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 prescription drugs on a state drug formulary; 
  1.5             establishing a statewide drug formulary; requiring a 
  1.6             pharmacy to post a sign on generic substitution; 
  1.7             amending Minnesota Statutes 1994, sections 151.21, 
  1.8             subdivisions 2, 3, and by adding a subdivision; and 
  1.9             256B.0625, subdivision 13; proposing coding for new 
  1.10            law in Minnesota Statutes, chapters 16B; 62J; and 256. 
  1.11  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.12     Section 1.  [16B.93] [DEFINITIONS.] 
  1.13     Subdivision 1.  [APPLICABILITY.] For purposes of sections 
  1.14  16B.93 to 16B.97, the following definitions apply. 
  1.15     Subd. 2.  [CONTRACTOR.] "Contractor" means the individual, 
  1.16  business entity, or other private organization who is awarded 
  1.17  the contract by the commissioner to negotiate the prices for 
  1.18  prescription drugs pursuant to section 16B.94, subdivision 1. 
  1.19     Subd. 3.  [MULTISTATE PHARMACEUTICAL CONTRACTING ALLIANCE 
  1.20  OR ALLIANCE.] "Multistate pharmaceutical contracting alliance" 
  1.21  or "alliance" means the alliance established and administered by 
  1.22  the commissioner of administration under the authority granted 
  1.23  in section 471.59. 
  1.24     Subd. 4.  [MANUFACTURER.] "Manufacturer" means a 
  1.25  manufacturer as defined in section 151.44, paragraph (c). 
  1.26     Subd. 5.  [PRESCRIPTION DRUG.] "Prescription drug" means a 
  1.27  drug as defined in section 151.44, paragraph (d). 
  1.28     Subd. 6.  [PURCHASER.] "Purchaser" means a pharmacy as 
  2.1   defined in section 151.01, subdivision 2, and includes health 
  2.2   maintenance organizations and hospitals. 
  2.3      Subd. 7.  [REBATE.] "Rebate" means any money, incentives, 
  2.4   or credits given to a purchaser by a manufacturer or seller for 
  2.5   purchasing a prescription drug. 
  2.6      Subd. 8.  [SELLER.] "Seller" means any person, other than a 
  2.7   manufacturer, who sells or distributes drugs to purchasers or 
  2.8   other sellers within the state. 
  2.9      Subd. 9.  [SINGLE SOURCE DRUG.] "Single source drug" means 
  2.10  a prescription drug for which there is no other drug product 
  2.11  sold or marketed in the state which the FDA has rated as 
  2.12  therapeutically equivalent and has determined is 
  2.13  pharmaceutically equivalent and bioequivalent. 
  2.14     Subd. 10.  [STATE DRUG FORMULARY.] "State drug formulary" 
  2.15  means a listing of drugs of proven safety, efficacy, and 
  2.16  cost-effectiveness established by the commissioner of human 
  2.17  services under section 256.996. 
  2.18     Sec. 2.  [16B.94] [PRICE CONTRACT FOR PRESCRIPTION DRUGS ON 
  2.19  THE STATE FORMULARY.] 
  2.20     Subdivision 1.  [MINNESOTA POOLED CONTRACT FOR PRESCRIPTION 
  2.21  DRUG DISCOUNTS.] (a) The commissioner shall negotiate price 
  2.22  contracts for prescription drugs listed on the state drug 
  2.23  formulary.  The commissioner may contract with an individual, 
  2.24  business entity, or other private organization to negotiate the 
  2.25  contract price as required under this subdivision.  The 
  2.26  commissioner may negotiate a price differential based on volume 
  2.27  purchasing. 
  2.28     (b) The contract price for each drug on the state drug 
  2.29  formulary, with the exception of single source drugs, shall be 
  2.30  based on the average manufacturer's price minus 15 percent, the 
  2.31  best competitive bid price, or a negotiated price, whichever is 
  2.32  lowest.  In the case of single source drugs, the contract price 
  2.33  shall be negotiated.  The initial average manufacturer's price 
  2.34  is the purchaser's actual acquisition cost as of March 1, 1996.  
