Tennessee Pharmacists Association

Pharmacy Benefits Manager Laws

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TPA continues to advocate for increased transparency and accountability for Pharmacy Benefits Managers (PBMs) at the state level. These enacted laws ensure that pharmacies have the ability to maintain a level playing field with respect to the practices of PBMs. Ongoing state advocacy efforts include protections for patient access to pharmacist-provided care, pharmacy audit restrictions, increased transparency and accountability for pharmacy payments from PBMs, and other essential laws listed below.

It is important to note that any laws enacted in Tennessee or any other state cannot be enforced on federally-funded programs, such as Medicare plans.

What does ERISA mean?
ERISA is a federal statute that regulates most forms of private employer- and union-sponsored healthcare plans. It includes a preemption clause, which provides that ERISA displaces certain State laws that apply to ERISA-covered plans. The question presented in Rutledge is whether ERISA preempts, or allows these plans to not follow, State laws that regulate PBM-pharmacy reimbursements and the relationship of these entities more generally.

Rutledge vs. PCMA

On December 10, 2020, the Supreme Court handed a significant win to states and broadened the path forward for state health care cost control efforts. In Rutledge vs. Pharmaceutical Care Management Association (PCMA), the Court ruled 8-0 that the Employee Retirement Income Security Act (ERISA) did not preempt Arkansas’s law regulating pharmacy benefit managers (PBMs), the intermediaries that administer prescription drug benefits for health plans.

This ruling makes a large impact on the state of Tennessee’s ability to regulate PBMs. Some questions did arise from the Rutledge vs. PCMA case around exactly what aspects of these plans are able to be regulated. There have been some interpretations that the decision only applies to “cost regulation” and that other pending court cases will take up other aspects. However, with the passage of Public Chapter 569 in 2021, the Tennessee Department of Commerce and Insurance issued a bulletin that stated all aspects of the Public Chapter would apply to ERISA plans, including patients’ right to choose their pharmacy. 

Public Chapter 569 – Enacted in 2021 

TPA is working on many resources that stem from what we are hearing from our members, as well as from the Tennessee Department of Commerce and Insurance and other partners. Please share your ideas with us. The situation is quickly evolving, and we want to help our members adapt to what we are learning as pharmacies go through the process. 

The following is a guide to the important PBM-related Tennessee laws linked below:

  • Creation and oversight of the PBM process for state government programs (TCA Title 4)
  • Prompt Pay Requirements (TCA 56-7-126)
  • “Any Willing Pharmacy” Statute (TCA 56-7-2359) *NEW*
  • Patient Choice Statute (TCA 56-7-3120)
  • Standards for PBM Identification Cards (TCA 56-7-2361)
  • Audit and Recoupment Restrictions for Pharmacy Services (TCA 56-7-2362)
  • Pharmacy Audit Bill of Rights and Restrictions on MAC Lists (TCA 56-7-3101 through TCA 56-7-3112)
  • Licensure as Pharmacy Benefits Manager (Mandatory PBM Licensure) (TCA 56-7-3113)
  • Right to Provide Information Regarding Amount of Insured’s Cost Share of Prescription Drug (Prohibition on PBM Gag Clauses) (TCA 56-7-3114)
  • Prohibition on PBMs from Assessing Retroactive, Non-Transparent Fees on Pharmacists or Pharmacies (TCA 56-7-3115)
  • Prohibition on PBMs from Requiring Pharmacists to Dispense Contrary to Professional Judgment (TCA 56-7-3116)
  • Prohibition on PBMs for Utilizing Spread Pricing and Prohibition Against Below Cost Claims (TCA 56-7-3206) *NEW*
  • Disclosure of Material Changes to Contract Provisions (TCA 56-7-3117)
  • Additional Contract Protections and Prohibited PBM Practices (TCA 56-7-3118)
  • Discrimination Against 340B Entities (TCA 56-7-3119) *NEW*
  • Cost Calculations and Pharmacy Right to Disclose Costs to Patients (TCA 56-7-3201 through TCA 56-7-3204)
  • Real Time Benefit Tool (TCA 56-7-3208) *NEW* 
  • Audit and Recoupment Restrictions for Pharmacy Claims (TCA 56-32-138)
  • PBM Authorization Statutes for TennCare (TCA 71-5-138, TCA 71-5-197, TCA 71-5-198)

These laws can also be accessed online in the Tennessee Code Annotated (TCA).

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TCA 4-3-1013. Authority to develop prescription drug programs and to contract with pharmacy benefits managers (PBMs).

Title 4. State Government
Chapter 3. Creation, Organization and Powers of Administrative Departments and Divisions
Part 10. Department of Finance and Administration
TCA 4-3-1013. Authority to develop prescription drug programs and to contract with pharmacy benefits managers (PBMs).
(a) The TennCare bureau is authorized to develop prescription drug programs and to contract with one (1) or more pharmacy benefit managers (PBMs) or other appropriate third party contractors to administer all or a portion of such prescription drug programs for the TennCare program. It is the legislative intent that, insofar as practical, any such pharmacy programs shall be developed and implemented in a manner that seeks to minimize undue disruption in successful drug therapies for current TennCare enrollees.
(b) )
Under such a contract, a PBM may be directed by the TennCare bureau to:
(1) Provide information to the state TennCare pharmacy advisory committee for making recommendations related to a state preferred drug list (PDL);
(2) Provide claims processing and administrative services for the TennCare program;
(3) Provide data on utilization patterns to the bureau of TennCare, the department of finance and administration, TennCare managed care organizations, the University of Tennessee Health Science Center, and other entities determined by the TennCare bureau;
(4) Conduct prospective and retrospective drug utilization review as directed by the bureau of TennCare;
(5) Establish procedures for determining potential liability of third party payers, including, but not limited to, Medicare and private insurance companies, for persons receiving pharmacy services through the state of Tennessee;
(6) Maintain a retail pharmacy network to provide prescription drugs through state programs;
(7) Set pharmacy reimbursement rates and dispensing fee schedules necessary to maintain an adequate retail pharmacy network and increase the cost-effectiveness of state pharmacy purchases;
(8) Negotiate supplemental rebates with pharmaceutical manufacturers for prescription drug expenditures;
(9) Propose other initiatives to the bureau of TennCare to maintain or improve patient care while reducing prescription drug costs; and
(10) Provide other services as directed by the bureau of TennCare
(c) The state TennCare program shall be authorized to receive one hundred percent (100%) of all rebates and any other financial incentives directly or indirectly resulting from the state’s contract with any PBM.
(d) The PBM contract may include performance goals and financial incentives for success or failure in attaining those goals. It is the legislative intent that such goals and incentives shall include the reliable and timely performance of any system of prior authorization that may be implemented pursuant to pharmacy programs authorized by this section.
(e) To the extent permitted by federal law and the TennCare waiver, the bureau of TennCare may implement, either independently or in combination with a PDL, cost saving measures for pharmaceutical services including, but not limited to, tiered co-payments, reference pricing, prior authorization, step therapy requirements, exclusion from coverage of drugs or classes of drugs, mandating the use of generic drugs, and mandating the use of therapeutic equivalent drugs.
(f) The TennCare bureau shall be required to annually report to the health committee of the house of representatives, the health and welfare committee of the senate, and to the finance, ways and means committees of the senate and the house of representatives concerning pharmacy benefits under the medical assistance program provided pursuant to title 71, chapter 5, on or before January 15 of each calendar year, beginning on January 15, 2013. The report shall specifically report on the use and cost of opioids and other controlled substances in the program.

TCA 4-3-1021. Monitoring and auditing of pharmacy benefits manager's compliance with state pharmacy benefits management contract.

