SF4062

Purpose

This bill aims to strengthen Minnesota oversight of pharmacy benefit managers (PBMs) by banning spread pricing, increasing license fees, clarifying fiduciary duties, limiting certain PBM income, and boosting transparency and accountability. It would change how PBMs operate, report data, and interact with health carriers, pharmacies, and enrollees.

Main provisions and what the bill seeks to accomplish

-Definition and pricing rules - Defines key terms: Pharmacy benefit manager (PBM), PBM fee, rebate, spread pricing, and related pricing concepts. - Prohibits spread pricing in Minnesota, meaning PBMs may not charge a health plan a price for drugs that is higher than what they pay pharmacies, and it requires pricing structures to be based on clear, defined services rather than profit from price differences. - Requires PBM pricing to be based on bona fide value of services, not on drug price concessions, rebates, premiums, deductibles, or other costs to patients.

-Licensing, fees, and renewal - PBMs must apply for a license with the commissioner of commerce. - License application requires basic company information, ownership and leadership details, and professional qualifications. - Initial license fee set by the commissioner; renewal fee is also set by the commissioner. Renewal requires a network adequacy report. - The commissioner may require additional information during applications and renewals and can deny or set a corrective action plan if not qualified.

-Good faith, conflicts of interest, fiduciary duty, and standards - PBMs must act in good faith and not contract in ways that undermine this obligation. - PBMs must disclose conflicts of interest to health carriers. - PBMs owe a fiduciary duty to health carriers and must discharge it lawfully. - PBMs must meet performance standards and cannot charge certain fees related to claims processing or other PBM services.

-Fee restrictions and income disclosures - PBMs may not charge fees to pharmacies for claim adjudication or for processing related services. - PBMs may not derive income from PBM services beyond the defined PBM fee, and must disclose the PBM fees to health carriers. - Prohibits certain accreditation or certification requirements that are stricter than state or board standards.

-Networks, access, and governance - PBMs must establish a network service area for each pharmacy network, aligning with state network requirements. - Prohibits penalties or financial incentives that discourage enrollees from using non-affiliated pharmacies; requires parity in incentives when ownership exists.

-340B program and provider networks - Prohibits PBMs or health carriers from blocking or unfairly restricting participation by 340B entities or pharmacies in PBM provider networks.

-Maximum Allowable Cost (MAC) pricing and price disputes - Requires PBMs to provide MAC pricing lists to pharmacies at contract start and update them frequently (at least every seven business days, and within seven calendar days after major price changes). - Requires a clear dispute/appeal process for MAC pricing, including timelines, required justifications, and national drug code (NDC) level detail. - If an appeal is upheld, the PBM must adjust MAC pricing promptly and apply the change to all similarly situated pharmacies. The process includes dedicated contact channels and a 30-business-day resolution window. - Allows pharmacies to reverse and rebill if MAC adjustments occur; requires justification if denied and requires transparency about stock sources and prices.

-Transparency and reporting to the state - PBMs must periodically file a “transparency report” with data from the prior calendar year for Minnesota clients, including: - Aggregate wholesale acquisition costs and drug costs net of rebates and fees. - Aggregate rebates received from manufacturers, including utilization discounts. - All fees retained or passed through to plan sponsors. - Rebate and fee percentages, including highs, lows, and means. - De-identified claims data to analyze drug type, prior authorization needs, patient cost-sharing, pharmacy payments, spread, pharmacy identity, network status, and whether enrollees are required to use certain pharmacies. - The commissioner will publish the transparency reports on the department’s website within 60 days, excluding trade secrets and without revealing plan sponsor identities or drug-specific prices. - Data identified as confidential or protected nonpublic is shielded from public disclosure, though it may be used in enforcement actions.

-Ownership disclosures and enrollee protections - PBMs with ownership interests in pharmacies must disclose the ownership difference between amounts paid to the pharmacy and charged to plan sponsors. - Enrollee financial incentives and access: prohibits using ownership-based incentives to steer enrollees to affiliated pharmacies; requires equal incentives if offered to use an affiliated network, with exceptions that ensure fairness. - Prohibits enrollees’ medication access limits that differ based on whether an owner has a stake in a pharmacy. - Prohibits discrimination against entities participating in the federal 340B Drug Pricing Program and requires non-discriminatory reimbursement for 340B-affiliated providers.

-Retroactive adjustments and audits - PBMs cannot retroactively adjust, deny, or reduce a claim unless the adjustment is tied to an audit (fraud, incorrect payment, or improper services) or certain technical billing errors.

-Enforcement, penalties, and funding - Violations by PBMs can trigger fines up to specified per-day amounts, with per-violation penalties defined, and penalties go to the general fund. - Appropriations are made to fund enforcement staff beginning in fiscal year 2027, building on a 2028 base.

Significant changes to existing law

• Establishes a formal PBM licensing regime in Minnesota (new license process, fees, renewal, and secrecy protections).
• Bans spread pricing in the state and tightens the definition and reporting around PBM fees and rebates.
• Introduces fiduciary duties and explicit conflicts-of-interest disclosures for PBMs.
• Expands transparency requirements to include MAC pricing data, detailed fee structures, and patient-level impact data (with strong confidentiality protections).
• Creates explicit MAC pricing dispute mechanics, with defined timelines and appeal procedures.
• Strengthens network and enrollment protections to curb ownership-based incentives and ensure fair access to pharmacies, including 340B entities.
• Sets penalties and creates an enforcement funding stream to support ongoing oversight.

Implementation and oversight

• Licenses last one year and require annual renewal with updated network adequacy information.
• The commissioner of commerce oversees licensing, fee setting, and enforcement actions.
• Public reporting will occur through the Minnesota Department of Commerce website, with safeguards for confidential data.
• An appropriation is provided to hire more staff for ongoing investigation and enforcement starting in 2027.

Potential impact

• Health plans and enrollees may see more transparent PBM pricing and costs.
• PBMs will need to adjust business practices to comply with fiduciary duties, pricing restrictions, and disclosure requirements.
• Pharmacies, including those affiliated with PBMs, may experience changes in MAC pricing, adjudication fees, and network participation terms.
• If enacted, the bill could limit what PBMs can earn and how they interact with health carriers, pharmacies, and plan sponsors in Minnesota.

Implementation considerations

• New licensing and reporting obligations may require PBMs to invest in compliance systems and data reporting capabilities.
• The MAC pricing and dispute provisions could lead to more frequent price adjustments and potential workflow changes for pharmacies and PBMs.
• The confidentiality provisions in transparency reporting balance public accountability with trade secret protections.

Relevant Terms - Pharmacy benefit manager (PBM) - Spread pricing - Rebate - Fiduciary duty - Conflicts of interest - Network adequacy - Maximum allowable cost (MAC) - National Drug Code (NDC) - Wholesale acquisition cost (WAC) - Average wholesale price (AWP) - 340B Drug Pricing Program - Plan sponsor - Health carrier - Network pharmacy / preferred pharmacy - Prior authorization - Reconciliation / price adjustments - Transparency report - Public disclosure trade secrets - Claim adjudication fees - Pharmacy reimbursement - Ownership interest in a pharmacy - Enrollee incentives - Network service area - Licensing and renewal fees - Enforcement and penalties - General fund allocation - Compliance and corrective action plan

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