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Minnesota Enacts New PBM Law: Notice and Comment Period for Proposed Regulations Open to the Public

On May 20, 2019, Minnesota Governor Tim Walz signed the Minnesota Pharmacy Benefit Manager Licensure and Regulation Act into law. Among the various new restrictions and responsibilities placed upon Pharmacy Benefit Managers (PBMs) acting within the State are the following:

  • PBMs must be licensed to operate within the State by the Commissioner of Commerce (Commissioner)
  • PBMs are required to maintain “adequate” networks, and those networks must be exclusive of mail-order pharmacies.
  • PBMs must be transparent to Plan Sponsors (subject to any non-disclosure agreement between the PBM and Plan Sponsor), which means they must disclose, among other things:
    • Any spread they retain between the price paid by Plan Sponsors and the remuneration paid by the PBM to pharmacies
    • The aggregate amount of rebates the PBM receives from drug manufacturers
    • The aggregate amount of payments made by the PBM both to pharmacies owned and not owned by the PBM
    • The aggregate amount of the fees imposed on, or collected from, network pharmacies or other assessments against network pharmacies, including point-of-sale fees and retroactive charges, and the application of those amounts collected pursuant to the contract with the plan sponsor
  • PBMs must also submit transparency reports to the Commissioner
  • PBMs are restricted from engaging in many activities that might advantage a PBM-owned pharmacy over an independent pharmacy
  • Maximum Allowable Cost (MAC) transparency and appeals process
  • Pharmacy Audit reform, including
    • Notice and timing requirements
    • Equal application of standards between pharmacies
    • Requirements for recoupment or chargeback, including:
      • No recoupment of dispensing fees unless a prescription was not actually dispensed, the prescriber denied authorization, the prescription dispensed was a medication error by the pharmacy, or the identified overpayment is solely based on an extra dispensing fee
      • Clerical and other record-keeping errors may not be considered fraud (though may be subject to recoupment)
      • In the case of errors that have no actual financial harm to the patient or plan, the pharmacy benefit manager must not assess any chargebacks, though errors that are a result of the pharmacy failing to comply with a formal corrective action plan may be subject to recovery
    • Gag-clause” and “clawback” prohibitions
    • A prohibition against retroactive adjustments, which may serve to eliminate Direct and Indirect Remuneration (DIR) fees from PBM contracts as well as Generic Effective Rate (GER) post-adjudication fees

This new law demonstrates Minnesota’s commitment to holding PBMs accountable for their predatory practices. The new law provides for a public “notice and comment” period to allow stakeholders and members of the public to weigh in on proposed regulations they would like to see the Commissioner promulgate. Of the matters within the discretion of the Commissioner under the law, one of the most significant is the Commissioner’s ability to decide what constitutes an “adequate” network for purposes of licensing. The Commissioner will have the authority to grant a waiver to any PBM that does not meet the adequacy requirement. While PBMs are sure to attempt to utilize this waiver loophole to exclude as many independent pharmacies as possible, the Commissioner may be persuaded through public comments to keep the waiver fairly restrictive. Moreover, provision may be made within the regulations for pharmacies to apply directly to the Commissioner to enforce the law, especially with respect to post-adjudication fees like DIR and GER fees, given persuasive commentary.

The notice and comment period opened on September 30, 2019, and will remain open to comment for 60 days.

Frier Levitt assists state and national pharmacy associations around the country in drafting proposed legislation. Our attorneys have drafted and commented upon many state any willing provider laws and prompt pay laws. We have also worked with Congress and the Senate on federal legislation designed to protect pharmacies. Our “request for comment” work has played a prominent role on important national issues including DIR fees, the rebate safe harbor, and others. Furthermore, Frier Levitt has utilized favorable state laws to fight for pharmacies’ rights against PBMs’ predatory practices, including DIR and GER fee litigation. Contact Frier Levitt today to speak to an attorney.