Title 4. State Government
Chapter 3. Creation, Organization and Powers of Administrative Departments and Divisions
Part 10. Department of Finance and Administration
TCA 4-3-1021. Monitoring and auditing of pharmacy benefits manager’s compliance with state pharmacy benefits management contract.
(a) The department of finance and administration shall monitor, and cause to be audited by its qualified independent auditor, the pharmacy benefits manager’s compliance with any state pharmacy benefits management contract. The commissioner of finance and administration, or the commissioner’s designee, shall report, by July 1 of each year, on the pharmacy benefits manager’s contract compliance to the speaker of the senate, the speaker of the house of representatives and the fiscal review committee.
(b) In order to comply with subsection (a), the department shall, after one (1) year of entering into or renewing any state pharmacy benefits management contract, annually perform a single risk assessment to determine those areas of the contracts that pose the greatest risk of noncompliance, fraud, waste and abuse. Upon completion of the risk assessment, the department shall incorporate the results of the risk assessment into its audit and monitoring plan. The department shall update the risk assessment when contract amendments result in additional risks of noncompliance, fraud, waste, or abuse. The department shall consult with the office of the comptroller of the treasury in determining the scope and extent of the audit and monitoring plan procedures. The department may submit the updated audit and monitoring plan, along with any audit or monitoring findings, to comply with the reporting requirement in subsection (a).
(c) The audit and monitoring plan shall address all state pharmacy benefits management contracts and be designed to examine source documentation whenever such documentation is available. The plan shall include, but not be limited to, a review of:
(1) Repricing of pharmacy claims at the drug level;
(2) Validation of the national drug code (NDC) usage;
(3) Appropriateness of the nationally recognized reference prices, or average wholesale price (AWP), in accordance with § 56-7-3104;
(4) Eligibility of beneficiaries for pharmacy claims paid;
(5) For pharmacy benefits contracts entered into or renewed on or after July 1, 2013, reconciliation of the pharmacy benefits manager’s payments to pharmacies with the state’s reimbursement to the pharmacy benefits manager;
(6) Confirmation that the pharmacy benefits manager’s payments to pharmacies do not reflect disparity among network pharmacies attributable to preferential treatment of one (1) or more pharmacies;
(7) Recalculation of discount and dispensing fee guarantees;
(8) Review of the state’s claim utilization to ensure that per claim rebate guarantees were accurately calculated by the pharmacy benefits manager;
(9) Review of rebate contracts between the pharmacy benefits manager and five (5) drug manufacturers, to be selected by the benefits administration division of the department, and the contracted auditor to ensure that eligible rebate utilization was accurately invoiced on behalf of the state;
(10) Comparison of total rebates collected by the PBM (pass-through rebates) to the minimum rebate guarantees (per claim rebates) to ensure that annual reconciliation of rebate payments to the state represented the greater of the two (2) amounts;
(11) Monitor the activities of the pharmacy benefits manager to ensure that the contractor is conducting audits and other reviews of pharmacies as provided in the contractor’s scope of services; and
(12) Consideration of other industry related risks to reduce the risk of financial losses due to fraud, waste and abuse.
(d) The department shall seek appropriate remedies for contract noncompliance and occurrences of fraud, waste or abuse that are discovered through monitoring or audits.
(e) The department shall have the authority to contract with a qualified independent auditor experienced in conducting pharmacy audits for auditing the pharmacy benefits manager’s compliance with the contract. No contracted qualified independent auditor shall subcontract any part of the plan described in this section without the express written approval by the commissioner, or the commissioner’s designee, and notification in writing to the comptroller of the treasury.
(f) This section shall apply to any state or local health insurance plan established under title 8, chapter 27.

TCA 56-7-126. Duty of pharmacy benefits manager -- Health insurance under TennCare program.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 1. General Provisions
TCA 56-7-126. Duty of pharmacy benefits manager — Health insurance under TennCare program.
(a) A pharmacy benefits manager shall notify a pharmacist who furnishes goods or services under any policy or contract for health insurance coverage provided under the TennCare program of the failure of any health insurer to provide timely payments for nondisputed claims pursuant to contract within fourteen (14) days of the failure of the health insurer to fund a scheduled payment.
(b) Failure by a pharmacy benefits manager to provide notice as described in subsection (a) shall be cause for the commissioner to impose the appropriate penalties allowed in this title.
(c) As used in this section, “pharmacy benefits manager” means a person, business or other entity and any wholly or partially owned subsidiary of the entity, that administers the prescription drug or device portion of plans providing health insurance coverage on behalf of a third party, including plan sponsors, insurance companies, unions, and health maintenance organizations.

TCA 56-7-2359. Pharmacy and pharmacy access.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 23. Mandated Insurer or Plan Coverage
TCA 56-7-2359. Pharmacy and pharmacy access.
(a) No health insurance issuer and no managed health insurance issuer may:
(1) Deny any licensed pharmacy or licensed pharmacist the right to participate as a participating provider in any policy, contract or plan on the same terms and conditions as are offered to any other provider of pharmacy services under the policy, contract or plan; provided, that nothing in this subdivision (a)(1) shall prohibit a managed health insurance issuer or health insurance issuer from establishing rates or fees that may be higher in nonurban areas, or in specific instances where a managed health insurance issuer or health insurance issuer determines it necessary to contract with a particular provider in order to meet network adequacy standards or patient care needs; and
  (2) Prevent any person who is a party to or beneficiary of any policy, contract or plan from selecting a licensed pharmacy of the person’s choice to furnish the pharmaceutical services offered under any contract, policy or plan; provided, that the pharmacy is a participating provider under the same terms and conditions of the contract, policy or plan as those offered any other provider of pharmacy services.
(b) Notwithstanding any provision of this chapter to the contrary, a health insurance issuer or managed health insurance issuer may restrict an abusive or heavy utilizer of pharmacy services to a single pharmacy provider for nonemergency services, so long as the individual to be restricted has been afforded the opportunity to participate in the process of selection of the pharmacy to be used, or has been given the right to change the pharmacy to be used to another participating provider of pharmacy services prior to the restriction becoming effective. After a restriction is effective, the individual so restricted shall have the right to change a pharmacy assignment based on geographic changes in residence or if the member’s needs cannot be met by the currently assigned pharmacy provider.
(c) If a managed health insurance issuer or health insurance issuer revises its drug formulary to remove a drug from a previously approved formulary, the health insurance issuer or managed health insurance issuer shall allow a subscriber or enrollee an opportunity to file a grievance relative to the decision to remove the drug. The grievance must be filed within sixty (60) days after notification to the provider that the drug is being removed. If the grievance is filed with a managed health insurance issuer or health insurance issuer within ten (10) days after the subscriber or enrollee knows or should have known that the drug is being removed, the subscriber or enrollee may continue to receive the drug that is being removed from the formulary until the managed health insurance issuer or health insurance issuer completes the grievance process. This subsection (c) shall not apply to any drug removed from a previously approved formulary when the reason for the removal is due to patient care concerns or other potentially detrimental effects of the drug. Nothing contained in this section shall be construed or interpreted as applying to the TennCare programs administered pursuant to the waivers approved by the federal department of health and human services.
(d) As used in this section, “managed health insurance issuer” has the same meaning as defined in ง 56-32-128(a).
(e) Each health insurance issuer or managed health insurance issuer shall apply the same coinsurance, co-payment, deductible and quantity limit factors within the same employee group and other plan-sponsored groups to all drug prescriptions filled by any licensed pharmacy provider, whether by a retail provider or a mail service provider; provided, that all pharmacy providers comply with the same terms and conditions. Nothing in this section shall be construed to prohibit the health insurance issuer or managed health insurance issuer from applying different co-insurance, co-payment, and deductible factors within the same employer group and other plan-sponsored groups between generic and brand-name drugs nor prohibit an employer or other plan-sponsored group from offering multiple options or choices of health insurance benefit plans, including, but not limited to, cafeteria benefit plans.

