New Jersey Law Grants Rights to Pharmacies Against PBM Post-Adjudication Fees and Mailing Prohibitions

On December 19, 2019, NJ Governor, Phil Murphy, signed into law an important new bill regulating PBMs, effective on March 18, 2020. The bill, A3717, passed with unanimous support in both legislative houses, amends the State’s current PBM regulations and outlaws post-adjudication fees by PBMs, such that:

“After the date of receipt of a clean claim for payment made by a pharmacy, a pharmacy benefits manager shall not retroactively reduce payment on the claim, either directly or indirectly, through aggregated effective rate, direct or indirect remuneration, quality assurance program, or otherwise, except if the claim is found not to be a clean claim during the course of a routine audit performed pursuant to an agreement between the pharmacy benefits manager and the pharmacy.”

The bill also states that a PBM “shall not recoup funds from a pharmacy in connection with claims for which the pharmacy has already been paid” unless pursuant to law or as the result of an audit. While the “audit” exception may provide PBMs with some cover, the law is designed to effectively outlaw all post-adjudication fees levied against pharmacies by PBMs, even those assessed through a Pharmacy Services Administration Organization (“PSAO”).

Other changes in the law include strengthening the current price transparency regulations to broadly include all pricing formulas by which PBMs set benchmarks for reimbursement, including from which New Jersey wholesaler pharmacies may acquire the products. The appeals process for multiple source generic pricing has also been expanded to include appeals for brand and generic effective rates and “any other pricing methodology” used by PBMs as a benchmark in setting pharmacy reimbursement.

Importantly, the new law adds a provision preventing PBMs from terminating New Jersey pharmacies solely because they provide “store direct delivery and mail prescriptions” to patients. In so doing, the law empowers the Commissioner of Banking and Insurance to review and approve the compensation from a PBM to a pharmacy to ensure compensation is “fair and reasonable” to provide an adequate network. Finally, the law subjects PBMs to civil penalties for violation of the law.

Finally, the new law disallows anti-mailing provisions in contracts between PBMs and pharmacies. This provision gives New Jersey pharmacies the necessary legal leverage to challenge the dispensing of medications through common courier and the like, as well as to challenge network access and/or termination issues predicated upon a PBMs unilateral and improper determination that a pharmacy is a “mail order” pharmacy.

Frier Levitt anticipates that PBMs will challenge the applicability and enforceability of the new law on a variety of grounds. However, it is beyond dispute that the law provides new leverage for pharmacies to insure more reasonable rates, network participation, and to dispute costly post-adjudication recoupments such as Direct and Indirect Remuneration (“DIR”) fees. 

Frier Levitt is a nationwide law firm that fights PBM abuses. Our attorneys assist pharmacies in litigating disputes against PBMs and developing and implementing regulatory compliant policies and practices to avoid disputes with PBMs. If you are involved in a dispute with a PBM, contact Frier Levitt today.