1.1                          A bill for an act
  1.2             relating to health; establishing the drug price 
  1.3             control board; requiring the board to establish 
  1.4             maximum manufacturer prices for prescription drugs and 
  1.5             perform other duties; providing penalties; 
  1.6             appropriating money; amending Minnesota Statutes 2000, 
  1.7             sections 151.47, subdivision 1; and 325D.071; 
  1.8             proposing coding for new law in Minnesota Statutes, 
  1.9             chapter 62Q; proposing coding for new law as Minnesota 
  1.10            Statutes, chapter 62U. 
  1.11  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.12                             ARTICLE 1
  1.13           MINNESOTA PRESCRIPTION DRUG PRICE CONTROL ACT
  1.14     Section 1.  [62U.01] [CITATION.] 
  1.15     This act may be known and cited as the "Minnesota 
  1.16  Prescription Drug Price Control Act." 
  1.17     Sec. 2.  [62U.03] [FINDINGS; PURPOSE.] 
  1.18     Subdivision 1.  [FINDINGS.] The legislature finds that: 
  1.19     (1) citizens of Minnesota and other Americans pay the 
  1.20  highest prices in the world for prescription drugs.  
  1.21  Pharmaceutical companies are charging the citizens of Minnesota 
  1.22  the highest prices in the world for prescription drugs, denying 
  1.23  Minnesotans access to medically necessary health care, and 
  1.24  thereby threatening their health and safety; 
  1.25     (2) lack of affordable access to prescription drugs results 
  1.26  in the denial of health care, an increased likelihood of serious 
  1.27  illness and death, and the inability to lead a life of good 
  1.28  health for many Minnesotans.  Many Minnesotans are admitted to 
  2.1   or treated at hospitals each year because they cannot afford the 
  2.2   drugs prescribed for them.  Many others are forced into 
  2.3   expensive institutional care settings because they cannot afford 
  2.4   necessary prescription drugs; 
  2.5      (3) prescription drug costs represent the fastest growing 
  2.6   expenditure item in health care and contribute to rapidly 
  2.7   increasing hospital costs and health insurance rates.  Excessive 
  2.8   pricing for prescription drugs threatens the state's ability to 
  2.9   assist with the health care costs of Minnesota citizens, 
  2.10  undermines the financial capacity of Minnesota communities to 
  2.11  meet the educational needs of children, hurts the ability of the 
  2.12  Minnesota business community to provide health insurance 
  2.13  coverage to the state's workforce, and has a negative effect on 
  2.14  the state's economy; and 
  2.15     (4) if voluntary nonregulatory approaches do not succeed in 
  2.16  ensuring that prescription drugs are sold in Minnesota at fair, 
  2.17  reasonable, and nondiscriminatory prices, a price control 
  2.18  program that prohibits excessive and discriminatory pricing in 
  2.19  transactions that take place in Minnesota is the most effective 
  2.20  and timely alternative to control drug prices for all 
  2.21  Minnesotans and thereby protect the health and safety of 
  2.22  Minnesotans. 
  2.23     Subd. 2.  [PURPOSE.] The purpose of the Minnesota 
  2.24  Prescription Drug Price Control Act is to promote the health and 
  2.25  safety of all Minnesota citizens by providing affordable access 
  2.26  to medically necessary prescription drugs at prices that are 
  2.27  fair, reasonable, nondiscriminatory, and not excessive, through 
  2.28  nonregulatory means or, if necessary, through a regulatory 
  2.29  system of price controls. 
  2.30     Sec. 3.  [62U.05] [DEFINITIONS.] 
  2.31     Subdivision 1.  [APPLICABILITY.] For purposes of this 
  2.32  chapter, the following definitions apply. 
  2.33     Subd. 2.  [BOARD.] "Board" means the drug price control 
  2.34  board established under section 62U.07. 
  2.35     Subd. 3.  [COMMISSIONER.] "Commissioner" means the 
  2.36  commissioner of health. 
  3.1      Sec. 4.  [62U.07] [DRUG PRICE CONTROL BOARD.] 
  3.2      Subdivision 1.  [ESTABLISHMENT.] The drug price control 
  3.3   board is established to develop and implement a price control 
  3.4   program for prescription drugs sold in Minnesota.  The board 
  3.5   shall perform the duties assigned in this chapter. 