TCA 56-7-2361. Standardized pharmacy benefit identification card.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 23. Mandated Insurer or Plan Coverage
TCA 56-7-2361. Standardized pharmacy benefit identification card.
(a) Every health benefit plan that provides coverage for prescription drugs or devices or services, or administers such a plan, including, but not limited to, health maintenance organizations, third party administrators for self-insured plans and state administered plans, shall issue to each insured a card or other technology containing standardized pharmacy benefit identification information. The card shall contain at a minimum the following information:
(1) The health benefit plan’s name and issuer identifier;
(2) The American National Standards Institute Issuer Identification Number assigned to the administrator or pharmacy benefit manager of the plan, when required for proper claims adjudication;
(3) The processor control number, when required for proper claims adjudication;
(4) The insured’s group number, when required for proper claims adjudication;
(5) The insured’s identification number;
(6) The insured’s name; and
(7)
  (A) The names of all other persons included under the subscriber’s coverage and individual identification number information if applicable and required for pharmacy claims processing; or
(B)
If a separate card is issued for each person included under the subscriber’s coverage, the name of the covered person for whom the card is issued may be listed in lieu of the information required by subdivision (a)(7)(A).
(b) This section does not require a health benefit plan to issue an identification card separate from any identification card issued to an enrollee to evidence coverage, under the health benefit plan, if the identification card contains the elements required by subsection (a).
(c) The Health Insurance Portability and Accountability Act (HIPAA) adopted identifiers may be used in lieu of any element listed in subsection (a) at such time that use of such HIPAA identifier is adopted as the standard.
(d) So as to ensure that insurance identification cards issued under this section contain accurate and updated information, each insurer shall provide each subscriber with a new insurance identification card within a reasonable time whenever the American National Standards Institute Issuer Identification Number, the group number or the processor control number is changed.
(e) As used in this section, “health benefit plan” means an accident and health insurance policy or certificate, a nonprofit hospital or medical service corporation contract, a health maintenance organization subscriber contract or a plan provided by a multiple employer welfare arrangement. Without limitation, “health benefit plan” does not mean any of the following types of insurance:
  (1) Accident;
(2)
Credit;
(3)
Disability income;
(4)
Specified disease coverage issued as a supplement;
(5)
Dental or vision;
(6)
Coverage issued as a supplement to liability insurance;
(7)
Medical payments under automobile or homeowners;
(8)
Insurance under which benefits are payable with or without regard to fault and this is statutorily required to be contained in any liability policy or equivalent self-insurance;
(9)
Hospital income or indemnity; or
(10)
Long-term care.

TCA 56-7-2362. Payment on authorized services -- Correction of submitted claims.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 23. Mandated Insurer or Plan Coverage
TCA 56-7-2362. Payment on authorized services — Correction of submitted claims.
(a)
(1) If authorization is given and a pharmacy claim is adjudicated by a health insurer or its agent to any pharmacy services provider for care to be delivered to a covered beneficiary under any individual, franchise, blanket or group health insurance policy, medical service plan corporation contract, hospital service corporation contract, hospital and medical service corporation contract or fraternal benefit society, the health insurer acting directly or by delegation through an agent acting on behalf of the health insurer shall not subsequently rescind or modify that authorization or deny the authorized payment to the pharmacy services provider for the authorized service after the provider renders the authorized service in good faith and pursuant to the authorization, except for payments made as a result of the provider’s misrepresentation or fraud.
  (2) If the bureau of TennCare provides notice to the health insurer or its agent that a person is eligible to participate in the TennCare program, and, if based on good faith reliance on the information, the health insurer makes a payment to a pharmacy provider for providing pharmacy services to the person enrolled in the TennCare program, and, if the bureau of TennCare later rescinds the eligibility for the person, then the bureau of TennCare shall remain liable to the health insurer for any amount the health insurer paid to the provider for the pharmacy services. The bureau of TennCare shall not be liable when the eligibility is rescinded in the case of fraud or death as defined in the contract. The bureau of TennCare shall not be liable due to an error or delay on the part of the managed care organization or its agents in processing eligibility information received from the bureau of TennCare.    
(b) Notwithstanding subsection (a), any organization may request the pharmacy to adjust or correct an adjudicated claim to correct incorrect data elements, including incorrect billing units, incorrect national drug code (NDC) numbers and incorrect prescriber identification numbers submitted in error and in good faith by the pharmacy. An organization shall provide the pharmacy an opportunity to correct claims submitted by the pharmacy in good faith. If the pharmacy does not correct the adjudicated claim requested within thirty (30) days of receipt of the request, then the organization may rescind, modify or recoup the funds paid on the requested claim and shall not be in violation of this section.

