1.1                          A bill for an act 
  1.2             relating to health; giving the commissioner of 
  1.3             administration authority to negotiate contract prices 
  1.4             for all prescription drugs sold in Minnesota; allowing 
  1.5             correction orders to be issued; establishing a 
  1.6             statewide drug formulary; requiring a pharmacy to post 
  1.7             a sign on generic substitution; amending Minnesota 
  1.8             Statutes 1994, sections 151.21, subdivisions 2, 3, and 
  1.9             by adding a subdivision; and 256B.0625, subdivision 
  1.10            13; proposing coding for new law in Minnesota 
  1.11            Statutes, chapters 16B; and 256. 
  1.12  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.13     Section 1.  [16B.93] [DEFINITIONS.] 
  1.14     Subdivision 1.  [APPLICABILITY.] For purposes of sections 
  1.15  16B.93 to 16B.97, the following definitions apply. 
  1.16     Subd. 2.  [MANUFACTURER.] "Manufacturer" means a 
  1.17  manufacturer as defined in section 151.44, paragraph (c). 
  1.18     Subd. 3.  [PRESCRIPTION DRUG.] "Prescription drug" means a 
  1.19  drug as defined in section 151.44, paragraph (d). 
  1.20     Subd. 4.  [PURCHASER.] "Purchaser" means a pharmacy as 
  1.21  defined in section 151.01, subdivision 2, and includes health 
  1.22  maintenance organizations and hospitals. 
  1.23     Subd. 5.  [REBATE.] "Rebate" means any money, incentives, 
  1.24  or credits given to a purchaser by a manufacturer or seller for 
  1.25  purchasing a prescription drug. 
  1.26     Subd. 6.  [SELLER.] "Seller" means any person, other than a 
  1.27  manufacturer, who sells or distributes drugs to purchasers or 
  1.28  other sellers within the state. 
  2.1      Subd. 7.  [SINGLE SOURCE DRUG.] "Single source drug" means 
  2.2   a prescription drug for which there is no other drug product 
  2.3   sold or marketed in the state which the FDA has rated as 
  2.4   therapeutically equivalent and has determined is 
  2.5   pharmaceutically equivalent and bioequivalent. 
  2.6      Subd. 8.  [STATE DRUG FORMULARY.] "State drug formulary" 
  2.7   means a listing of drugs of proven safety, efficacy, and 
  2.8   cost-effectiveness established by the commissioner of human 
  2.9   services under section 256.996. 
  2.10     Sec. 2.  [16B.94] [CONTRACTOR FOR PRESCRIPTION DRUGS.] 
  2.11     Subdivision 1.  [MINNESOTA POOLED CONTRACT FOR PRESCRIPTION 
  2.12  DRUG DISCOUNTS.] (a) Effective January 1, 1996, the commissioner 
  2.13  shall negotiate price contracts for Minnesota purchasers for 
  2.14  prescription drugs listed on the state drug formulary. 
  2.15     (b) The contract price for each drug on the state drug 
  2.16  formulary, with the exception of single source drugs, shall be 
  2.17  based on the average manufacturer's price minus 15 percent, the 
  2.18  best competitive bid price, or a negotiated price, whichever is 
  2.19  lowest.  In the case of single source drugs, the contract price 
  2.20  shall be negotiated.  The initial average manufacturer's price 
  2.21  is the purchaser's actual acquisition cost as of March 1, 1995.  
  2.22  For purposes of computing the contract price in 1996 and each 
  2.23  year thereafter for those drugs on the state drug formulary, the 
  2.24  commissioner shall not recognize increases in the average 
  2.25  manufacturer's contracted price that exceed the rate of increase 
  2.26  in the Consumer Price Index for All Items (U.S. city average) 
  2.27  (CPI-U). 
  2.28     (c) Nothing in this section shall prohibit the commissioner 
  2.29  from granting multiple awards. 
  2.30     Subd. 2.  [REBATES.] No rebates shall be offered by 
  2.31  manufacturers for prescription drugs delivered to Minnesota 
  2.32  sellers and purchasers.  This subdivision does not prohibit 
  2.33  rebates received by the commissioner of human services through 
  2.34  purchasing prescription drugs for the medical assistance program.
