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Minnesota Legislature

Office of the Revisor of Statutes

SF 278

4th Engrossment - 91st Legislature (2019 - 2020) Posted on 05/16/2019 01:41pm

KEY: stricken = removed, old language.
underscored = added, new language.
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A bill for an act
relating to health care; creating licensure and regulations for pharmacy benefit
managers; appropriating money; amending Minnesota Statutes 2018, section
151.21, subdivision 7, by adding a subdivision; proposing coding for new law as
Minnesota Statutes, chapter 62W; repealing Minnesota Statutes 2018, sections
151.214, subdivision 2; 151.60; 151.61; 151.62; 151.63; 151.64; 151.65; 151.66;
151.67; 151.68; 151.69; 151.70; 151.71.

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

Section 1.

new text begin [62W.01] CITATION.
new text end

new text begin This chapter may be cited as the "Minnesota Pharmacy Benefit Manager Licensure and
Regulation Act."
new text end

Sec. 2.

new text begin [62W.02] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin For purposes of this chapter, the following terms have the meanings
given.
new text end

new text begin Subd. 2. new text end

new text begin Aggregate retained rebate. new text end

new text begin "Aggregate retained rebate" means the percentage
of all rebates received by a pharmacy benefit manager from a drug manufacturer for drug
utilization that is not passed on to the pharmacy benefit manager's client.
new text end

new text begin Subd. 3. new text end

new text begin Claims processing service. new text end

new text begin "Claims processing service" means the
administrative services performed in connection with the processing and adjudicating of
claims relating to pharmacy services that includes:
new text end

new text begin (1) receiving payments for pharmacy services;
new text end

new text begin (2) making payments to pharmacists or pharmacies for pharmacy services; or
new text end

new text begin (3) both clause (1) and clause (2).
new text end

new text begin Subd. 4. new text end

new text begin Commissioner. new text end

new text begin "Commissioner" means the commissioner of commerce.
new text end

new text begin Subd. 5. new text end

new text begin Enrollee. new text end

new text begin "Enrollee" means a natural person covered by a health plan and
includes an insured, policyholder, subscriber, contract holder, member, covered person, or
certificate holder.
new text end

new text begin Subd. 6. new text end

new text begin Health carrier. new text end

new text begin "Health carrier" has the meaning given in section 62A.011,
subdivision 2.
new text end

new text begin Subd. 7. new text end

new text begin Health plan. new text end

new text begin "Health plan" means a policy, contract, certificate, or agreement
defined in section 62A.011, subdivision 3.
new text end

new text begin Subd. 8. new text end

new text begin Mail order pharmacy. new text end

new text begin "Mail order pharmacy" means a pharmacy whose
primary business is to receive prescriptions by mail, fax, or through electronic submissions,
dispense prescription drugs to enrollees through the use of the United States mail or other
common carrier services, and provide consultation with patients electronically rather than
face-to-face.
new text end

new text begin Subd. 9. new text end

new text begin Maximum allowable cost price. new text end

new text begin "Maximum allowable cost price" means the
maximum amount that a pharmacy benefit manager will reimburse a pharmacy for a group
of therapeutically and pharmaceutically equivalent multiple source drugs. The maximum
allowable cost price does not include a dispensing or professional fee.
new text end

new text begin Subd. 10. new text end

new text begin Multiple source drugs. new text end

new text begin "Multiple source drugs" means a therapeutically
equivalent drug that is available from at least two manufacturers.
new text end

new text begin Subd. 11. new text end

new text begin Network pharmacy. new text end

new text begin "Network pharmacy" means a retail or other licensed
pharmacy provider that directly contracts with a pharmacy benefit manager.
new text end

new text begin Subd. 12. new text end

new text begin Other prescription drug or device services. new text end

new text begin "Other prescription drug or
device services" means services other than claims processing services, provided directly or
indirectly, whether in connection with or separate from claims processing services, including:
new text end

new text begin (1) negotiating rebates, discounts, or other financial incentives and arrangements with
drug manufacturers;
new text end

new text begin (2) disbursing or distributing rebates;
new text end

new text begin (3) managing or participating in incentive programs or arrangements for pharmacy
services;
new text end

new text begin (4) negotiating or entering into contractual arrangements with pharmacists or pharmacies,
or both;
new text end

new text begin (5) developing prescription drug formularies;
new text end

new text begin (6) designing prescription benefit programs; or
new text end

new text begin (7) advertising or promoting services.
new text end

new text begin Subd. 13. new text end

new text begin Pharmacist. new text end

new text begin "Pharmacist" means an individual with a valid license issued by
the Board of Pharmacy under chapter 151.
new text end

new text begin Subd. 14. new text end

new text begin Pharmacy. new text end

new text begin "Pharmacy" or "pharmacy provider" means a place of business
licensed by the Board of Pharmacy under chapter 151 in which prescription drugs are
prepared, compounded, or dispensed under the supervision of a pharmacist.
new text end

new text begin Subd. 15. new text end

new text begin Pharmacy benefit manager. new text end

new text begin (a) "Pharmacy benefit manager" means a person,
business, or other entity that contracts with a plan sponsor to perform pharmacy benefits
management, including but not limited to:
new text end

new text begin (1) contracting directly or indirectly with pharmacies to provide prescription drugs to
enrollees or other covered individuals;
new text end