TCA 56-7-3101 through TCA 56-7-3112. Pharmacy benefits managers.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 31. Pharmacy Benefits Managers
TCA 56-7-3101 through TCA 56-7-3112. Pharmacy benefits managers:
TCA 56-7-3101. Compliance.
Pharmacy benefits managers shall, and contracts for pharmacy benefits management must, comply with the requirements of this part.
TCA 56-7-3102. Part definitions.
As used in this part, unless the context otherwise requires:
(1) “Covered entity” means a health insurance issuer, managed health insurance issuer as defined in TCA 56-32-128(a), nonprofit hospital, medication service organization, insurer, health coverage plan, health maintenance organization licensed to practice pursuant to this title, a health program administered by the state or its political subdivisions, including the TennCare programs administered pursuant to the waivers approved by the United States department of health and human services, nonprofit insurance companies, prepaid plans, self-insured entities, and all other corporations, entities or persons, or an employer, labor union, or other group of persons organized in the state that provides health coverage to covered individuals who are employed or reside in the state. “Covered entity” does not include a health plan that provides coverage only for accidental injury, specified disease, hospital indemnity, medicare supplement, disability income, or other long-term care;
  (2) “Maximum allowable cost” means the maximum amount that a pharmacy benefits manager or covered entity will reimburse a pharmacy for the cost of a drug or a medical product or device;
  (3) “Maximum allowable cost list” means a list of drugs, medical products or devices, or both medical products and devices, for which a maximum allowable cost has been established by a pharmacy benefits manager or covered entity;
  (4) “Pharmacist” and “pharmacy” have the same meanings as those terms are defined in TCA 63-10-204;
  (5) “Pharmacy benefits manager” means a person, business or other entity and any wholly or partially owned subsidiary of the entity, that administers the medication and/or device portion of pharmacy benefits coverage provided by a covered entity. “Pharmacy benefits manager” includes, but is not limited to, a health insurance issuer, managed health insurance issuer as defined in TCA 56-32-128(a), nonprofit hospital, medication service organization, insurer, health coverage plan, health maintenance organization licensed to practice pursuant to this title, a health program administered by the state or its political subdivisions, including the TennCare programs administered pursuant to the waivers approved by the United States department of health and human services, nonprofit insurance companies, prepaid plans, self-insured entities, and all other corporations, entities or persons acting for a pharmacy benefits manager in a contractual or employment relationship in the performance of pharmacy benefits management for a covered entity and includes, but is not limited to, a mail order pharmacy; and
  (6) “Pharmacy services administrative organization” means an entity that provides contracting and other administrative services to pharmacies to assist them in their interaction with third-party payers, pharmacy benefits managers, drug wholesalers, and other entities.
TCA 56-7-3103. Audit of records of pharmacist or pharmacy.
(a) When an audit of records of a pharmacist or pharmacy is conducted by a covered entity, a pharmacy benefits manager, the state or its political subdivisions, or any other entity representing the same, it shall be conducted in the following manner:
(1) Written notice shall be given to the pharmacist or pharmacy at least two (2) weeks prior to conducting the initial on-site audit for each audit cycle;
  (2) Any audit performed under this section that involves clinical or professional judgment shall be conducted in consultation with a pharmacist who has knowledge of the Tennessee Pharmacy Practice Act, compiled in title 63, chapter 10, parts 2-4;
  (3) Any clerical or recordkeeping error identified during an audit, such as a typographical error, scrivener’s error, omission, or computer error, does not, in and of itself, constitute fraud or intentional misrepresentation and must not be the basis of a recoupment unless the error results in an actual overpayment to the pharmacy or the wrong medication being dispensed to the patient. Notwithstanding any other law to the contrary, no such claim is subject to criminal penalties without proof of intent to commit fraud;
  (4) A pharmacist or pharmacy may use the records of a hospital, physician, or other authorized practitioner of the healing arts for drugs or medical supplies written or transmitted by any means of communication for purposes of validating pharmacy records with respect to orders or refills of a legend or narcotic drug;
  (5) A finding of overpayment or underpayment may be a projection based on the number of patients served having a similar diagnosis or on the number of similar orders or refills for similar drugs; however, recoupment of claims must be based on the actual overpayment or underpayment, unless the projection for overpayment or underpayment is part of a settlement as agreed to by the pharmacist or pharmacy;
  (6) Each pharmacist or pharmacy shall be audited under the standards and parameters as other similarly situated pharmacists or pharmacies audited by a covered entity, a pharmacy benefits manager, the state or its political subdivisions, or any other entity representing the same;
  (7) A pharmacist or pharmacy must be allowed the length of time described in the pharmacist’s or pharmacy’s contract or provider manual, whichever is applicable, which must not be less than thirty (30) days, following receipt of the preliminary audit report in which to produce documentation to address any discrepancy found during an audit. A pharmacist or pharmacy may correct a clerical or recordkeeping error by submitting an amended claim during the designated time frame if the prescription was dispensed according to the requirements of state and federal law. If the pharmacist’s or pharmacy’s contract or provider manual does not specify the allowed length of time for the pharmacist or pharmacy to address any discrepancy found in the audit following receipt of the preliminary report, then that pharmacist or pharmacy must be allowed no less than thirty (30) days following receipt of the preliminary audit report to respond and produce documentation;
  (8) The period covered by an audit may not exceed two (2) years from the date the claim was submitted to or adjudicated by a covered entity, a pharmacy benefits manager, the state or its political subdivisions, or any other entity representing the same, except this subdivision (a)(8) shall not apply where a longer period is required by any federal rule or law;
  (9) An audit shall not be initiated or scheduled during the first seven (7) calendar days of any month due to the high volume of prescriptions filled during that time, unless otherwise consented to by the pharmacist or pharmacy;
  (10) The preliminary audit report must be delivered to the pharmacist or pharmacy within one hundred twenty (120) days after conclusion of the audit. A final audit report shall be delivered to the pharmacist or pharmacy within six (6) months after receipt of the preliminary audit report or final appeal, whichever is later;
  (11) Notwithstanding any other law to the contrary, any audit of a pharmacist or pharmacy shall not use the accounting practice of extrapolation in calculating recoupments or penalties for audits; and
  (12) Any recoupment related to clerical or recordkeeping errors must not include the cost of the drug or dispensed product, except in cases of the following:
(A) Fraud or other intentional and willful misrepresentation;    
(B) Dispensing in excess of the pharmacy benefits contract established by the plan sponsor; or
(C) Prescriptions not filled in accordance with the prescriber’s order.    
(b) Recoupments of any disputed funds shall only occur after final internal disposition of the audit, including the appeal process as set forth in subsection (c).
(c) Each pharmacy benefits manager, as defined in § 56-7-3102, conducting an audit shall establish an appeals process under which a pharmacist or pharmacy may appeal an unfavorable preliminary audit report to the pharmacy benefits manager on whose behalf the audit was conducted. The pharmacy benefits manager conducting any audit shall provide to the pharmacist or pharmacy, before or at the time of delivery of the preliminary audit report, a written explanation of the appeals process, including the name, address and telephone number of the person to whom an appeal should be addressed. If, following the appeal, it is determined that an unfavorable audit report or any portion of the audit report is unsubstantiated, the audit report or the portion shall be dismissed without the necessity of further proceedings.
(d) A pharmacy provider may use any prescription that meets the requirements of being a legal prescription as defined by applicable Tennessee law to validate claims submitted for reimbursement for dispensing of original and refill prescriptions, or changes made to prescriptions.
(e) Auditors are permitted to enter the prescription department when accompanied by or authorized by a member of the pharmacy staff. During the auditing process, auditors shall not disrupt the provision of services to the pharmacy’s customers.
(f) A demand for recoupment, repayment or offset against future reimbursement for an overpayment on a claim for dispensing of an original or refill prescription shall not include the dispensing fee, unless the prescription that is the subject of the claim was not actually dispensed, was not valid, was fraudulent, or was outside the contract. This subsection (f) shall not apply where a pharmacy is requested, pursuant to a contractual provision or to § 56-7-2362(b) or § 56-32-138(b), to correct an error in a claim submitted in good faith.
(g) Audit information from an audit conducted by one pharmacy benefits manager shall not be shared with or utilized by another pharmacy benefits manager. This subsection (g) shall not apply to an investigative audit that is believed by the pharmacy benefits manager to involve fraud or willful misrepresentation.
(h) Unless otherwise agreed to by contract, no audit finding or demand for recoupment, repayment or offset against future reimbursement shall be made for any claim for dispensing of an original or refill prescription for the reason of information missing from a prescription or for information not placed in a particular location on a prescription when the information or location of the information is not required or specified by federal or state law.
