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S.F. No. 278 - Pharmacy Benefit Manager Licensure and Regulations (Delete Everything Amendment)
Author: Senator Scott M. Jensen
Prepared By: Katie Cavanor, Senate Counsel (651/296-3801)
Date: March 6, 2019


S.F. 278 requires a pharmacy benefit manager (PBM) to obtain a license from the commissioner of commerce in order to do business in the state, and establishes that a PBM has a fiduciary duty to a health carrier. S.F. 278 also requires PBMs to disclose rebate and pricing information to plan sponsors and the Commissioner of Commerce. S.F. 278 also requires PBMs to provide pharmacies with a maximum allowable cost list, which must be updated every seven business days. S.F. 278 also prohibits a PBM from prohibiting a pharmacist from disclosing information about the cost of the drug or the availability of alternative therapies. S.F. 278 also imposes cost-sharing limits for consumers at the point of sale and allows a pharmacist to substitute a therapeutically equivalent and interchangeable drug in place of a prescribed drug. 

Section 1 (62W.01) permits chapter 62W to be cites as the “Minnesota Pharmacy Benefit Manager Licensure and Regulation Act.”

Section 2 (62W.02) defines the following terms: aggregate retained rebate; claims processing service; commissioner; enrollee; health carrier; heath plan; mail order pharmacy; maximum allowable cost price; multiple source drugs; network pharmacy; other prescription drug or devise services; pharmacist; pharmacy; pharmacy benefit manager; plan sponsor; specialty drug; retail pharmacy; and rebates.

Section 3 (62W.03) requires licensure to do business in the state as a pharmacy benefit manager (PBM).

Subdivision 1 requires a PBM to obtain a license from the commissioner of commerce to do business in the state beginning January 1, 2020.

Subdivision 2 describes the application process and sets a nonrefundable application fee. Requires that as part of the application process an applicant must submit a network adequacy report required under section 62W.05.

Subdivision 3 specifies that an issued license is valid for three years. To renew a license an applicant must submit a renewal application, a renewal fee, and the required network adequacy report.

Subdivision 4 authorizes the commissioner of commerce to suspend, revoke, or place on probation a PBM license.

Subdivision 5 specifies that if a PBM does business in this state without a license the PBM may be subject to a fine of $5000 per day.

Subdivision 6 requires the commissioner of commerce to enforce this chapter under the provisions of chapter 45 (commissioner's general regulatory authority).

Section 4 (62W.04) paragraph (a) requires a PBM to exercise good faith and fair dealing in the performance of its contractual duties. This paragraph also specifies that these obligations may not be contractually waived or limited. Paragraph (b) requires a PBM to notify a health carrier in writing if any activity, policy or practice of the PBM presents a conflict of interest with its duties imposed under this section.

Section 5 (62W.05) requires a PBM to provide an adequate and accessible pharmacy network that provides access to pharmacies within a reasonable distance from an enrollee’s residence. Requires a PBM to submit to the commissioner a pharmacy network adequacy report describing the pharmacy network and accessibility in the state.

Section 6 (62W.06) establishes transparency requirements for PBMs.

Subdivision 1 requires each PBM to disclose, upon request of a plan sponsor information regarding the prescription drug benefits specific to the plan sponsor, including information on costs, rebates, and other fees received by manufacturing or wholesale drug distributors, and payments made to pharmacies. This subdivision also permits a PBM to require a plan sponsor to agree to a nondisclosure agreement that specifies that this information is propretary and the PBM is not required to disclose the information until the nondisclosure agreement is executed.

Subdivision 2 requires each PBM, beginning June 1, 2020, to annually submit to the commissioner of commerce a transparency report containing aggregate data on the prescription drugs for all of the PBM’s health carrier clients including costs and rebate information.

Subdivision 3 gives the commissioner the authority to impose civil penalties of not more than $1000 per day per violation of this section.

Section 7 (62W.07) places limitations and disclosure requirements on PBMs that have specific ownership interests.

Paragraph (a) requires a PBM that has an ownership interest in a pharmacy to disclose to a plan sponsor that contracts with the PBM any difference between the amount paid to that pharmacy and the amount charged to the plan sponsor.