  3.6      Subd. 2.  [MEMBERSHIP.] (a) The board consists of 13 
  3.7   members, as specified in this subdivision.  The appointing 
  3.8   authorities shall make all initial appointments by August 15, 
  3.9   2001.  The commissioner shall designate one member as the chair 
  3.10  of the board for a two-year term and shall designate successor 
  3.11  chairs as necessary. 
  3.12     (b) The board includes five consumer members, one appointed 
  3.13  under the rules of the house, one appointed by the subcommittee 
  3.14  on committees of the senate, and three appointed by the 
  3.15  governor.  Of the members appointed by the governor, one member 
  3.16  shall represent the interests of senior citizens, one member 
  3.17  shall represent the interests of disabled citizens, and one 
  3.18  member shall represent the interests of low-income citizens. 
  3.19     (c) The board includes two pharmacists, one appointed by 
  3.20  the Minnesota pharmacists association and one appointed by the 
  3.21  Minnesota board of pharmacy.  The board includes one 
  3.22  representative of physicians, appointed by the Minnesota medical 
  3.23  association, and one representative of nurses, appointed by the 
  3.24  Minnesota nurses association. 
  3.25     (d) The board includes the commissioner of health, the 
  3.26  commissioner of human services, and the commissioner of 
  3.27  administration, who shall serve as ex officio, nonvoting members.
  3.28     Subd. 3.  [TERMS; COMPENSATION; REMOVAL; AND 
  3.29  VACANCIES.] The board is governed by section 15.0575. 
  3.30     Subd. 4.  [ADMINISTRATION.] The commissioner shall provide 
  3.31  office space, equipment and supplies, and technical assistance 
  3.32  to the board. 
  3.33     Subd. 5.  [STAFF.] The board shall appoint an executive 
  3.34  director who serves in the unclassified service.  The executive 
  3.35  director may hire employees and retain consultants as authorized 
  3.36  by the board and may prescribe their duties.  The attorney 
  4.1   general shall provide legal services to the board. 
  4.2      Subd. 6.  [RULEMAKING.] The board shall adopt rules to 
  4.3   implement this chapter. 
  4.4      Subd. 7.  [COOPERATION WITH STATE AGENCIES.] In performing 
  4.5   its duties, the board shall cooperate and work with the board of 
  4.6   pharmacy and the commissioners of health, human services, and 
  4.7   administration.  The board of pharmacy and the commissioners of 
  4.8   all state agencies shall, upon request, provide technical 
  4.9   assistance to the board. 
  4.10     Sec. 5.  [62U.09] [PRESCRIPTION DRUG PRICING.] 
  4.11     Subdivision 1.  [ESTABLISHING MAXIMUM PRICES.] By January 
  4.12  10, 2003, and by each January 10 thereafter, the board shall 
  4.13  establish the maximum prices for prescription drugs.  Rules 
  4.14  establishing maximum prices are exempt from the rulemaking 
  4.15  process in chapter 14.  The rules are subject to section 14.386, 
  4.16  paragraph (a), but not paragraph (b). 
  4.17     Subd. 2.  [MANUFACTURER PRICES.] The board shall establish 
  4.18  the price schedule of maximum manufacturer prices for 
  4.19  prescription drugs sold in the state after consideration of the 
  4.20  prices listed on the federal supply schedule for pharmaceuticals 
  4.21  and drugs maintained by the United States Department of Veterans 
  4.22  Affairs, the prices charged for prescription drugs in Canada, 
  4.23  and any other relevant information.  The maximum manufacturer 
  4.24  price of a prescription drug may not exceed the manufacturer 
  4.25  price for that drug sold in Canada.  If a prescription drug is 
  4.26  not sold in Canada, the maximum manufacturer price may not 
  4.27  exceed the manufacturer price for that drug sold in Mexico.  
  4.28     Subd. 3.  [WHOLESALER PRICES.] The maximum wholesaler price 
  4.29  for a prescription drug sold in the state by a wholesaler is the 
  4.30  maximum manufacturer price under subdivision 2 plus any 
  4.31  reasonable and customary cost of doing business and profit 
  4.32  markup by the wholesaler, as determined by the wholesaler, as 
  4.33  long as that wholesale price does not constitute an unfair, 
  4.34  discriminatory, or unlawful practice in business, commerce, or 
  4.35  trade, as provided under section 8.31. 
