1.1 	A bill for an act
1.2 	relating to human services; establishing a pharmacy payment reform advisory 
1.3 	committee; providing for a study; requiring a report to the legislature.
1.4 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.5 	Section 1. PHARMACY PAYMENT REFORM ADVISORY COMMITTEE.
 1.6 		Subdivision 1.Definitions. For purposes of this section, the following words, terms, 
1.7 	and phrases have the following meanings:
1.8 	(a) "Department" means the Department of Human Services.
1.9 	(b) "Commissioner" means the commissioner of the Department of Human Services.
1.10 	(c) "Cost of dispensing" includes, but is not limited to, operational and overhead 
1.11 	costs; professional counseling as required under the Omnibus Budget Reconciliation Act 
1.12 	of 1990, excluding medication management services under Minnesota Statutes, section 
1.13 	256B.0625, subdivision 13h; salaries; and other associated administrative costs, as well 
1.14 	as a reasonable return on investment. In addition, cost of dispensing includes expenses 
1.15 	transferred by wholesale drug distributors to pharmacies as a result of the wholesale drug 
1.16 	distributor tax under Minnesota Statutes, sections 295.52 to 295.582.
1.17 	(d) "Additional costs" include, but are not limited to, costs relating to coordination of 
1.18 	benefits, bad debt, uncollected co-pays, payment lag times, and high rate of rejected claims.
1.19 	(e) "Advisory committee" means the Pharmacy Payment Reform Advisory 
1.20 	Committee established by this section.
1.21 		Subd. 2.Advisory committee. The Pharmacy Payment Reform Advisory 
1.22 	Committee is established under the direction of the commissioner of human services. 
1.23 	The commissioner, after receiving recommendations from the Minnesota Pharmacists 
1.24 	Association, the Minnesota Retailers Association, the Minnesota Hospital Association, 
2.1 	and the Minnesota Wholesale Druggists Association, shall convene a pharmacy payment 
2.2 	reform advisory committee to advise the commissioner and make recommendations to the 
2.3 	legislature on implementation of pharmacy reforms contained in title VI, chapter IV, of 
2.4 	the Deficit Reduction Act of 2005. The committee shall be comprised of three licensed 
2.5 	pharmacists representing both independent and chain pharmacy entities, one of whom 
2.6 	must have expertise in pharmacoeconomics, two individuals representing hospitals with 
2.7 	outpatient pharmacies, and two individuals with expertise in wholesale drug distribution. 
2.8 	The committee shall be staffed by an employee of the department who shall serve as an ex 
2.9 	officio nonvoting member of the committee. The department's pharmacy program manager 
2.10 	shall also serve as an ex officio, nonvoting member of the committee. The committee is 
2.11 	governed by Minnesota Statutes, section 15.059, except that committee members do not 
2.12 	receive compensation or reimbursement for expenses. The advisory committee members 
2.13 	shall serve a two-year term and the advisory committee will expire on January 31, 2008.
2.14 		Subd. 3.Cost of dispensing study. The department shall conduct a prescription 
2.15 	drug cost of dispensing study to determine the average cost of dispensing Medicaid 
2.16 	prescriptions in Minnesota. The department shall contract with an independent third 
2.17 	party in the state that has experience conducting business cost allocation studies, such as 
2.18 	an academic institution, to conduct a prescription drug cost of dispensing study. If no 
2.19 	independent third-party entity exists in the state, the department may contract with an 
2.20 	out-of-state entity. The cost of dispensing study shall be completed by an independent 
2.21 	third party no later than October 1, 2006, and reported to the department and the advisory 
2.22 	committee upon completion.
2.23 		Subd. 4.Content of study. The study shall determine the cost of dispensing 
2.24 	the average prescription and any additional costs that might be incurred for dispensing 
2.25 	Medicaid prescriptions. The study shall include the current level of dispensing fees paid 
2.26 	to providers and an estimate of revenues required to adequately adjust reimbursement 
2.27 	to cover the cost to pharmacies.
2.28 		Subd. 5.Methodology of study and publishing requirement. The independent 
2.29 	third-party entity performing the cost of dispensing research shall submit to the advisory 
2.30 	committee the entity's proposed research methodology and shall publish the collected data 
2.31 	to allow other independent researchers to validate the study results. The data shall be 
2.32 	published in a manner that does not identify the source of the data.
2.33 		Subd. 6.Recommendations. The advisory committee shall use the information 
2.34 	from the cost of dispensing study and make recommendations to the commissioner on 
2.35 	implementation of pharmacy reforms contained in title VI, chapter IV, of the Deficit 
2.36 	Reduction Act of 2005. The commissioner shall report the findings of the study and 
3.1 	the recommendations of the advisory committee to the legislature by January 15, 2007. 
3.2 	The department shall conduct a cost of dispensing study every three years following the 
3.3 	initial report. The commissioner, in consultation with the advisory committee, shall make 
3.4 	recommendations to the legislature on how to adequately adjust reimbursement rates to 
3.5 	pharmacies to cover the costs of dispensing and additional costs to pharmacies. Reports 
3.6 	shall include the current level of dispensing fees paid to providers and an estimate of 
3.7 	revenues required to adequately adjust reimbursement to ensure that:
3.8 	(1) reimbursement is sufficient to enlist an adequate number of participating 
3.9 	pharmacy providers so that pharmacy services are as available for Medicaid recipients 
3.10 	under the program as for the state's general population;
3.11 	(2) Medicaid dispensing fees are adequate to reimburse pharmacy providers for the 
3.12 	costs of dispensing prescriptions under the Medicaid program;
3.13 	(3) Medicaid pharmacy reimbursement for multiple-source drugs included on the 
3.14 	federal upper reimbursement limit is set at the level established by the federal government 
3.15 	under United States Code, title 42, section 1396r-8(e)(5);
3.16 	(4) the combined Medicaid program reimbursement for prescription drug product 
3.17 	and the dispensing fee provides a return adequate to provide a reasonable profit for the 
3.18 	participating pharmacy; and
3.19 	(5) the new payment system does not create disincentives for pharmacists to 
3.20 	dispense generic drugs.

3.21 	EFFECTIVE DATE. This section is effective the day following final enactment.