Paragraph (b) specifies that a PBM or the PBM’s affiliates or subsidiaries must not own or have an ownership interest in a patient assistance program or a mail order or specialty pharmacy unless the PBM, affiliate, or subsidiary agrees to fair competition, no self-dealing, and no interference with prospective economic advantages and establishes a fire wall between the administrative functions of the PBM and the mail order or specialty pharmacy.

Paragraph (c) prohibits a PBM or health carrier from penalizing or providing financial incentives to an enrollee to use a retail pharmacy, mail order pharmacy, specialty pharmacy or other network pharmacy provider in which the PBM has an ownership interest in or in which the pharmacy provider has an ownership interest in the PBM.

Paragraph (d)  prohibits a PBM or health carrier from imposing limits  on a patient’s access to medication that differ based solely on whether the health carrier or PBM has an ownership interest in a pharmacy or the pharmacy has an ownership interest in the PBM.

Paragraph (e) prohibits a PBM from requiring pharmacy accreditation standards or recertification requirements to participate in a network that are more stringent than or in addition to federal and state requirements for licensure as a pharmacy.

Section 8 (62W.08) establishes maximum allowable cost pricing requirements with respect to the contract between a PBM and a pharmacy.  (This section is essentially the same language as currently in section 151.71.)  (Moving this section to this new chapter). The additions are as follows:

  • requires the PBM to indicate price changes from the previous maximum allowable cost price list;
  • ensure that the maximum allowable cost prices are not set below sources utilized by the PBM; and
  • disclose the sources utilized for setting maximum allowable cost price rates upon request of a network pharmacy.

Section 9 (62W.09) establishes procedures that PBMs are required to follow when conducting pharmacy audits.  (This section is essentially the same language that is currently in sections 151.61 to 151.70). (Moving these sections to this new chapter).

Section 10 (62W.10) requires a contract between a PBM and a pharmacy to permit for synchronization of prescription drug refills for a patient on at least one occasion per year if the following conditions are met: 

  1. The drugs are covered under the patient’s health plan or have been approved through a formulary exceptions process;
  2. The drugs are maintenance medications and have one or more refills available at time of synchronization;
  3. The drugs are not a schedule II, III, or IV controlled substance;
  4. The patient meets all utilization management criteria;
  5. The drugs are of a formation that can be safely split into short fill periods to achieve synchronization; and
  6. The drugs do not have special handling or sourcing needs that require a single designated pharmacy to fill or refill the prescription.

(This section is essentially the same language that was included in SF 3656 supplemental omnibus bill from last session.)

Section 11 (62W.11) paragraph (a) states that a contract between a PBM or health carrier and a pharmacy or pharmacist may not prohibit , restrict, or penalize a pharmacy or pharmacist from disclosing to an enrollee any health care information that the pharmacy or pharmacist deems appropriate.

Paragraph (b) requires a pharmacy or pharmacist to provide an enrollee information regarding the enrollee’s total cost for each prescription drug dispensed in accordance with section 151.214.

Paragraph (c) states that a PBM or health carrier must not prohibit a pharmacist or pharmacy from discussing information regarding the total cost for pharmacy services for a prescription drug.  (This paragraph and paragraph (d) are essentially the same language that is currently in section 151.214 subd.2 and include changes to that section that were in S.F. 3656, supplemental omnibus bill from last session).

Paragraph (d) states that a PBM or health carrier may not prohibit a pharmacist or pharmacy form discussing the availability of any therapeutically equivalent alternative prescription drugs or alternative methods of purchasing a prescription drug including when paying the pharmacy’s usual and customary price when that amount is less than the amount the enrollee is required to pay for the prescription drug under the enrollee’s health plan.

Section 12 (62W.12) prohibits a PBM or health carrier from requiring an enrollee to pay for a covered prescription drug at the point of sale an amount greater than the lesser of the applicable copayment for the drug; the allowable claim amount for the drug; the amount the enrollee would have paid for the drug if purchased without using health plan coverage or any other benefit or discount; or the amount the pharmacy will be reimbursed for the drug from the PBM or health carrier.

Sections 13 and 14 (151.21) state that when a pharmacist receives a prescription order from a prescriber and the drug prescribed is not covered under the patient’s health plan the pharmacist may dispense a therapeutically equivalent and interchangeable prescribe drug or biological product that is covered under the purchaser’s plan, if a written protocol is in place between the prescriber and the pharmacist or pharmacy.  

Section 15 repeals the sections that are being moved to the new chapter 62W.

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