New Jersey’s New “Prescription Drug Patient Protection Act” Will Regulate PBMs and Limit Use of Prior Authorization

The “Prescription Drug Patient Protection Act” has recently passed both houses of the Legislature in New Jersey and is currently awaiting signature by Governor Phil Murphy. The Bill establishes a host of new requirements to be followed by PBMs offering services in the state, including certain prohibitions regarding the Prior Authorization process. If signed into law by the Governor, it could greatly impact PBMs that are currently operating in New Jersey, as well as those that are looking to expand their business into the state.

A few of the key provisions set forth by the Prescription Drug Patient Protection Act include:

  • PBMs are prohibited from requiring prior authorization for any prescription, unless there is an alternative drug that has a lower cost and is of equal quality and efficacy to the prescribed drug; if there is such an alternative drug, then that alternative drug would also not be subject to prior authorization
  • Every PBM looking to provide pharmacy benefit management services in New Jersey must meet certain application requirements. In addition to providing basic ownership and contact information, the Division of Banking and Insurance (DOBI) will require PBMs to submit the following information in order to get a Certificate of Authority (C of A) before they are able to provide PBM services:
  1. A copy of the PBM’s most recent financial statement audited by an independent CPA
  2. A proposed plan of operation for the PBM, including the manner in which PBM services will be provided
  • Once a Certificate of Authority is obtained, the Bill would require the PBM to:
  1. Have a complaint resolution mechanism with reasonable procedures to resolve complaints by pharmacists, doctors and patients
  2. Adopt procedures to ensure compliance with State and federal laws governing the confidentiality of its records as to pharmacists, prescribers and patients. These procedures must be designed to the satisfaction of the Commissioner of the Division of Banking and Insurance in order for the PBM to be issued a Certificate of Authority
  • If the Commissioner revokes a Certificate of Authority, the PBM must pay all outstanding claims, but conduct no further business in New Jersey except as may be essential to the orderly conclusion of its affairs in NJ

It should be noted that the Bill does not apply to PBMs that are an affiliate of a carrier and that provide PBM services solely to that carrier. However, the Bill does not provide a great deal of clarity on this point other than to provide a broad, generic definition of the term “Carrier.”

Frier Levitt attorneys counsel pharmacies regarding PBM issues, including networks access, reimbursement rates, and PBM audits. Contact Frier Levitt to speak to an attorney.