new text begin (2) administering a prescription drug benefit;
new text end

new text begin (3) processing or paying pharmacy claims;
new text end

new text begin (4) creating or updating prescription drug formularies;
new text end

new text begin (5) making or assisting in making prior authorization determinations on prescription
drugs;
new text end

new text begin (6) administering rebates on prescription drugs; or
new text end

new text begin (7) establishing a pharmacy network.
new text end

new text begin (b) Pharmacy benefit manager does not include the Department of Human Services.
new text end

new text begin Subd. 16. new text end

new text begin Plan sponsor. new text end

new text begin "Plan sponsor" means a group purchaser as defined under
section 62J.03; an employer in the case of an employee health benefit plan established or
maintained by a single employer; or an employee organization in the case of a health plan
established or maintained by an employee organization, an association, joint board trustees,
a committee, or other similar group that establishes or maintains the health plan. This term
includes a person or entity acting for a pharmacy benefit manager in a contractual or
employment relationship in the performance of pharmacy benefit management. Plan sponsor
does not include the Department of Human Services.
new text end

new text begin Subd. 17. new text end

new text begin Specialty drug. new text end

new text begin "Specialty drug" means a prescription drug that: (1) is not
available for order or purchase by a retail pharmacy, regardless if the drug is meant to be
self-administered; and (2) requires special storage and has distribution or inventory limitations
that are not available at a retail pharmacy.
new text end

new text begin Subd. 18. new text end

new text begin Retail pharmacy. new text end

new text begin "Retail pharmacy" means a chain pharmacy, a supermarket
pharmacy, an independent pharmacy, or a network of independent pharmacies, licensed
under chapter 151, that dispenses prescription drugs to the public.
new text end

new text begin Subd. 19. new text end

new text begin Rebates. new text end

new text begin "Rebates" means all price concessions paid by a drug manufacturer
to a pharmacy benefit manager or plan sponsor, including discounts and other price
concessions that are based on the actual or estimated utilization of a prescription drug.
Rebates also include price concessions based on the effectiveness of a prescription drug as
in a value-based or performance-based contract.
new text end

new text begin Subd. 20. new text end

new text begin Specialty pharmacy. new text end

new text begin "Specialty pharmacy" means a pharmacy that specializes
in dispensing specialty drugs for patients with serious health conditions requiring complex
therapies and high cost biotech and injectable medications. A pharmacy benefit manager
or health carrier may require a specialty pharmacy to be accredited as a specialty pharmacy
from one of the following accrediting organizations:
new text end

new text begin (1) Utilization Review Accreditation Commission (URAC);
new text end

new text begin (2) Accreditation Commissioner for Health Care, Inc.; or
new text end

new text begin (3) Joint Accreditation Commission.
new text end

Sec. 3.

new text begin [62W.03] LICENSE TO DO BUSINESS.
new text end

new text begin Subdivision 1. new text end

new text begin General. new text end

new text begin (a) Beginning January 1, 2020, no person shall perform, act,
or do business in this state as a pharmacy benefit manager unless the person has a valid
license issued under this chapter by the commissioner of commerce.
new text end

new text begin (b) A license issued in accordance with this chapter is nontransferable.
new text end

new text begin Subd. 2. new text end

new text begin Application. new text end

new text begin (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:
new text end

new text begin (1) the name, address, and telephone number of the pharmacy benefit manager;
new text end

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

new text begin (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.
new text end

new text begin (b) Each application for licensure must be accompanied by a nonrefundable fee of $8,500.
The fees collected under this subdivision shall be deposited in the general fund.
new text end

new text begin (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 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.
new text end

new text begin Subd. 3. new text end

new text begin Renewal. new text end

new text begin (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 and a renewal fee of $8,500. 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.
new text end

new text begin (b) A renewal application submitted after the renewal deadline date must be accompanied
by a nonrefundable late fee of $500. The fees collected under this paragraph shall be
deposited in the general fund.
new text end

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

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

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

new text begin 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.
new text end

new text begin Subd. 4. new text end

new text begin Oversight. new text end

new text begin (a) The commissioner may suspend, revoke, or place on probation
a pharmacy benefit manager license issued under this chapter for any of the following
circumstances:
new text end

new text begin (1) the pharmacy benefit manager has engaged in fraudulent activity that constitutes a
violation of state or federal law;
new text end

new text begin (2) the commissioner has received consumer complaints that justify an action under this
subdivision to protect the safety and interests of consumers;
new text end

new text begin (3) the pharmacy benefit manager fails to pay an application license or renewal fee; and
new text end

new text begin (4) the pharmacy benefit manager fails to comply with a requirement set forth in this
chapter.
new text end

new text begin (b) The commissioner may issue a license subject to restrictions or limitations, including
the types of services that may be supplied or the activities in which the pharmacy benefit
manager may be engaged.
new text end

new text begin Subd. 5. new text end

new text begin Penalty. new text end

new text begin If a pharmacy benefit manager acts without a license, the pharmacy
benefit manager may be subject to a fine of $5,000 per day for the period the pharmacy
benefit manager is found to be in violation. Any penalties collected under this subdivision
shall be deposited in the general fund.
new text end

new text begin Subd. 6. new text end

new text begin Enforcement. new text end

new text begin The commissioner shall enforce this chapter under the provisions
of chapter 45.
new text end

Sec. 4.

