1.1 	A bill for an act
1.2 	relating to health; requiring a certificate of
1.3 	authority for pharmacy benefits managers; granting
1.4 	powers and duties to state agencies and officers;
1.5 	allowing access to certain information; requiring
1.6 	disclosures to certain entities; setting standards and
1.7 	responsibilities of pharmacy benefits managers;
1.8 	proposing coding for new law as Minnesota Statutes,
1.9 	chapter 60I.
1.10 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.11 	Section 1. [60I.01] DEFINITIONS.
1.12 		Subdivision 1.Scope of definitions. For purposes of
1.13 	this chapter, the terms defined in this section have the
1.14 	meanings given them except as otherwise provided.
1.15 		Subd. 2.Aggregate amount. "Aggregate amount" means the
1.16 	total amount of payment received by the pharmacy benefits
1.17 	manager for each category listed in subdivision 9.
1.18 		Subd. 3.Commissioner. "Commissioner" means the
1.19 	commissioner of commerce.
1.20 		Subd. 4.Covered entity. "Covered entity" means a
1.21 	nonprofit hospital or a medical service corporation; a health
1.22 	insurer; a health benefit plan; a health maintenance
1.23 	organization; a health program administered by the state in the
1.24 	capacity of provider of health coverage; or an employer, a labor
1.25 	union, or other entity organized in the state which provides
1.26 	health coverage to covered individuals who are employed or
1.27 	reside in the state.
2.1 		Subd. 5.Covered individual. "Covered individual" means
2.2 	a member, a participant, an enrollee, a contractholder, a
2.3 	policyholder, or beneficiary of a covered entity who is provided
2.4 	health coverage by the covered entity.  The term includes a
2.5 	dependent or other individual provided health coverage through a
2.6 	policy, contract, or plan for a covered individual.
2.7 		Subd. 6.De-identified information. "De-identified
2.8 	information" means information from which the name, address,
2.9 	telephone number, and other variables have been removed
2.10 	according to the requirements of Code of Federal Regulations,
2.11 	title 45, part 164, section 512, subsection (a) or (b).
2.12 		Subd. 7.Generic drug. "Generic drug" means a drug that
2.13 	is chemically equivalent to a brand name drug for which the
2.14 	patent has expired.
2.15 		Subd. 8.Labeler. "Labeler" means a person that has been
2.16 	assigned a labeler code by the federal Food and Drug
2.17 	Administration under Code of Federal Regulations, title 21, part
2.18 	207, section 20, and who receives prescription drugs from a
2.19 	manufacturer or wholesaler and repackages those drugs for later
2.20 	retail sale.
2.21 		Subd. 9.Payments received by pharmacy benefits
2.22 	manager. "Payments received by pharmacy benefits manager" means
2.23 	the aggregate amount of any of the following payments, whether
2.24 	paid directly or indirectly:
2.25 	(1) rebates collected on behalf of and allocated to the
2.26 	covered entity and pharmacy benefits manager;
2.27 	(2) administrative fees collected from the manufacturer in
2.28 	consideration of administrative services provided by the
2.29 	pharmacy benefits manager to the manufacturer;
2.30 	(3) any other fees or amounts collected by the pharmacy
2.31 	benefits manager from a manufacturer or labeler for drug switch
2.32 	programs, educational support, or data sales related to covered
2.33 	individuals; or 
2.34 	(4) pharmacy network fees.
2.35 		Subd. 10.Pharmacy benefits management. "Pharmacy
2.36 	benefits management" means the procurement of prescription drugs
3.1 	at a negotiated rate for dispensing within the state to covered
3.2 	individuals, the administration or management of prescription
3.3 	drug benefits provided by a covered entity for the benefit of
3.4 	covered individuals, or the providing of any of the following
3.5 	services with regard to the administration of the following
3.6 	pharmacy benefits:
3.7 	(1) claims processing, retail network management, and
3.8 	payment of claims to a pharmacy for prescription drugs dispensed
3.9 	to a covered individual;
3.10 	(2) clinical formulary development and management services;
3.11 	or 
3.12 	(3) rebate contracting and administration.
3.13 		Subd. 11.Pharmacy benefits manager. "Pharmacy benefits
3.14 	manager" means an entity that performs pharmacy benefits
3.15 	management.  The term includes a person acting for a pharmacy
3.16 	benefits manager in a contractual or employment relationship in
3.17 	the performance of pharmacy benefits management for a covered
3.18 	entity.  The term does not include a public self-funded pool or
3.19 	a private single-employer self-funded plan that provides
3.20 	benefits or services directly to its beneficiaries.
3.21 		Subd. 12.Pharmacy network fees. "Pharmacy network fees"
3.22 	means dollars collected from covered entities in excess of
3.23 	dollars paid to the participating pharmacies for the cost of
3.24 	drugs provided to covered individuals.
3.25 		Subd. 13.Rebate. "Rebate" means retrospective
3.26 	reimbursement of monetary amounts by a manufacturer under a
3.27 	manufacturer's discount program with a pharmacy benefits manager
3.28 	for drugs dispensed to covered individuals.
3.29 		Subd. 14.Utilization information. "Utilization
3.30 	information" means de-identified information regarding the
3.31 	quantity of drug prescriptions dispensed to members of a health
3.32 	plan during a specified time period.