(i) In the event the actual quantity dispensed on a valid prescription for a covered beneficiary exceeds the allowable maximum days supply of the product as defined in the applicable pharmacy benefit provider agreement, the amount allowed to be recouped, repaid or offset against future reimbursement shall be limited to an amount that is calculated based on the quantity of the product dispensed found to be in excess of the allowed days supply quantity and using the cost of the product as reflected on the original claim.
(j) A pharmacy provider shall be allowed to dispense and shall be reimbursed for the full quantity of the smallest available commercially packaged product, including, but not limited to, eye drops, insulin, and topical products, which contains the total amount that is required to be dispensed to meet the days supply ordered by the prescriber, even if the full quantity of the commercially prepared package exceeds the maximum days supply allowed.
(k) The highest daily total dose which may be utilized by the patient pursuant to the prescriber’s directions shall be used to make a determination of the days supply. For prescriptions having a titrated dose schedule, the schedule shall be used to determine the days supply.
(l) Subsections (d)-(k) shall not apply to any investigative audit that involves allegations of fraud or willful misrepresentation.
TCA 56-7-3104. Calculation of reimbursement of pharmacy benefits manager.
(a) Reimbursement by a pharmacy benefits manager under a contract to a pharmacist or pharmacy for prescription drugs and other products and supplies that is calculated according to a formula that uses a nationally recognized reference in the pricing calculation shall use the most current nationally recognized reference price or amount in the actual or constructive possession of the pharmacy benefits manager or its agent.
(b) For purposes of compliance with this section, pharmacy benefits managers shall be required to update the nationally recognized reference prices or amounts used for calculation of reimbursement for prescription drugs and other products and supplies no less than every three (3) business days.
TCA 56-7-3105. Contract compliance.
No contract entered into or amended on or after July 1, 2007, shall contain provisions in violation of this part.
TCA 56-7-3106. Placement of drug on maximum allowable cost list.
(a) Before a pharmacy benefits manager or covered entity may place a drug on a maximum allowable cost list, the pharmacy benefits manager or covered entity must find that the drug is generally available for purchase by pharmacies in this state from a national or regional wholesaler.
(b) If a drug that has been placed on a maximum allowable cost list no longer meets the requirements of subsection (a), the drug shall be removed from the maximum allowable cost list by the pharmacy benefits manager or covered entity within five (5) business days after the date that the pharmacy benefits manager or covered entity becomes aware that the drug no longer meets the requirements of subsection (a).
(c) Nothing in this part shall be construed as preventing a pharmacy benefits manager or covered entity from reimbursing claims for a generic drug at the previously determined maximum allowable cost even if the pharmacy benefits manager or covered entity reimburses for the equivalent brand name drug at the contracted brand rate after confirmation by a national or regional wholesaler and by the manufacturer that the generic drug is generally unavailable for purchase from a national or regional wholesaler.
TCA 56-7-3107. Information to be provided regarding maximum allowable cost lists — Updating maximum allowable cost lists.
(a) A pharmacy benefits manager or covered entity shall make available to each pharmacy with which the pharmacy benefits manager or covered entity has a contract and to each pharmacy included in a network of pharmacies served by a pharmacy services administrative organization with which the pharmacy benefits manager or covered entity has a contract, at the beginning of the term of a contract and upon renewal of a contract:
(1) The sources used to determine the maximum allowable costs for the drugs and medical products and devices on each maximum allowable cost list;
  (2) Every maximum allowable cost for individual drugs used by that pharmacy benefits manager or covered entity for patients served by that contracted pharmacy; and
  (3) Upon request, every maximum allowable cost list used by that pharmacy benefits manager or covered entity for patients served by that contracted pharmacy.
(b) A pharmacy benefits manager or covered entity shall
  (1) Update each maximum allowable cost list at least every three (3) business days, as required by § 56-7-3104(b);
  (2) Make the updated lists available to every pharmacy with which the pharmacy benefits manager or covered entity has a contract and to every pharmacy included in a network of pharmacies served by a pharmacy services administrative organization with which the pharmacy benefits manager or covered entity has a contract, in a readily accessible, secure and usable web-based format or other comparable format or process; and
  (3) Utilize the updated maximum allowable costs to calculate the payments made to the contracted pharmacies within five (5) business days.
TCA 56-7-3108. Appeal by pharmacy of cost of particular drug or device on maximum allowable cost list — Procedure.
(a) A pharmacy benefits manager or covered entity shall establish a clearly defined process through which a pharmacy may contest the listed maximum allowable cost for a particular drug or medical product or device. If a pharmacy chooses to contest the listed maximum allowable cost for a particular drug or medical product or device, the pharmacy shall have the right to designate a pharmacy services administrative organization or other agent to file and handle its appeal of the maximum allowable cost of the drug or medical product or device.
(b) A pharmacy may base its appeal on one (1) or more of the following:
(1) The maximum allowable cost established for a particular drug or medical product or device is below the cost at which the drug or medical product or device is generally available for purchase by pharmacies in this state from national or regional wholesalers; or
  (2) The pharmacy benefits manager or covered entity has placed a drug on the list without properly determining that the requirements of ง 56-7-3106 have been met.
(c) The pharmacy must file its appeal within seven (7) business days of its submission of the initial claim for reimbursement for the drug or medical product or device. The pharmacy benefits manager or covered entity must make a final determination resolving the pharmacy’s appeal within seven (7) business days of the pharmacy benefits manager or covered entity’s receipt of the appeal.
(d) If the final determination is a denial of the pharmacy’s appeal, the pharmacy benefits manager or covered entity must state the reason for the denial and provide the national drug code of an equivalent drug that is generally available for purchase by pharmacies in this state from national or regional wholesalers at a price which is equal to or less than the maximum allowable cost for that drug.
(e)  
  (1) If a pharmacy’s appeal is determined to be valid by the pharmacy benefits manager or covered entity, the pharmacy benefits manager or covered entity shall adjust the maximum allowable cost of the drug or medical product or device for the appealing pharmacy. The adjustment for the appealing pharmacy shall be effective from the date the pharmacy’s appeal was filed, and the pharmacy benefits manager or covered entity shall provide reimbursement to the appealing pharmacy and may require the appealing pharmacy to reverse and rebill the claim in question in order to receive the corrected reimbursement.
  (2) Once an appealing pharmacy’s appeal is determined to be valid by the pharmacy benefits manager or covered entity, the pharmacy benefits manager or covered entity shall adjust the maximum allowable cost of the drug or medical product or device to which the maximum allowable cost applies for all similar pharmacies in the network as determined by the pharmacy benefits manager within three (3) business days for claims submitted in the next payment cycle.
(f) A pharmacy benefits manager or covered entity shall make available on its secure web site information about the appeals process, including, but not limited to, a telephone number or process that a pharmacy may use to submit maximum allowable cost appeals.
TCA 56-7-3109. Medical products and devices subject to requirements of part.
The medical products and devices subject to the requirements of this part are limited to the medical products and devices included as a pharmacy benefit under the pharmacy benefits contract.
TCA 56-7-3110. Sanctions for violation of part.
A violation of this part may subject the pharmacy benefits manager or covered entity to any of the sanctions described in TCA 56-2-305.
TCA 56-7-3111. Disclosure of maximum allowable cost lists and related information.
A pharmacy shall not disclose to any third party the maximum allowable cost lists and any related information it receives from a pharmacy benefits manager or covered entity; provided, however, a pharmacy may share such lists and related information with a pharmacy services administrative organization or similar entity with which the pharmacy has a contract to provide administrative services for that pharmacy. If a pharmacy shares this information with a pharmacy services administrative organization or similar entity, that organization or entity shall not disclose the information to any third party.
TCA 56-7-3112. Fair Disclosure of State Funded Payments for Pharmacists’ Services Act.
(a) This section shall be known and may be cited as the “Fair Disclosure of State Funded Payments for Pharmacists’ Services Act”.
(b) As used in this section:
(1) “Pharmacist” means a pharmacist as defined in TCA 63-10-204;
  (2) “Pharmacist services” means products, goods, or services provided as a part of the practice of pharmacy as defined in TCA 63-10-204 to individuals who reside or are employed in this state;
  (3) “Pharmacy” means the same as defined in TCA 63-10-204;
  (4) “Pharmacy benefits manager” or “PBM” means an entity that administers or manages a pharmacy benefits plan or program; and
  (5) “Pharmacy benefits plan or program” means any plan or program that is funded by state dollars to furnish, cover the cost of, or otherwise provide for pharmacist services to individuals who reside or are employed in this state.
(c) A PBM, when seeking payment or reimbursement for pharmacist services provided in connection with a pharmacy benefits plan or program or reporting expenditures for pharmacist services provided in connection with a pharmacy benefits plan or program, shall itemize by individual claim:
  (1) The amount actually paid or to be paid to the pharmacy or pharmacist for the pharmacist services;    
  (2) The identity of the pharmacy or pharmacist actually paid or to be paid; and
   
