SF 3063

Introduction - 94th Legislature (2025 - 2026)

Posted on 03/28/2025 10:12 a.m.

A bill for an act
relating to insurance; modifying the reverse auction procurement requirement for
SEGIP pharmacy benefit contracts; prohibiting the use of spread pricing by
pharmacy benefit managers; increasing pharmacy benefit manager license
application fees; imposing fiduciary duties on pharmacy benefit managers;
appropriating money; amending Minnesota Statutes 2024, sections 62W.02, by
adding a subdivision; 62W.03, subdivisions 2, 3, 5; 62W.04; 62W.05, by adding
a subdivision; 62W.06, subdivision 2; 62W.08; 62W.13; proposing coding for
new law in Minnesota Statutes, chapter 62W.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2024, section 62W.02, is amended by adding a subdivision
to read:

new text begin Subd. 21. new text end

new text begin Spread pricing. new text end

new text begin "Spread pricing" means any model of prescription drug
pricing in which a pharmacy benefit manager charges a health plan a contracted price for
prescription drugs, and the contracted price for the prescription drugs differs from the amount
the pharmacy benefit manager directly or indirectly pays the pharmacist or pharmacy for
pharmacist services.
new text end

Sec. 2.

Minnesota Statutes 2024, section 62W.03, subdivision 2, is amended to read:

Subd. 2.

Application.

(a) A pharmacy benefit manager seeking a license shall apply to
the commissioner of commerce on a form prescribed by the commissioner. The application
form must include at a minimum the following information:

(1) the name, address, and telephone number of the pharmacy benefit manager;

(2) the name and address of the pharmacy benefit manager agent for service of process
in this state; and

(3) the name, address, official position, and professional qualifications of each person
responsible for the conduct of affairs of the pharmacy benefit manager, including all members
of the board of directors, board of trustees, executive committee, or other governing board
or committee; the principal officers in the case of a corporation; or the partners or members
in the case of a partnership or association.

(b) Each application for licensure must be accompanied by a nonrefundable fee deleted text begin of $8,500 deleted text end new text begin
determined by the commissioner but in no event less than $15,000 new text end . The fees collected under
this subdivision shall be deposited in the general fund.

(c) Within 30 days of receiving an application, the commissioner may require additional
information or submissions from an applicant and may obtain any document or information
reasonably necessary to verify the information contained in the application. Within 90 days
after receipt of a completed application, the network adequacy report required under section
62W.05, and the applicable license fee, the commissioner shall review the application and
issue a license if the applicant is deemed qualified under this section. If the commissioner
determines the applicant is not qualified, the commissioner shall notify the applicant and
shall specify the reason or reasons for the denial.

Sec. 3.

Minnesota Statutes 2024, section 62W.03, subdivision 3, is amended to read:

Subd. 3.

Renewal.

(a) A license issued under this chapter is valid for one year. To renew
a license, an applicant must submit a completed renewal application on a form prescribed
by the commissioner, the network adequacy report required under section 62W.05, and a
renewal fee deleted text begin of $8,500 deleted text end new text begin determined by the commissioner but in no event less than $15,000 new text end .
The fees collected under this paragraph shall be deposited in the general fund. The
commissioner may request a renewal applicant to submit additional information to clarify
any new information presented in the renewal application.

(b) A renewal application submitted after the renewal deadline date must be accompanied
by a nonrefundable late fee deleted text begin of $500 deleted text end new text begin determined by the commissioner but in no event less
than $1,000 new text end . The fees collected under this paragraph shall be deposited in the general fund.

(c) The commissioner may deny the renewal of a license for any of the following reasons:

(1) the pharmacy benefit manager has been determined by the commissioner to be in
violation or noncompliance with federal or state law; or

(2) the pharmacy benefit manager has failed to timely submit a renewal application and
the information required under paragraph (a).

In lieu of a denial of a renewal application, the commissioner may permit the pharmacy
benefit manager to submit to the commissioner a corrective action plan to cure or correct
deficiencies.

Sec. 4.

