Use of spread pricing by pharmacy benefit managers prohibited, license application fees increased, permissible sources of income limited, fiduciary duties imposed, and money appropriated.

A bill for an act

relating to insurance; prohibiting the use of spread pricing by pharmacy benefit

managers; increasing pharmacy benefit manager license application fees; limiting

permissible sources of pharmacy benefit manager income; imposing fiduciary

duties on pharmacy benefit managers; appropriating money; amending Minnesota

Statutes 2024, sections 62W.02, subdivision 17, by adding subdivisions; 62W.03,

subdivisions 2, 3, 5; 62W.04; 62W.05, by adding a subdivision; 62W.06,

subdivision 2; 62W.07; 62W.08; 62W.13.

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:

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Subd. 14a.

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Pharmacy benefit management fee.

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"Pharmacy benefit management fee"

means a flat, defined, dollar-amount fee that covers the cost of providing one or more

pharmacy benefit management services and that does not exceed the bona fide value of the

itemized service or services actually performed by the pharmacy benefit manager on behalf

of the health carrier, that the health carrier would otherwise perform or contract for in the

absence of the service arrangement, whether or not the health carrier takes title to the

prescription drug. The value of the service or services shall be based on the value to the

health carrier or health plan. A pharmacy benefit management fee may not directly or

indirectly be based on or contingent upon any of the following:

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(1) the price of prescription drugs, including direct or indirect rebates; discounts;

wholesale acquisition costs; drug benchmark prices, such as average wholesale prices; or

other price concessions;

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(2) the amount of savings, rebates, or other fees charged, realized, or collected by, or

generated based on the activity of the pharmacy benefit manager or its affiliated entities

that is retained by the pharmacy benefit manager or its affiliated entities;

new text end

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(3) the amount of premiums, deductibles, or other cost-sharing or fees charged, realized,

or collected by the pharmacy benefit manager or its affiliated entities from patients or other

persons on behalf of a patient;

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(4) coverage or formulary placement decisions or the volume or value of any referrals

or business generated between the parties to the arrangement; or

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(5) any other amounts or methodologies as defined by the commissioner.

new text end

Sec. 2.

Minnesota Statutes 2024, section 62W.02, subdivision 17, is amended to read:

Subd. 17.

Rebates.

"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.
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Rebates does not include a pharmacy benefit

management fee.
new text end

Sec. 3.

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

read:

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Subd. 21.

new text end

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Spread pricing.

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"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. 4.

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
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of $8,500
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determined by the commissioner in an amount between $15,000 and $.......
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. 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. 5.

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
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of $8,500
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determined by the commissioner in an amount between $15,000 and

$.......
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. 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
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of $500
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determined by the commissioner in an amount between

$1,000 and $.......
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. 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. 6.

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

Subd. 5.

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Penalty
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Penalties
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.

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(a)
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If a pharmacy benefit manager acts without a license,

the pharmacy benefit manager may be subject to a fine
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of $5,000
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determined by the

commissioner in an amount between $10,000 and $.......
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per day for the period the pharmacy

benefit manager is found to be in violation.

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(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.

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

Sec. 7.

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

62W.04 PHARMACY BENEFIT MANAGER GENERAL BUSINESS PRACTICES.

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Subdivision 1.

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Good faith and fair dealing.

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(a)
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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.

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Subd. 2.

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Disclosure of conflicts of interest.

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(b)
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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.

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Subd. 3.

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Fiduciary duty.

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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.

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Subd. 4.

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Performance standards.

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A pharmacy benefit manager must perform its duties

with care, skill, prudence, diligence, and professionalism.

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Subd. 5.

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Prohibited fees and income.

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(a) A pharmacy benefit manager must not charge

a pharmacy a fee related to the adjudication of a claim, including but not limited to:

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(1) receiving and processing a pharmacy claim;

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(2) developing or managing claims processing services in a pharmacy benefit manager

network; or

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(3) participating in a pharmacy benefit network.

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(b) A pharmacy benefit manager must not derive income from pharmacy benefit

management services provided to a health carrier in Minnesota, except for income derived

from a pharmacy benefit management fee for pharmacy benefit management services

provided. The amount of any pharmacy benefit management fee must be set forth in the

agreement between the pharmacy benefit manager and the health carrier. The pharmacy

benefit manager must disclose the amount and types of the pharmacy benefit management

fees to the health carrier.

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Subd. 6.

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Prohibited accreditation standards and certification requirements.

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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.

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Subd. 7.

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Spread pricing prohibited.

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A pharmacy benefit manager is prohibited from

engaging in spread pricing in Minnesota.

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Subd. 8.

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Ingredient drug product component reimbursement prohibition.

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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.

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Subd. 9.

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Pharmacy payment reductions prohibited.

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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.

