HF3931

Purpose

• This bill aims to regulate pharmacy benefit managers (PBMs) in Minnesota. It seeks to increase transparency, prohibit or limit certain PBM practices, strengthen protections for health plans and patients, and create clearer licensing and enforcement rules for PBMs operating in the state.

Key Definitions and Scope

• The bill adds and clarifies terms used for PBMs and their operations, including what counts as a “pharmacy benefit management fee,” what constitutes “rebates,” and what is considered “spread pricing.” It also covers how PBMs interact with health carriers, plan sponsors, and pharmacies.

Main Provisions

• Licensing and Fees

  • PBMs must apply for a license with the commissioner of commerce. The application requires basic information about the PBM, its leadership, and its organization.
  • Initial license fee is set (with a per-year renewal). Licenses last one year and must be renewed.
  • The commissioner may request additional information during licensing and renewal, and can deny, or require a corrective action plan if there are deficiencies.

• Prohibition of Spread Pricing and Other Income Rules

  • Spread pricing is prohibited. This means the price charged to a health plan for a drug cannot differ from what is paid to the pharmacist for services.
  • PBMs may not derive income from activities beyond the defined PBM fee. They must disclose the amount and types of fees to the health carrier.
  • PBMs cannot charge fees related to adjudication of a claim or related claims-processing services.
  • PBMs must not reimburse or pay pharmacies less or differently for the same drug based on ownership relationships or other conflicts.

• Fiduciary Duty, Conflicts of Interest, and Good Faith

  • PBMs have a fiduciary duty to health carriers and must act in good faith and with fair dealing.
  • PBMs must disclose conflicts of interest that could affect duties to health carriers.

• Prohibited Standards and Practices

  • PBMs cannot require pharmacy accreditation or certification standards that are more stringent than or add to those set by the Board of Pharmacy or this chapter.
  • PBMs cannot impose network or pricing practices that discriminate against or penalize enrollees based on ownership relationships with pharmacies.

• Rebate and Pricing Rules

  • Rebates are defined as price concessions from drug manufacturers to PBMs or plan sponsors (including discounts tied to utilization or value-based contracts). Rebates are not the same as the PBM management fee.
  • The bill limits how PBMs can use and retain rebates; they must be disclosed to health carriers, and some retained rebates/fees must be passed through or appropriately disclosed.

• Maximum Allowable Cost (MAC) Pricing and Disputes

  • PBMs must use MAC pricing and provide to network pharmacies a clear MAC price list at the start of every contract or renewal.
  • MAC lists must be updated frequently (including after significant cost increases) and communicated in a timely, accessible way.
  • Contracts must include a process to appeal MAC prices, with timeframes for filing, investigation, and resolution. If an appeal is upheld, the price must be adjusted.

• 340B and Network Participation

  • The bill restricts certain practices around 340B entities and requires non-discriminatory treatment for 340B drugs within PBM networks. It also prevents rebates or reimbursements from treating 340B differently than non-340B drugs when applicable.

• Price and Payment Protections for Pharmacies

  • PBMs cannot reduce payments to pharmacies in a way that undermines proper reimbursement for drugs or services.
  • The bill prohibits paying below pharmacy acquisition cost or below the cost used for the same drug elsewhere in the network.
  • If MAC disputes arise, pharmacies may appeal and seek adjustments; if an appeal is denied, the PBM must provide the reason and related supplier information.

• Transparency and Reporting

  • Beginning in a prior year and annually thereafter, PBMs must file a transparency report with the commissioner. The report includes:
  • Aggregate drug costs before rebates and fees.
  • Aggregate rebates received from manufacturers.
  • All fees received from all sources.
  • Retained rebates/fees not passed through to plan sponsors.
  • Aggregate retained rebate/fee percentages.
  • Deidentified claims-level data about drug, quantity, prior authorization, patient cost-sharing, payments to pharmacies, and any spread between amounts paid to the pharmacy and charged to the plan sponsor.
  • The commissioner will publish the reports on the Department of Commerce website, omitting identifying information about plan sponsors and specific drugs, while keeping data useful for oversight.
  • Some data is treated as confidential or protected nonpublic, especially details that could reveal trade secrets.
  • The commissioner may request related information from the health department or other agencies to support enforcement actions.

• Network Service Area and Licenses

  • PBMs must establish a pharmacy network service area consistent with existing Minnesota rules for every network reviewed under this section.

• Retroactive Adjustments

  • PBMs may not retroactively adjust, deny, or reduce a claim unless it’s tied to specific circumstances like fraud, incorrect original payment, or a technical billing error identified in a pharmacy audit.

• Appropriations for Enforcement

  • In fiscal year 2027, general-fund money is appropriated to increase staff for the exclusive purposes of investigating and enforcing PBM-related provisions of Minnesota law, with the base level noted for 2028 onwards.

• Changes to Existing Law

  • The bill makes numerous amendments to Minnesota Statutes 2024 sections 62W.02, 62W.03, 62W.04, 62W.05, 62W.06, 62W.07, 62W.08, and 62W.13 to implement these provisions and align enforcement, reporting, and pricing practices with the new rules.

Significant Changes vs. Current Law

• Establishes a formal, state-level licensing framework for PBMs (instead of leaving licensing vague or optional).
• Makes spread pricing illegal in Minnesota and sets clear rules about PBM pricing, fees, and income.
• Introduces fiduciary duties and explicit conflict-of-interest disclosures for PBMs.
• Requires comprehensive MAC pricing transparency and a formal MAC dispute/appeal process with timelines.
• Expands transparency requirements with annual public reporting, including detailed, deidentified claim data.
• Tightens controls around rebates, discounts, and how PBMs can retain or pass through savings to plan sponsors.
• Strengthens enforcement tools, penalties, and funding for ongoing oversight.

Implications for Stakeholders

• PBMs: Must adjust business practices to comply with licensing, pricing, disclosure, and reporting requirements; potential changes to revenue models and fee structures.
• Health carriers and plan sponsors: Gain more visibility into pricing, rebates, and network costs; improved protections against certain PBM practices; new reporting and audit requirements.
• Pharmacies: Access to MAC pricing information; ability to appeal pricing decisions; protections against unpredictable price reductions or below-cost payments.
• Patients/enrollees: Potentially more stable drug pricing and more transparency about how pharmacy costs are set, though changes will depend on implementation.

Implementation and Oversight

• Licensing and enforcement are handled by the Minnesota Department of Commerce (with support from other agencies as needed).
• Penalties include per-day fines and per-violation fines, and funds go to the state general fund.
• A funding increase in 2027 is provided to boost enforcement capability.

Summary of Intent

• Overall, the bill seeks to curb certain PBM practices, improve transparency, ensure fair pricing and network access, and strengthen state oversight of PBMs to protect health plans, pharmacies, and patients in Minnesota.

Relevant Terms - pharmacy benefit manager (PBM) - spread pricing - pharmacy benefit management fee - rebates - maximum allowable cost (MAC) pricing - MAC price list - deidentified claims data - plan sponsor - health carrier - network adequacy report - conflicts of interest - fiduciary duty - good faith and fair dealing - preferred/contracted pharmacies - 340B Drug Pricing Program - claim adjudication fee - network service area - retroactive adjustments - compliance penalties (per day and per violation) - transparency report - commissioner of commerce - licensure and renewal - license fees - enforcement funding