  4.36     Subd. 4.  [RETAILER PRICES.] The maximum retailer price for 
  5.1   a prescription drug sold in the state by a retailer is the 
  5.2   maximum wholesaler price under subdivision 3, plus any usual and 
  5.3   customary cost of doing business and profit markup by the 
  5.4   retailer, as determined by the retailer, as long as that retail 
  5.5   price does not constitute an unfair, discriminatory, or unlawful 
  5.6   practice in business, commerce, or trade, as provided under 
  5.7   section 8.31. 
  5.8      Subd. 5.  [EFFECTIVE DATE OF MAXIMUM PRICES.] The maximum 
  5.9   prices for prescription drugs established under subdivisions 2, 
  5.10  3, and 4 take effect on October 1 of the same year in which the 
  5.11  maximum prices are established, beginning October 1, 2003. 
  5.12     Subd. 6.  [EXCEPTION.] The provisions of this section 
  5.13  establishing maximum prices for prescription drugs do not apply 
  5.14  to prices subject to legally binding contracts entered into 
  5.15  before the effective date of this act. 
  5.16     Sec. 6.  [62U.11] [APPEALS.] 
  5.17     Subdivision 1.  [APPEAL OF MAXIMUM PRICE.] A manufacturer 
  5.18  of prescription drugs may appeal the maximum price of a 
  5.19  prescription drug established under section 62U.09 to the 
  5.20  board.  The board may grant an exemption from the board's price 
  5.21  schedule upon appeal of the manufacturer or on its own 
  5.22  initiative. 
  5.23     Subd. 2.  [CRITERIA FOR BOARD.] In considering an appeal, 
  5.24  the board shall consider: 
  5.25     (1) changed circumstances since the price schedule was 
  5.26  established; 
  5.27     (2) reasonable costs of production, distribution, 
  5.28  marketing, and research; 
  5.29     (3) the profit through sale and the price charged in other 
  5.30  markets for the prescription drug; 
  5.31     (4) the availability of prescription drugs essential to the 
  5.32  health of the state's citizens or any other factor related to 
  5.33  the health and safety of the state's citizens; and 
  5.34     (5) other relevant information as determined by the board. 
  5.35     Subd. 3.  [COURT APPEALS.] Board rulings on appeals may be 
  5.36  appealed to the court of appeals. 
  6.1      Subd. 4.  [DISCLOSURE.] If a manufacturer of prescription 
  6.2   drugs appeals a price set by the board, the manufacturer shall 
  6.3   fully disclose to the board information regarding the production 
  6.4   costs of the drug and any other information that is pertinent to 
  6.5   the appeal and requested by the board, notwithstanding any law 
  6.6   protecting the manufacturer from having to disclose such 
  6.7   information.  Data provided under this subdivision are nonpublic 
  6.8   data. 
  6.9      Subd. 5.  [EFFECT OF APPEAL.] The filing of an appeal does 
  6.10  not delay the implementation or effective dates of maximum 
  6.11  prices imposed by the board. 
  6.12     Sec. 7.  [62U.13] [COLLECTION OF INFORMATION.] 
  6.13     The board shall collect from any manufacturer, wholesaler, 
  6.14  or retailer of prescription drugs sold in Minnesota all 
  6.15  information necessary for the board to carry out its duties 
  6.16  under this chapter.  A manufacturer, wholesaler, or retailer of 
  6.17  prescription drugs sold in this state shall file with the board, 
  6.18  on request, data, statistics, schedules, or other information 
  6.19  that the board requires to carry out its duties.  The board may 
  6.20  examine books, accounts, and documents of any manufacturer, 
  6.21  wholesaler, or retailer of prescription drugs sold in this 
  6.22  state, subpoena witnesses and documents, administer oaths to 
  6.23  witnesses, and examine those witnesses and documents, on all 
  6.24  matters over which the board has jurisdiction. 
  6.25     Sec. 8.  [62U.15] [PRESCRIPTION DRUG SURVEY.] 
  6.26     Subdivision 1.  [SEMIANNUAL SURVEY REQUIRED.] The board 
  6.27  shall conduct a semiannual survey of prescription drugs to 
  6.28  assist in the development of maximum drug prices.  The survey 
  6.29  must include the following information: 
  6.30     (1) current manufacturer, wholesaler, and retailer maximum 
  6.31  prices of prescription drugs in the state, as set by the board; 
  6.32     (2) manufacturer, wholesaler, and retailer maximum prices 
  6.33  for prescription drugs for the previous five years at six-month 
  6.34  intervals; 
  6.35     (3) the federal supply schedule for pharmaceuticals and 
  6.36  drugs maintained by the United States Department of Veterans 
  7.1   Affairs; 
  7.2      (4) the drug formulary maintained by the province of 
  7.3   Manitoba; and 
  7.4      (5) any other information concerning prescription drug 
  7.5   prices in the state that the board considers appropriate. 