  2.35     Subd. 3.  [ADDITIONAL DISCOUNTS.] Sections 16B.93 to 16B.97 
  2.36  do not prevent a purchaser from negotiating further discounts as 
  3.1   long as:  (1) the drug item and contract vendor of that drug 
  3.2   remain the same as that established by the commissioner's 
  3.3   negotiated contract price; (2) the new price negotiated by the 
  3.4   purchaser is offered to all Minnesota purchasers; and (3) the 
  3.5   new price is communicated to the commissioner. 
  3.6      Subd. 4.  [EXEMPTION FROM PREFERENCE REQUIREMENTS.] In 
  3.7   implementing this section, the commissioner is exempt from 
  3.8   sections 16B.101, 16B.102, 16B.121, 16B.18, and 16B.19. 
  3.9      Subd. 5.  [RULEMAKING.] The commissioner shall adopt rules 
  3.10  to implement and administer sections 16B.93 to 16B.97. 
  3.11     Sec. 3.  [16B.95] [PRESCRIPTION DRUG PURCHASES.] 
  3.12     Subdivision 1.  [CONTRACT PRICING.] No Minnesota purchaser 
  3.13  shall purchase a prescription drug from a manufacturer unless 
  3.14  that manufacturer has been awarded the price contract for that 
  3.15  drug as negotiated by the commissioner under section 16B.94.  
  3.16  This section does not apply to drugs that are not listed on the 
  3.17  state drug formulary or to drugs that are prescribed in 
  3.18  accordance with section 151.21, subdivision 2.  
  3.19     Subd. 2.  [EXEMPTIONS.] Subdivision 1 does not apply to: 
  3.20     (1) the department of human services in administering the 
  3.21  medical assistance program, to the extent the requirement would 
  3.22  conflict with federal Medicaid requirements for the purchase of 
  3.23  prescription drugs or would result in the loss of federal 
  3.24  financial participation in the state medical assistance program; 
  3.25     (2) a hospital purchaser when purchasing prescription drugs 
  3.26  purchased for its own use.  "For its own use" means that the 
  3.27  purchased drugs are provided to or used for: 
  3.28     (i) patients registered at the hospital who are under 
  3.29  active treatment by physicians employed by or under contract 
  3.30  with the hospital; 
  3.31     (ii) hospital employees, their spouses and dependents; or 
  3.32     (iii) ancillary services or facilities for which the 
  3.33  hospital is the majority owner.  "For its own use" does not 
  3.34  include the provision of drugs to outpatient customers by 
  3.35  pharmacies owned by the hospital; and 
  3.36     (3) a community health clinic that meets the criteria 
  4.1   listed in Minnesota Rules, part 9505.0255, when purchasing 
  4.2   prescription drugs for use in its clinic services. 
  4.3      Subd. 3.  [PURCHASING PRESCRIPTION DRUGS NOT INCLUDED ON 
  4.4   THE STATE DRUG FORMULARY.] Nothing in this section shall prevent 
  4.5   a purchaser from purchasing a prescription drug that is not 
  4.6   included on the state drug formulary. 
  4.7      Sec. 4.  [16B.96] [ADMINISTRATIVE PENALTY.] 
  4.8      The commissioner may issue correction orders for violations 
  4.9   of sections 16B.93 to 16B.97.  The commissioner may assess 
  4.10  administrative penalties for failure to comply with correction 
  4.11  orders. 
  4.12     Sec. 5.  [16B.97] [PRICING DISCLOSURE.] 
  4.13     The commissioner of administration, in consultation with 
  4.14  the commissioners of health and human services, shall compile 
  4.15  the prices of prescription drugs from manufacturers and sellers 
  4.16  serving all Minnesota purchasers.  This information shall be 
  4.17  updated on an annual basis and shall be filed with the 
  4.18  information clearinghouse established under section 62J.33, 
  4.19  subdivision 2.  
  4.20     Sec. 6.  Minnesota Statutes 1994, section 151.21, 
  4.21  subdivision 2, is amended to read: 
  4.22     Subd. 2.  When a pharmacist receives a written prescription 
  4.23  on which the prescriber has personally written in handwriting 
  4.24  "dispense as written - brand medically necessary," or "D.A.W.," 
  4.25  or an oral prescription in which the prescriber has expressly 
  4.26  indicated that the prescription is to be dispensed as 
  4.27  communicated, the pharmacist shall dispense the brand name 
  4.28  legend drug as prescribed.  If the practitioner specifies orally 
  4.29  that the prescription shall be dispensed as communicated, 
  4.30  written certification in the practitioner's handwriting bearing 
  4.31  the phrase "dispense as written - brand medically necessary" 
  4.32  must be sent to the dispensing pharmacy within ten days. 