new text begin [62W.04] PHARMACY BENEFIT MANAGER GENERAL BUSINESS
PRACTICES.
new text end

new text begin (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.
new text end

new text begin (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 end

Sec. 5.

new text begin [62W.05] PHARMACY BENEFIT MANAGER NETWORK ADEQUACY.
new text end

new text begin (a) A pharmacy benefit manager must provide an adequate and accessible pharmacy
network for the provision of prescription drugs that at a minimum meets the relevant
requirements under section 62K.10. Mail order pharmacies must not be included in the
calculations of determining the adequacy of the pharmacy benefit manager's pharmacy
network under section 62K.10.
new text end

new text begin (b) A pharmacy benefit manager may apply for a waiver from the commissioner of
health if the pharmacy benefit manager is unable to meet the network adequacy requirements
in paragraph (a). The waiver application must demonstrate with specific data why the
pharmacy benefit manager is not able to meet the requirements and must include the steps
that were and will be taken to address network adequacy.
new text end

new text begin (c) A pharmacy benefit manager must not require pharmacy accreditation standards or
recertification requirements to participate in a network that are inconsistent with, more
stringent than, or in addition to federal and state requirements for licensure as a pharmacy
in this state unless authorized under this chapter.
new text end

Sec. 6.

new text begin [62W.06] PHARMACY BENEFIT MANAGER TRANSPARENCY.
new text end

new text begin Subdivision 1. new text end

new text begin Transparency to plan sponsors. new text end

new text begin (a) Beginning in the second quarter
after the effective date of a contract between a pharmacy benefit manager and a plan sponsor,
the pharmacy benefit manager must disclose, upon the request of the plan sponsor, the
following information with respect to prescription drug benefits specific to the plan sponsor:
new text end

new text begin (1) the aggregate wholesale acquisition costs from a drug manufacturer or wholesale
drug distributor for each therapeutic category of prescription drugs;
new text end

new text begin (2) the aggregate wholesale acquisition costs from a drug manufacturer or wholesale
drug distributor for each therapeutic category of prescription drugs available to the plan
sponsor's enrollees;
new text end

new text begin (3) the aggregate amount of rebates received by the pharmacy benefit manager by
therapeutic category of prescription drugs. The aggregate amount of rebates must include
any utilization discounts the pharmacy benefit manager receives from a drug manufacturer
or wholesale drug distributor;
new text end

new text begin (4) any other fees received from a drug manufacturer or wholesale drug distributor;
new text end

new text begin (5) whether the pharmacy benefit manager has a contract, agreement, or other arrangement
with a drug manufacturer to exclusively dispense or provide a drug to a plan sponsor's
employees or enrollees, and the application of all consideration or economic benefits collected
or received pursuant to the arrangement;
new text end

new text begin (6) prescription drug utilization information for the plan sponsor's enrollees;
new text end

new text begin (7) the aggregate amount of payments made by the pharmacy benefit manager to
pharmacies owned or controlled by the pharmacy benefit manager on behalf of the sponsor's
plan;
new text end

new text begin (8) the aggregate amount of payments made by the pharmacy benefit manager to
pharmacies not owned or controlled by the pharmacy benefit manager on behalf of the
sponsor's plan; and
new text end

new text begin (9) the aggregate amount of the fees imposed on, or collected from, network pharmacies
or other assessments against network pharmacies, including point-of-sale fees and retroactive
charges, and the application of those amounts collected pursuant to the contract with the
plan sponsor.
new text end

new text begin (b) A pharmacy benefit manager may require a plan sponsor to agree to a nondisclosure
agreement that specifies that the information reported under this subdivision is proprietary
information. The pharmacy benefit manager is not required to disclose the information to
the plan sponsor until the plan sponsor has executed the nondisclosure agreement, if required
by the pharmacy benefit manager.
new text end

new text begin Subd. 2. new text end

new text begin Transparency report to the commissioner. new text end

new text begin (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
located in Minnesota. The report must contain the following information:
new text end

new text begin (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, unless providing this information even in the aggregate
permits the determination of a specific drug manufacturer;
new text end

new text begin (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;
new text end

new text begin (3) the aggregate retained rebates that the pharmacy benefit manager received from all
drug manufacturers that were not passed through to plan sponsors; and
new text end

new text begin (4) the aggregate retained rebate percentage.
new text end

new text begin (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.
new text end

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

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

new text begin (2) divided by the sum total dollar amount of all rebates received from all drug
manufacturers for all enrollees of a plan sponsor.
new text end

new text begin Subd. 3. new text end

new text begin Penalty. new text end

new text begin The commissioner may impose civil penalties of not more than $1,000
per day per violation of this section.
new text end

Sec. 7.

