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Minnesota Legislature Approves First Ever Bill Regulating Pharmacy Benefit Managers

Last week, the Minnesota Legislature approved its first ever bill regulating pharmacy benefit managers (PBMs) to ensure that they don't contribute to higher drug costs. A conference committee of members from both the Minnesota House and Senate met and hammered out a compromise between two bills. The bill now goes to Minnesota Governor Tim Walz, who is expected to sign it.

The bill's chief sponsor, Republican State Senator Scott Jensen, said that "this shines a bright light on a piece of the supply chain that needed a bright line shined on it." Many other state legislators had become concerned that PBMs were unsupervised and subject to few rules, and that they needed to be reined in. Several of them stated that PBMs needed additional oversight. And rising drug prices have become such a problem that both Democrats and Republicans are feeling the need to take action.

The bill, SF 278, was approved by the Senate by a vote of 67-0 while the House approved it by a vote of 130-2. It requires PBMs operating in Minnesota to be licensed and pay an annual fee of $85,000, which covers the costs of regulation by Minnesota's Commissioner of Commerce. These licenses are valid for three years and can be revoked if a PBM engages in fraud, doesn't comply with regulations, or causes a lot of consumer complaints. SF 278 also requires PBMs to have a fiduciary duty to their health plans and to provide "adequate and accessible" pharmacy networks pharmacy networks for providing prescription drugs at pharmacies that are a reasonable distance from their patients.

SF 278 also requires the disclosure of information so that legislators, elected officials, consumer advocates, and ordinary citizens know what is occurring in the prescription drug supply chain. PBMs must release this information to their plan sponsors when they ask for it and also report the information annually to the Commissioner. This information includes: 1) the aggregate wholesale costs from drug manufacturers for prescription drugs, 2) the aggregate amount of rebates the PBMs receive by therapeutic category of prescription drugs, and 3) the aggregate amount of rebates that the PBMs get from drug manufacturers, and 4) the aggregate amount of rebates that they retain and do not pass on to plan sponsors.

These facts will help policymakers reduce drug prices, and help them find out what PBMs do with their rebates and fees. PBMs claim that they lower prescription costs and pass most of the money through to consumers, but evidence suggests otherwise, and PBMs fight transparency at every turn. They lobbied against this bill. Without this information it is very to determine where the money in the drug supply chain is going and whether PBMs are doing their job or keeping much of the money for themselves. SF 278 has a number of other excellent provisions-it bans gag clauses that PBMs use to prevent pharmacists from telling patients about cheaper options for purchasing drugs, it places tight restrictions on unnecessary switching on drugs, and it blocks PBMs from using pricing and other incentives to steer business to their own mail-order pharmacies or brick and mortar drug stores.

Four physicians who are also members of the Minnesota state legislature helped craft this bill, which is a well-thought out, long overdue reform that will hold PBMs accountable and help lower drug costs. We previously submitted testimony in support of the bill, and urge Governor Walz to sign it without delay.

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