Bulletin Number 2024-05 All Pharmacy Services Administrative Organizations (PSAOs), Pharmacy Benefits Mgrs and Other Intereste persons

South Carolina Department of Insurance Capitol Center 1201 Main Street, Suite 1000 Columbia, South Carolina 29201 _________________________ Mailing Address: P.O. Box 100105, Columbia, S.C. 29202-3105 Telephone: (803) 737-6160 HENRY MCMASTER Governor MICHAEL WISE Director BULLETIN NUMBER 2024-05 TO: All Pharmacy Services Administrative Organizations (PSAOs), Pharmacy Benefits Managers and Other Interested Persons FROM: Michael Wise Director RE: 2024 Legislative Changes to S.C. Code Ann. § 38-71-2330 and Summary of New S.C. Code Ann. Regs. 69-78 related to Pharmacy Services Administrative Organizations (PSAOs). DATE: June 28, 2024 I. PURPOSE The purpose of this bulletin is to summarize changes made during the 2024 legislative session of the South Carolina General Assembly relating to Pharmacy Services Administrative Organizations (PSAOs). II. AMENDMENT TO S.C. CODE ANN. § 38-71-2330 Effective May 20, 2024, S.C. Code Ann. § 38-71-2330(A)(1) was amended to remove the requirement that PSAOs must act as fiduciaries to pharmacies, and now provides that a PSAO must “perform its duties to a pharmacy exercising good faith and fair dealing.” (See S.C. Act No. 166 of 2024.) III. ADDITION OF S.C. CODE ANN. REGULATION 69-78 Regulation 69-78, which took effect on May 24, 2024, has been added to provide licensing, reporting and activity standards for PSAOs. This regulation describes 1) the requirements for initial licensure and annual license renewal for PSAOs; 2) contract review for prohibited language and prohibited waivers; 3) examination of PSAOs for compliance with the requirements of S.C. Act No. 30 of 2023, as amended (“the Act”) and applicable South Carolina law or requirements of this regulation; 4) record-keeping requirements of PSAOs; (5) confidentiality requirements; and (6) penalties for violations of this regulation. A. Licensure Requirements A PSAO seeking to do business in South Carolina shall apply for a license by submitting the application and all requisite supporting documentation and paying a non-refundable filing fee of $1,000. The application, supporting documentation and filing fee must be submitted online through the National Insurance Producer Registry (NIPR) at www.nipr.com. Licensees must renew the license annually no later than March 1st of each year by submitting a renewal application, a $500 renewal license fee, and all requisite supporting documentation. It is a violation of South Carolina law to conduct business without a valid license. Renewal applications submitted after March 1st will be subject to an initial license fee and may be subject to administrative action for any period for which the PSAO license is not active. Licensing requirements and instructions are posted on the dedicated PSAO web page on the Department’s website, https://doi.sc.gov/1025/Pharmacy-Services-Administrative-Organiz. License applications may be denied 1) if it appears the PSAO is or proposes to operate in a manner that is hazardous to the public; 2) the PSAO has violated the requirements of South Carolina law or regulation; or 3) the PSAO fails to timely submit information for review of its application. B. Contract Review No contract entered into by a PSAO shall contain language in violation of the laws governing PSAOs (S.C. Code Ann. § 38-71-2310 et seq.) or other applicable provision of South Carolina law, and the prohibitions set forth in the PSAO laws cannot be waived by contract. C. Examinations Beginning January 1, 2025, the Department will conduct regular examinations of the books and records of PSAOs for compliance with applicable law. PSAOs are required to pay the cost of examination, which occur at least every five (5) years. Information or data acquired during an examination pursuant to S.C. Code Ann. § 38-71-2340 is proprietary and confidential and is not subject to disclosure under FOIA. D. Record Keeping Requirements Effective January 1, 2024, PSAOs shall maintain a detailed breakdown of the prescription numbers, amounts and contractual basis for each recoupment and regular updates on the status of appeals for a period of five years. A request for appeals and challenges shall be considered a special report pursuant to S.C. Code Ann. § 38-13-160 and all information submitted in the response to the request shall be strictly confidential in accordance with the language of that statute. All PSAOs must designate the name, address and phone number, including an electronic mail contact, of the organization which shall be responsible for responding to the Department for complaints the Department has received. Any PSAO contacted by the Department regarding a complaint is subject to S.C. Code Ann. § 38-13-70, as amended, relating to the time period for submitting a response to the Department, which is currently within seven (7) calendar days, or a larger timeframe granted by the Department. The Department will review complaints, and upon determination of a violation of the Act or this regulation, institute regulatory action in accordance with the requirements set forth in the penalties section of this regulation. E. Confidentiality The Department may report on its activities relating to the implementation of the Act and this regulation in compliance with the confidentiality requirements set forth in the Act and this regulation. F. Penalties for Violations Violations of this regulation shall be subject to the penalties set forth in Sections 38-2-10 through 38-2-30 of the Code of Laws of South Carolina 1976, as amended. IV. QUESTIONS Questions about the content of this bulletin, the application process, or any PSAO-related matters should be directed to the Office of PBM Oversight via telephone at (803) 734-0398 or by email at PBMDept@doi.sc.gov. Bulletins are the method by which the Director of Insurance formally communicates with persons and entities regulated by the Department. Bulletins are departmental interpretations of South Carolina insurance laws and regulations and provide guidance on the Department’s enforcement approach. Bulletins do not provide legal advice. Readers should consult applicable statutes and regulations or contact an attorney for legal advice or for additional information on the impact of that legislation on their specific situation.