The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise:

“Auditing entity.” A person or company that performs a pharmacy audit, including a covered entity, pharmacy benefit manager, managed care organization or third-party administrator.

“Business day.” Any day of the week excluding Saturday, Sunday and any legal holiday.

“Covered entity.” A contract holder or policy holder providing pharmacy benefits to a covered individual under a health insurance policy pursuant to a contract administered by a pharmacy benefit manager.

“Covered individual.” A member, participant, enrollee or beneficiary of a covered entity who is provided health coverage by the covered entity. The term includes a dependent or other person provided health coverage through the policy or contract of a covered individual.

“Department.” The Insurance Department of the Commonwealth.

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

“Health care practitioner.” As defined in section 103 of the act of July 19, 1979 (P.L. 130, No. 48),¹ known as the Health Care Facilities Act.

“Health insurance policy.” A policy, subscriber contract, certificate or plan that provides prescription drug coverage. The term includes both comprehensive and limited benefit health policies.

“Health insurer.” An entity licensed by the department with authority to issue a policy, subscriber contract, certificate or plan that provides prescription drug coverage that is offered or governed under any of the following:

“Maximum allowable cost.” The maximum amount that a pharmacy benefits manager will reimburse a pharmacy for the cost of a drug or a medical product or device.

“Multiple source drug.” A covered outpatient drug for which there is at least one other drug product that is rated as therapeutically equivalent under the Food and Drug Administration's most recent publication of “Approved Drug Products with Therapeutic Equivalence Evaluations.”

“Multiple source generic list.” A list of drugs, medical products or devices, or both, for which a maximum allowable cost has been established by a pharmacy benefits manager.

“Network.” A pharmacy or group of pharmacies that agrees to provide prescription services to covered individuals on behalf of a covered entity or group of covered entities in exchange for payment for its services by a pharmacy benefits manager or pharmacy services administration organization. The term includes a pharmacy that generally dispenses outpatient prescriptions to covered individuals or dispenses particular types of prescriptions, provides pharmacy services to particular types of covered individuals or dispenses prescriptions in particular health care settings, including networks of specialty, institutional or long-term care facilities.

“Nonproprietary drug.” As defined in section 2(7.1) of the act of September 27, 1961 (P.L. 1700, No. 699),⁵ known as the Pharmacy Act.

“Pharmacist.” As defined in section 2(10) of the act of September 27, 1961 (P.L. 1700, No. 699), known as the Pharmacy Act.

“Pharmacy.” As defined in section 2(12) of the act of September 27, 1961 (P.L. 1700, No. 699), known as the Pharmacy Act.

“Pharmacy audit.” An audit, conducted on-site by or on behalf of an auditing entity of any records of a pharmacy for prescription or nonproprietary drugs dispensed by a pharmacy to a covered individual.

“Pharmacy benefits management.” The performance of any of the following:

“Pharmacy benefits manager” or “PBM.” A person, business or other entity that performs pharmacy benefits management for covered entities.

“Pharmacy record.” Any record stored electronically or as a hard copy by a pharmacy that relates to the provision of prescription or nonproprietary drugs or pharmacy services or other component of pharmacist care that is included in the practice of pharmacy.

“Pharmacy Services Administration Organization” or “PSAO.” Any entity that contracts with a pharmacy to assist with third-party payer interactions and that may provide a variety of other administrative services, including contracting with PBMs on behalf of pharmacies and managing pharmacies' claims payments from third-party payers.