HF4140

Purpose

• Establish a Minnesota framework to protect patient access to community pharmacies.
• Ensure sustainable reimbursement rates for community pharmacies.
• Prevent unfair reimbursement practices that can lead to pharmacy closures.
• Regulate pharmacy benefit managers (PBMs) to improve transparency and fairness in prescription drug reimbursements.

Key Provisions and What They Do

• Reimbursement standard for community pharmacies
  • For drugs dispensed by a community pharmacy and for claims processed by a PBM, the total reimbursement must equal:
  • NADAC (National Average Drug Acquisition Cost) on the day of claim adjudication; or
  • If NADAC is unavailable, the WAC (Wholesale Acquisition Cost) on the day of adjudication.
  • Plus either:
  • Four percent of the calculated total ingredient cost (based on NADAC or WAC), or
  • A maximum of 50 (whichever is less).
  • Plus a professional dispensing fee equal to the amount paid by the state for Medicaid, adjusted biennially based on a cost-of-dispensing survey.
  • This reimbursement standard sets both minimum and maximum reimbursement; contracts or other methods cannot override it.
• Scope and exclusions
  • Applies to prescription drugs dispensed by community pharmacies and to claims paid by PBMs under health plans or PBM-managed plans.
  • Does not apply to drugs bought under the 340B Drug Pricing Program (still must follow applicable laws).
  • Excludes reimbursement rules for Medicare and Medicaid programs (Medicare Part B, Part D, and fee-for-service or managed care under Medicaid or state/federal programs).
  • PBM rules apply to commercial health plans and state-regulated plans.
• Protections for patients and pharmacy access
  • Prohibits PBMs from below-cost reimbursements or any fees/recoupments that leave a pharmacy short of the required total reimbursement.
  • Bans spread pricing by PBMs (no keeping a portion of payer payments); PBMs must pass 100% of payments to the dispensing pharmacy after patient cost-sharing.
  • Prohibits retroactive claim denials except in cases of fraud, billing errors, or verified overpayments.
  • Prevents patient steering; enrollees cannot be coerced or financially penalized to use PBM-owned, affiliated, or mail-order pharmacies.
• Professional and cost reporting
  • Requires a professional dispensing fee aligned with Medicaid, updated biennially via independent cost-of-dispensing data.
  • Establishes an annual compliance certification requirement for PBMs.
  • Requires an annual compliance report summarizing violations, fines, restitution, and impact on access and closures.
• Enforcement, penalties, and remedies
  • The Minnesota Department of Commerce has exclusive authority to enforce these provisions.
  • The commissioner can investigate violations and require production of pricing files, contracts, and other records.
  • Penalties include:
  • Civil penalties of $5,000 per violation per claim.
  • Escalating penalties up to $20,000 per claim for repeat violations, with a focus not to exceed $2,000,000 per enforcement action.
  • Additional sanctions may include suspension or revocation of a PBM’s license to operate in Minnesota.
  • Remedies may include restitution (with interest and costs), and other corrective actions.
  • Whistleblower protections for individuals who report noncompliance in good faith.
  • Final orders are subject to judicial review.
• Rulemaking and severability
  • The commissioner of commerce must adopt necessary rules to implement these provisions.
  • If any part is found invalid, the rest can still stand and be applied.

Definitions and Key Terms (conceptual)

• Pharmacy Benefit Manager (PBM): An entity that administers prescription drug benefits and reimbursement for health plans.
• NADAC: Public benchmark for average drug acquisition cost used to set reimbursement.
• WAC: Manufacturers’ list price to wholesalers; used when NADAC is unavailable.
• Professional dispensing fee: Fee paid to the pharmacy for dispensing services.
• Community pharmacy: Outpatient retail pharmacy not owned or controlled by a PBM or health plan.
• 340B Program: A federal program with discounted drug pricing; this law does not require adherence to NADAC/WAC for 340B purchases.

Significant Changes to Existing Law

• Establishes a mandatory, NADAC-based reimbursement floor/ceiling for community pharmacies, plus a standardized dispensing fee.
• Tightens and codifies PBM conduct rules, including prohibitions on below-cost reimbursements, spread pricing, and retroactive denial, with strong enforcement provisions.
• Expands government oversight of PBM practices in Minnesota and requires transparency through data submission and annual compliance reporting.
• Clarifies scope to include PBMs’ impact on commercial and state-regulated plans, while explicitly excluding Medicare, Medicaid, and 340B purchases from certain requirements.

Relevant terms - NADAC - WAC - professional dispensing fee - pharmacy benefit manager (PBM) - spread pricing - retroactive claim denials - community pharmacy - cost-of-dispensing survey - Medicare Part B - Medicare Part D - Medicaid fee-for-service - 340B Drug Pricing Program - Department of Commerce (Minnesota) - compliance certification - restitution - civil penalties - contrast between NADAC/WAC-based reimbursement and contract-based pricing