SENATE, No. 1765

STATE OF NEW JERSEY

219th LEGISLATURE

 

INTRODUCED FEBRUARY 13, 2020

 

 

Sponsored by:

Senator  VIN GOPAL

District 11 (Monmouth)

 

 

 

 

SYNOPSIS

     Requires pharmacy benefits manager providing services within Medicaid program to implement pass-through pricing model and to disclose certain information to DHS and managed care organizations.

 

CURRENT VERSION OF TEXT

     As introduced.

  

An Actconcerning pharmacy benefits managers providing services within the Medicaid program and supplementing Title 30 of the Revised Statutes.

 

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

 

      1.   a.  Any contract or other arrangement entered into by a managed care organization that has contracted with the Division of Medical Assistance and Health Services in the Department of Human services to provide benefits under the Medicaid Program for the provision of pharmacy benefits management services shall be based on a pass-through pricing model and shall include the following requirements:

     (1)   Payment to the pharmacy benefits manager shall be limited to the actual ingredient costs, dispensing fees paid to pharmacies, and an administrative fee that covers the cost of providing pharmacy benefits management services pursuant to the contract or other arrangements.  The Commissioner of Human Services may establish a maximum administrative fee;

     (2)   The pharmacy benefits manager shall identify all sources and amounts of income, payments, and financial benefits to the pharmacy benefits managers in relation to the provision and administration of pharmacy benefit 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 and shall ensure that any portion of such income, payments, and financial benefits is passed through to the managed care organization, in full, to reduce the reportable ingredient cost;

     (3)   The pharmacy benefits manager shall fully disclose to the department and to the managed care organization the sources and amounts of all income, payments, and financial benefits, as identified in paragraph (2) of subsection a. of this section, received by the pharmacy benefits manager;

     (4)   The pharmacy benefits manager shall identify 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;

     (5)   The pharmacy benefits manager shall not utilize any form of spread pricing in the contract or other arrangement with the managed care organization.  Any amount due to spread pricing shall be remitted to the managed care organization on a quarterly basis; and

     (6)   The pharmacy benefits manager shall make their payment model for administrative fees available to the department and the managed care organization.  The managed care organization shall, if directed by the department, make changes to the payment model and resubmit an amended contract or contracts to the department for review and approval.

     b.    All contracts or other arrangements subject to this section shall be submitted to the department for review and approval.  Existing contracts or other arrangements subject to this section shall be submitted to the department for review and approval by July 1, 2020. 

     c.     As used in this section:

     "Pass-through pricing model" means a model in which the managed care organization reimburses the pharmacy benefits manager for prescription drugs at a rate equal to the amount paid by the pharmacy benefits manger to the pharmacy on behalf of the managed care organization, plus an administrative fee based on a predetermined metric, such as per prescription or per member.

     "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.

     "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.

     "Spread pricing" means any amount charged or claimed by a pharmacy benefits manager in excess of the amount paid to a pharmacy on behalf of a managed care organization, less an administrative fee.

 

     2.    The Commissioner of Human Services, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), shall adopt rules and regulations necessary to implement the provisions of this act.

 

     3.    This act shall take effect immediately

 

 

STATEMENT

 

     The bill requires a pharmacy benefits manager providing services within Medicaid program to implement a pass-through pricing model.  As defined in the bill, a "pass-through pricing model" is a model in which a managed care organization reimburses the pharmacy benefits manager for prescription drugs at a rate equal to the amount paid by the pharmacy benefits manger to the pharmacy on behalf of the managed care organization, plus an administrative fee based on a predetermined metric, such as per prescription or per member.  Additionally, the bill requires a pharmacy benefits manager to disclose certain information to the Department of Human Services and the applicable managed care organization.  A similar law recently adopted in New York is projected to save the State at least $43 million in Medicaid dollars by ensuring that pharmacy benefits managers do not charge managed care organizations more for prescription drugs than what they actually pay to pharmacies.

     Under the bill, any contract or other arrangement entered into by a managed care organization that has contracted with the Division of Medical Assistance and Health Services in the Department of Human services to provide benefits under the Medicaid Program for the provision of pharmacy benefits management services is required to be based on a pass-through pricing model and include the following provisions:

     (1)   Payment to the pharmacy benefits manager is limited to the actual ingredient costs, dispensing fees paid to pharmacies, and an administrative fee that covers the cost of providing pharmacy benefits management services pursuant to the contract or other arrangements.  The Commissioner of Human Services may establish a maximum administrative fee;

     (2)   The pharmacy benefits manager is required to identify all sources and amounts of income, payments, and financial benefits to the pharmacy benefits managers in relation to the provision and administration of pharmacy benefit 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 and to ensure that any portion of such income, payments, and financial benefits is passed through to the managed care organization, in full, to reduce the reportable ingredient cost;

     (3)   The pharmacy benefits manager is required to fully disclose to the department and to the managed care organization the sources and amounts of all income, payments, and financial benefits received by the pharmacy benefits manager;

     (4)   The pharmacy benefits manager is required to identify 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;

     (5)   The pharmacy benefits manager is prohibited from utilizing any form of spread pricing in the contract or other arrangement with the managed care organization.  As defined in the bill, "spread pricing" means any amount charged or claimed by a pharmacy benefit manager in excess of the amount paid to a pharmacy on behalf of a managed care organization, less an administrative fee.  Any amount due to spread pricing shall be remitted to the managed care organization on a quarterly basis; and

     (6)   The pharmacy benefits manager is required to make their payment model for administrative fees available to the department and the managed care organization. The managed care organization, if directed by the department, is required to make changes to the payment model and resubmit an amended contract or contracts to the department for review and approval.

     Finally, all contracts or other arrangements subject to the bill's provisions are to be submitted to the department for review and approval.  Existing contracts or other arrangements subject to the bill's provisions at the time of the bill's enactment are to be submitted to the department for review and approval by July 1, 2020. 

     As defined in the bill, a "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" is further defined to 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.