new text begin [62W.07] PHARMACY OWNERSHIP INTEREST; PHARMACY SERVICES.
new text end

new text begin (a) A pharmacy benefit manager that has an ownership interest either directly or indirectly,
or through an affiliate or subsidiary, in a pharmacy must disclose to a plan sponsor that
contracts with the pharmacy benefit manager any difference between the amount paid to
that pharmacy and the amount charged to the plan sponsor.
new text end

new text begin (b) A pharmacy benefit manager or health carrier is prohibited from penalizing, requiring,
or providing financial incentives, including variations in premiums, deductibles, co-payments,
or coinsurance, to an enrollee as an incentive to use a retail pharmacy, mail order pharmacy,
specialty pharmacy, or other network pharmacy provider in which a pharmacy benefit
manager has an ownership interest or in which the pharmacy provider has an ownership
interest in the pharmacy benefit manager.
new text end

new text begin (c) Paragraph (b) does not apply if the pharmacy benefit manager or health carrier offers
an enrollee the same financial incentives for using a network retail pharmacy, mail order
pharmacy, specialty pharmacy, or other network pharmacy in which the pharmacy benefit
manager has no ownership interest and the network pharmacy has agreed to accept the same
pricing terms, conditions, and requirements related to the cost of the prescription drug and
the cost of dispensing the prescription drug that are in the agreement with a network
pharmacy in which the pharmacy benefit manager has an ownership interest.
new text end

new text begin (d) A pharmacy benefit manager or health carrier is prohibited from imposing limits,
including quantity limits or refill frequency limits, on an enrollee's access to medication
that differ based solely on whether the health carrier or pharmacy benefit manager has an
ownership interest in a pharmacy or the pharmacy has an ownership interest in the pharmacy
benefit manager.
new text end

new text begin (e) Nothing in paragraph (d) shall be construed to prohibit a pharmacy benefit manager
from imposing different limits, including quantity limits or refill frequency limits on an
enrollee's access to medication based on whether the enrollee uses a mail order pharmacy
or retail pharmacy so long as the enrollee has the option to use a mail order pharmacy or
retail pharmacy with the same limits imposed in which the pharmacy benefit manager or
health carrier does not have an ownership interest.
new text end

Sec. 8.

new text begin [62W.075] THERAPEUTIC ALTERNATIVE PRESCRIPTION DRUG.
new text end

new text begin A pharmacy benefit manager or health carrier must not require a pharmacy to dispense
a therapeutically equivalent or therapeutically alternative drug that costs the enrollee more
out-of-pocket than the prescribed drug, unless the switch is made for medical reasons that
benefit the patient.
new text end new text begin Before a switch is made under this section, the pharmacy must obtain
approval from the prescribing practitioner and must inform the enrollee of the reason for
the switch.
new text end

Sec. 9.

new text begin [62W.076] SPECIALTY PHARMACY.
new text end

new text begin A pharmacy benefit manager that contracts with a specialty pharmacy must disclose to
an enrollee, upon request, the enrollee's out-of-pocket costs at the specialty pharmacy for
the prescription drug referenced by the enrollee and the enrollee's out-of-pocket cost at a
network retail pharmacy that is identified by the enrollee that is within the enrollee's health
plan network.
new text end

Sec. 10.

new text begin [62W.077] PREFERRED NETWORK.
new text end

new text begin A pharmacy benefit manager that uses a preferred network of pharmacies must disclose
to an enrollee upon request the enrollee's out-of-pocket cost at the preferred pharmacy for
the prescription drug referenced by the enrollee and the enrollee's out-of-pocket cost at a
nonpreferred pharmacy identified by the enrollee that is within the enrollee's health plan
network.
new text end

Sec. 11.

new text begin [62W.08] MAXIMUM ALLOWABLE COST PRICING.
new text end

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

new text begin (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;
new text end

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

new text begin (3) 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;
new text end

new text begin (4) ensure that the maximum allowable cost prices are not set below sources utilized by
the pharmacy benefits manager; and
new text end

new text begin (5) upon request of a network pharmacy, disclose the sources utilized for setting
maximum allowable cost price rates on each maximum allowable cost price list included
under the contract and identify each maximum allowable cost price list that applies to the
network pharmacy. A pharmacy benefit manager must make the list of the maximum
allowable costs available to a contracted pharmacy in a format that is readily accessible and
usable to the network pharmacy.
new text end

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

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

new text begin (1) a 15-business-day limit on the right to appeal following the initial claim;
new text end

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

new 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.
new text end

new text begin (d) 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.
new text end

Sec. 12.

new text begin [62W.09] PHARMACY AUDITS.
new text end

new text begin Subdivision 1. new text end

new text begin Procedure and process for conducting and reporting an audit. new text end

new text begin (a)
Unless otherwise prohibited by federal requirements or regulations, any entity conducting
a pharmacy audit must follow the following procedures:
new text end

new text begin (1) a pharmacy must be given notice 14 days before an initial on-site audit is conducted;
new text end

new text begin (2) an audit that involves clinical or professional judgment must be conducted by or in
consultation with a licensed pharmacist; and
new text end

new text begin (3) each pharmacy shall be audited under the same standards and parameters as other
similarly situated pharmacies.
new text end

new text begin (b) Unless otherwise prohibited by federal requirements or regulations, for any entity
conducting a pharmacy audit the following items apply:
new text end

new text begin (1) the period covered by the audit may not exceed 24 months from the date that the
claim was submitted to or adjudicated by the entity, unless a longer period is required under
state or federal law;
new text end

new text begin (2) if an entity uses random sampling as a method for selecting a set of claims for
examination, the sample size must be appropriate for a statistically reliable sample.
Notwithstanding section 151.69, the auditing entity shall provide the pharmacy a masked
list that provides a prescription number or date range that the auditing entity is seeking to
audit;
new text end

new text begin (3) an on-site audit may not take place during the first five business days of the month
unless consented to by the pharmacy;
new text end