  2.35  For purposes of computing the contract price in 1997 and each 
  2.36  year thereafter for those drugs on the state drug formulary, the 
  3.1   commissioner or contractor shall not recognize increases in the 
  3.2   average manufacturer's contracted price that exceed the rate of 
  3.3   increase in the Consumer Price Index for All Items (U.S. city 
  3.4   average) (CPI-U). 
  3.5      (c) Nothing in this section shall prohibit the commissioner 
  3.6   or contractor from granting multiple awards. 
  3.7      Sec. 3.  [16B.95] [STATE CONTRACT PRICE.] 
  3.8      Subdivision 1.  [MANUFACTURER REQUIREMENT.] The contract 
  3.9   price for all prescription drugs listed on the state formulary 
  3.10  that the commissioner has negotiated shall be made available to 
  3.11  any Minnesota purchaser by any manufacturer or seller who 
  3.12  participates in the alliance.  Any manufacturer who does not 
  3.13  extend the negotiated contract price to a Minnesota purchaser 
  3.14  shall be prohibited from participating in the alliance. 
  3.15     Subd. 2.  [PURCHASER REQUIREMENT.] The commissioner of 
  3.16  administration may require any Minnesota purchaser who plans on 
  3.17  purchasing prescription drugs at the contract price negotiated 
  3.18  by the commissioner of administration to submit any information 
  3.19  deemed necessary by the commissioner regarding prescription drug 
  3.20  purchase projections to assist the commissioner in the contract 
  3.21  price negotiations. 
  3.22     Subd. 3.  [PURCHASING PRESCRIPTION DRUGS NOT INCLUDED ON 
  3.23  THE STATE DRUG FORMULARY.] Nothing in this section shall prevent 
  3.24  a purchaser from purchasing a prescription drug that is not 
  3.25  included on the state drug formulary. 
  3.26     Sec. 4.  [16B.96] [NONDISCRIMINATION.] 
  3.27     No insurer or health plan company shall discriminate 
  3.28  against a purchaser for participating in the multistate 
  3.29  pharmaceutical contracting alliance or for taking advantage of 
  3.30  the alliance contracting price. 
  3.31     Sec. 5.  [62J.67] [PRESCRIPTION DRUG PRICE DISCLOSURE.] 
  3.32     Each health plan company and hospitals licensed under 
  3.33  chapter 144 must annually submit to the commissioner of health 
  3.34  the contract price paid for each prescription drug listed on its 
  3.35  drug formulary.  The contract price submitted must include any 
  3.36  discount or rebate received from a manufacturer or drug 
  4.1   wholesaler.  The commissioner shall make this information 
  4.2   available to the public through the information clearinghouse. 
  4.3      Sec. 6.  Minnesota Statutes 1994, section 151.21, 
  4.4   subdivision 2, is amended to read: 
  4.5      Subd. 2.  When a pharmacist receives a written prescription 
  4.6   on which the prescriber has personally written in handwriting 
  4.7   "dispense as written - brand medically necessary," or "D.A.W.," 
  4.8   or an oral prescription in which the prescriber has expressly 
  4.9   indicated that the prescription is to be dispensed as 
  4.10  communicated, the pharmacist shall dispense the brand name 
  4.11  legend drug as prescribed.  If the prescriber specifies orally 
  4.12  that the prescription shall be dispensed as communicated, 
  4.13  written certification in the prescriber's handwriting bearing 
  4.14  the phrase "dispense as written - brand medically necessary" 
  4.15  must be sent to the dispensing pharmacy within ten days. 