3.33 	Sec. 2. [60I.02] PHARMACY BENEFITS MANAGER CERTIFICATE OF
3.34 	AUTHORITY REQUIRED.
3.35 		Subdivision 1.Certificate of authority. (a) In addition
3.36 	to the other requirements in this chapter, all pharmacy benefits
4.1 	managers that provide services to residents of Minnesota shall
4.2 	apply for, obtain, and maintain a certificate of authority to
4.3 	operate as a pharmacy benefits manager in the state from the
4.4 	commissioner by December 1, 2005, and yearly thereafter.
4.5 	(b) The application by a pharmacy benefits manager for a
4.6 	certificate of authority to operate in the state shall be in a
4.7 	form and manner prescribed by the commissioner, and shall be
4.8 	verified by the sworn statement of an officer or authorized
4.9 	representative of the pharmacy benefits manager.
4.10 	(c) The application shall disclose any ownership interest
4.11 	of any kind with:
4.12 	(1) any insurance company responsible for providing
4.13 	benefits directly or through reinsurance to any plan for which
4.14 	the pharmacy benefits manager provides services; and 
4.15 	(2) any parent company, subsidiary, or other organization
4.16 	that is related to the provision of pharmacy services, the
4.17 	provision of other prescription drug or device services, or a
4.18 	pharmaceutical manufacturer.
4.19 	(d) A pharmacy benefits manager shall notify the
4.20 	commissioner in writing within five business days of any
4.21 	material change in the pharmacy benefits manager's ownership.
4.22 		Subd. 2.Authority of commissioner. (a) The commissioner
4.23 	shall have the authority to establish and assess fees for
4.24 	certificates of authority, renewal of certificates, penalties,
4.25 	and other fees and assessments as deemed necessary and
4.26 	appropriate under this chapter.
4.27 	(b) The pharmacy benefits manager shall disclose annually
4.28 	to the commissioner the payments received by the pharmacy
4.29 	benefits manager under any contract with a covered entity and
4.30 	shall describe the manner in which the payments received by the
4.31 	pharmacy benefits manager are applied toward reducing rates of
4.32 	covered entities or distributed to covered individuals.
4.33 	(c) If the commissioner has reason to believe the pharmacy
4.34 	benefits manager has violated any of the provisions contained in
4.35 	this chapter or determines that it is necessary to prevent fraud
4.36 	and abuse, the commissioner shall serve upon the pharmacy
5.1 	benefits manager a statement of the charges and notice of
5.2 	examination of records.  After notice is given and a date for
5.3 	examination of records is set with the pharmacy benefits
5.4 	manager, the commissioner may examine any contract between a
5.5 	covered entity and the pharmacy benefits manager and any related
5.6 	record to determine if there has been a violation of this
5.7 	chapter.
5.8 	(d) The commissioner may revoke, suspend, deny, or restrict
5.9 	a certificate of authority of a pharmacy benefits manager for
5.10 	violation of this chapter or other violations of state or
5.11 	federal laws or regulations.  In the event that a certificate is
5.12 	revoked, suspended, or denied, the commissioner may permit
5.13 	further operation of the pharmacy benefits manager for a limited
5.14 	period not to exceed 60 days under conditions and restrictions
5.15 	determined by the commissioner to be necessary for the
5.16 	beneficial interests of the covered entities and covered
5.17 	individuals.
5.18 	(e) The commissioner may renew the certificate of authority
5.19 	of any pharmacy benefits manager subject to any restrictions
5.20 	considered necessary or appropriate by the commissioner.
5.21 	(f) Any information disclosed to the commissioner under
5.22 	this section shall be considered a trade secret covered under
5.23 	chapter 325C.

5.24 	Sec. 3. [60I.03] DISCLOSURES TO COVERED ENTITIES.
5.25 		Subdivision 1.Disclosure requirements. Each pharmacy
5.26 	benefits manager shall satisfy the following disclosure
5.27 	requirements to covered entities upon request of the covered
5.28 	entity:
5.29 	(1) a pharmacy benefits manager that derives any payment or
5.30 	benefit for providing pharmacy benefits management from a drug
5.31 	manufacturer or distributor or similar entity based on volume or
5.32 	any other measurement of sales, prescribing or dispensing of
5.33 	certain prescription drugs or classes or brands of drugs within
5.34 	the state shall fully disclose to the covered entity the amount
5.35 	of the payments and benefits received and the amount of the
5.36 	payments and benefits retained by the pharmacy benefits manager.
6.1 	(2) a pharmacy benefits manager shall provide to a covered
6.2 	entity all financial and utilization information requested by
6.3 	the covered entity relating to the provision of benefits to
6.4 	participants on behalf of that covered entity relating to
6.5 	services provided to or on behalf of that covered entity.
6.6 	(3) a pharmacy benefits manager must allow the covered
6.7 	entity to audit the pharmacy benefits manager's books, accounts,
6.8 	and records including de-identified information as necessary to
6.9 	confirm that the benefit of payments received by the pharmacy
6.10 	benefits manager are being shared as required by the contract.
6.11 		Subd. 2.Drug substitution. (a) A pharmacy benefits
6.12 	manager may not substitute another prescription drug for the
6.13 	drug originally prescribed unless the substitution is made for
6.14 	medical reasons that benefit the covered individual or the
6.15 	substitution results in financial savings and benefits to the
6.16 	covered entity.
6.17 	(b) If a substitution is made under this subdivision, the
6.18 	pharmacy benefits manager shall fully disclose to the covered
6.19 	entity any benefit or payment received in any form by the
6.20 	pharmacy benefits manager from a drug manufacturer or other
6.21 	entity or person with regard to the prescription drug
6.22 	substitution.
6.23 	(c) The request for substitution to the prescribing
6.24 	practitioner must be made by a pharmacist from the pharmacy
6.25 	where the prescription is on file.

6.26 	Sec. 4. SEVERABILITY CLAUSE.
 6.27 	If any provision in sections 1 to 3 is held invalid, the
6.28 	remaining provisions shall remain valid and be given full effect.

6.29 	Sec. 5. EFFECTIVE DATE.
 6.30 	Sections 1 to 3 are effective August 1, 2005.