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Sec. 8.

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

read:

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Subd. 4.

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Network service area requirements.

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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.

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Sec. 9.

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.

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(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.

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Sec. 10.

Minnesota Statutes 2024, section 62W.07, is amended to read:

62W.07 PHARMACY OWNERSHIP INTEREST; PHARMACY SERVICES.

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Subdivision 1.

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Disclosure of ownership interests.

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(a)
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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.

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Subd. 2.

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Enrollee financial incentives for use of affiliates prohibited.

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(b)
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(a)
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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.

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(c)
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(b)
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Paragraph
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(b)
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new text begin
(a)
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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.

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Subd. 3.

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Enrollee limits on medication access for nonaffiliates prohibited.

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(d)
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(a)
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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.

deleted text begin

(e)
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(b)
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Nothing in paragraph
deleted text begin
(d)
deleted text end
new text begin
(a)
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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.

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Subd. 4.

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340B entity limits on provider network participation prohibited.

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(f)
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A

pharmacy benefit manager or health carrier must not prohibit an entity authorized to

participate in the federal 340B Drug Pricing Program under section 340B of the Public

Health Service Act, United States Code, title 42, chapter 6A, or a pharmacy under contract

with such an entity to provide pharmacy services from participating in the pharmacy benefit

manager's or health carrier's provider network. A pharmacy benefit manager or health carrier

must not reimburse an entity or a pharmacy under contract with such an entity participating

in the federal 340B Drug Pricing Program differently than other similarly situated pharmacies.

A pharmacy benefit manager that contracts with a managed care plan or county-based

purchasing plan under contract with the commissioner of human services under chapter

256B or 256L must comply with this paragraph only if the entity or contracted pharmacy

can identify all claims eligible for 340B drugs at the time of initial claims submission at the

point of sale. This paragraph does not preclude a pharmacy benefit manager that contracts

with a managed care plan or county-based purchasing plan under contract with the

commissioner of human services under chapter 256B or 256L from reimbursing an entity

or pharmacy identified in this paragraph at a lower rate for any prescription drug purchased

by the entity or pharmacy through the federal 340B Drug Pricing Program.

new text begin

Subd. 5.

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Pharmacy reimbursement prohibited practices.

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new text begin

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.

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Sec. 11.

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
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within seven calendar days from:
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(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;

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(ii) a change in the methodology on which the maximum allowable cost price list is

based; or

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(iii) a change in the value of a variable involved in the methodology;

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new text begin

(3)
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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;

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(3)
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new text begin
(4)
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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;

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(4)
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(5)
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ensure that the maximum allowable cost prices are not set below sources utilized

by the pharmacy benefits manager
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nor set below the pharmacy acquisition cost
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; and

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(5)
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(6)
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upon request of a network pharmacy,
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identify each maximum allowable price

list that applies to the network pharmacy and
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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
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, including the following:
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(i) average acquisition cost, including national average drug acquisition cost;

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(ii) average manufacturer price;

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(iii) average wholesale price;

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(iv) brand effective rate or generic effective rate;

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(v) discount indexing;

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(vi) federal upper limits;

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(vii) wholesale acquisition cost; and

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(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.

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A
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The
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pharmacy benefit manager must make
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the list of
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the maximum allowable
deleted text begin
costs
deleted text end
new text begin
cost

price list
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available to a
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contracted
deleted text end
new text begin
network
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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
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include
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provide
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a process to appeal, investigate, and resolve disputes regarding maximum allowable

cost pricing that includes
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the ability of a pharmacy to challenge the maximum allowable

cost price if the price
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:

(1)
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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
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;
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or
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(2)
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a requirement that the appeal be investigated and resolved within seven business

days after the appeal is received; and
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is below the pharmacy acquisition cost.
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(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)
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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:
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(1) a dedicated telephone number and email address or website for the purpose of

submitting an appeal; and

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(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

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(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.

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(f) If the appeal is upheld, the pharmacy benefit manager must:

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(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

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(3) provide to the pharmacy the National Drug Code number on which the adjustment

is based.

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(g) If the appeal is denied, the pharmacy benefit manager must provide the challenging

pharmacy with the reason for the denial and:

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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

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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 that the

pharmacy purchases the majority of prescription drugs for resale, 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. 12.

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
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retroactively
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adjust
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new text begin
deny or

reduce
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a claim
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or aggregate of claims
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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:
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new text begin

(i) the original claim was submitted fraudulently;

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new text begin

(ii) the original claim payment was incorrect because the pharmacy was already paid

for the prescription drug or service; or

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(iii) the prescription drug or service was not properly rendered by the pharmacy or

pharmacist
new text end
; or

(2) technical billing error.

Sec. 13.
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APPROPRIATION.
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new text begin

$....... in fiscal year 2027 is 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.

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