  (3) The prescription number or other identifier of the pharmacist services    
(d) A PBM shall pay the amounts it receives for pharmacist services provided in connection with a pharmacy benefits plan or program to the pharmacies or pharmacists that provided the pharmacist services.
(e) This section does not:
(1) Require a PBM to set specific fees, rates, or schedules for payment for pharmacist services;
  (2) Prohibit a PBM from charging for any services in addition to pharmacist services; or
  (3) Require a PBM to pay a pharmacy or pharmacist more on any claim than the amount disclosed under subdivision (c)(1).
(f) A violation of this section is an unfair trade practice under the Tennessee Unfair Trade Practices and Unfair Claims Settlement Act of 2009, compiled in chapter 8, part 1 of this title.
(g) All documents containing individual claim and payment information specified in subsections (c) and (d) shall be confidential records and not subject to the requirements of title 10, chapter 7, relating to public inspection of records.
(h) A state agency administering a PBM contract may provide the information described in subsections (c) and (d) to a qualified independent auditor in accordance with TCA 4-3-1021; provided, the information is relevant to an audit authorized under TCA 4-3-1021, and the independent auditor has agreed to maintain the confidentiality of the information.

TCA 56-7-3113. Licensure as pharmacy benefits manager.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 31. Pharmacy Benefits Managers
TCA 56-7-3113. Licensure as pharmacy benefits manager.
(a) No person or entity shall administer the medication or device portion of pharmacy benefits coverage provided by a covered entity or otherwise act as a pharmacy benefits manager in this state unless the person or entity has obtained licensure through the department of commerce and insurance.
(b) To obtain licensure as a pharmacy benefits manager, the person or entity must demonstrate to the department that the person or entity:
(1) Is authorized to transact business in this state;
(2) Is financially responsible, as determined by the department; and
(3) Has not had a prior license to be a pharmacy benefits manager denied for cause or revoked by the department within five (5) years of the date on which licensure is sought.
(c)  
  (1) In addition to the showing required by subsection (b), a person or entity seeking licensure as a pharmacy benefits manager shall also provide the following information to the department:
(A) The person or entity’s name, address, telephone number, email address, and website address; and
(B) If the licensure is sought for an entity, the name, address, telephone number, and email address for a contact person.
(2) Any material changes in the information described in this subsection (c) shall be filed with the department within sixty (60) days of the change.
(d) A person or entity’s license as a pharmacy benefits manager shall be renewed biennially.
(e)
  (1) Any person or entity seeking licensure as a pharmacy benefits manager shall pay a fee in the amount of one hundred dollars ($100) to the department to obtain the license. Any person or entity seeking renewal of a license as a pharmacy benefits manager shall pay a fee in the amount of fifty dollars ($50) to renew the license.
(2) All fees paid pursuant to this section shall be used by the department for purposes of administering this section.
(f)  
  (1) Failure to obtain licensure or renew a license pursuant to this section while acting as a pharmacy benefits manager in this state shall constitute a violation of this section and shall be punishable by a fine of not less than one hundred dollars ($100) nor more than five hundred dollars ($500).
  (2) Any person or entity assessed a fine pursuant to this section or denied a license or renewal of a license may appeal the fine or denial pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
 
Effective January 1, 2019

TCA 56-7-3114. Right to provide information regarding amount of insured's cost share of prescription drug.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 31. Pharmacy Benefits Managers
TCA 56-7-3114. Right to provide information regarding amount of insured’s cost share of prescription drug.
A pharmacy or pharmacist has the right to provide an insured information regarding the amount of the insured’s cost share for a prescription drug. Neither a pharmacy nor a pharmacist shall be penalized by a pharmacy benefits manager for discussing any information described in this section or for selling a lower priced drug to the insured if one is available.
Effective July 1, 2018
     

TCA 56-7-3115. Prohibition on PBMs from assessing retroactive, non-transparent fees on pharmacists or pharmacies.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 31. Pharmacy Benefits Managers
TCA 56-7-3115. Prohibition on PBMs from Assessing Retroactive, Non-Transparent Fees on Pharmacists or Pharmacies.
A covered entity or pharmacy benefits manager shall not charge a pharmacist or a pharmacy a fee related to a claim unless it is apparent at the time of claim processing and is reported on the remittance advice of an adjudicated claim. This section does not prohibit a covered entity or pharmacy benefits manager from entering into an agreement with a pharmacy or pharmacist which includes prospective performance-based incentives and increases payment to pharmacies or pharmacists.
Effective July 1, 2019
     

TCA 56-7-3116. Prohibition on PBMs from requiring pharmacists to dispense contrary to professional judgment.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 31. Pharmacy Benefits Managers
TCA 56-7-3116. Prohibition on PBMs from requiring pharmacists to dispense contrary to professional judgment.
A covered entity or pharmacy benefits manager shall not include any term or condition in a contract with a pharmacy or pharmacist that requires a pharmacist to dispense a drug or other product to a patient contrary to a pharmacist’s professional judgment.
Effective July 1, 2019
     

TCA 56-7-3117. Disclosure of material changes to contract provisions.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 31. Pharmacy Benefits Managers
TCA 56-7-3117. Disclosure of material changes to contract provisions.
A covered entity or pharmacy benefits manager shall disclose to a pharmacy or pharmacist in its network, at least thirty (30) days before the date the change becomes effective, any material change to a contract provision that affects the terms of reimbursement, the process for verifying benefits and eligibility, the dispute resolution procedure, the procedure for verifying drugs included in the formulary, and the procedure for contract termination. Nothing in this section prohibits a covered entity or pharmacy benefits manager from taking action without notice against a pharmacy or pharmacist in its network for a fraudulent claim or service.
Effective July 1, 2019
     

TCA 56-7-3118. Additional contract protections and prohibited PBM practices.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 31. Pharmacy Benefits Managers
TCA 56-7-3118. Additional contract protections and prohibited PBM practices.
(a) Each contract between a covered entity or pharmacy benefits manager and a pharmacist or pharmacy must be mutually agreed upon and must outline the terms and conditions for the provision of pharmacy services.
(b) A covered entity or pharmacy benefits manager shall not cause or knowingly permit the use of any advertisement, promotion, solicitation, representation, proposal, or offer that is untrue, deceptive, or misleading.
(c) Removal of a pharmacy or a pharmacist from the network of a covered entity or pharmacy benefits manager does not release the covered entity or pharmacy benefits manager from the obligation to make any payment due to the pharmacy or pharmacist for services that have been properly rendered prior to the pharmacy being removed from the network. Properly rendered services do not include any services related to a fraudulent claim or intentional misrepresentation.
(d) A covered entity or pharmacy benefits manager shall not engage in a pattern or practice of reimbursing pharmacies or pharmacists in this state less than the amount that the pharmacy benefits manager reimburses a pharmacy benefits manager affiliate for providing the same drug or dispensed product or service.
Effective July 1, 2019
     

TCA 56-7-3119. Dealings with 340B entities — Discrimination against 340B entity prohibited.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 31. Pharmacy Benefits Managers
TCA 56-7-3119. Dealings with 340B entities — Discrimination against 340B entity prohibited.
(a) A health insurance issuer, managed health insurance issuer as defined in § 56-32-128(a), pharmacy benefits manager, or other third-party payer shall not:
(1) Reimburse a 340B entity for pharmacy-dispensed drugs at a rate lower than the rate paid for the same drug by national drug code number to pharmacies that are not 340B entities;
  (2) Assess a fee, chargeback, or adjustment upon a 340B entity that is not equally assessed on non-340B entities;
  (3) Exclude 340B entities from its network of participating pharmacies based on criteria that is not applied to non-340B entities; or;
  (4) Require a claim for a drug by national drug code number to include a modifier to identify that the drug is a 340B drug.
(b) With respect to a patient eligible to receive drugs subject to an agreement under 42 U.S.C. § 256b, a pharmacy benefits manager, or third party that makes payment for those drugs, shall not discriminate against a 340B entity in a manner that violates § 56-7-2359 or otherwise prevents or interferes with the patient’s choice to receive those drugs from the 340B entity. 
(c) Notwithstanding § 56-7-1005, this section does not apply to: 
  (1) The TennCare program administered under the Medical Assistance Act of 1968, compiled in title 71, chapter 5, part 1, or a successor Medicaid program; 
  (2) The CoverKids Act of 2006, compiled in title 71, chapter 3, part 11, or a successor program; or     
  (3) The prescription drug program described in chapter 57 of this title, or a successor program.     
(d) As used in this section:
  (1) “340B entity” means a covered entity participating in the federal 340B drug discount program, as defined in section 340B of the Public Health Service Act, 42 U.S.C. § 256b, including the entity’s pharmacy or pharmacies, or any pharmacy or pharmacies under contract with the 340B covered entity to dispense drugs on behalf of the 340B covered entity; and     
  (2) “National drug code number” means the unique national drug code number that identifies a specific approved drug, its manufacturer, and its package presentation.    

TCA 56-7-3120. Penalty for obtaining prescription drugs from contracted pharmacy prohibited — Interference with patient's right to choose contracted pharmacy or contracted provider of choice prohibited.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 31. Pharmacy Benefits Managers
TCA 56-7-3120. Dealings with 340B entities — Penalty for obtaining prescription drugs from contracted pharmacy prohibited — Interference with patient’s right to choose contracted pharmacy or contracted provider of choice prohibited.
(a) A pharmacy benefits manager or a covered entity shall not require a person covered under a pharmacy benefit contract, that provides coverage for prescription drugs, including specialty drugs, to pay an additional fee, higher copay, higher coinsurance, second copay, second coinsurance, or other penalty when obtaining prescription drugs, including specialty drugs from a contracted pharmacy.
(b) A pharmacy benefits manager or a covered entity shall not interfere with the patient’s right to choose a contracted pharmacy or contracted provider of choice in a manner that violates § 56-7-2359 or by other means, including inducement, steering, or offering financial or other incentives.