  4.33     Sec. 7.  Minnesota Statutes 1994, section 151.21, 
  4.34  subdivision 3, is amended to read: 
  4.35     Subd. 3.  When a pharmacist receives a written prescription 
  4.36  on which the prescriber has not personally written in 
  5.1   handwriting "dispense as written - brand medically 
  5.2   necessary," or "D.A.W.," or an oral prescription in which the 
  5.3   prescriber has not expressly indicated that the prescription is 
  5.4   to be dispensed as communicated, and there is available in the 
  5.5   pharmacist's stock a less expensive generically equivalent drug 
  5.6   that, in the pharmacist's professional judgment, is safely 
  5.7   interchangeable with the prescribed drug, then the pharmacist 
  5.8   shall, after disclosing the substitution to the purchaser, 
  5.9   dispense the generic drug, unless the purchaser objects.  A 
  5.10  pharmacist may also substitute pursuant to the oral instructions 
  5.11  of the prescriber.  A pharmacist may not substitute a 
  5.12  generically equivalent drug product unless, in the pharmacist's 
  5.13  professional judgment, the substituted drug is therapeutically 
  5.14  equivalent and interchangeable to the prescribed drug.  A 
  5.15  pharmacist shall notify the purchaser if the pharmacist is 
  5.16  dispensing a drug other than the brand name drug prescribed.  
  5.17     Sec. 8.  Minnesota Statutes 1994, section 151.21, is 
  5.18  amended by adding a subdivision to read: 
  5.19     Subd. 8.  Each pharmacy must post a sign in a conspicuous 
  5.20  location in a typeface easily seen at the counter where 
  5.21  prescriptions are dispensed stating that, "This pharmacy will 
  5.22  substitute whenever possible an FDA approved, less expensive, 
  5.23  generic drug product which is therapeutically equivalent and 
  5.24  safely interchangeable to the one prescribed by your doctor in 
  5.25  order to save you money, unless you object to this substitution."
  5.26     Sec. 9.  [256.996] [STATE DRUG FORMULARY.] 
  5.27     Subdivision 1.  [ESTABLISHMENT.] By January 1, 1996, the 
  5.28  commissioner of human services shall establish a state drug 
  5.29  formulary based on the criteria developed by the drug formulary 
  5.30  committee established under section 256B.0625, subdivision 13.  
  5.31  The commissioner shall publish the state drug formulary on an 
  5.32  annual basis.  Prior to publication, the drug formulary 
  5.33  committee shall review and comment on the formulary contents.  
  5.34  The establishment and publication of the state drug formulary 
  5.35  are not subject to the requirements of chapter 14. 
  5.36     Subd. 2.  [DEVELOPMENT OF CRITERIA.] In developing the 
  6.1   criteria to be used by the commissioner in establishing the 
  6.2   state drug formulary, the drug formulary committee shall consult 
  6.3   with health care professional experts in each therapeutic class 
  6.4   of drugs.  The criteria must also be based on review of 
  6.5   scientific literature in peer-reviewed biomedical journals for 
  6.6   purposes of identifying the most efficacious, safe, and 
  6.7   cost-effective drugs in achieving optimal patient therapeutic 
  6.8   outcomes.  The development of these criteria is not subject to 
  6.9   the requirements of chapter 14, but the drug formulary committee 
  6.10  shall provide an opportunity for public input in developing 
  6.11  these criteria. 
  6.12     Subd. 3.  [STATE DRUG FORMULARY ADDITIONS AND 
  6.13  DELETIONS.] (a) Any health care provider, consumer or consumer 
  6.14  group, or seller of prescription drugs may apply to the 
  6.15  commissioner on a form specified in the state drug formulary to 
  6.16  add or delete a drug from the state drug formulary.  For 
  6.17  purposes of this subdivision, "health care provider" includes 
  6.18  any vendor of medical care qualifying for reimbursement under 
  6.19  the medical assistance program provided under chapter 256B. 
  6.20     (b) The drug formulary committee may recommend to the 
  6.21  commissioner the addition or deletion of a prescription drug in 
  6.22  the state drug formulary. 
  6.23     Subd. 4.  [AVAILABILITY OF PRESCRIPTION DRUGS NOT INCLUDED 
  6.24  ON THE STATE DRUG FORMULARY.] Nothing in this section shall 
  6.25  prevent a physician or other person authorized to prescribe 
  6.26  prescription drugs from prescribing a drug that is not included 
  6.27  on the state drug formulary. 
