LEGISLATIVE FISCAL ESTIMATE

[First Reprint]

ASSEMBLY, No. 4953

STATE OF NEW JERSEY

221st LEGISLATURE

 

DATED: MAY 16, 2025

 

 

SUMMARY

 

Synopsis:

“Patient and Provider Protection Act.”

Type of Impact:

Annual local government cost impact.

Agencies Affected:

Local governments, school districts.

 

 

Office of Legislative Services Estimate

Fiscal Impact

 

 

Annual Local Cost Impact

Indeterminate

 

 

 

 

·       The Office of Legislative Services (OLS) finds that the bill would have an indeterminate impact on the expenditures of local government employers, including school districts, that purchase employee health insurance through the commercial market.

·       The bill imposes new requirements on pharmacy benefits managers (PBMs) that would impact these employers’ costs of providing prescription drug coverage through their health plans.

·       Some of the bill’s provisions would potentially increase the cost of these health plans while others would potentially lower costs.  The OLS lacks the informational basis to quantify the magnitude of these impacts.

·       The State Health Benefits Program, the School Employees' Health Benefits Program, and NJ FamilyCare, the State’s Medicaid program, would not be affected by the bill. 

 

BILL DESCRIPTION

 

      This bill, the Patient and Provider Protection Act, establishes new requirements for PBMs.

      The bill requires that insurance carrier compensation paid to a PBM is to be based on a flat fee arrangement and not include commissions, and it stipulates that an agreement between a PBM and a manufacturer is not valid if the contract conditions any rebate on the exclusion of generic drugs from coverage.  In addition, no formulary may place a prescription drug with a higher cost in a more favorable position than a generic or biosimilar prescription drug with a lower cost.  The bill also prohibits PBMs from engaging in any marketing activity that uses inaccurate or misleading information to convince covered persons to use a contracted or network pharmacy. 

      The bill stipulates that a contract between a PBM and a contracted pharmacy or network pharmacy is, in the event of a dispute, to be presumed to be a “contract of adhesion.”  A contract of adhesion is a standardized contract in which one party has significantly superior bargaining power.  In a contractual dispute involving a contract of adhesion, the courts may subject the contract to special scrutiny.

      The bill also requires PBMs to reimburse a contracted pharmacy or a network pharmacy for a prescription drug at a rate that is at least equal to the pharmacy’s cost of acquiring the prescription drug; and the bill requires PBMs to reimburse an unaffiliated pharmacy at a rate that is up to five percent lower than the lowest reimbursement rate provided to a contracted pharmacy or a network pharmacy, but not less than the pharmacy’s cost of acquiring the prescription drug.

      The bill also stipulates that a PBM may not prohibit an unaffiliated pharmacy from offering a prescription drug to a covered person in the same quantity and at the same price as a contracted pharmacy or a network pharmacy.

      Lastly, PBMs shall have a fiduciary duty to the long-term health outcomes of covered persons.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS finds that the bill would have an indeterminate impact on the expenditures of local government employers, including school districts, that purchase employee health insurance through the commercial market.

      The bill imposes new requirements on PBMs that would impact the cost of providing prescription drug coverage by these employers through their health plans.  Some of the bill’s provisions would potentially increase the cost of these health plans while others would potentially lower costs.  The OLS lacks the informational basis to quantify the magnitude of these impacts.

      The OLS notes that the State Health Benefits Program, the School Employees' Health Benefits Program, and NJ FamilyCare, the State’s Medicaid program, would not be affected by the bill.  

 

Section:

Commerce, Labor and Industry

Analyst:

John Gaudioso

Associate Fiscal Analyst

Approved:

Thomas Koenig

Legislative Budget and Finance Officer

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).