  4.16     Sec. 7.  Minnesota Statutes 1994, section 151.21, 
  4.17  subdivision 3, is amended to read: 
  4.18     Subd. 3.  When a pharmacist receives a written prescription 
  4.19  on which the prescriber has not personally written in 
  4.20  handwriting "dispense as written - brand medically 
  4.21  necessary," or "D.A.W.," or an oral prescription in which the 
  4.22  prescriber has not expressly indicated that the prescription is 
  4.23  to be dispensed as communicated, and there is available in the 
  4.24  pharmacist's stock a less expensive generically equivalent drug 
  4.25  that, in the pharmacist's professional judgment, is safely 
  4.26  interchangeable with the prescribed drug, then the pharmacist 
  4.27  shall, after disclosing the substitution to the purchaser, 
  4.28  dispense the generic drug, unless the purchaser objects.  A 
  4.29  pharmacist may also substitute pursuant to the oral instructions 
  4.30  of the prescriber.  A pharmacist may not substitute a 
  4.31  generically equivalent drug product unless, in the pharmacist's 
  4.32  professional judgment, the substituted drug is therapeutically 
  4.33  equivalent and interchangeable to the prescribed drug.  A 
  4.34  pharmacist shall notify the purchaser if the pharmacist is 
  4.35  dispensing a drug other than the brand name drug prescribed.  
  4.36     Sec. 8.  Minnesota Statutes 1994, section 151.21, is 
  5.1   amended by adding a subdivision to read: 
  5.2      Subd. 4a.  Each pharmacy must post a sign in a conspicuous 
  5.3   location in a typeface easily seen at the counter where 
  5.4   prescriptions are dispensed stating that, "This pharmacy will 
  5.5   substitute whenever possible an FDA approved, less expensive, 
  5.6   generic drug product which is therapeutically equivalent and 
  5.7   safely interchangeable to the one prescribed by your doctor in 
  5.8   order to save you money, unless you object to this substitution."
  5.9      Sec. 9.  [256.996] [STATE DRUG FORMULARY.] 
  5.10     Subdivision 1.  [ESTABLISHMENT.] By January 1, 1997, the 
  5.11  commissioner of human services shall establish a state drug 
  5.12  formulary based on the criteria developed by the drug formulary 
  5.13  committee established under section 256B.0625, subdivision 13.  
  5.14  The commissioner shall publish the state drug formulary on an 
  5.15  annual basis.  Prior to publication, the drug formulary 
  5.16  committee shall review and comment on the formulary contents.  
  5.17  When developing the formulary contents, consideration must be 
  5.18  given to drugs with a narrow therapeutic index. 
  5.19     Subd. 2.  [DEVELOPMENT OF CRITERIA.] In developing the 
  5.20  criteria to be used by the commissioner in establishing the 
  5.21  state drug formulary, the drug formulary committee shall consult 
  5.22  with health care professional experts in each therapeutic class 
  5.23  of drugs.  The criteria must also be based on review of 
  5.24  scientific literature in peer-reviewed biomedical journals for 
  5.25  purposes of identifying the most efficacious, safe, and 
  5.26  cost-effective drugs in achieving optimal patient therapeutic 
  5.27  outcomes. 
  5.28     Subd. 3.  [STATE DRUG FORMULARY ADDITIONS AND 
  5.29  DELETIONS.] (a) Any health care provider, consumer or consumer 
  5.30  group, or seller of prescription drugs may apply to the 
  5.31  commissioner on a form specified in the state drug formulary to 
  5.32  add or delete a drug from the state drug formulary.  For 
  5.33  purposes of this subdivision, "health care provider" includes 
  5.34  any vendor of medical care qualifying for reimbursement under 
  5.35  the medical assistance program provided under chapter 256B. 
  5.36     (b) The drug formulary committee may recommend to the 
  6.1   commissioner the addition or deletion of a prescription drug in 
  6.2   the state drug formulary. 
  6.3      Subd. 4.  [AVAILABILITY OF PRESCRIPTION DRUGS NOT INCLUDED 
  6.4   ON THE STATE DRUG FORMULARY.] Nothing in this section shall 
  6.5   prevent a physician or other person authorized to prescribe 
  6.6   prescription drugs from prescribing a drug that is not included 
  6.7   on the state drug formulary. 