TCA 56-7-3201 through TCA 56-7-3205. Pharmacy benefits.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 32. Pharmacy Benefits
TCA 56-7-3201 through TCA 56-7-3205. Pharmacy benefits:
TCA 56-7-3201. Part definitions.
As used in this part, unless the context otherwise requires:
(1) “Actual reimbursement” means the total amount that a covered entity or pharmacy benefits manager determines that a pharmacy or other dispenser will receive consistent with the provider agreement, and is the sum of the amount the covered entity or pharmacy benefits manager will pay directly to the pharmacy or other dispenser plus any applicable patient out-of-pocket cost paid directly by the patient to the pharmacy or other dispenser, for dispensing of a particular prescription or providing a covered service;
  (2) “Cost sharing requirement” means a copayment, coinsurance, deductible, or annual limitation on cost sharing, including, but not limited to, a limitation subject to 42 U.S.C. §§ 18022(c) and 300gg-6(b), required by, or on behalf of, an enrollee in order to receive a specific healthcare service covered by a health plan, including a prescription drug, whether under the medical or the pharmacy benefit;    
  (3) “Covered entity” means a covered entity as defined in § 56-7-3102;    
  (4) “Generic alternative” means a drug that is designated to be therapeutically equivalent by the United States food and drug administration’s Approved Drug Products with Therapeutic Equivalence Evaluations;    
  (5) “Pharmacy benefits manager” means a pharmacy benefits manager as defined in § 56-7-3102; and    
  (6) “Prescription drug” means a drug that under federal or state law is required to be dispensed only pursuant to a prescription order or is restricted to use by individuals authorized by law to prescribe drugs.     
TCA 56-7-3202. Calculation of out-of-pocket costs for prescription drugs and covered services.
(a) When a patient’s out-of-pocket cost for a prescription or covered service is percentage-based, the covered entity or pharmacy benefits manager shall calculate the out-of-pocket cost such that when the out-of-pocket cost is added to the amount that the covered entity or pharmacy benefits manager will directly pay to the pharmacy or other dispenser the sum will equal the actual reimbursement
(b) The requirements of subsection (a) shall not apply when patient out-of-pocket cost for a prescription or covered service is percentage-based for only a specified portion or predefined subset of drug tiers or specialty drug categories and the remainder of the covered drug prescriptions or services available to the patient are associated with predefined and specific out-of-pocket costs.
TCA 56-7-3203. Disclosure of the actual reimbursement for a particular prescription or covered service.
A covered entity or pharmacy benefits manager shall not in any way restrict, by contract or otherwise, any pharmacy or other dispenser from disclosing to the patient or authorized representative of the patient the actual reimbursement for a particular prescription or covered service. A pharmacy or other dispenser may disclose the actual reimbursement either orally or in writing on any document, including, but not limited to, a receipt, patient profile and summary of the patient’s expenditures for prescriptions or covered services.
TCA 56-7-3204. Construction of part. 
The requirements of this part shall only be construed to apply to policies, contracts and certificates executed, delivered, issued for delivery or renewed in this state on or after January 1, 2010.
TCA 56-7-3205. Calculation of enrollee’s contribution to applicable cost sharing requirement. 
(a) When calculating an enrollee’s contribution to an applicable cost sharing requirement, an insurer shall include cost sharing amounts paid by the enrollee or on behalf of the enrollee by another person. 
(b) Subsection (a) does not apply to a prescription drug for which there is a generic alternative, unless the enrollee has obtained access to the brand name prescription drug through prior authorization, a step therapy protocol, the insurer’s exceptions and appeals process, or as specified in § 53-10-204(a).

TCA 56-7-3206. Calculation of coinsurance or deductible for prescription drug or device based on allowed amount of drug or device — Prohibited charges and reimbursements.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 32. Pharmacy Benefits
TCA 56-7-3206. Calculation of coinsurance or deductible for prescription drug or device based on allowed amount of drug or device — Prohibited charges and reimbursements.
(a) Notwithstanding a law to the contrary, a pharmacy benefits manager or a covered entity shall base the calculation of any coinsurance or deductible for a prescription drug or device on the allowed amount of the drug or device. For purposes of this section, coinsurance or deductible does not mean or include copayments. 
(b) Notwithstanding a law to the contrary, a pharmacy benefits manager shall not charge a covered entity an amount greater than the reimbursement paid by a pharmacy benefits manager to a contracted pharmacy for the prescription drug or device.
(c)
(1) Notwithstanding a law to the contrary, and except as otherwise provided in this subsection (c), a pharmacy benefits manager shall not reimburse a contracted pharmacy for a prescription drug or device an amount that is less than the actual cost to that pharmacy for the prescription drug or device.
  (2)    
    (A) Subdivision (c)(1) does not apply to a pharmacy benefits manager when utilizing a reimbursement methodology that is identical to the methodology provided for in the state plan for medical assistance approved by the federal centers for medicare and medicaid services.
    (B) If a pharmacy benefits manager utilizes a reimbursement methodology that is identical to the methodology provided for in the state plan for medical assistance approved by the federal centers for medicare and medicaid services, then the pharmacy benefits manager shall establish a process for a pharmacy to appeal a reimbursement paid at average acquisition cost and receive an adjusted payment by providing valid and reliable evidence that the reimbursement does not reflect the actual cost to the pharmacy for the prescription drug or device.
  (3)    
    (A) Subdivision (c)(1) does not apply to a covered entity or pharmacy benefits manager that establishes a clearly defined process through which a pharmacy may contest the actual reimbursement received for a particular drug or medical product or device.
    (B) If a pharmacy chooses to contest the actual reimbursement cost for a particular drug or medical product or device, then the pharmacy has the right to designate a pharmacy services administrative organization or other agent to file and handle its appeal of the actual reimbursement.
(4) A covered entity’s or pharmacy benefits manager’s appeals process must be approved by the commissioner of commerce and insurance and comply with the timing and notice requirements of § 56-7-3108.
(d) As used in this section, “allowed amount” means the cost of a prescription drug or device after applying pharmacy benefits manager or covered entity pricing discounts available at the time of the prescription claim transaction.

TCA 56-7-3207. Report of benefit percentage.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 32. Pharmacy Benefits
TCA 56-7-3207. Report of benefit percentage.
A pharmacy benefits manager has a responsibility to report to the plan and the patient any benefit percentage that either are entitled to as a benefit as a covered person. 

TCA 56-7-3208. Request for cost, benefit, and coverage data.

Title 56. Insurance
Chapter 7. Policies and Policyholders
Part 32. Pharmacy Benefits
TCA 56-7-3208. Request for cost, benefit, and coverage data.
(a)
(1) A covered entity shall, upon request of an enrollee, enrollee’s healthcare provider, or authorized third party, furnish the cost, benefit, and coverage data described in subsection (b) to the enrollee, the enrollee’s healthcare provider, or an authorized third party, and shall ensure that the data is:
    (A) Accurate as of the most recent change to the data that was made prior to the date of request; 
    (B) Provided in real time; and
    (C) Provided in the same format in which the request is made. 
(2)
    (A)  A request for coverage data must be in a format that uses established industry content and transport standards as published by the following:
  (i) A standard developing organization that is accredited by the American National Standards Institute, including, but not limited to, the National Council for Prescription Drug Programs, ASC X12, and Health Level 7; or
  (ii)  A relevant governing entity of this state or the federal government, including, but not limited to, the federal centers for medicare and medicaid services and the office of national coordinator for health information technology.
    (B)  The following are not acceptable formats for requests for coverage data under this section:
  (i) A facsimile; or
  (ii)  Use of a proprietary payor or patient portal or other electronic form.
(b) A covered entity that receives a request for data that complies with subsection (a) shall provide the following data for each drug covered under the enrollee’s health plan:
(1) The enrollee’s eligibility information for the drug;
(2) A list of any clinically appropriate alternatives to drugs covered under the enrollee’s health plan;
(3) Cost-sharing information for the drugs and the clinically appropriate alternatives; and
(4) Applicable utilization management requirements for the drugs or clinically appropriate alternatives, including prior authorization, step therapy, quantity limits, and site-of-service restrictions.
(c) A covered entity that furnishes data as provided in subsection (b) shall not:
(1) Restrict, prohibit, or otherwise hinder a healthcare provider from communicating or sharing with the enrollee or enrollee’s authorized representative:
    (A) The data set forth in subsection (b);
    (B) Additional information on lower-cost or clinically appropriate alternative drugs, whether or not the drugs are covered under the enrollee’s plan; or 
    (C) Additional payment or cost-sharing information that may reduce the patient’s out-of-pocket costs, such as cash price or patient assistance, and support programs sponsored by a manufacturer, foundation, or other entity; 
(2) Except as may be required by law, interfere with, prevent, or materially discourage access to, exchange of, or the use of the data set forth in subsection (b), including:
  (A) Charging fees; 
    (B) Failing to respond to a request at the time made when such a response is reasonably possible;
  (C)Implementing technology in nonstandard ways; or
    (D)Instituting requirements, processes, policies, procedures, or renewals that are likely to substantially increase the complexity or burden of accessing, exchanging, or using the data; or
(3) Penalize a healthcare provider for:
  (A) Disclosing the information described in subdivision (c)(1) to an enrollee; or
    (B)Prescribing, administering, or ordering a clinically appropriate or lower-cost alternative drug.

