ASSEMBLY, No. 2337

 

STATE OF NEW JERSEY

 

210th LEGISLATURE

 

INTRODUCED MAY 9, 2002

 

 

Sponsored by:

Assemblyman JOSEPH V. DORIA, JR.

District 31 (Hudson)

Assemblywoman LINDA R. GREENSTEIN

District 14 (Mercer and Middlesex)

 

Co-Sponsored by:

Assemblymen Ahearn, Diegnan, Eagler, Gusciora, Conaway, Assemblywomen Cruz-Perez, Perez-Cinciarelli, Assemblyman Guear, Assemblywoman Stender and Assemblyman Cryan

 

 

 

 

SYNOPSIS

    "Pharmacy Benefits Management Company Act."

 

CURRENT VERSION OF TEXT

    As introduced.

 

(Sponsorship Updated As Of: 1/15/2003)


An Act providing for the certification of pharmacy benefits management companies and supplementing Title 52 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 "Pharmacy Benefits Management Company Act."

 

    2. The Legislature finds and declares that:

    a. Pharmacy benefits management companies are providing services for a growing number of health benefits plan enrollees and now cover a substantial portion of the State and national population;

    b. These entities have operated in a largely unregulated environment to date, which raises serious questions about their role and impact with respect to health care services delivery in this State and nationally; and

    c. This act provides for appropriate regulation of pharmacy benefits management companies by the Division of Consumer Affairs in the Department of Law and Public Safety to ensure that they provide high-quality pharmaceutical care at the lowest possible cost, and to reduce the potential for adverse impact on competition in markets for drug manufacturers' products and pharmacy benefits management company services. The purpose of this act is to promote, preserve and protect the public health, safety and welfare by and through effective regulation and certification of pharmacy benefits management companies.

 

    3. As used in this act:

    "Carrier" means an insurance company, health service corporation, hospital service corporation, medical service corporation or health maintenance organization authorized to issue health benefits plans in this State.

    "Commissioner" means the Commissioner of Banking and Insurance.

    "Covered person" means a person on whose behalf a carrier or other entity is obligated to pay benefits pursuant to a health benefits plan.

    "Director" means the Director of the Division of Consumer Affairs in the Department of Law and Public Safety.

    "Division" means the Division of Consumer Affairs.

    "Drug" means a drug or device as defined in R.S.24:1-1.

    "Drug utilization review" means a system for monitoring the prescribing, dispensing and consumption of prescription drugs under a health benefits plan according to specified guidelines, in order to recommend or determine whether, or to what extent, a prescription drug given or proposed to be given to a covered person should or will be reimbursed, covered, paid for or otherwise provided under the health benefits plan, and which system may include both retrospective and prospective review.

    "Health benefits plan" means a benefits plan which pays hospital and medical expense benefits for covered services and is delivered or issued for delivery in this State by or through a carrier or any other entity. For the purposes of this act, health benefits plan shall not include the following plans, policies or contracts: accident only, credit, disability, long-term care, Medicare supplement coverage, CHAMPUS supplement coverage, coverage for Medicare services pursuant to a contract with the United States government, coverage for Medicaid services pursuant to a contract with the State, coverage arising out of a workers' compensation or similar law, automobile medical payment insurance, personal injury protection insurance issued pursuant to P.L.1972, c.70 (C.39:6A-1 et seq.) or hospital confinement indemnity coverage.

    "Health care practitioner" means a physician, dentist or other health care professional authorized to write prescriptions.

    "Pharmacy benefits management company" or "PBM" 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 health benefits plan sponsor, such as a self-insured employer, carrier, union and health maintenance organization, with the objective of providing high-quality pharmaceutical care at the lowest possible cost.

    "Prescription" means a prescription as defined in section 5 of P.L.1977, c.240 (C.24:6E-4).

 

    4. a. Beginning on the 180th day after the effective date of this act, no person, corporation, partnership, or other entity shall operate a pharmacy benefits management company in this State except in accordance with the provisions of this act. A pharmacy benefits management company which is operated by a health maintenance organization solely for the benefit of its enrollees is exempted from the provisions of this act.

    b. A pharmacy benefits management company operating in this State on the effective date of this act shall submit an application for a certificate to the director within nine months of the effective date of this act. The company may continue to operate during the pendency of its application, but in no case longer than 18 months after the effective date of this act. In the event the application is denied, the applicant shall then be treated as a pharmacy benefits management company whose certificate has been revoked pursuant to section 9 of this act. Nothing in this subsection shall operate to impair any contract which was entered into before the effective date of this act.

    c. Any person administering prescription drug benefits on behalf of a health benefits plan sponsor in a manner substantially provided for in this act shall be presumed to be subject to the provisions of the act unless the person is otherwise regulated under State law.