  6.8      Sec. 10.  Minnesota Statutes 1994, section 256B.0625, 
  6.9   subdivision 13, is amended to read: 
  6.10     Subd. 13.  [DRUGS.] (a) Medical assistance covers drugs if 
  6.11  prescribed by a licensed practitioner and dispensed by a 
  6.12  licensed pharmacist, or by a physician enrolled in the medical 
  6.13  assistance program as a dispensing physician.  The commissioner, 
  6.14  after receiving recommendations from professional medical 
  6.15  associations and professional pharmacist associations, shall 
  6.16  designate a formulary committee to advise the commissioner on 
  6.17  the names of drugs for which payment is made, recommend a system 
  6.18  for reimbursing providers on a set fee or charge basis rather 
  6.19  than the present system, and develop methods encouraging use of 
  6.20  generic drugs when they are less expensive and equally effective 
  6.21  as trademark drugs.  The formulary committee shall consist of 
  6.22  nine 11 members, four of whom shall be three physicians who are 
  6.23  not employed by the department of human services, and a majority 
  6.24  of whose practice is for persons paying privately or through 
  6.25  health insurance, three of whom shall be one pharmacoeconomist, 
  6.26  one nurse, four pharmacists who are not employed by the 
  6.27  department of human services or by a health plan company as 
  6.28  defined in section 62Q.01, subdivision 4, and a majority of 
  6.29  whose practice is for persons paying privately or through health 
  6.30  insurance, a one consumer representative, and a one nursing home 
  6.31  representative.  Committee members shall serve three-year terms 
  6.32  and shall serve without compensation.  Members may be 
  6.33  reappointed once.  
  6.34     (b) The commissioner shall establish a drug formulary.  Its 
  6.35  establishment and publication shall not be subject to the 
  6.36  requirements of the administrative procedure act, but the 
  7.1   formulary committee shall review and comment on the formulary 
  7.2   contents.  The formulary committee shall review and recommend 
  7.3   drugs which require prior authorization.  The formulary 
  7.4   committee may recommend drugs for prior authorization directly 
  7.5   to the commissioner, as long as opportunity for public input is 
  7.6   provided.  Prior authorization may be requested by the 
  7.7   commissioner based on medical and clinical criteria before 
  7.8   certain drugs are eligible for payment.  Before a drug may be 
  7.9   considered for prior authorization at the request of the 
  7.10  commissioner:  
  7.11     (1) the drug formulary committee must develop criteria to 
  7.12  be used for identifying drugs; the development of these criteria 
  7.13  is not subject to the requirements of chapter 14, but the 
  7.14  formulary committee shall provide opportunity for public input 
  7.15  in developing criteria; 
  7.16     (2) the drug formulary committee must hold a public forum 
  7.17  and receive public comment for an additional 15 days; and 
  7.18     (3) the commissioner must provide information to the 
  7.19  formulary committee on the impact that placing the drug on prior 
  7.20  authorization will have on the quality of patient care and 
  7.21  information regarding whether the drug is subject to clinical 
  7.22  abuse or misuse.  Prior authorization may be required by the 
  7.23  commissioner before certain formulary drugs are eligible for 
  7.24  payment.  The formulary shall not include:  
  7.25     (i) drugs or products for which there is no federal 
  7.26  funding; 
  7.27     (ii) over-the-counter drugs, except for antacids, 
  7.28  acetaminophen, family planning products, aspirin, insulin, 
  7.29  products for the treatment of lice, vitamins for adults with 
  7.30  documented vitamin deficiencies, and vitamins for children under 
  7.31  the age of seven and pregnant or nursing women; 
  7.32     (iii) any other over-the-counter drug identified by the 
  7.33  commissioner, in consultation with the drug formulary committee, 
  7.34  as necessary, appropriate, and cost-effective for the treatment 
  7.35  of certain specified chronic diseases, conditions or disorders, 
  7.36  and this determination shall not be subject to the requirements 
  8.1   of chapter 14; 
  8.2      (iv) anorectics; and 
  8.3      (v) drugs for which medical value has not been established. 
  8.4      The commissioner shall publish conditions for prohibiting 
  8.5   payment for specific drugs after considering the formulary 
  8.6   committee's recommendations.  
