KRS § 205.5512 — KY Code / Title XVII / Chapter 205 / Section 205.5512
205.5512 Selection of and contract with third-party administrator as pharmacy benefit manager for Medicaid managed care organizations -- Requirements for department’s contracts, procurement process, disclosure of information, and legislative committee review
Status: in_force

205.5512 Selection of and contract with third-party administrator as pharmacy

benefit manager for Medicaid managed care organizations -- Requirements for

department’s contracts, procurement process, disclosure of information, and

legislative committee review.

(1) By December 31, 2020, the department, in accordance with KRS Chapter 45A, shall

select and contract with a third-party administrator to serve as the state pharmacy

benefit manager for every managed care organization with whom the department

contracts for the delivery of Medicaid services.

(2) The state pharmacy benefit manager shall be responsible for administering all

pharmacy benefits for Medicaid recipients enrolled in a managed care organization

with whom the department contracts for the delivery of Medicaid services.

(3) Each contract entered into or renewed by the department for the delivery of

Medicaid services by a managed care organization after the cabinet has selected and

contracted with the state pharmacy benefit manager shall require the managed care

organization to contract with and utilize the state pharmacy benefit manager for the

purpose of administering all pharmacy benefits for Medicaid recipients enrolled

with the managed care organization.

(4) As part of the procurement process to select the state pharmacy benefit manager, the

department shall:

(a) Establish eligibility criteria that an entity shall meet in order to be eligible to

become the state pharmacy benefit manager;

(b) Accept proposals from eligible entities seeking to become the state pharmacy

benefit manager;

(c) Establish a master contract to be used by the department when contracting

with the state pharmacy benefit manager, which shall:

1. Establish the state pharmacy benefit manager's fiduciary duty owed to

the department;

2. Comply with the provisions of KRS 205.5514(4);

3. Require:

a. The use of pass-through pricing; and

b. The state pharmacy benefit manager to use the preferred drug list,

reimbursement methodologies, and dispensing fees established by

the department pursuant to KRS 205.5514(1); and

4. Prohibit:

a. The use of spread pricing; and

b. The state pharmacy benefit manager from:

i. Reducing payment for pharmacy or pharmacist services,

directly or indirectly, under a reconciliation process to an

effective rate of reimbursement. This prohibition shall

include without limitation creating, imposing, or establishing

direct or indirect remuneration fees, generic effective rates,

dispensing effective rates, brand effective rates, any other

effective rates, in-network fees, performance fees, pre-

adjudication fees, post-adjudication fees, or any other

mechanism that reduces, or aggregately reduces, payment for

pharmacy or pharmacist services;

ii. Creating, modifying, implementing, or indirectly establishing

any fee on a pharmacy, pharmacist, or a Medicaid recipient

without first seeking and obtaining written approval from the

department to do so;

iii. Requiring a Medicaid recipient to obtain a specialty drug

from a specialty pharmacy owned by or otherwise associated

with the state pharmacy benefit manager;

iv. Requiring or incentivizing a Medicaid recipient to use a

pharmacy owned by or otherwise associated with the state

pharmacy benefit manager; and

v. Requiring a Medicaid recipient to use a mail-order

pharmaceutical distributor or mail-order pharmacy; and

(d) Select and contract with a single third-party administrator to serve as the state

pharmacy benefit manager to administer all pharmacy benefits for Medicaid

recipients enrolled in a managed care organization with whom the department

contracts for the delivery of Medicaid services.

(5) As part of the procurement process to select the state pharmacy benefit manager, an

entity seeking to become the state pharmacy benefit manager shall disclose the

following information:

(a) Any activity, policy, practice, contract including any national pharmacy

contract, or agreement of the entity that may directly or indirectly present a

conflict of interest in the entity's relationship with the department or a

managed care organization with whom the department contracts for the

delivery of Medicaid services;

(b) Any direct or indirect fees, charges, or any kind of assessments imposed by

the pharmacy benefit manager on pharmacies licensed in Kentucky:

1. With which the pharmacy benefit manager shares common ownership,

management, or control;

2. Which are owned, managed, or controlled by any of the pharmacy

benefit manager's management companies, parent companies, subsidiary

companies, jointly held companies, or companies otherwise affiliated by

a common owner, manager, or holding company;

3. Which share any common members on the board of directors; or

4. Which share managers in common;

(c) Any direct or indirect fees, charges, or any kind of assessments imposed by

the pharmacy benefit manager on pharmacies licensed in Kentucky which

operate:

1. More than ten (10) locations in the Commonwealth; or

2. Ten (10) or fewer locations in the Commonwealth; and

(d) All common ownership, management, common members of a board of

directors, shared managers, or control of a pharmacy benefit manager, or any

of the pharmacy benefit manager's management companies, parent companies,

subsidiary companies, jointly held companies, or companies otherwise

affiliated by a common owner, manager, or holding company with:

1. A managed care organization and its affiliated companies;

2. An entity that contracts on behalf of a pharmacy or any pharmacy

services administration organization and its affiliated companies;

3. A drug wholesaler or distributor and its affiliated companies;

4. A third-party payor and its affiliated companies; and

5. A pharmacy and its affiliated companies.

(6) The contract between the department and the state pharmacy benefit manager shall

be submitted to the Government Contract Review Committee of the Legislative

Research Commission for comment and review.