  7.6      Subd. 2.  [SURVEY INFORMATION.] Semiannually, the board 
  7.7   shall provide copies of the results of the survey to the 
  7.8   legislature.  The board shall maintain a publicly accessible 
  7.9   site on the Internet containing the results of the survey. 
  7.10     Sec. 9.  [62U.17] [REGIONAL STRATEGIES AND PURCHASING 
  7.11  ALLIANCES.] 
  7.12     The board shall explore the feasibility of regional 
  7.13  strategies and purchasing alliances for reducing the cost of 
  7.14  prescription drugs.  The board shall report on the results of 
  7.15  these efforts to the legislature and the commissioner.  The 
  7.16  board may enter into agreements with other states and with 
  7.17  Canadian provinces for the purpose of maintaining fair and 
  7.18  uniform prescription drug prices and ensuring maximum access to 
  7.19  affordable prescription drugs. 
  7.20     Sec. 10.  [62U.19] [VIOLATIONS.] 
  7.21     A violation of this chapter is subject to section 325D.071. 
  7.22                             ARTICLE 2
  7.23                 CONFORMING CHANGES; APPROPRIATIONS
  7.24     Section 1.  [62Q.80] [PASS-THROUGH OF SAVINGS TO 
  7.25  PURCHASERS.] 
  7.26     Subdivision 1.  [REDUCED PREMIUMS.] All health plan 
  7.27  companies shall pass on to purchasers, in the form of reduced 
  7.28  premium rates, all savings resulting from implementation of 
  7.29  chapter 62U. 
  7.30     Subd. 2.  [DOCUMENTING COMPLIANCE.] Each health plan 
  7.31  company shall annually submit documentation indicating 
  7.32  compliance with subdivision 1 to the appropriate commissioner. 
  7.33     Subd. 3.  [ENFORCEMENT.] If the appropriate commissioner 
  7.34  finds that a health plan company has not complied with 
  7.35  subdivision 1, the commissioner may take enforcement action 
  7.36  against the health plan company.  The commissioner may, by 
  8.1   order, require premium rate reductions, fine or censure the 
  8.2   health plan company, or revoke or suspend the certificate of 
  8.3   authority or license of the health plan company to do business 
  8.4   in this state if the commissioner finds that the health plan 
  8.5   company has not complied with this section.  The health plan 
  8.6   company may appeal the commissioner's order through a contested 
  8.7   case hearing in accordance with chapter 14. 
  8.8      Sec. 2.  Minnesota Statutes 2000, section 151.47, 
  8.9   subdivision 1, is amended to read: 
  8.10     Subdivision 1.  [REQUIREMENTS.] All wholesale drug 
  8.11  distributors are subject to the requirements in paragraphs (a) 
  8.12  to (f) (g).  
  8.13     (a) No person or distribution outlet shall act as a 
  8.14  wholesale drug distributor without first obtaining a license 
  8.15  from the board and paying the required fee. 
  8.16     (b) No license shall be issued or renewed for a wholesale 
  8.17  drug distributor to operate unless the applicant agrees to 
  8.18  operate in a manner prescribed by federal and state law and 
  8.19  according to the rules adopted by the board. 
  8.20     (c) The board may require a separate license for each 
  8.21  facility directly or indirectly owned or operated by the same 
  8.22  business entity within the state, or for a parent entity with 
  8.23  divisions, subsidiaries, or affiliate companies within the 
  8.24  state, when operations are conducted at more than one location 
  8.25  and joint ownership and control exists among all the entities. 