new text begin (4) auditors may not enter the pharmacy area unless escorted where patient-specific
information is available and to the extent possible must be out of sight and hearing range
of the pharmacy customers;
new text end

new text begin (5) any recoupment will not be deducted against future remittances until after the appeals
process and both parties have received the results of the final audit;
new text end

new text begin (6) a pharmacy benefit manager may not require information to be written on a
prescription unless the information is required to be written on the prescription by state or
federal law. Recoupment may be assessed for items not written on the prescription if:
new text end

new text begin (i) additional information is required in the provider manual; or
new text end

new text begin (ii) the information is required by the Food and Drug Administration (FDA); or
new text end

new text begin (iii) the information is required by the drug manufacturer's product safety program; and
new text end

new text begin (iv) the information in item (i), (ii), or (iii) is not readily available for the auditor at the
time of the audit; and
new text end

new text begin (7) the auditing company or agent may not receive payment based on a percentage of
the amount recovered. This section does not prevent the entity conducting the audit from
charging or assessing the responsible party, directly or indirectly, based on amounts recouped
if both of the following conditions are met:
new text end

new text begin (i) the plan sponsor and the entity conducting the audit have a contract that explicitly
states the percentage charge or assessment to the plan sponsor; and
new text end

new text begin (ii) a commission to an agent or employee of the entity conducting the audit is not based,
directly or indirectly, on amounts recouped.
new text end

new text begin (c) An amendment to pharmacy audit terms in a contract between a pharmacy benefit
manager and a pharmacy must be disclosed to the pharmacy at least 60 days prior to the
effective date of the proposed change.
new text end

new text begin Subd. 2. new text end

new text begin Requirement for recoupment or chargeback. new text end

new text begin For recoupment or chargeback,
the following criteria apply:
new text end

new text begin (1) audit parameters must consider consumer-oriented parameters based on manufacturer
listings;
new text end

new text begin (2) a pharmacy's usual and customary price for compounded medications is considered
the reimbursable cost unless the pricing methodology is outlined in the pharmacy provider
contract;
new text end

new text begin (3) a finding of overpayment or underpayment must be based on the actual overpayment
or underpayment and not a projection based on the number of patients served having a
similar diagnosis or on the number of similar orders or refills for similar drugs;
new text end

new text begin (4) the entity conducting the audit shall not use extrapolation in calculating the
recoupment or penalties for audits unless required by state or federal law or regulations;
new text end

new text begin (5) calculations of overpayments must not include dispensing fees unless a prescription
was not actually dispensed, the prescriber denied authorization, the prescription dispensed
was a medication error by the pharmacy, or the identified overpayment is solely based on
an extra dispensing fee;
new text end

new text begin (6) an entity may not consider any clerical or record-keeping error, such as a typographical
error, scrivener's error, or computer error regarding a required document or record as fraud,
however such errors may be subject to recoupment;
new text end

new text begin (7) in the case of errors that have no actual financial harm to the patient or plan, the
pharmacy benefit manager must not assess any chargebacks. Errors that are a result of the
pharmacy failing to comply with a formal corrective action plan may be subject to recovery;
and
new text end

new text begin (8) interest may not accrue during the audit period for either party, beginning with the
notice of the audit and ending with the final audit report.
new text end

new text begin Subd. 3. new text end

new text begin Documentation. new text end

new text begin (a) To validate the pharmacy record and delivery, the pharmacy
may use authentic and verifiable statements or records including medication administration
records of a nursing home, assisted living facility, hospital, physician, or other authorized
practitioner or additional audit documentation parameters located in the provider manual.
new text end

new text begin (b) Any legal prescription that meets the requirements in this chapter may be used to
validate claims in connection with prescriptions, refills, or changes in prescriptions, including
medication administration records, faxes, e-prescriptions, or documented telephone calls
from the prescriber or the prescriber's agents.
new text end

new text begin Subd. 4. new text end

new text begin Appeals process. new text end

new text begin The entity conducting the audit must establish a written
appeals process which must include appeals of preliminary reports and final reports.
new text end

new text begin Subd. 5. new text end

new text begin Audit information and reports. new text end

new text begin (a) A preliminary audit report must be delivered
to the pharmacy within 60 days after the conclusion of the audit.
new text end

new text begin (b) A pharmacy must be allowed at least 45 days following receipt of the preliminary
audit to provide documentation to address any discrepancy found in the audit.
new text end

new text begin (c) A final audit report must be delivered to the pharmacy within 120 days after receipt
of the preliminary audit report or final appeal, whichever is later.
new text end

new text begin (d) An entity shall remit any money due to a pharmacy or pharmacist as a result of an
underpayment of a claim within 45 days after the appeals process has been exhausted and
the final audit report has been issued.
new text end

new text begin Subd. 6. new text end

new text begin Disclosure to plan sponsor. new text end

new text begin Where contractually required, an auditing entity
must provide a copy to the plan sponsor of its claims that were included in the audit, and
any recouped money shall be returned to the plan sponsor.
new text end

new text begin Subd. 7. new text end

new text begin Applicability of other laws and regulations. new text end

new text begin This section does not apply to
any investigative audit that involves suspected fraud, willful misrepresentation, abuse, or
any audit completed by Minnesota health care programs.
new text end

new text begin Subd. 8. new text end

new text begin Definitions. new text end

new text begin For purposes of this section, "entity" means a pharmacy benefit
manager or any person or organization that represents a pharmacy benefit manager.
new text end