 

    5. a. A pharmacy benefits management company, hereinafter referred to as a PBM, shall submit an application for a certificate on such a form, and in such a manner, as the director requires, which shall be signed under oath by the chief executive officer of the PBM or by a legal representative of the PBM, and shall include the following:

    (1) the name, address, telephone number and normal business hours of the PBM;

    (2) the name, address and telephone number of a person who is employed by, or otherwise represents, the PBM and who is available to answer questions concerning the application which may be posed by division staff;

    (3) the proposed plan of operation for the PBM, including the mechanism by which the PBM will manage prescription drug benefits; and

    (4) such other information as the director may require to ensure that the PBM can and will comply with the requirements for certification.

    If there is a material change in any of the information included in the application subsequent to its initial submission, including a change subsequent to the issuance or renewal of the certificate, the PBM shall inform the director of the change on such a form, and in such a manner, as the director requires.

    b. The director shall issue a certificate to a PBM if, in the determination of the director, the application demonstrates that:

    (1) the PBM will provide high-quality pharmaceutical care in a cost-effective manner which ensures adequate availability and accessibility of pharmaceutical services to covered persons;

    (2) the PBM provides a continuous quality of pharmaceutical care assurance and improvement program, a drug utilization review program which meets standards adopted by the director, and a complaint resolution mechanism to provide reasonable procedures for the resolution of complaints by pharmacists, health care practitioners and covered persons;

    (3) the PBM is financially sound and may reasonably be expected to meet any obligations to persons covered under a health benefits plan which the PBM represents;

    (4) the PBM has a procedure to establish and maintain a uniform system of cost accounting approved by the division and a uniform system of reports and audits meeting the requirements of the director; and

    (5) the PBM has adopted procedures to ensure compliance with all State and federal laws governing the confidentiality of its records with respect to pharmacists, health care practitioners and covered persons.

    c. Upon receipt of an application for a certificate, the director shall transmit a copy thereof to the Commissioner of Banking and Insurance, whose approval shall be required to the extent that the PBM involves the doing of an insurance business or a contract with a carrier.

    d. If an application is rejected by the director, the director shall specify in what respect it fails to comply with the requirements for certification and, if applicable, the requirements of the commissioner. When the certificate of a pharmacy benefits management company is revoked, the company shall proceed, immediately following the effective date of the order of revocation, to wind up its affairs and shall conduct no further business except as may be essential to the orderly conclusion of the affairs of the company. The director may permit such further operation of the company as the director may find to be in the best interest of covered persons to obtain pharmaceutical services.

    e. A certificate issued pursuant to section 4 of this act shall be valid for three years from the date of issuance by the director, and shall be renewed thereafter, upon payment of the renewal fee by the PBM, if the PBM meets such standards for recertification as the director may adopt.

    f. The director shall establish uniform application and renewal fees for the certificate, the amount of which shall be no greater than is reasonably necessary to enable the division to carry out the provisions of this act.

 

    6. Any PBM that contracts with a pharmacy or pharmacist to provide services under a pharmacy management plan for covered persons in this State after the effective date of this act shall file the contract with the director 30 days before the execution of the contract. The contract shall be deemed approved unless the director disapproves the contract within 30 days after filing with the director. Disapproval shall be in writing, stating the reasons therefor, and a copy thereof shall be delivered to the PBM. The director, consistent with his responsibility for protecting the public interest, shall develop formal criteria for the approval and disapproval of PBM contracts.

 

    7. A PBM may engage in any of the following activities, and in such other activities as the director deems appropriate, in accordance with regulations adopted by the director:

    a. process prescription drug claims and issue payments to pharmacists for drugs dispensed to persons covered under a health benefits plan which the PBM represents;

    b. provide mail-order pharmacy services to persons covered under a health benefits plan which the PBM represents;

    c. contract with a network of pharmacies to obtain discounted prescription drug prices and dispensing fees for persons covered under a health benefits plan which the PBM represents;

    d. develop an open, incentive-based or closed prescription drug formulary and make changes in the formulary;

    e. negotiate with pharmaceutical manufacturers to obtain rebates on prescription drug prices for the sponsor of a health benefits plan which the PBM represents;

    f. develop disease management protocols to help contain prescription drug expenditures for chronic conditions such as asthma and diabetes and manage the care of persons with these illnesses who are covered under a health benefits plan which the PBM represents; and

    g. perform drug utilization review under the direction of a registered pharmacist within the meaning of R.S.45:14-1 et seq.

