A1502

An Act concerning pharmacy benefits managers, amending P.L.2023, c.107, and amendingand supplementing P.L.2015, c.179 (C.17B:27F-1 et seq.).

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 7 of P.L.2023, c.107 (C.17B:27F-3.3) is amended to read as follows:

7. a. A carrier, or a pharmacy benefits manager under contract with a carrier, shall establish a pharmacy and therapeutics committee responsible for managing the formulary system.

b. A carrier, or a pharmacy benefits manager under contract with a carrier, shall not allow a person with a conflict of interest to be a member of its pharmacy and therapeutics committee.

A carrier, or a pharmacy benefits manager under contract with a carrier, shall require that its pharmacy and therapeutics committee meet the requirements for conflict of interest as set by the Centers for Medicare and Medicaid Services or meets the accreditation standards of the National Committee for Quality Assurance or another independent accrediting organization.

c. A pharmacy and therapeutics committee shall ensure that no decision concerning the inclusion of a prescription drug in a formulary system, or in a particular tier of the formulary system, places a prescription drug with a higher cost to the patient in a more favorable position than a generic or biosimilar prescription drug with a lower cost.

(cf: P.L.2023, c.107, s.7)

2. Section 9 of P.L.2023, c.107 (C.17B:27F-3.4) is amended to read as follows:

9. a. If a carrier uses a pharmacy benefits manager to administer or manage the prescription drug benefits of covered persons, any pharmacy benefits manager compensation, for purposes of calculating a carrier's anticipated loss ratio or any loss ratio calculated as part of any applicable medical loss ratio filing or rate filing, shall:

(1) constitute an administrative cost incurred by the carrier in connection with a health benefits plan; and

(2) not constitute a benefit provided under a health benefits plan. A carrier shall claim only the amounts paid by the pharmacy benefits manager to a pharmacy or pharmacist as an incurred claim.

b. Any rate filing submitted by a carrier with respect to a health benefits plan that provides coverage for prescription drugs or pharmacy services and that is administered or managed by a pharmacy benefits manager shall include:

(1) a memorandum prepared by a qualified actuary describing the calculation of the pharmacy benefits manager compensation; and

(2) any records and supporting information as the department reasonably determines is necessary to confirm the calculation of the pharmacy benefits manager compensation.

c. Upon request, a carrier shall provide any records to the department that relate to the calculation of the pharmacy benefits manager and pharmacy services administrative organization compensation.

d. A pharmacy benefits manager and pharmacy services administrative organization shall provide any necessary documentation requested by a carrier that relates to pharmacy benefits manager compensation in order to comply with the requirements of this section.

e. Compensation to a pharmacy benefits manager shall be in a flat fee arrangement. No pharmacy benefits manager shall receive compensation in any form of commission structure.

f. Upon request by the department or a purchaser, a pharmacy benefits manager shall disclose to the department or purchaser the amount of any fees paid by the pharmacy benefits manager to a third party broker.

(cf: P.L.2023, c.107, s.9)

3. Section 1 of P.L.2015, c.179 (C.17B:27F-1) is amended to read as follows:

1. As used in P.L.2015, c.179 (C.17B:27F-1 et seq.):

"Anticipated loss ratio" means the ratio of the present value of the future benefits payments, including claim offsets after the point of sale, to the present value of the future premiums of a policy form over the entire period for which rates are computed to provide health insurance coverage.

"Average wholesale price" means the average wholesale price of a prescription drug determined by a national drug pricing publisher selected by a carrier. The average wholesale price shall be identified using the national drug code published by the National Drug Code Directory within the United States Food and Drug Administration.

"Brand-name drug" means a prescription drug marketed under a proprietary name or registered trademark name, including a biological product.

"Carrier" means an insurance company, health service corporation, hospital service corporation, medical service corporation, or health maintenance organization authorized to issue health benefits plans in this State.

“Commercial market plan” means a health benefits plan issued by an insurance company, health service corporation, hospital service corporation, medical service corporation, or health maintenance organization in this State.

"Contracted pharmacy" means a pharmacy that participates in the network of a pharmacy benefits manager through a contract with:

a. the pharmacy benefits manager directly;

b. a pharmacy services administration organization; or

c. a pharmacy group purchasing organization.

"Cost-sharing amount" means the amount paid by a covered person as required under the covered person's health benefits plan for a prescription drug at the point of sale.

"Covered person" means a person on whose behalf a carrier or other entity, who is the sponsor of the health benefits plan, is obligated to pay benefits pursuant to a health benefits plan.

"Department" means the Department of Banking and Insurance.

"Drug" means a drug or device as defined in R.S.24:1-1.

