Capitol Corner July 2025

This edition

1. Minnesota DHS – Medicaid Directed Pharmacy Dispensing Payment Program Update

2. Congress Passes and President Trump Signs HR1, the OBBB

3. Minnesota Legislative and Political Update: Three vacancies and Three Special Elections

1. Minnesota DHS – Medicaid Directed Pharmacy Dispensing Payment Program Update

This past June, the Minnesota legislature passed and the Governor signed into law a pharmacy lifeline provision intended to bridge the gap between what MCO-PBMs currently reimburse pharmacies participating in the Medicaid program and their true costs for dispensing a prescription medication to an MA covered patient. 

The program calls for a supplemental dispensing reimbursement payment of $4.50 on top of the current MCO contracted reimbursement to eligible pharmacies for their MA-MCO/PBM reimbursed claims. The program is targeted to independent (less than 13 retail locations) and medically underserved areas in Minnesota, as defined by HRSA. MPhA and our colleagues at MPA, the MN Retailers Association, the Grocers Association and the MNIndy’s are working with MN-DHS to stand up and implement the program that will run from federal approval of the program through December 31st, 2026. The Single PBM for MA and NADAC or MAAC + will be implemented January 1st, 2027.

Representatives of the aforementioned organizations met with the implementation team at MN-DHS this month. They indicated their intent to submit the program for CMSD-federal approval in early July. The program calls for a federal match of $0.505 per state appropriated dollar. Both the Department and stakeholder organizations are concerned that the current Administration’s statements similar to DPDPP may not be approved, so we will await a decision. 

2. Congress Passes and President Trump Signs HR1, the OBBB

What pharmacy provisions are and are not in the new law...

Previous versions of this bill included several prescription drug provisions, including changes to Medicare drug price negotiation, NADAC expansion, PBM reform, and pharmacy reimbursement. Many of these provisions were dropped from the final version of the bill and none of the following policies were included in the final bill.

Provisions NOT included in the final bill.

• Requiring retail, specialty, and mail-order pharmacy participation in the National Average Drug Acquisition Cost (NADAC) survey
• Prohibiting spread pricing
• Limiting pharmacy payment to ingredient cost (NADAC) + a dispensing fee for FFS Medicaid and MCOs
• Limiting payments to PBMs to an administrative fee
• Requiring PBMs to submit data to Medicaid programs and HHS on all costs, payments, and fees for covered drugs
• Requiring all manufacturer rebates or discounts be passed through to the Part D plan sponsor
• Requiring PBMs to annually submit data to HHS and Part D plan sponsors on drug spending, and other aspects of PBM operations

Key Pharmaceutical-Related Provisions included in the OBBB – HR1 Final Law

1. Revisions to Medicare Drug Price Negotiation Program
The law expands eligibility for the orphan drug exclusion under Medicare’s negotiation framework. Starting in 2026, broader categories of rare disease therapies may be excluded from price negotiation, potentially reducing expected savings. As a result, the Congressional Budget Office anticipates about $5 billion in lost negotiation savings over ten years.

2. Medicaid Cost-Sharing and Pharmacy Co-Pay Changes
States must charge Medicaid enrollees with family incomes between 100 and 138% of the federal poverty level up to $35 per healthcare service, which includes prescription drugs. This introduces higher out-of-pocket costs for low-income individuals accessing medications.

3. General Medicaid Restrictions Affecting Pharmacy Access
Although not strictly pharmacy-specific, these health law changes have indirect implications for medication access:

• Work requirements: Individuals ages 19–64 must complete at least 80 hours per month of work or equivalent activities to maintain Medicaid eligibility
• More frequent eligibility checks: States must redetermine eligibility every six months instead of annually
• Reduced retroactive coverage, tighter caps on provider tax rates for Medicaid, new restrictions on state directed provider payments, and temporary defunding of Planned Parenthood may further hinder access to care and pharmacy services

3. Minnesota Legislative and Political Update: Three Vacancies and Three Special Elections

Speaker Emerita Melissa Hortman will be remembered for her leadership, sense of humor, and strong commitment to doing good work to improve the lives of Minnesotans. The dynamics in the Capitol will undergo a significant shift in the Minnesota House due to her absence. She played a pivotal role in nearly every issue thanks to her leadership. 

The Governor has called a special election to fill Hortman’s seat (34B) September 16th, with a Primary to be held August 12th. Filings closed earlier this week and three candidates filed to run for the DFL nomination and one candidate filed to be nominated as the Republican candidate.

SD47:  Democratic state Sen. Nicole Mitchell resigned her Woodbury State Senate seat after her conviction on felony burglary charges  earlier in July. 

SD29: Long-time Minnesota State Sen. Bruce Anderson (R-Buffalo) died unexpectedly on Monday, announced Senate Republican Leader Mark Johnson.

According to a news release, Anderson’s family has asked for privacy and will release a statement at a later time. “I’m saddened to learn Senator Bruce Anderson passed unexpectedly today,” Johnson stated. “Bruce was a dedicated public servant, loving family man, and dear friend to many at the Capitol and in Buffalo. We offer our condolences and prayers for comfort for the entire Anderson family.

Gov. Tim Walz announced that special elections to fill the vacancies in Districts 29 and 47 will be held on Nov. 4, following special primaries on Aug. 26, if necessary. Candidates have until Aug. 6 to file.

In addition, the DFL caucus in the Minnesota House of Representatives will need to choose a new leader for the first time in seven years.

The tragic events of June 14th will undoubtedly affect members’ decisions to run for re-election and whether highly qualified individuals will choose to seek office in the current environment.

Threats against lawmakers have been rising rapidly in recent years, and members and their families have legitimate concerns about serving in such a toxic environment.

At a time when our state and nation need the best and brightest to step forward and run for public office, many may feel discouraged about seriously considering that decision.

While the calls for elected officials to tone down political rhetoric and encourage more civilized debate in government and politics are critically important, further action is needed to address the reckless and dangerous behavior of fringe political groups that deliberately spread misinformation or inflame debates to provoke outrage among their audience.

We anticipate that significant numbers of legislative incumbents will not run again in 2026.

This update was written with help from Fluence Media, Axios, ChatGPT sources, the PORTAL MNPDAB presentation, and our team at Hill Capitol Strategies.