Sec. 13.

new text begin [62W.10] SYNCHRONIZATION.
new text end

new text begin (a) For purposes of this section, "synchronization" means the coordination of prescription
drug refills for a patient taking two or more medications for one or more chronic conditions,
to allow the patient's medications to be refilled on the same schedule for a given period of
time.
new text end

new text begin (b) A contract between a pharmacy benefit manager and a pharmacy must allow for
synchronization of prescription drug refills for a patient on at least one occasion per year,
if the following criteria are met:
new text end

new text begin (1) the prescription drugs are covered under the patient's health plan or have been
approved by a formulary exceptions process;
new text end

new text begin (2) the prescription drugs are maintenance medications as defined by the health plan
and have one or more refills available at the time of synchronization;
new text end

new text begin (3) the prescription drugs are not Schedule II, III, or IV controlled substances;
new text end

new text begin (4) the patient meets all utilization management criteria relevant to the prescription drug
at the time of synchronization;
new text end

new text begin (5) the prescription drugs are of a formulation that can be safely split into short-fill
periods to achieve synchronization; and
new text end

new text begin (6) the prescription drugs do not have special handling or sourcing needs that require a
single, designated pharmacy to fill or refill the prescription.
new text end

new text begin (c) When necessary to permit synchronization, the pharmacy benefit manager must apply
a prorated, daily patient cost-sharing rate to any prescription drug dispensed by a pharmacy
under this section. The dispensing fee must not be prorated, and all dispensing fees shall
be based on the number of prescriptions filled or refilled.
new text end

Sec. 14.

new text begin [62W.11] GAG CLAUSE PROHIBITION.
new text end

new text begin (a) No contract between a pharmacy benefit manager or health carrier and a pharmacy
or pharmacist shall prohibit, restrict, or penalize a pharmacy or pharmacist from disclosing
to an enrollee any health care information that the pharmacy or pharmacist deems appropriate
regarding the nature of treatment; the risks or alternatives; the availability of alternative
therapies, consultations, or tests; the decision of utilization reviewers or similar persons to
authorize or deny services; the process that is used to authorize or deny health care services
or benefits; or information on financial incentives and structures used by the health carrier
or pharmacy benefit manager.
new text end

new text begin (b) A pharmacy or pharmacist must provide to an enrollee information regarding the
enrollee's total cost for each prescription drug dispensed where part or all of the cost of the
prescription is being paid or reimbursed by the employer-sponsored plan or by a health
carrier or pharmacy benefit manager, in accordance with section 151.214.
new text end

new text begin (c) A pharmacy benefit manager or health carrier must not prohibit a pharmacist or
pharmacy from discussing information regarding the total cost for pharmacy services for a
prescription drug, including the patient's co-payment amount and the pharmacy's own usual
and customary price of the prescription.
new text end

new text begin (d) A pharmacy benefit manager or health carrier must not prohibit a pharmacist or
pharmacy from discussing the availability of any therapeutically equivalent alternative
prescription drugs or alternative methods for purchasing the prescription drug, including
but not limited to paying out-of-pocket the pharmacy's usual and customary price when that
amount is less expensive to the enrollee than the amount the enrollee is required to pay for
the prescription drug under the enrollee's health plan.
new text end

Sec. 15.

new text begin [62W.12] POINT OF SALE.
new text end

new text begin No pharmacy benefit manager, health carrier, or pharmacy shall require an enrollee to
make a payment at the point of sale for a covered prescription drug in an amount greater
than the lesser of:
new text end

new text begin (1) the applicable total prescription price, including any co-payment for the prescription
drug;
new text end

new text begin (2) the allowable claim amount for the prescription drug; or
new text end

new text begin (3) the amount an enrollee would pay for the prescription drug if the enrollee purchased
the prescription drug without using a health plan or any other source of prescription drug
benefits or discounts.
new text end

Sec. 16.

Minnesota Statutes 2018, section 151.21, subdivision 7, is amended to read:


Subd. 7.

Drug formulary.

deleted text beginThis sectiondeleted text endnew text begin Subdivision 3new text end does not apply when a pharmacist
is dispensing a prescribed drug to persons covered under a managed health care plan that
maintains a mandatory or closed drug formulary.

Sec. 17.

Minnesota Statutes 2018, section 151.21, is amended by adding a subdivision to
read:


new text begin Subd. 7a. new text end

new text begin Coverage by substitution. new text end

new text begin (a) When a pharmacist receives a prescription
order by paper or hard copy, by electronic transmission, or by oral instruction from the
prescriber, in which the prescriber has not expressly indicated that the prescription is to be
dispensed as communicated and the drug prescribed is not covered under the purchaser's
health plan or prescription drug plan, the pharmacist may dispense a therapeutically
equivalent and interchangeable prescribed drug or biological product that is covered under
the purchaser's plan if the pharmacist has a written protocol with the prescriber that outlines
the class of drugs of the same generation and designed for the same indication that can be
substituted and the required communication between the pharmacist and the prescriber.
new text end

new text begin (b) The pharmacist must inform the purchaser if the pharmacist is dispensing a drug or
biological product other than the specific drug or biological product prescribed and the
reason for the substitution.
new text end

new text begin (c) The pharmacist must communicate to the prescriber the name and manufacturer of
the substituted drug that was dispensed and the reason for the substitution in accordance
with the written protocol.
new text end

