SENATE BUDGET AND APPROPRIATIONS COMMITTEE

STATEMENT TO

SENATE COMMITTEE SUBSTITUTE FOR

SENATE, No. 3533

STATE OF NEW JERSEY

DATED:  MARCH 17, 2025

      The Senate Budget and Appropriations Committee reports favorably a Senate Committee Substitute for Senate Bill No. 3533.

      As reported, the bill establishes certain guidelines for the State Health Benefits Program, the School Employees Health Benefits Program, and the State Medicaid program concerning step therapy protocols.  The bill also applies to: vendors that contract with the State Health Benefits Program and the School Employees Health Benefits Program; managed care organizations that administer the State Medicaid program; and utilization review organizations that work with these entities. 

      The bill defines “step therapy protocol” as a protocol, policy, or program that establishes the specific sequence in which prescription drugs for a specified medical condition, and medically appropriate for a particular patient, are required to be administered in order to be covered by a health benefits plan.  "Vendor" means a third-party administrator that conducts claims administration, network management, claims processing, or other related services for the State Health Benefits Commission or the School Employees' Health Benefits Commission.

      The bill provides that clinical review criteria used to establish a step therapy protocol will be based on clinical practice guidelines that:

      (1)  recommend that the prescription drugs be taken in the specific sequence required by the step therapy protocol;

      (2)  are developed and endorsed by a multidisciplinary panel of experts that rely on objective data and manages conflicts of interest among the members;

      (3)  are based on high quality studies, research, and medical practice;

      (4)  are created by an explicit and transparent process that minimizes biases and conflicts of interest, explains the relationship between treatment options and outcomes, rates the quality of the evidence supporting recommendations, and considers relevant patient subgroups and preferences; and

      (5)  are reviewed annually or quarterly if there is a new indication or new clinical information available and updated when such review reveals new evidence necessitating modification.

      The bill further provides that when coverage of a prescription drug for the treatment of any medical condition is restricted for use pursuant to a step therapy protocol, the vendor or managed care organization is to provide the covered person and prescribing practitioner a clear, readily accessible, and convenient process to request a step therapy exception.  An existing medical exceptions process may be used to satisfy this requirement.

      A step therapy exception will be granted if the prescribing health care provider determines that:

      (1)  the required prescription drug is contraindicated or is likely to cause an adverse reaction or physical or mental harm to the patient;

      (2)  the required prescription drug is expected to be ineffective or less effective than an alternative based on the known clinical characteristics of the patient and the known characteristics of the prescription drug regimen; or

      (3)  all formulary drugs used to treat each disease state have been ineffective or less effective than an alternative in the treatment of the covered person's disease or condition, or all such drugs have caused or are reasonably expected to cause adverse or harmful reactions in the covered person.

      If requested by a vendor or managed care organization, the prescribing health care provider is to provide documentation to support the determinations made by the provider.

      Additionally, the bill provides that when a step therapy exception is granted, the vendor or managed care organization will authorize coverage for the prescription drug prescribed by the patient’s treating health care provider at least 180 days or the duration of therapy if less than 180 days, provided that the prescription drug is covered by the patient’s health care plan.

      The bill provides that any step therapy exception is eligible for appeal by a covered person.  The vendor or managed care organization is to grant or deny a step therapy exception request or an appeal of a step therapy exception request within a time frame appropriate to the medical exigencies of the case but no later than 24 hours for urgent requests and 72 hours for non-urgent requests after obtaining all necessary information to make the approval or adverse determination.

      The bill finally requires certain information regarding step therapy exception request approvals and denials to be made available to the public.

FISCAL IMPACT:

      The Office of Legislative Services (OLS) concludes that this bill would increase annual State expenditures for prescription drugs under the New Jersey State Health Benefits Program, the School Employees’ Health Benefits Program, and the NJ FamilyCare program (the State’s Medicaid and Children’s Health Insurance Program) by an indeterminate amount. Generally, the expenditure increase would result as the bill would regulate the use of prescription drug step therapy protocols for patients covered under these plans and ease the overriding of the protocols in favor of drugs selected by health care providers.

      The bill would result in indeterminate increases in annual expenditures for local government employers that provide employee coverage through the State Health Benefits Program or the School Employees’ Health Benefits Program.

      There is the potential for annual cost savings to the State Health Benefits Program, School Employees’ Health Benefits Program, and NJ FamilyCare program if the bill’s regulations were to result in positive health outcomes that reduce future treatment costs.

      Higher NJ FamilyCare expenditures would increase annual State revenue by an indeterminate amount from federal Medicaid and Children’s Health Insurance Program matching funds.