Minnesota Statutes 2024, section 62W.03, subdivision 5, is amended to read:

Subd. 5.

deleted text begin Penalty deleted text end new text begin Penalties new text end .

new text begin (a) new text end If a pharmacy benefit manager acts without a license,
the pharmacy benefit manager may be subject to a fine deleted text begin of $5,000 deleted text end new text begin determined by the
commissioner but in no event less than $10,000 new text end per day for the period the pharmacy benefit
manager is found to be in violation.

new text begin (b) Except as expressly provided otherwise in this chapter, the commissioner may impose
a fine on a pharmacy benefit manager of up to $25,000 per violation of any provision in
this chapter. For purposes of this paragraph, each occurrence is considered a separate
violation.
new text end

new text begin (c) new text end Any penalties collected under this subdivision shall be deposited in the general fund.

Sec. 5.

Minnesota Statutes 2024, section 62W.04, is amended to read:

62W.04 PHARMACY BENEFIT MANAGER GENERAL BUSINESS PRACTICES.

(a) A pharmacy benefit manager must exercise good faith and fair dealing in the
performance of its contractual duties. A provision in a contract between a pharmacy benefit
manager and a health carrier or a network pharmacy that attempts to waive or limit this
obligation is void.

(b) A pharmacy benefit manager must notify a health carrier in writing of any activity,
policy, or practice of the pharmacy benefit manager that directly or indirectly presents a
conflict of interest with the duties imposed in this section.

new text begin (c) A pharmacy benefit manager has a fiduciary duty to a health carrier and must
discharge that duty in accordance with the provisions of state and federal law.
new text end

new text begin (d) A pharmacy benefit manager must perform its duties with care, skill, prudence,
diligence, and professionalism.
new text end

new text begin (e) A pharmacy benefit manager must not charge a pharmacy a fee related to the
adjudication of a claim, including but not limited to:
new text end

new text begin (1) receiving and processing a pharmacy claim;
new text end

new text begin (2) developing or managing claims processing services in a pharmacy benefit manager
network; or
new text end

new text begin (3) participating in a pharmacy benefit network.
new text end

new text begin (f) A pharmacy benefit manager must not require pharmacy accreditation standards or
certification requirements that are inconsistent with, more stringent than, or in addition to
requirements established by the Board of Pharmacy or as permitted under this chapter.
new text end

Sec. 6.

new text begin [62W.045] PHARMACY BENEFIT MANAGER GENERAL
REIMBURSEMENT PRACTICES.
new text end

new text begin (a) A pharmacy benefit manager must not reimburse a pharmacy in an amount less than
the amount the pharmacy benefit manager reimburses a pharmacy benefit manager affiliate
or subsidiary for providing the same prescription drug.
new text end

new text begin (b) A pharmacy benefit manager must not pay or reimburse a pharmacy for the ingredient
drug product component less than the national average drug acquisition cost or, if the national
drug acquisition cost is unavailable, the wholesale acquisition cost.
new text end

new text begin (c) A pharmacy benefit manager must not make or permit any reduction of payment for
a prescription drug or service either directly or indirectly to a pharmacy under a reconciliation
process to an effective rate of reimbursement, direct or indirect remuneration fees, or any
other reduction or aggregate reduction of payment.
new text end

Sec. 7.

Minnesota Statutes 2024, section 62W.05, is amended by adding a subdivision to
read:

new text begin Subd. 4. new text end

new text begin Network service area requirements. new text end

new text begin A pharmacy benefit manager must
establish a pharmacy network service area consistent with the requirements under section
62K.13 for every pharmacy network subject to review under this section.
new text end

Sec. 8.

Minnesota Statutes 2024, section 62W.06, subdivision 2, is amended to read:

Subd. 2.

Transparency report to commissioner.

