ASSEMBLY APPROPRIATIONS COMMITTEE

STATEMENT TO

ASSEMBLY COMMITTEE SUBSTITUTE FOR

ASSEMBLY, No. 1502

with committee amendments

STATE OF NEW JERSEY

DATED:  MAY 14, 2026

      The Assembly Appropriations Committee reports favorably and with committee amendments Assembly Bill No. 1502 ACS.

      As amended, 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 the carrier with which it contracts.  This also includes contracts between pharmacy benefits managers and the State Health Benefits Program, School Employees’ Health Benefits Program, and Medicaid.  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.”  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 pharmacies at the State fee-for-service benchmark of the National Average Drug Acquisition Cost (NADAC) plus the prevailing State defined Medicaid professional dispensing fee.  However, if a pharmacy benefits manager, or an affiliate of the pharmacy benefits manager, owns or controls a pharmacy, the pharmacy benefits manager shall reimburse the pharmacy for a prescription drug at the State fee-for-service benchmark of the National Drug Acquisition Cost (NADAC) and shall exclude the prevailing State defined Medicaid professional dispensing fee.  In either circumstance, 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).

      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.

      The bill also stipulates that a pharmacy benefits manager will be prohibited, with limited exception, from denying a pharmacy or pharmacist the right to participate as a contract pharmacy under a policy or plan if the pharmacy or pharmacist agrees to the terms and conditions established by the carrier, pharmacy benefits manager, or other administrator’s network.

      The bill further prohibits a pharmacy benefits manager, with limited exception, from:

      (1)  requiring a covered person to use a pharmacy, including a mail-order or specialty pharmacy, in which the pharmacy benefits manager or its affiliate maintains an ownership interest or control; or

      (2)  offering or implementing a plan design that encourages a covered person to use a pharmacy, including a mail-order or specialty pharmacy, in which the pharmacy benefits manager or an affiliate maintains an ownership interest or control.

      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.

COMMITTEE AMENDMENTS:

      The committee amended the bill to:

      (1)  require that a pharmacy benefits manager has a fiduciary duty to act, in connection with a contract, in the best interests of the State Medicaid program;

      (2)  require that a pharmacy benefits manager reimburse, for a prescription drug, pharmacies owned or controlled by the pharmacy benefits manager or its affiliate at the State fee-for-service benchmark of the National Drug Acquisition Cost (NADAC) and exclude the prevailing State defined Medicaid professional dispensing fee; and

      (3)  exclude self-insured health benefits plans governed by the provisions of the federal “Employee Retirement Income Security Act of 1974” from certain provisions that govern prescription drug benefit designs and structure.

FISCAL IMPACT:

      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 health insurance.

      The bill imposes new requirements on pharmacy benefit 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 information 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.