LEGISLATIVE FISCAL ESTIMATE
ASSEMBLY COMMITTEE SUBSTITUTE FOR
ASSEMBLY, No. 1502
STATE OF NEW JERSEY
222nd LEGISLATURE
DATED: MAY 18, 2026
SUMMARY
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Synopsis: |
"Patient and Provider Protection Act." |
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Type of Impact: |
Annual State and local government cost impact. |
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Agencies Affected: |
Division of Pension and Benefits in the Department of the Treasury, Department of Human Services, local governments, school districts. |
Office of Legislative Services Estimate
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Fiscal Impact |
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Annual State Cost Impact |
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Indeterminate |
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Annual Local Cost Impact |
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Indeterminate |
· The Office of Legislative Services (OLS) finds that the bill would have an indeterminate impact on State expenditures related to employee health insurance and for expenditures related to NJ Family care, the State’s Medicaid program. The bill would also have an indeterminate impact on local government expenditures, including school districts, related to the purchase of employee health insurance.
· The bill imposes new requirements on pharmacy benefits managers that would impact the cost of providing prescription drug coverage through health plans covered by the provisions of the bill.
· 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, are all covered by the provisions of the bill.
BILL DESCRIPTION
The Patient and Provider Protection Act establishes certain requirements for pharmacy benefits managers relating to contractual agreements with manufacturers and pharmacies. Under the bill, pharmacy benefits managers have a fiduciary duty to act in the best interests of the carrier with which it contracts. This includes contracts between pharmacy benefits managers and the State Health Benefits Program, School Employees’ Health Benefits Program, and NJ Family Care, the State’s Medicaid program.
In addition, pharmacy benefits managers are prohibited from engaging in any marketing activity that uses inaccurate or misleading information to convince or attempt to convince covered persons to use a contracted or network pharmacy. Furthermore, the bill stipulates that an agreement between a pharmacy benefits manager and a manufacturer is not valid if the contract conditions any rebate on the exclusion of generic drugs from coverage.
In the event of a dispute, the bill stipulates that a contract between a pharmacy benefits manager and a contracted pharmacy or network pharmacy is to be presumed to be a contract of adhesion, which 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 pharmacy benefits managers, for a prescription drug, to reimburse the State fee-for-service benchmark of the National Average Drug Acquisition Cost (NADAC) plus the prevailing State defined Medicaid professional dispensing fee. If the NADAC is not established for a specific national drug code, the ingredient reimbursement rate shall default to the Wholesale Average Cost, or the Suggested Wholesale Price. This reimbursement rate does not apply to pharmacies in which a pharmacy benefits manager or its affiliate maintains an ownership interest or control.
The bill stipulates that a pharmacy benefits manager may not engage in differential payment pricing. A pharmacy benefits manager is required to reimburse all contracted pharmacies at the same rate regardless of ownership or affiliation. Additionally, a pharmacy benefits manager is prohibited from deriving income from pharmacy benefits management services provided to a carrier or health benefits plan in this State except for income derived from a pharmacy benefits management fee that is agreed upon between the pharmacy benefits manager and carrier or health benefits plan. The pharmacy benefits management fee charged or paid to a pharmacy benefits manager from a carrier or health benefits plan must not be directly or indirectly based or contingent upon: (1) the acquisition cost or any other price metric of a drug; (2) the amount of savings, rebates, or other fees charged, realized, or collected by or generated based on the activity of the pharmacy benefits manager; or (3) the amount of premiums, deductibles, or other cost sharing or fees charged, realized, or collected by the pharmacy benefits manager from patients or other persons on behalf of a patient.
Finally, under the bill, a pharmacy benefits manager is prohibited from providing a recommendation, advice, or counsel to a plan sponsor or carrier concerning the inclusion of a prescription drug in a formulary system, or in a particular tier of the formulary system, that places a prescription drug with a higher cost to the patient, including but not limited to coinsurance, copayments, deductibles, and other cost-sharing, in a more favorable position than a generic or biosimilar prescription drug with a lower cost, if the recommendation, advice, or counsel is based solely on the cost of the prescription drug and not on another factor.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS finds that the bill would have an indeterminate impact on State expenditures related to employee health insurance and for expenditures related to NJ Family care, the State’s Medicaid program. The bill would also have an indeterminate impact on local government expenditures, including school districts, related to the purchase of employee health insurance.
The bill imposes new requirements on pharmacy benefits managers that would impact the cost of providing prescription drug coverage through health plans covered by the provisions of the bill. 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, are covered by the bill.
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Section: |
Commerce, Labor and Industry |
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Analyst: |
Associate Fiscal Analyst |
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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.).