  6.28     Sec. 10.  Minnesota Statutes 1994, section 256B.0625, 
  6.29  subdivision 13, is amended to read: 
  6.30     Subd. 13.  [DRUGS.] (a) Medical assistance covers drugs if 
  6.31  prescribed by a licensed practitioner and dispensed by a 
  6.32  licensed pharmacist, or by a physician enrolled in the medical 
  6.33  assistance program as a dispensing physician.  The commissioner, 
  6.34  after receiving recommendations from professional medical 
  6.35  associations and professional pharmacist associations, shall 
  6.36  designate a formulary committee to advise the commissioner on 
  7.1   the names of drugs for which payment is made, recommend a system 
  7.2   for reimbursing providers on a set fee or charge basis rather 
  7.3   than the present system, and develop methods encouraging use of 
  7.4   generic drugs when they are less expensive and equally effective 
  7.5   as trademark drugs.  The formulary committee shall consist of 
  7.6   nine eleven members, four of whom shall be three physicians who 
  7.7   are not employed by the department of human services, and a 
  7.8   majority of whose practice is for persons paying privately or 
  7.9   through health insurance, three of whom shall be one 
  7.10  pharmacoeconomist, one nurse, four pharmacists who are not 
  7.11  employed by the department of human services or by a health plan 
  7.12  company as defined in section 62Q.01, subdivision 4, and a 
  7.13  majority of whose practice is for persons paying privately or 
  7.14  through health insurance, a one consumer representative, and a 
  7.15  one nursing home representative.  Committee members shall serve 
  7.16  three-year terms and shall serve without compensation.  Members 
  7.17  may be reappointed once.  
  7.18     (b) The commissioner shall establish a drug formulary.  Its 
  7.19  establishment and publication shall not be subject to the 
  7.20  requirements of the administrative procedure act, but the 
  7.21  formulary committee shall review and comment on the formulary 
  7.22  contents.  The formulary committee shall review and recommend 
  7.23  drugs which require prior authorization.  The formulary 
  7.24  committee may recommend drugs for prior authorization directly 
  7.25  to the commissioner, as long as opportunity for public input is 
  7.26  provided.  Prior authorization may be requested by the 
  7.27  commissioner based on medical and clinical criteria before 
  7.28  certain drugs are eligible for payment.  Before a drug may be 
  7.29  considered for prior authorization at the request of the 
  7.30  commissioner:  
  7.31     (1) the drug formulary committee must develop criteria to 
  7.32  be used for identifying drugs; the development of these criteria 
  7.33  is not subject to the requirements of chapter 14, but the 
  7.34  formulary committee shall provide opportunity for public input 
  7.35  in developing criteria; 
  7.36     (2) the drug formulary committee must hold a public forum 
  8.1   and receive public comment for an additional 15 days; and 
  8.2      (3) the commissioner must provide information to the 
  8.3   formulary committee on the impact that placing the drug on prior 
  8.4   authorization will have on the quality of patient care and 
  8.5   information regarding whether the drug is subject to clinical 
  8.6   abuse or misuse.  Prior authorization may be required by the 
  8.7   commissioner before certain formulary drugs are eligible for 
  8.8   payment.  The formulary shall not include:  
  8.9      (i) drugs or products for which there is no federal 
  8.10  funding; 
  8.11     (ii) over-the-counter drugs, except for antacids, 
  8.12  acetaminophen, family planning products, aspirin, insulin, 
  8.13  products for the treatment of lice, vitamins for adults with 
  8.14  documented vitamin deficiencies, and vitamins for children under 
  8.15  the age of seven and pregnant or nursing women; 
  8.16     (iii) any other over-the-counter drug identified by the 
  8.17  commissioner, in consultation with the drug formulary committee, 
  8.18  as necessary, appropriate, and cost-effective for the treatment 
  8.19  of certain specified chronic diseases, conditions or disorders, 
  8.20  and this determination shall not be subject to the requirements 
  8.21  of chapter 14; 
  8.22     (iv) anorectics; and 
  8.23     (v) drugs for which medical value has not been established. 
  8.24     The commissioner shall publish conditions for prohibiting 
  8.25  payment for specific drugs after considering the formulary 
  8.26  committee's recommendations.  
