This bill (S.F. No. 1877) proposes a new law in Minnesota requiring pharmacy benefit managers (PBMs) and health carriers to use prescription drug rebates and other compensation to directly benefit covered persons.

Key Provisions:

1. Use of Compensation to Reduce Costs:

   • PBMs and health carriers must pass all financial compensation (such as rebates and discounts) received from drug manufacturers to covered individuals at the point of sale, reducing their out-of-pocket costs for prescription drugs.
   • An exception applies if a covered person's cost-sharing obligation (e.g., copay or coinsurance) for a drug is already lower than it would be after applying the compensation. In such cases, PBMs or health carriers may retain the compensation but must use it to offset future premiums or costs for all covered persons.

2. State Employee Insurance Contracts:

   • State employee group insurance programs that contract with PBMs must ensure compliance with this requirement.

3. Definitions:

   • "Compensation" includes financial benefits such as rebates, discounts, credits, fees, grants, and chargebacks.
   • "Cost-sharing obligation" refers to a covered person’s copayment or coinsurance for a drug.

4. Annual Compliance Reports:

   • Beginning March 1, 2026, and annually thereafter, PBMs and health carriers must submit a compliance report to the Minnesota Commissioner, demonstrating how they have adhered to the requirements.

Purpose:

The bill aims to ensure that prescription drug cost savings from manufacturers benefit patients rather than being retained by PBMs or insurance providers, ultimately reducing out-of-pocket expenses for consumers.