Sec. 18. new text beginRULEMAKING AUTHORITY.
new text end

new text begin The commissioner of commerce may adopt permanent rules for license application and
renewal requirements, forms, procedures, network adequacy, and reporting procedures and
compliance, for pharmacy benefit manager licensing under Minnesota Statutes, chapter
62W. The commissioner must not adopt rules to implement Minnesota Statutes, chapter
62W, under any other grant of rulemaking authority. If the commissioner of commerce does
not adopt rules by January 1, 2021, rulemaking authority under this section is repealed.
Rulemaking authority under this section is not continuing authority to amend or repeal rules.
Notwithstanding Minnesota Statutes, section 14.125, any additional action on rules after
adoption must be under specific statutory authority to take the additional action.
new text end

Sec. 19. new text beginAPPROPRIATION.
new text end

new text begin $340,000 in fiscal year 2020 and $383,000 in fiscal year 2021 are appropriated from the
general fund to the commissioner of commerce for licensing activities under Minnesota
Statutes, chapter 62W. The base for this appropriation is $425,000 in fiscal year 2022 and
$425,000 in fiscal year 2023. $246,000 each year shall be used solely for staff costs for two
enforcement investigators solely for enforcement activities under Minnesota Statutes, chapter
62W.
new text end

Sec. 20. new text beginREPEALER.
new text end

new text begin Minnesota Statutes 2018, sections 151.214, subdivision 2; 151.60; 151.61; 151.62;
151.63; 151.64; 151.65; 151.66; 151.67; 151.68; 151.69; 151.70; and 151.71,
new text end new text begin are repealed.
new text end

APPENDIX

Repealed Minnesota Statutes: S0278-4

151.214 PAYMENT DISCLOSURE.

Subd. 2.

No prohibition on disclosure.

No contracting agreement between an employer-sponsored health plan or health plan company, or its contracted pharmacy benefit manager, and a resident or nonresident pharmacy registered under this chapter, may prohibit the pharmacy from disclosing to patients information a pharmacy is required or given the option to provide under subdivision 1.

151.60 PHARMACY AUDIT INTEGRITY PROGRAM.

The pharmacy audit integrity program is established to provide standards for an audit of pharmacy records carried out by a pharmacy benefits manager or any entity that represents pharmacy benefits managers.

151.61 DEFINITIONS.

Subdivision 1.

Scope.

For the purposes of sections 151.60 to 151.70, the following terms have the meanings given.

Subd. 2.

Entity.

"Entity" means a pharmacy benefits manager or any person or organization that represents these companies, groups, or organizations.

Subd. 3.

Pharmacy benefits manager or PBM.

"Pharmacy benefits manager" or "PBM" means a person, business, or other entity that performs pharmacy benefits management. The term includes a person or entity acting for a PBM in a contractual or employment relationship in the performance of pharmacy benefits management.

Subd. 4.

Plan sponsor.

"Plan sponsor" means the employer in the case of an employee benefit plan established or maintained by a single employer, a group purchaser as defined in section 62J.03, subdivision 6, or the employee organization in the case of a plan established or maintained by an employee organization, an association, joint board trustees, a committee, or other similar group that establishes or maintains the plan.

151.62 PHARMACY BENEFIT MANAGER CONTRACT.

An amendment to pharmacy audit terms in a contract between a PBM and a pharmacy must be disclosed to the pharmacy at least 60 days prior to the effective date of the proposed change.

151.63 PROCEDURE AND PROCESS FOR CONDUCTING AND REPORTING AN AUDIT.

Subdivision 1.

Audit procedures.

Unless otherwise prohibited by federal requirements or regulations, any entity conducting a pharmacy audit must follow the following procedures.

(1) A pharmacy must be given notice 14 days before an initial on-site audit is conducted.

(2) An audit that involves clinical or professional judgment must be conducted by or in consultation with a licensed pharmacist.

(3) Each pharmacy shall be audited under the same standards and parameters as other similarly situated pharmacies.

Subd. 2.

Audit process.

Unless otherwise prohibited by federal requirements or regulations, for any entity conducting a pharmacy audit the following audit items apply.

(1) The period covered by the audit may not exceed 24 months from the date that the claim was submitted to or adjudicated by the entity, unless a longer period is required under state or federal law.

(2) If an entity uses random sampling as a method for selecting a set of claims for examination, the sample size must be appropriate for a statistically reliable sample. Notwithstanding section 151.69, the auditing entity shall provide the pharmacy a masked list that provides a prescription number or date range that the auditing entity is seeking to audit.

(3) An on-site audit may not take place during the first five business days of the month unless consented to by the pharmacy.

(4) Auditors may not enter the pharmacy area unless escorted where patient-specific information is available and to the extent possible must be out of sight and hearing range of the pharmacy customers.

(5) Any recoupment will not be deducted against future remittances until after the appeals process and both parties have received the results of the final audit.

(6) A PBM may not require information to be written on a prescription unless the information is required to be written on the prescription by state or federal law. Recoupment may be assessed for items not written on the prescription if:

(i) additional information is required in the provider manual; or

(ii) the information is required by the Food and Drug Administration (FDA); or

(iii) the information is required by the drug manufacturer's product safety program; and

(iv) the information in clause (i), (ii), or (iii) is not readily available for the auditor at the time of the audit.

