On March 7, 2022, Senator Vin Gopal introduced Senate Bill 2221 (“S2221”) with the goal of establishing transparency standards and licensing requirements for pharmacy benefit managers (“PBMs”) operating in New Jersey. Senate Bill S2221 follows a suite of Bills (S1614, S1615, and S1616) introduced on February 14, 2022 by Governor Phil Murphy and his legislative partners seeking to enhance prescription drug affordability and establish much-needed oversight of pharmacy benefit managers. S2221 not only introduces additional protections for pharmacies, but also provides pharmacies with certainty and security in the historically volatile pharmacy benefits space.
Specifically, the comprehensive Bill introduces new definitions related to PBMs that will ensure certain PBM activities are covered by the law. The Bill also precludes any business entity from operating as a pharmacy benefits manager without proper licensure issued by the New Jersey Department of Banking and Insurance. PBMs who fail to comply with federal or state laws risk revocation of this license.
S2221 saddles insurance carriers with the responsibility to ensure that their PBM agents follow the Bill’s mandates. In other words, the Bill imposes on carriers a duty to enforce PBM compliance with S2221. It also prevents carriers from contracting with PBMs that prohibit pharmacies from providing patients with the option of paying cash for their prescriptions instead of filing a claim with the carrier if the cash price is less than the patient’s cost-sharing amount.
For patients, S2221 includes a variety of important rights.
- The Bill prevents carriers and PBMs from forcing patients to make payments for prescriptions that exceed their applicable cost-sharing amount or the total amount the pharmacy will be reimbursed for dispensing the drug. This provision ensures that under no circumstances will a patient pay more than their applicable cost-sharing amount, and in some cases, the patient will pay less.
- The Bill requires that any compensation paid by or on behalf of pharmaceutical manufacturers, developers, or labelers to PBMs shall be credited either
- directly to the patient at the point of sale to reduce the patient’s out of pocket cost, or
- to the carrier, in which case, the carrier shall apply that compensation to its plan design to offset patient premiums.
“Compensation” is defined broadly to include “any direct or indirect financial benefit, including, but not limited to, rebates, discounts, credits, fees, grants, chargebacks or other payments or benefits of any kind.” Together, these provisions help to tackle the ever-rising costs of prescription drugs for patients.
Moreover, to stabilize the pharmacy landscape, the Bill requires PBMs to establish one maximum allowable cost (“MAC”) list that identifies the maximum amount insurers will pay pharmacy providers for generics or certain brand-name drugs. Under the new law, PBMs would be required to use the same MAC list for each pharmacy provider and to provide pharmacies with an administrative appeal process to challenge maximum allowable costs. For drugs not on the MAC list, PBMs and carriers must use the Average Wholesale Prices (“AWP”). However, the law requires PBMs and carriers to use only one national drug pricing source during the calendar year, which must be applied uniformly amongst pharmacy providers and made publicly available on the carrier’s or PBM’s website.
If enacted, this legislation will alter the relationship between PBMs, carriers, pharmacies and, most importantly, patients. S2221 could go further by providing patients and providers with a private right of action to sue PBMs for relief from PBM’s failure to comply with their duties, obligations, and responsibilities under S2221. In addition, an extension of the current audit period from 14 days to 28-30 days would lessen the burden on Pharmacy Services Administrative Organizations who often submit appeals on behalf pharmacies but have, in recent years, become so inundated that they can hardly submit appeals within the prescribed 14-day period.
As of today, S2221 awaits the New Jersey Senate Commerce Committee’s review.
How Frier Levitt Can Help
Frier Levitt has extensive knowledge in all aspects of the patient-pharmacy-PBM-plan relationship including PBM audits, network access issues, and reimbursement practices. Frier Levitt attorneys also have experience drafting letters to lawmakers to effectuate change at the legislative level. Contact us today to speak to with an attorney.