(a) Beginning June 1, 2020, and
annually thereafter, each pharmacy benefit manager must submit to the commissioner a
transparency report containing data from the prior calendar year as it pertains to plan sponsors
doing business in Minnesota. The report must contain the following information:

(1) the aggregate wholesale acquisition costs from a drug manufacturer or wholesale
drug distributor for each therapeutic category of prescription drugs for all of the pharmacy
benefit manager's plan sponsor clients, and these costs net of all rebates and other fees and
payments, direct or indirect, from all sources;

(2) the aggregate amount of all rebates that the pharmacy benefit manager received from
all drug manufacturers for all of the pharmacy benefit manager's plan sponsor clients. The
aggregate amount of rebates must include any utilization discounts the pharmacy benefit
manager receives from a drug manufacturer or wholesale drug distributor;

(3) the aggregate of all fees from all sources, direct or indirect, that the pharmacy benefit
manager received for all of the pharmacy benefit manager's plan sponsor clients;

(4) the aggregate retained rebates and other fees, as listed in clause (3), that the pharmacy
benefit manager received from all sources, direct or indirect, that were not passed through
to plan sponsors;

(5) the aggregate retained rebate and fees percentage;

(6) the highest, lowest, and mean aggregate retained rebate and fees percentage for all
of the pharmacy benefit manager's plan sponsor clients; and

(7) de-identified claims level information in electronic format that allows the
commissioner to sort and analyze the following information for each claim:

(i) the drug and quantity for each prescription;

(ii) whether the claim required prior authorization;

(iii) patient cost-sharing paid on each prescription. This data is classified pursuant to
paragraph (d);

(iv) the amount paid to the pharmacy for each prescription, net of the aggregate amount
of fees or other assessments imposed on the pharmacy, including point-of-sale and retroactive
charges. This data is classified pursuant to paragraph (d);

(v) any spread between the net amount paid to the pharmacy in item (iv) and the amount
charged to the plan sponsor. This data is classified pursuant to paragraph (d);

(vi) identity of the pharmacy for each prescription;

(vii) whether the pharmacy is, or is not, under common control or ownership with the
pharmacy benefit manager;

(viii) whether the pharmacy is, or is not, a preferred pharmacy under the plan;

(ix) whether the pharmacy is, or is not, a mail order pharmacy; and

(x) whether enrollees are required by the plan to use the pharmacy.

(b) Within 60 days upon receipt of the transparency report, the commissioner shall
publish the report from each pharmacy benefit manager on the Department of Commerce's
website, with the exception of data considered trade secret information under section 13.37.
The transparency report must be published in such a way as to not disclose the identity of
a specific plan sponsor, the prices charged for a specific prescription drug or classes of
drugs, or the amount of any rebates provided for a specific prescription drug or classes of
drugs.

(c) For purposes of this subdivision, the aggregate retained rebate and fee percentage
must be calculated for each plan sponsor for rebates and fees in the previous calendar year
as follows:

(1) the sum total dollar amount of rebates and fees from all drug manufacturers for all
utilization of enrollees of a plan sponsor that was not passed through to the plan sponsor;
and

(2) divided by the sum total dollar amount of all rebates and fees received from all
sources, direct or indirect, for all enrollees of a plan sponsor.

(d) Data, documents, materials, or other information in the possession or control of the
commissioner of commerce that are obtained by, created by, or disclosed to the commissioner
pursuant to paragraph (a), clause (7), items (iii), (iv), and (v), are classified as confidential,
protected nonpublic, or both. Those data, documents, materials, or other information are
not subject to subpoena, and are not subject to discovery or admissible in evidence in any
private civil action. However, the commissioner may use the data, documents, materials,
or other information in the furtherance of a regulatory or legal action brought as a part of
the commissioner's official duties. The commissioner shall not otherwise make the data,
documents, materials, or other information public without the prior written consent of the
pharmacy benefit manager. Neither the commissioner nor any person who received data,
documents, materials, or other information while acting under the authority of the
commissioner are permitted or required to testify in any private civil action concerning data,
documents, materials, or information subject to this paragraph that are classified as
confidential, protected nonpublic, or both.

new text begin (e) The commissioner may request from the commissioner of health, and the
commissioner of health must provide, any information obtained by the commissioner of
health pursuant to the reporting required under section 62J.84, subdivision 12. Information
obtained under this paragraph may be used in any enforcement action brought by the
commissioner.
new text end

Sec. 9.