TCA 56-32-138. Payment of authorized pharmacy claims -- Corrections by pharmacy.

Title 56. Insurance
Chapter 32. Health Maintenance Organization Act of 1986
TCA 56-32-138. Payment of authorized pharmacy claims — Corrections by pharmacy.
(a)
(1) If authorization is given and a pharmacy claim is adjudicated by an HMO or its agent to any pharmacy services provider for care to be delivered to a covered beneficiary under any evidence of coverage issued by the HMO, including those organizations participating in the TennCare program, collectively referred to as “organization,” then the organization acting directly or by delegation through an agent acting on behalf of the organization shall not subsequently rescind or modify that authorization or deny the authorized payment to the pharmacy services provider for the authorized service after the provider renders the authorized service in good faith and pursuant to the authorization, except for payments made as a result of the provider’s misrepresentation or fraud.
  (2) If the bureau of TennCare provides notice to the HMO or its agent that a person is eligible to participate in the TennCare program, and, if based on good faith reliance on the information, the HMO makes a payment to a pharmacy provider for providing pharmacy services to the person enrolled in the TennCare program, and if the bureau of TennCare later rescinds the eligibility for the person, then the bureau of TennCare shall remain liable to the HMO for any amount the HMO paid to the provider for the pharmacy services. The bureau of TennCare shall not be liable when the eligibility is rescinded in the case of fraud or death as defined in the contract. The bureau of TennCare shall not be liable due to an error or delay on the part of the managed care organization or its agents in processing eligibility information received from the bureau of TennCare.    
(b) Notwithstanding subsection (a), any organization may request the pharmacy to adjust or correct an adjudicated claim to correct incorrect data elements, including incorrect billing units, incorrect national drug code (NDC) numbers and incorrect prescriber identification numbers submitted in error and in good faith by the pharmacy. An organization shall provide the pharmacy an opportunity to correct claims submitted by the pharmacy in good faith. If the pharmacy does not correct the adjudicated claim requested within thirty (30) days of receipt of the request, then the organization may rescind, modify or recoup the funds paid on the requested claim and shall not be in violation of this section.

TCA 71-5-138, TCA 71-5-197, and TCA 71-5-198. Medical Assistance Act.

Title 71. Welfare
Chapter 5. Programs and Services for Poor Persons
Part 1. Medical Assistance Act
TCA 71-5-138, TCA 71-5-197, and TCA 71-5-198. Medical Assistance Act:
TCA 71-5-138. Compliance with provisions regarding authorizations for pharmacy services.
Any managed care organization participating in the TennCare program shall comply with the provisions of TCA 56-32-138 concerning authorizations given to a pharmacy services provider for care to be delivered to an enrollee receiving TennCare benefits.
TCA 71-5-197. Authority over TennCare pharmacy purchases — Confidential information — Exemption from open meeting laws.
(a) The bureau of TennCare is authorized to remove pharmacy services from managed care organization (MCO) contracts and assume direct responsibility for all TennCare pharmacy purchases.
(b) The bureau of TennCare is authorized to implement, either independently or in combination with a state preferred drug list (PDL), cost saving measures for pharmaceutical services, including, but not limited to, tiered co-payments, reference pricing, prior authorization and step therapy requirements; provided, however, that any prior approval process shall, at a minimum, comply with 42 U.S.C. ง 1396r-8(d)(5), which requires a response to a request for prior authorization within twenty-four (24) hours and further requires at least a seventy-two (72) hour supply of a covered outpatient drug in an emergency situation.
(c) The bureau of TennCare, through a state pharmacy benefit manager (PBM) or on its own, is authorized to negotiate supplemental manufacturer rebates for TennCare prescription drug purchases; provided, however, that when conducting such negotiations, the bureau or PBM, or both, shall utilize the average manufacturer’s price (AMP) as defined in 42 U.S.C. ง 1396r-8(k)(1) or any other recognized acceptable basis for negotiating rebates as the cost basis for the product.
(d) Notwithstanding any other law to the contrary, all information and documents containing trade secrets, proprietary information, rebate amounts for individual drugs or individual manufacturers, percent of rebate for individual drugs or individual manufacturers, and manufacturer’s pricing that are contained in records of the TennCare bureau, the state of Tennessee and its agents shall be confidential and shall not be a public record for the purposes of title 10, chapter 7, part 5. Nothing in this subsection (d) shall be construed to prohibit the TennCare bureau and the state of Tennessee from disclosing the information covered by this subsection (d) to members of the state TennCare pharmacy advisory committee, who shall be deemed agents of the state of Tennessee for purposes of this subsection (d).
(e) Notwithstanding any other law to the contrary, those portions of meetings of the state TennCare pharmacy advisory committee at which information described in subsection (d) is disclosed for discussion are exempt from title 8, chapter 44.
TCA 71-5-198. Prescription drug program waiver.
(a) If necessary, the bureau of TennCare is authorized to seek a research and demonstration waiver under Section 1115 of the federal Social Security Act from the United States department of health and human services to create a TennCare prescription program, subject to funding by the general assembly and the terms and conditions imposed by the waiver.
(b) To the extent and only to the extent permitted by federal law or the terms of the waiver, the TennCare prescription program may provide a prescription benefit to individuals lacking prescription drug insurance coverage who meet criteria established by the bureau of TennCare and the general assembly in its annual appropriation bill.
(c) To the extent permitted by federal law and the TennCare waiver, the bureau of TennCare may implement, either independently or in combination with a state preferred drug list (PDL), cost saving measures for pharmaceutical services including, but not limited to, tiered co-payments, reference pricing, prior authorization, step therapy requirements, exclusion from coverage of drugs or classes of drugs, mandating the use of generic drugs, and mandating the use of therapeutic equivalent drugs.
(d) To the extent permitted by federal law or the terms of the waiver, the bureau of TennCare, through a state pharmacy benefit manager (PBM) or on its own, may negotiate manufacturer rebates for TennCare prescription drug purchases. The bureau of TennCare shall retain ultimate authority to negotiate or contract directly with a pharmaceutical manufacturer, in the interest of implementing rebates or other cost saving measures and for other purposes permitted by this section. Notwithstanding anything under Tennessee law to the contrary, the bureau’s designation of a negotiating agent shall not infringe upon the state’s ability to negotiate and contract directly with pharmaceutical manufacturers.
(e) To the extent permitted by federal law or the terms of the waiver, the bureau of TennCare may establish an open enrollment period based on appropriations from the general assembly.
(f) To the extent permitted by federal law or the terms of the waiver, the bureau of TennCare may contract with another department or a private entity to conduct an eligibility determination. The bureau or a contracted entity may implement an eligibility determination process to ensure participants comply with eligibility standards set by the bureau and the general assembly.
(g) As permitted by the waiver or federal law, program participants may purchase prescription drugs through pharmacies participating in the state network.
(h) To the extent permitted by federal law or the terms of the waiver, the bureau of TennCare may establish an enrollment fee to defray administrative expenses associated with the program.