"Health benefits plan" means a benefits plan which pays hospital or medical expense benefits for covered services, or prescription drug benefits for covered services, and is delivered or issued for delivery in this State by or through a carrier or any other sponsor. For the purposes of P.L.2015, c.179 (C.17B:27F-1), health benefits plan shall not include the following plans, policies or contracts: accident only, credit disability, long-term care, Medicare supplement coverage; TRICARE supplement coverage, coverage for Medicare services pursuant to a contract with the United States government, the State Medicaid program established pursuant to P.L.1968, c.413 (C.30:4D-1 et seq.), coverage arising out of a worker's compensation or similar law, the State Health Benefits Program, the School Employees' Health Benefits Program, or [a self-insured health benefits plan governed by the provisions of the federal "Employee Retirement Income Security Act of 1974," 29 U.S.C. s.1001 et seq.,] coverage under a policy of private passenger automobile insurance issued pursuant to P.L.1972, c.70 (C.39:6A-1 et seq.), or hospital confinement indemnity coverage.

"Maximum allowable cost" means the maximum amount a health insurer will pay for a generic drug or brand-name drug that has at least one generic alternative available.

"Network pharmacy" means a licensed retail pharmacy or other pharmacy provider that contracts with a pharmacy benefits manager either directly or by and through a contract with a pharmacy services administrative organization.

"Pharmacy" means any place in the State, either physical or electronic, where drugs are dispensed or pharmaceutical care is provided by a licensed pharmacist, but shall not include a medical office under the control of a licensed physician.

"Pharmacy benefits manager" means a corporation, business, or other entity, or unit within a corporation, business, or other entity, that, pursuant to a contract or under an employment relationship with a carrier, a self-insurance plan or other third-party payer, either directly or through an intermediary, administers prescription drug benefits on behalf of a purchaser.

"Pharmacy benefits manager compensation" means the difference between: (1) the amount of payments made by a carrier of a health benefits plan to its pharmacy benefits manager; and (2) the value of payments made by the pharmacy benefits manager to dispensing pharmacists for the provision of prescription drugs or pharmacy services with regard to pharmacy benefits covered by the health benefits plan.

"Pharmacy benefits management services" means the provision of any of the following services on behalf of a purchaser: the procurement of prescription drugs at a negotiated rate for dispensation within this State; the processing of prescription drug claims; or the administration of payments related to prescription drug claims.

"Pharmacy services administrative organization" means an entity operating within the State that contracts with independent pharmacies to conduct business on their behalf with third-party payers.

"Prescription" means a prescription as defined in section 5 of P.L.1977, c.240 (C.24:6E-4).

"Prescription drug benefits" means the benefits provided for prescription drugs and pharmacy services for covered services under a health benefits plan contract.

"Purchaser" means any sponsor of a health benefits plan who enters into an agreement with a pharmacy benefits management company for the provision of pharmacy benefits management services to covered persons.

(cf: P.L.2023, c.107, s.1)

4. (New section) a. A pharmacy benefits manager shall have a fiduciary duty to act in the best interests of a carrier with which it contracts.

b. A pharmacy benefits manager shall not engage 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.

5. (New section) An agreement between a pharmacy benefits manager and a manufacturer shall not be valid if the contract conditions any rebate on the exclusion of generic drugs from coverage.

6. (New section) a. A commerical market plan contract between a pharmacy benefits manager and a contracted pharmacy or network pharmacy shall, in the event of a dispute, be presumed to be a “contract of adhesion.”

b. A pharmacy benefits manager shall, for a prescription drug, reimburse:

(1) a contracted pharmacy or a network pharmacy at a rate that is at least equal to the pharmacy’s cost of acquiring the prescription drug; and

(2) 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 (WAC), or the Suggested Wholesale Price (SWP).

c. A carrier shall not engage in differential payment pricing in commercial market plans. A pharmacy benefits manager shall reimburse all contracted pharmacies at the same rate regardless of ownership or affiliation.

7. This act shall take effect on the first day of the seventh month next following the date of enactment and shall apply to contracts and agreements entered into, renewed, modified, or amended on or after the effective date, but the Commissioner of Banking and Insurance may take such anticipatory administrative action in advance thereof as shall be necessary for the implementation of the act.

STATEMENT

This bill, 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 a carrier with which it contracts. 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.

The bill stipulates that a commercial market plan contract between a pharmacy benefits manager 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 pharmacy benefits managers, for a prescription drug, to reimburse:

(1) a contracted pharmacy or a network pharmacy at a rate that is at least equal to the pharmacy’s cost of acquiring the prescription drug; and

The bill also stipulates that a carrier may not engage in differential payment pricing in commercial market plans. A pharmacy benefits manager is required to reimburse all contracted pharmacies at the same rate regardless of ownership or affiliation.

Under the bill, a pharmacy and therapeutics committee is to ensure that no decision concerning the inclusion of a prescription drug in a formulary system, or in a particular tier of the formulary system, places a prescription drug with a higher cost to the patient in a more favorable position than a generic or biosimilar prescription drug with a lower cost.