see BACKGROUND).

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

2 — ANTITRUST CASES AGAINST DRUG MANUFACTURERS

The act 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, Antitrust Related Case). The act 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 act 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 defendant may attempt to prove this as a partial or complete defense.

The act 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 alleged 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 act clarifies that a contract between a health care provider and a health carrier cannot contain a provision prohibiting 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. It also clarifies that this information may be used to help consumers and institutional purchasers make informed health care choices and price comparisons.

Starting October 1, 2017, the act extends the same prohibition to a contract between a (1) health carrier and (2) health care provider, 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.

Any provision of a contract that violates the act is void and unenforceable, but a contract provision rendered invalid or unenforceable does not affect the 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 act 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 act, if the hospital has reason to believe 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 act also specifically adds patient admission and transfer records to the definition of “electronic health record” for these purposes.

Under existing law, hospitals are not required to pay for any new or additional information technology, equipment, hardware, or software needed to enable EHR exchange. The act specifies that hospitals also are not required to install, construct, or build any such items for this purpose.

As under the existing provisions on hospitals' EHR exchange:

1. a hospital is deemed to have satisfied the act'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 act constitutes evidence of health information blocking, which is an unfair trade practice (see BACKGROUND).

5 — FACILITY FEES

Patient Notification Requirements

Notice Contents. Under existing 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 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 act expands 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 existing 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 act requires a hospital-based facility, when scheduling services for which a facility fee may be charged, to inform the patient that the facility is part of a hospital or health system and it may charge a facility fee in addition to, and separate from, the provider's professional fee. The facility must also inform the patient of the name of the hospital or health system and the telephone number the patient may call for additional information about his or her potential financial liability.

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

BACKGROUND

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 (CGS 42-110a et seq.).

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 a contract or conspiracy to fix prices, control the production of a good, divide markets, or refuse to deal with third parties (CGS 35-24 et seq.).

Antitrust Related Case

In a 2002 case, an end user licensee of a software product purchased at a retail store alleged that the product manufacturer had a monopoly on the market and thus violated antitrust laws. The state Supreme 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)).

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 above). 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).