Minnesota Statutes 2024, section 62W.08, is amended to read:

62W.08 MAXIMUM ALLOWABLE COST PRICING.

(a) With respect to each contract and contract renewal between a pharmacy benefit
manager and a pharmacy, the pharmacy benefits manager must:

(1) provide to the pharmacy, at the beginning of each contract and contract renewal, the
sources utilized to determine the maximum allowable cost pricing of the pharmacy benefit
manager;

(2) update any maximum allowable cost price list at least every seven business days,
noting any price changes from the previous list, and new text begin within seven calendar days from:
new text end

new text begin (i) an increase of ten percent or more in the pharmacy acquisition cost from 60 percent
or more of the pharmaceutical wholesalers doing business in Minnesota;
new text end

new text begin (ii) a change in the methodology on which the maximum allowable cost price list is
based; or
new text end

new text begin (iii) a change in the value of a variable involved in the methodology;
new text end

new text begin (3) new text end provide a means by which network pharmacies may promptly review current prices
in an electronic, print, or telephonic format within one business day at no cost to the
pharmacy;

deleted text begin (3) deleted text end new text begin (4) new text end maintain a procedure to eliminate products from the list of drugs subject to
maximum allowable cost pricing in a timely manner in order to remain consistent with
changes in the marketplace;

deleted text begin (4) deleted text end new text begin (5) new text end ensure that the maximum allowable cost prices are not set below sources utilized
by the pharmacy benefits manager new text begin nor set below the pharmacy acquisition cost new text end ; and

deleted text begin (5) deleted text end new text begin (6) new text end upon request of a network pharmacy, new text begin identify each maximum allowable price
list that applies to the network pharmacy, and new text end disclose the sources utilized for setting
maximum allowable cost price rates on each maximum allowable cost price list included
under the contract deleted text begin and identify each maximum allowable cost price list that applies to the
network pharmacy. deleted text end new text begin , including the following:
new text end

new text begin (i) average acquisition cost, including national average drug acquisition cost;
new text end

new text begin (ii) average manufacturer price;
new text end

new text begin (iii) average wholesale price;
new text end

new text begin (iv) brand effective rate or generic effective rate;
new text end

new text begin (v) discount indexing;
new text end

new text begin (vi) federal upper limits;
new text end

new text begin (vii) wholesale acquisition cost; and
new text end

new text begin (viii) any other term that a pharmacy benefit manager or plan sponsor may use to establish
the maximum allowable cost price for a prescription drug.
new text end

deleted text begin A deleted text end new text begin The new text end pharmacy benefit manager must make deleted text begin the list of deleted text end the maximum allowable deleted text begin costs deleted text end new text begin cost
price list new text end available to a deleted text begin contracted deleted text end new text begin network new text end pharmacy in a format that is readily accessible
and usable to the network pharmacy.

(b) A pharmacy benefit manager must not place a prescription drug on a maximum
allowable cost list unless the drug is available for purchase by pharmacies in this state from
a national or regional drug wholesaler and is not obsolete.

(c) Each contract between a pharmacy benefit manager and a pharmacy must deleted text begin include deleted text end new text begin
provide new text end a process to appeal, investigate, and resolve disputes regarding maximum allowable
cost pricing that includes new text begin the ability of a pharmacy to challenge the maximum allowable
cost price if the price new text end :

(1) deleted text begin a 15-business-day limit on the right to appeal following the initial claim deleted text end new text begin does not
meet the requirements of this chapter new text end ; new text begin or
new text end

(2) deleted text begin a requirement that the appeal be investigated and resolved within seven business
days after the appeal is received; and deleted text end new text begin is below the pharmacy acquisition cost.
new text end

deleted text begin (3) a requirement that a pharmacy benefit manager provide a reason for any appeal denial
and identify the national drug code of a drug that may be purchased by the pharmacy at a
price at or below the maximum allowable cost price as determined by the pharmacy benefit
manager.
deleted text end