  8.7      (c) The basis for determining the amount of payment shall 
  8.8   be the lower of the actual acquisition costs of the drugs plus a 
  8.9   fixed dispensing fee established by the commissioner, the 
  8.10  maximum allowable cost set by the federal government or by the 
  8.11  commissioner plus the fixed dispensing fee or the usual and 
  8.12  customary price charged to the public.  Actual acquisition cost 
  8.13  includes quantity and other special discounts except time and 
  8.14  cash discounts.  The actual acquisition cost of a drug shall be 
  8.15  estimated by the commissioner, at average wholesale price minus 
  8.16  7.6 percent effective January 1, 1994.  The maximum allowable 
  8.17  cost of a multisource drug may be set by the commissioner and it 
  8.18  shall be comparable to, but no higher than, the maximum amount 
  8.19  paid by other third-party payors in this state who have maximum 
  8.20  allowable cost programs.  Establishment of the amount of payment 
  8.21  for drugs shall not be subject to the requirements of the 
  8.22  administrative procedure act.  An additional dispensing fee of 
  8.23  $.30 may be added to the dispensing fee paid to pharmacists for 
  8.24  legend drug prescriptions dispensed to residents of long-term 
  8.25  care facilities when a unit dose blister card system, approved 
  8.26  by the department, is used.  Under this type of dispensing 
  8.27  system, the pharmacist must dispense a 30-day supply of drug.  
  8.28  The National Drug Code (NDC) from the drug container used to 
  8.29  fill the blister card must be identified on the claim to the 
  8.30  department.  The unit dose blister card containing the drug must 
  8.31  meet the packaging standards set forth in Minnesota Rules, part 
  8.32  6800.2700, that govern the return of unused drugs to the 
  8.33  pharmacy for reuse.  The pharmacy provider will be required to 
  8.34  credit the department for the actual acquisition cost of all 
  8.35  unused drugs that are eligible for reuse.  Over-the-counter 
  8.36  medications must be dispensed in the manufacturer's unopened 
  9.1   package.  The commissioner may permit the drug clozapine to be 
  9.2   dispensed in a quantity that is less than a 30-day supply.  
  9.3   Whenever a generically equivalent product is available, payment 
  9.4   shall be on the basis of the actual acquisition cost of the 
  9.5   generic drug, unless the prescriber specifically indicates 
  9.6   "dispense as written - brand necessary" on the prescription as 
  9.7   required by section 151.21, subdivision 2.  Implementation of 
  9.8   any change in the fixed dispensing fee that has not been subject 
  9.9   to the administrative procedure act is limited to not more than 
  9.10  180 days, unless, during that time, the commissioner initiates 
  9.11  rulemaking through the administrative procedure act. 
  9.12     (d) Until the date the on-line, real-time Medicaid 
  9.13  Management Information System (MMIS) upgrade is successfully 
  9.14  implemented, as determined by the commissioner of 
  9.15  administration, a pharmacy provider may require individuals who 
  9.16  seek to become eligible for medical assistance under a one-month 
  9.17  spenddown, as provided in section 256B.056, subdivision 5, to 
  9.18  pay for services to the extent of the spenddown amount at the 
  9.19  time the services are provided.  A pharmacy provider choosing 
  9.20  this option shall file a medical assistance claim for the 
  9.21  pharmacy services provided.  If medical assistance reimbursement 
  9.22  is received for this claim, the pharmacy provider shall return 
  9.23  to the individual the total amount paid by the individual for 
  9.24  the pharmacy services reimbursed by the medical assistance 
  9.25  program.  If the claim is not eligible for medical assistance 
  9.26  reimbursement because of the provider's failure to comply with 
  9.27  the provisions of the medical assistance program, the pharmacy 
  9.28  provider shall refund to the individual the total amount paid by 
  9.29  the individual.  Pharmacy providers may choose this option only 
  9.30  if they apply similar credit restrictions to private pay or 
  9.31  privately insured individuals.  A pharmacy provider choosing 
  9.32  this option must inform individuals who seek to become eligible 
  9.33  for medical assistance under a one-month spenddown of (1) their 
  9.34  right to appeal the denial of services on the grounds that they 
  9.35  have satisfied the spenddown requirement, and (2) their 
  9.36  potential eligibility for the MinnesotaCare program or the 
 10.1   children's health plan.