(7) The auditing company or agent may not receive payment based on a percentage of the amount recovered. This section does not prevent the entity conducting the audit from charging or assessing the responsible party, directly or indirectly, based on amounts recouped if both of the following conditions are met:

(i) the plan sponsor and the entity conducting the audit have a contract that explicitly states the percentage charge or assessment to the plan sponsor; and

(ii) a commission to an agent or employee of the entity conducting the audit is not based, directly or indirectly, on amounts recouped.

151.64 REQUIREMENTS FOR RECOUPMENT OR CHARGEBACK.

For recoupment or chargeback, the following criteria apply.

(1) Audit parameters must consider consumer-oriented parameters based on manufacturer listings.

(2) A pharmacy's usual and customary price for compounded medications is considered the reimbursable cost unless the pricing methodology is outlined in the provider contract.

(3) A finding of overpayment or underpayment must be based on the actual overpayment or underpayment and not a projection based on the number of patients served having a similar diagnosis or on the number of similar orders or refills for similar drugs.

(4) The entity conducting the audit shall not use extrapolation in calculating the recoupment or penalties for audits unless required by state or federal law or regulations.

(5) Calculations of overpayments must not include dispensing fees unless a prescription was not actually dispensed, the prescriber denied authorization, the prescription dispensed was a medication error by the pharmacy, or the identified overpayment is solely based on an extra dispensing fee.

(6) An entity may not consider any clerical or record-keeping error, such as a typographical error, scrivener's error, or computer error regarding a required document or record as fraud, however such errors may be subject to recoupment.

(7) In the case of errors that have no actual financial harm to the patient or plan, the PBM must not assess any chargebacks. Errors that are a result of the pharmacy failing to comply with a formal corrective action plan may be subject to recovery.

(8) Interest may not accrue during the audit period for either party, beginning with the notice of the audit and ending with the final audit report.

151.65 DOCUMENTATION.

(a) To validate the pharmacy record and delivery, the pharmacy may use authentic and verifiable statements or records including medication administration records of a nursing home, assisted living facility, hospital, physician, or other authorized practitioner or additional audit documentation parameters located in the provider manual.

(b) Any legal prescription that meets the requirements in this chapter may be used to validate claims in connection with prescriptions, refills, or changes in prescriptions, including medication administration records, faxes, e-prescriptions, or documented telephone calls from the prescriber or the prescriber's agents.

151.66 APPEALS PROCESS.

The entity conducting the audit must establish a written appeals process which must include appeals of preliminary reports and final reports.

151.67 AUDIT INFORMATION AND REPORTS.

(a) A preliminary audit report must be delivered to the pharmacy within 60 days after the conclusion of the audit.

(b) A pharmacy must be allowed at least 45 days following receipt of the preliminary audit to provide documentation to address any discrepancy found in the audit.

(c) A final audit report must be delivered to the pharmacy within 120 days after receipt of the preliminary audit report or final appeal, whichever is later.

(d) An entity shall remit any money due to a pharmacy or pharmacist as a result of an underpayment of a claim within 45 days after the appeals process has been exhausted and the final audit report has been issued.

151.68 DISCLOSURES TO PLAN SPONSOR.

Where contractually required, an auditing entity must provide a copy to the plan sponsor of its claims that were included in the audit, and any recouped money shall be returned to the plan sponsor.

151.69 APPLICABILITY OF OTHER LAWS AND REGULATIONS.

Sections 151.62 to 151.67 do not apply to any investigative audit that involves suspected fraud, willful misrepresentation, abuse, or any audit completed by Minnesota health care programs.

151.70 VIOLATIONS.

Violations of sections 151.62 to 151.68 may be grounds for action, but are not deemed misdemeanors as described in section 151.29.

151.71 MAXIMUM ALLOWABLE COST PRICING.

Subdivision 1.

Definitions.

(a) For purposes of this section, the following definitions apply.

(b) "Health plan company" has the meaning provided in section 62Q.01, subdivision 4.

(c) "Pharmacy benefit manager" means an entity doing business in this state that contracts to administer or manage prescription drug benefits on behalf of any health plan company that provides prescription drug benefits to residents of this state.

Subd. 2.

Pharmacy benefit manager contracts with pharmacies; maximum allowable cost pricing.

(a) In each contract between a pharmacy benefit manager and a pharmacy, the pharmacy shall be given the right to obtain from the pharmacy benefit manager a current list of the sources used to determine maximum allowable cost pricing. The pharmacy benefit manager shall update the pricing information at least every seven business days and provide a means by which contracted pharmacies may promptly review current prices in an electronic, print, or telephonic format within one business day at no cost to the pharmacy. A pharmacy benefit manager shall 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.

(b) In order to place a prescription drug on a maximum allowable cost list, a pharmacy benefit manager shall ensure that the drug is generally available for purchase by pharmacies in this state from a national or regional wholesaler and is not obsolete.

(c) Each contract between a pharmacy benefit manager and a pharmacy must include a process to appeal, investigate, and resolve disputes regarding maximum allowable cost pricing that includes:

(1) a 15-business day limit on the right to appeal following the initial claim;

(2) a requirement that the appeal be investigated and resolved within seven business days after the appeal is received; and

(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.

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