(d) deleted text begin If an appeal is upheld, the pharmacy benefit manager must make an adjustment to
the maximum allowable cost price no later than one business day after the date of
determination. The pharmacy benefit manager must make the price adjustment applicable
to all similarly situated network pharmacy providers as defined by the plan sponsor. deleted text end new text begin The
appeal process must include:
new text end

new text begin (1) a dedicated telephone number and email address or website for the purpose of
submitting an appeal; and
new text end

new text begin (2) the ability to submit an appeal directly to the pharmacy benefit manager regarding
the pharmacy benefit plan or program or through a pharmacy service administrative program.
new text end

new text begin (e) Any appeal must be submitted to the pharmacy benefit manager within 30 business
days from the date of the initial claim. The pharmacy benefit manager must investigate and
resolve the appeal within 30 business days from the date the appeal is received.
new text end

new text begin (f) If the appeal is upheld, the pharmacy benefit manager must:
new text end

new text begin (1) make an adjustment to the maximum allowable cost price list to at least the pharmacy
acquisition cost no later than one business day after the date of determination and make the
price adjustment applicable to all similarly situated network providers as defined by the
plan sponsor;
new text end

new text begin (2) permit the challenging pharmacy to reverse and rebill the claim in question; and
new text end

new text begin (3) provide to the pharmacy the National Drug Code number on which the adjustment
is based.
new text end

new text begin (g) If the appeal is denied, the pharmacy benefit manager must provide the challenging
pharmacy with the reason for the denial and:
new text end

new text begin (1) identify the National Drug Code number and the names of the national or regional
pharmaceutical wholesalers operating in Minnesota that have the drug currently in stock at
a price below the maximum allowable cost price; or
new text end

new text begin (2) if the National Drug Code number provided by the pharmacy benefit manager is not
available below the pharmacy acquisition cost from the pharmaceutical wholesaler from
whom the pharmacy purchases the majority of prescription drugs for resale, then the
pharmacy benefit manager must adjust the maximum allowable cost price above the
challenging pharmacy's pharmacy acquisition cost and permit the pharmacy to reverse and
rebill each claim affected by the inability to procure the drug at a cost that is equal to or
less than the previously challenged maximum allowable cost price.
new text end

new text begin (h) A pharmacy may decline to provide a prescription drug or services to a patient or
pharmacy benefit manager if, as a result of a maximum allowable cost pricing, a pharmacy
is to be paid less than the pharmacy acquisition cost of the pharmacy dispensing the
prescription drug or providing the pharmacy services.
new text end

Sec. 10.

Minnesota Statutes 2024, section 62W.13, is amended to read:

62W.13 RETROACTIVE ADJUSTMENTS.

No pharmacy benefit manager shall new text begin directly or indirectly new text end retroactively deleted text begin adjust deleted text end new text begin deny or
reduce new text end a claim new text begin or aggregate of claims new text end for reimbursement submitted by a pharmacy for a
prescription drug, unless the adjustment is a result of a:

(1) pharmacy audit conducted in accordance with section 62W.09 new text begin determining that:
new text end

new text begin (i) the original claim was submitted fraudulently;
new text end

new text begin (ii) the original claim payment was incorrect because the pharmacy was already paid
for the prescription drug or service; or
new text end

new text begin (iii) the prescription drug or service was not properly rendered by the pharmacy or
pharmacist new text end ; or

(2) technical billing error.

Sec. 11.

new text begin [62W.16] SPREAD PRICING PROHIBITION.
new text end

new text begin A pharmacy benefit manager is prohibited from engaging in spread pricing in this state.
new text end

Sec. 12. new text begin APPROPRIATION.
new text end

new text begin $....... in fiscal year 2026 and $....... in fiscal year 2027 are appropriated from the general
fund to the commissioner of commerce to increase staff for the exclusive purposes of
investigation and enforcement of pharmacy benefit managers under Minnesota Statutes,
chapter 62W. The base for this appropriation is $....... in fiscal year 2028.
new text end