 

    8. a. The director shall require a PBM to report to the division on an annual or periodic basis regarding any activities conducted pursuant to section 7 of this act, the qualifications of staff, administrative procedures and financial condition of the PBM, and any other information relating to the operations of that PBM, as the director deems necessary to effectuate the purposes of this act.

    b. A PBM shall provide to each covered person under a health benefits plan which the PBM represents, a notice written in easily understandable language which: explains restrictions on covered pharmaceutical services under the plan, lists the pharmacies included in a network with which the PBM contracts pursuant to section 7 of this act, and includes such other information as the director may require.

 

    9. The director may deny, revoke or suspend a certificate issued pursuant to this act for a violation of the provisions of this act or the rules and regulations adopted pursuant thereto, after serving a notice on the PBM which sets forth the reasons for the director's action. The director shall provide for an appropriate and timely right of appeal for the PBM.

 

    10. A PBM which violates a provision of this act shall be liable to a civil penalty of not less than $250 and not greater than $10,000 for each day that the PBM is in violation of this act. The penalty shall be collected by the director in the name of the State in a summary proceeding in accordance with the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).

 

    11. a. A PBM shall file a statement with the commissioner annually by March 1. The statement shall be verified by at least two principal officers and shall cover the preceding calendar year. Each PBM shall also send a copy of the statement to the board of pharmacy of the State of New Jersey.

    b. The statement shall be on forms prescribed by the commissioner and shall include:

    (1) a financial statement of the company, including its balance sheet and income statement for the preceding year;

    (2) the number of persons enrolled during the year, the number of covered persons enrolled as of the end of the year and the number of enrollments terminated during the year; and

    (3) other information relating to the operations of the PBM as required by the commissioner pursuant to this act.

    c. If the PBM is audited annually by an independent certified public accountant, a copy of the certified audit report shall be filed annually with the commissioner by June 30.

    d. The commissioner may extend the time prescribed for any PBM for filing annual statements or other reports or exhibits of any kind for good cause shown; however, the commissioner shall not extend the time for filing annual statements beyond 60 days after the time prescribed by subsection a. of this section. Any PBM, which fails to file its annual statement within the time prescribed by this section, may have its certification revoked or suspended by the director pursuant to section 9 of this act.

 

    12. a. In lieu of or in addition to making its own financial examination of a PBM, the commissioner may accept the report of a financial examination of any other person responsible for the PBM under the laws of another state certified by the insurance supervisory official, similar regulatory agency, or state health commissioner of another state.

    b. The commissioner shall coordinate financial examinations of a PBM that administers prescription drug benefits on behalf of health benefits plan sponsors in this State to ensure an appropriate level of regulatory oversight and avoid any undue duplication of effort or regulation. The PBM being examined shall pay the cost of the examination. The cost of the examination shall be deposited in a special fund that shall provide all expenses for the regulation, supervision and examination of all entities subject to regulation under this act.

 

    13. The State shall not contract with a health maintenance organization or a PBM to administer the "Pharmaceutical Assistance to the Aged and Disabled" program established pursuant to P.L.1975, c.194 (C.30:4D-20 et seq.) or the "Senior Gold Prescription Discount Program" established pursuant to P.L.2001, c.96 (C.30:4D-43 et seq.).

 

    14. a. The director, in consultation with the board of pharmacy of the State of New Jersey, shall adopt rules and regulations, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to effectuate the purposes of this act.

    b. The Commissioner of Banking and Insurance shall adopt rules and regulations, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to effectuate the purposes of this act.

 

    15. This act shall take effect on the 60th day after the date of enactment, but the director may take such anticipatory administrative action in advance as shall be necessary for the implementation of the act.

 

 

STATEMENT

 

    This bill, which is designated the "Pharmacy Benefits Management Company Act," requires that a pharmacy benefits management company (PBM), which manages prescription drug benefits for a health benefits plan covering New Jersey residents, be certified by the Director of the Division of Consumer Affairs in the Department of Law and Public Safety. The certificate would be for a three-year period and would be subject to revocation by the director for a violation of the provisions of the bill.

    The bill defines a PBM as an entity which manages prescription drug benefits on behalf of a health benefits plan sponsor with the objective of providing high-quality pharmaceutical care at the lowest possible cost. A PBM which is operated by a health maintenance organization solely for the benefit of its enrollees is exempted from the provisions of the bill, since its activities would be subject to regulation by the Department of Health and Senior Services pursuant to N.J.S.A.26:2J-1 et seq.

    The bill also provides that the State shall not contract with a health maintenance organization or a PBM to administer the "Pharmaceutical Assistance to the Aged and Disabled" program or the "Senior Gold Prescription Discount Program."

    The provisions of the bill take effect on the 60th day after the date of enactment, and the requirement for certification would become effective on the 180th day after the effective date.