For purposes of this chapter, the following definitions shall apply:

(a) “Carrier” means a health care service plan, as defined in § 1345 of the Health and Safety Code, or a health insurer that issues policies of health insurance, as defined in § 106 of the Insurance Code.

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(b) “Clerical or recordkeeping error” includes a typographical error, scrivener’s error, or computer error in a required document or record.

(c) “Extrapolation” means the practice of inferring a frequency or dollar amount of overpayments, underpayments, nonvalid claims, or other errors on any portion of claims submitted, based on the frequency or dollar amount of overpayments, underpayments, nonvalid claims, or other errors actually measured in a sample of claims.

(d) “Health benefit plan” means any plan or program that provides, arranges, pays for, or reimburses the cost of health benefits. “Health benefit plan” includes, but is not limited to, a health care service plan contract issued by a health care service plan, as defined in § 1345 of the Health and Safety Code, and a policy of health insurance, as defined in § 106 of the Insurance Code, issued by a health insurer.

(e) “Maximum allowable cost” means the maximum amount that a pharmacy benefit manager will reimburse a pharmacy for the cost of a drug.

(f) “Maximum allowable cost list” means a list of drugs for which a maximum allowable cost has been established by a pharmacy benefit manager.

(g) “Obsolete” means a drug that may be listed in national drug pricing compendia but is no longer available to be dispensed based on the expiration date of the last lot manufactured.

(h) “Pharmacy” has the same meaning as provided in Section 4037.

(i) “Pharmacy audit” means an audit, either onsite or remotely, of any records of a pharmacy conducted by or on behalf of a carrier or a pharmacy benefits manager, or a representative thereof, for prescription drugs that were dispensed by that pharmacy to beneficiaries of a health benefit plan pursuant to a contract with the health benefit plan or the issuer or administrator thereof. “Pharmacy audit” does not include a concurrent review or desk audit that occurs within three business days of transmission of a claim, or a concurrent review or desk audit if a chargeback or recoupment is not demanded.

(j) “Pharmacy benefit manager” means a person, business, or other entity that, pursuant to a contract or under an employment relationship with a carrier, health benefit plan sponsor, or other third-party payer, either directly or through an intermediary, manages the prescription drug coverage provided by the carrier, plan sponsor, or other third-party payer, including, but not limited to, the processing and payment of claims for prescription drugs, the performance of drug utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to prescription drug coverage, contracting with network pharmacies, and controlling the cost of covered prescription drugs.

(Amended by Stats. 2016, Ch. 86, Sec. 8. (SB 1171) Effective January 1, 2017.)