  8.26     (d) As a condition for receiving and retaining a wholesale 
  8.27  drug distributor license issued under sections 151.42 to 151.51, 
  8.28  an applicant shall satisfy the board that it has and will 
  8.29  continuously maintain: 
  8.30     (1) adequate storage conditions and facilities; 
  8.31     (2) minimum liability and other insurance as may be 
  8.32  required under any applicable federal or state law; 
  8.33     (3) a viable security system that includes an after hours 
  8.34  central alarm, or comparable entry detection capability; 
  8.35  restricted access to the premises; comprehensive employment 
  8.36  applicant screening; and safeguards against all forms of 
  9.1   employee theft; 
  9.2      (4) a system of records describing all wholesale drug 
  9.3   distributor activities set forth in section 151.44 for at least 
  9.4   the most recent two-year period, which shall be reasonably 
  9.5   accessible as defined by board regulations in any inspection 
  9.6   authorized by the board; 
  9.7      (5) principals and persons, including officers, directors, 
  9.8   primary shareholders, and key management executives, who must at 
  9.9   all times demonstrate and maintain their capability of 
  9.10  conducting business in conformity with sound financial practices 
  9.11  as well as state and federal law; 
  9.12     (6) complete, updated information, to be provided to the 
  9.13  board as a condition for obtaining and retaining a license, 
  9.14  about each wholesale drug distributor to be licensed, including 
  9.15  all pertinent corporate licensee information, if applicable, or 
  9.16  other ownership, principal, key personnel, and facilities 
  9.17  information found to be necessary by the board; 
  9.18     (7) written policies and procedures that assure reasonable 
  9.19  wholesale drug distributor preparation for, protection against, 
  9.20  and handling of any facility security or operation problems, 
  9.21  including, but not limited to, those caused by natural disaster 
  9.22  or government emergency, inventory inaccuracies or product 
  9.23  shipping and receiving, outdated product or other unauthorized 
  9.24  product control, appropriate disposition of returned goods, and 
  9.25  product recalls; 
  9.26     (8) sufficient inspection procedures for all incoming and 
  9.27  outgoing product shipments; and 
  9.28     (9) operations in compliance with all federal requirements 
  9.29  applicable to wholesale drug distribution. 
  9.30     (e) An agent or employee of any licensed wholesale drug 
  9.31  distributor need not seek licensure under this section. 
  9.32     (f) A wholesale drug distributor shall file with the board 
  9.33  an annual report, in a form and on the date prescribed by the 
  9.34  board, identifying all payments, honoraria, reimbursement or 
  9.35  other compensation authorized under section 151.461, clauses (3) 
  9.36  to (5), paid to practitioners in Minnesota during the preceding 
 10.1   calendar year.  The report shall identify the nature and value 
 10.2   of any payments totaling $100 or more, to a particular 
 10.3   practitioner during the year, and shall identify the 
 10.4   practitioner.  Reports filed under this provision are public 
 10.5   data. 
 10.6      (g) As a condition for receiving and retaining a wholesale 
 10.7   drug distributor license, an applicant must agree to comply with 
 10.8   the requirements of chapter 62U and a license holder must 
 10.9   demonstrate to the board that it has complied with the 
 10.10  requirements of that chapter. 
 10.11     Sec. 3.  Minnesota Statutes 2000, section 325D.071, is 
 10.12  amended to read: 
 10.13     325D.071 [VIOLATIONS; PENALTIES.] 
 10.14     Any person, firm, or corporation, whether as principal, 
 10.15  agent, officer, or director, for itself, or for another person, 
 10.16  firm, or corporation, willfully violating the provisions of 
 10.17  sections 325D.03, 325D.04, and 325D.05, or chapter 62U, shall be 
 10.18  guilty of a misdemeanor.  
 10.19     Any person who, either as director, officer, or agent of 
 10.20  any firm or corporation or as agent of any person violating the 
 10.21  provisions of sections 325D.03, 325D.04, and 325D.05, or chapter 
 10.22  62U, knowingly assists or aids directly or indirectly in such 
 10.23  violation shall be equally responsible therefor.  
 10.24     Sec. 4.  [APPROPRIATIONS.] 
 10.25     Subdivision 1.  [DRUG PRICE CONTROL BOARD.] $....... is 
 10.26  appropriated from the general fund to the drug price control 
 10.27  board for the fiscal year ending June 30, 2002, to implement 
 10.28  article 1. 
 10.29     Subd. 2.  [COMMISSIONER OF HEALTH.] $....... is 
 10.30  appropriated from the general fund to the commissioner of health 
 10.31  for the fiscal year ending June 30, 2002, to provide office 
 10.32  space, equipment and supplies, and technical assistance to the 
 10.33  drug price control board. 
 10.34     Subd. 3.  [ATTORNEY GENERAL.] $....... is appropriated from 
 10.35  the general fund to the office of the attorney general for the 
 10.36  fiscal year ending June 30, 2002, to enforce article 1 and 
 11.1   section 3 and to provide legal services to the board of pharmacy 
 11.2   to enforce section 2.