Prescription drug carve-out seeks to save rural pharmacies at risk of closure

Life is priceless, but your prescription drugs aren’t.

And for many pharmacies, costs are higher than reimbursement payments.

To change this, HF1752 would require the Department of Human Services to reimburse prescription drugs from medical assistance and MinnesotaCare using their fee-for-service model.

Awaiting a fiscal note, the House Health Finance and Policy Committee laid the bill over Thursday for possible omnibus bill inclusion after adopting a delete-all amendment.

Instead of managed care organizations processing claims and paying providers, the department would effectively bypass insurance companies and pay pharmacies directly for prescription drugs.

Running the pharmacy program through the managed care organizations is not only costly for the state, but kills small pharmacies, said Rep. Tina Liebling (DFL-Rochester), the bill sponsor.

If that isn’t complicated enough, a federal program comes into play.

Under the federal 340b program, drug companies give deep discounts to managed care organizations, something Liebling refers to as a “hidden subsidy.”

“We as legislators are funding this without even knowing how much it is or where it is going,” she said.

With an effective date of Jan. 1, 2026, the bill would require managed care organizations to reimburse the pharmacist for the cost of filling a prescription at the fee-for-service rate until then.

Discussion of the bill

The Legislature has previously said there is nothing that can be done for reimbursement rates for pharmacy claims, but John Hoeschen, owner of St. Paul Corner Drug, said this is not the case for Medicaid.

“The state is already adequately paying for this service, but by the time the money gets to the actual provider, me, there is nothing left,” he said. “The middleman is taking all the resources and completely decimating the pharmacy-provider network of Minnesota.”

Luke Slindee, senior pharmacy consultant at Myers and Stauffer LLC, said 30 cities across the state that had a pharmacy in 2006 no longer do. His hometown among them.

Despite being a second-generation pharmacist, Slindee’s parents sold their pharmacy in 2007 while he was still in school.

Why?

Because of unsustainable payment rates and abusive anti-competitive business practices from very powerful, for-profit pharmacy benefit managers, he said.

Worsening conditions caused the new owners to close their doors in 2022, leaving the city of Harmony without a pharmacy for the first time in over 100 years.

“Unfortunately, Harmony’s circumstance is not unique,” he said.