  8.27     (c) The basis for determining the amount of payment shall 
  8.28  be the lower of the actual acquisition costs of the drugs plus a 
  8.29  fixed dispensing fee established by the commissioner, the 
  8.30  maximum allowable cost set by the federal government or by the 
  8.31  commissioner plus the fixed dispensing fee or the usual and 
  8.32  customary price charged to the public.  Actual acquisition cost 
  8.33  includes quantity and other special discounts except time and 
  8.34  cash discounts.  The actual acquisition cost of a drug shall be 
  8.35  estimated by the commissioner, at average wholesale price minus 
  8.36  7.6 percent effective January 1, 1994.  The maximum allowable 
  9.1   cost of a multisource drug may be set by the commissioner and it 
  9.2   shall be comparable to, but no higher than, the maximum amount 
  9.3   paid by other third-party payors in this state who have maximum 
  9.4   allowable cost programs.  Establishment of the amount of payment 
  9.5   for drugs shall not be subject to the requirements of the 
  9.6   administrative procedure act.  An additional dispensing fee of 
  9.7   $.30 may be added to the dispensing fee paid to pharmacists for 
  9.8   legend drug prescriptions dispensed to residents of long-term 
  9.9   care facilities when a unit dose blister card system, approved 
  9.10  by the department, is used.  Under this type of dispensing 
  9.11  system, the pharmacist must dispense a 30-day supply of drug.  
  9.12  The National Drug Code (NDC) from the drug container used to 
  9.13  fill the blister card must be identified on the claim to the 
  9.14  department.  The unit dose blister card containing the drug must 
  9.15  meet the packaging standards set forth in Minnesota Rules, part 
  9.16  6800.2700, that govern the return of unused drugs to the 
  9.17  pharmacy for reuse.  The pharmacy provider will be required to 
  9.18  credit the department for the actual acquisition cost of all 
  9.19  unused drugs that are eligible for reuse.  Over-the-counter 
  9.20  medications must be dispensed in the manufacturer's unopened 
  9.21  package.  The commissioner may permit the drug clozapine to be 
  9.22  dispensed in a quantity that is less than a 30-day supply.  
  9.23  Whenever a generically equivalent product is available, payment 
  9.24  shall be on the basis of the actual acquisition cost of the 
  9.25  generic drug, unless the prescriber specifically indicates 
  9.26  "dispense as written - brand necessary" on the prescription as 
  9.27  required by section 151.21, subdivision 2.  Implementation of 
  9.28  any change in the fixed dispensing fee that has not been subject 
  9.29  to the administrative procedure act is limited to not more than 
  9.30  180 days, unless, during that time, the commissioner initiates 
  9.31  rulemaking through the administrative procedure act. 
  9.32     (d) Until the date the on-line, real-time Medicaid 
  9.33  Management Information System (MMIS) upgrade is successfully 
  9.34  implemented, as determined by the commissioner of 
  9.35  administration, a pharmacy provider may require individuals who 
  9.36  seek to become eligible for medical assistance under a one-month 
 10.1   spenddown, as provided in section 256B.056, subdivision 5, to 
 10.2   pay for services to the extent of the spenddown amount at the 
 10.3   time the services are provided.  A pharmacy provider choosing 
 10.4   this option shall file a medical assistance claim for the 
 10.5   pharmacy services provided.  If medical assistance reimbursement 
 10.6   is received for this claim, the pharmacy provider shall return 
 10.7   to the individual the total amount paid by the individual for 
 10.8   the pharmacy services reimbursed by the medical assistance 
 10.9   program.  If the claim is not eligible for medical assistance 
 10.10  reimbursement because of the provider's failure to comply with 
 10.11  the provisions of the medical assistance program, the pharmacy 
 10.12  provider shall refund to the individual the total amount paid by 
 10.13  the individual.  Pharmacy providers may choose this option only 
 10.14  if they apply similar credit restrictions to private pay or 
 10.15  privately insured individuals.  A pharmacy provider choosing 
 10.16  this option must inform individuals who seek to become eligible 
 10.17  for medical assistance under a one-month spenddown of (1) their 
 10.18  right to appeal the denial of services on the grounds that they 
 10.19  have satisfied the spenddown requirement, and (2) their 
 10.20  potential eligibility for the MinnesotaCare program or the 
 10.21  children's health plan. 
 10.22     Sec. 11.  [EFFECTIVE DATE.] 
 10.23     Section 5 is effective January 1, 1996.  Section 3 is 
 10.24  effective January 1, 1997.