A5388

An Act concerning Medicaid beneficiaries and amending and supplementing Title 30 of the Revised Statutes.

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

1. This act shall be known and may be cited as the “Medicaid Pharmacy Benefit Transparency and Accountability Act.”

2. a. The State Auditor shall conduct audits of any contract or other arrangement entered into by a managed care organization, or by the Division of Medical Assistance and Health Services in the Department of Human Services, for the provision of pharmacy benefits management services under the Medicaid program. Such audits shall review:

(1) all sources and amounts of income, payments, and financial benefits received by the pharmacy benefits manager in relation to the provision and administration of pharmacy benefits management services on behalf of the managed care organization, including, but not limited to, any pricing discounts, rebates of any kind, inflationary payments, credits, clawbacks, fees, grants, chargebacks, reimbursements, or other benefits;

(2) all ingredient costs and dispensing fees or similar payments made by the pharmacy benefits manager to any pharmacy in connection with the contract or other arrangement;

(3) the pharmacy benefits manager's payment model for administrative fees; and

(4) the amount of payment paid by the State and the amount of reimbursement paid to pharmacies for providing prescription drug services.

b. The State Auditor may employ technical experts and other employees or consultants as necessary to conduct the audits required pursuant to subsection a. of this section.

c. The State Auditor shall provide to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1):

(1) quarterly reports that describe the findings of any audits conducted pursuant to subsection a. of this section in the previous quarter; and

(2) an annual report that:

(a) describes the findings of all the audits conducted pursuant to subsection a. of this section in the previous year;

(b) summarizes the total costs to the State for the provision of pharmacy benefits management services under the Medicaid program in the previous year; and

(c) makes any recommendations deemed necessary for the improvement of the administration of prescription drug benefits and reduction of costs for the provision of pharmacy benefits management services under the Medicaid program.

d. As used in this section:

"Pharmacy benefits manager" means a corporation, business, or other entity, or unit within a corporation, business, or other entity, that administers prescription drug benefits on behalf of a managed care organization.

"Pharmacy benefits management services" mean the provision of any of the following services on behalf of a managed care organization: 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.

3. a. To the extent that the provisions of this section do not conflict with federal law and regulation, the reimbursement rate for prescription drug services paid to a pharmacy providing prescription drug services to a beneficiary of the Medicaid program, whether such services are provided in the Medicaid fee-for-service delivery system or through the Medicaid managed care delivery system, shall be no less than the national average drug acquisition cost of the drug plus a Medicaid fee-for-service professional dispensing fee of $10.92.

b. The provisions of this section shall not apply to claims, reimbursements, or contractual arrangements involving covered entities, as defined under section 340B of the federal Public Health Service Act, 42 U.S.C. s.256, or other providers serving high-need populations as designated by the Division of Medical Assistance and Health Services in the Department of Human Services.

4. a. The Division of Medical Assistance and Health Services in the Department of Human Services shall conduct a study and prepare, and submit, within 24 months of the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), to the Governor and, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), to the Legislature, a written report that shall describe the study’s findings and make recommendations concerning the provision of prescription drug services and pharmacy benefits management services under the Medicaid program.

b. In conducting the study, the division shall:

(1) gather and analyze all data concerning the provision of prescription drug services and pharmacy benefits management services under the Medicaid program to understand the costs of, accessibility of, and outcomes related to the provision of those services;

(2) compare the division’s current model of providing prescription drug services and pharmacy benefits management services under the Medicaid program to alternative approaches, including, but not limited to, fee-for-service and carve-out models; and

(3) based on the analysis required pursuant to paragraph (2) of this subsection, make recommendations as the division deems necessary for legislative action, including recommendations for the establishment of a pilot program developed in consultation with relevant stakeholders, which program will assess the effectiveness of alternative pharmacy models for the provision of prescription drug services and pharmacy benefits management services under the Medicaid program.

5. The Commissioner of Human Services shall apply for such State plan amendments or waivers as may be necessary to implement the provisions of this act and to secure federal financial participation for State Medicaid expenditures under the federal Medicaid program.

6. Section 1 of P.L.2021, c.257 (C.30:4D-7ee) is amended to read as follows:

1. a. Any contract or other arrangement entered into by a managed care organization, or by the Division of Medical Assistance and Health Services in the Department of Human Services, for the provision of pharmacy benefits management services under the Medicaid program shall require the pharmacy benefits manager to disclose to the department:

(2) all ingredient costs and dispensing fees or similar payments made by the pharmacy benefits manager to any pharmacy in connection with the contract or other arrangement; [and]

(3) the pharmacy benefits manager's payment model for administrative fees;

(4) any information necessary for the State Auditor to conduct an audit required pursuant to section 3. of P.L. , c. (C. ) (pending before the Legislature as this bill), including, but not limited to, claims-level data and the terms of any contract or other arrangement entered into by a managed care organization, or the division for the provision of pharmacy benefits management services; and

(5) any ownership interest or affiliation with a contracted pharmacy, which information the division shall review to identify any conflicts of interest or anti-competitive practices in connection with the performance of pharmacy benefits management services.

b. Information disclosed by a pharmacy benefits manager to the division pursuant to subsection a. of this section shall be confidential and not be subject to public disclosure under P.L.1963, c.73 (C.47:1A-1 et seq.), or P.L.2001, c.404 (C.47:1A-5 et al.). In addition to any other penalty provided by law, a person who is authorized to access information submitted by a pharmacy benefits manager to the division who knowingly discloses such information to any person or entity who is not authorized to access the information shall be guilty of a crime of the fourth degree and shall be subject to a civil penalty in an amount not to exceed $10,000. A civil penalty imposed under this subsection shall be collected by the director pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).

c. As used in this section:

"Steering" means a practice employed by a pharmacy benefit manager that channels a prescription to an affiliated pharmacy, or pharmacy in which a pharmacy benefits manager or carrier has an ownership interest, and includes, but is not limited to, retail, mail-order, or specialty pharmacies.

d. Any contract or other arrangement entered into by a managed care organization, or by the Division of Medical Assistance and Health Services in the Department of Human Services, for the provision of pharmacy benefits management services under the Medicaid program shall:

(1) require the pharmacy benefits manager to:

(a) remit to the division all manufacturer rebates, fees, and other renumerations received by the pharmacy benefits manager;

(b) provide an internal appeal mechanism to resolve any dispute raised by the division or managed care organization or pharmacy concerning drug pricing. Any dispute regarding the determination of an internal appeal conducted pursuant to this paragraph may be referred to arbitration. The division shall contract with a nationally recognized, independent organization that specializes in arbitration to conduct the arbitration proceedings; and

(c) meet standards and practices used in the creation of pharmacy networks and contracting with network pharmacies and other providers, including the promotion and use of independent and community pharmacies and patient access and minimizing excessive concentration and vertical integration of markets;

(2) prohibit the pharmacy benefits manager from engaging in the practice of steering; and

(3) in the case of the termination of a contracted pharmacy, permit a Medicaid beneficiary to continue receiving prescription drug services from the pharmacy for a period of not less than 90 days from the date of the termination, which period shall be determined by the division.

(cf: P.L.2021, c.257)

7. This act shall take effect immediately, but shall remain inoperable until the Commissioner of Human Services receives approval for any necessary federal waivers pursuant to section 5 of this act.

STATEMENT

This bill establishes the “Medicaid Pharmacy Benefit Transparency and Accountability Act.”

The bill requires the State Auditor to conduct audits of any contract or other arrangement entered into by a managed care organization, or by the Division of Medical Assistance and Health Services (division) in the Department of Human Services (DHS), for the provision of pharmacy benefits management services under the Medicaid program. The audits will review: all sources and amounts of income, payments, and financial benefits received by the pharmacy benefits manager in relation to the provision and administration of pharmacy benefits management services on behalf of the managed care organization; all ingredient costs and dispensing fees or similar payments made by the pharmacy benefits manager to any pharmacy in connection with the contract or other arrangement; the pharmacy benefits manager's payment model for administrative fees; and the amount of payment paid by the State and the amount of reimbursement paid to pharmacies for providing prescription drug services.

The State Auditor will provide to the Legislature reports that: describe the findings of any audits conducted pursuant to the bill; summarize the total costs to the State for the provision of pharmacy benefits management services under the Medicaid program; and make any recommendations deemed necessary for the improvement of the administration of prescription drug benefits and the reduction of costs for the provision of pharmacy benefits management services under the Medicaid program.

The bill revises current law to require pharmacy benefits managers under the scope of the bill to:

1) disclose to the department any information necessary for the State Auditor to conduct an audit required pursuant to the bill and any ownership interest or affiliation with a contracted pharmacy;

2) remit to the division all manufacturer rebates, fees, and other renumerations received by the pharmacy benefits manager;

3) provide an internal appeal mechanism to resolve any dispute raised by the division or managed care organization or pharmacy concerning drug pricing; and

4) meet standards and practices used in the creation of pharmacy networks and contracting with network pharmacies and other providers.

The bill prohibits pharmacy benefits managers from engaging in the practice of steering and provides that in the case of the termination of a contracted pharmacy, a Medicaid beneficiary will be permitted to receive prescription drug services from the pharmacy for a certain period of time.

The bill provides that, to the extent that the provisions of the bill do not conflict with federal law and regulation, the reimbursement rate for prescription drug services paid to a pharmacy providing prescription drug services to a beneficiary of the Medicaid program, whether such services are provided in the Medicaid fee-for-service delivery system or through the Medicaid managed care delivery system, will be no less than the national average drug acquisition cost of the drug plus a Medicaid fee-for-service professional dispensing fee of $10.92. This provision will not apply to claims, reimbursements, or contractual arrangements involving covered entities, as defined under section 340B of the federal Public Health Service Act, 42 U.S.C. s.256, or other providers serving high-need populations as designated by the division.

The bill requires the division to conduct a study and prepare and submit, within 24 months of the effective date of the bill, to the Governor and to the Legislature, a written report that will describe the study’s findings and provide recommendations concerning the provision of prescription drug services and pharmacy benefits management services under the Medicaid program.