S887

An Act concerning prescription drug services provided under 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. The Legislature finds and declares:

a. The State has a continuing responsibility to ensure that funds expended under the Medicaid program are used appropriately and efficiently to promote the public health;

b. Currently, prescription drug services provided under the Medicaid program are delivered via managed care organizations (MCOs) who contract with the Division of Medical Assistance and Health Services in the Department of Human Services to provide those Medicaid benefits at a fixed annual fee per patient;

c. Under the State’s current delivery model, each MCO contracts with a pharmacy benefits manager (PBM) to administer the prescription drug benefit;

d. Experience in other states, however, has demonstrated that transitioning this benefit to a fee-for-service (FFS) delivery system, in which the state reimburses pharmacies directly, potentially via a single PBM, generates significant prescription drug savings due to lower overall spending and a reduction in program administration costs;

e. For example, the West Virginia Medicaid Agency realized a savings of $54.4 million in the first year of such a transition;

f. Such savings has the potential to grow with the implementation of a reverse auction for the State’s PBM contract to administer the FFS Medicaid prescription drug benefit, similar to the reduced costs of prescription drugs achieved within the State Health Benefits Program and School Employees’ Health Benefits Program through the PBM reverse auction conducted in 2017; and

g. As prescription drug prices continue to rise, the State must employ innovative policy initiatives that help cover the costs of Medicaid services and prevent harmful benefit reductions for Medicaid recipients; and

h. Therefore, it is in the best interest of the State to transition Medicaid prescription drug services from a managed care to a FFS delivery system and to procure the most cost-effective PBM to administer such benefits.

2. a. The Division of Medical Assistance and Health Services in the Department of Human Services shall take all necessary actions to transition the prescription drug services provided under the Medicaid program, established pursuant to P.L.1968, c.413 (C.30:4D-1 et seq.), via a managed care delivery system to a fee-for-service delivery system by December 31, 2020. This section shall not apply to the provision of prescription drug benefits under section 340B of the federal Public Health Service Act (42 U.S.C. s.2566).

b. Beginning January 1, 2021, the division shall provide all prescription drug services under the Medicaid program, except those benefits exempt pursuant to subsection a. of this section, via a fee-for-service delivery system.

3. The Commissioner of Human Services shall apply for such State plan amendments or waivers as may be necessary to implement the provisions of this act and to secure federal financial participation for State Medicaid expenditures under the federal Medicaid program.

4. The Commissioner of Human Services 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.

5. a. Notwithstanding the provisions of any other law to the contrary, the Division of Purchase and Property in the Department of the Treasury shall conduct a reverse auction for the purposes of awarding a contract to a Pharmacy Benefits Manager (PBM) to administer the prescription drug services provided under fee-for-service delivery system of the Medicaid program, established pursuant to P.L.1968, c.413 (C.30:4D-1 et seq.). To effectuate the purpose of this subsection, the division shall procure from qualified vendors the following services based upon price and other factors:

(1) a technology platform required to conduct a reverse auction and any related professional services through an expedited procurement process, as provided in subsection b. and subsection c. of this section, no later than July 1, 2020. The contract for such services shall not be awarded to a vendor that is a PBM, is a subsidiary or affiliate of a PBM, is managed by a PBM, or receives remuneration from a PBM for aggregating clients into a contractual relationship with a PBM. The vendor may not outsource any part of the reverse auction or the automated, real-time, electronic, line-by-line, review of PBM prescription drug reimbursements.

The technology platform shall, at a minimum, possess the ability to:

(i) conduct an automated, online, reverse auction of PBM services;

(ii) automate re-pricing of PBM proposals for Medicaid prescription drug spending using Medicaid claims data and other nationally-accepted data sources, as determined by the Commissioner of Human Services, for comparisons of the costs of PBM proposals;

(iii) produce an automated report and analysis of PBM bids, including the ranking of bids, based on the comparative costs and qualitative aspects thereof, within a 48-hour time period following close of each round of reverse auction bidding;

(iv) perform real-time, electronic, line-by-line, review of PBM Medicaid prescription drug reimbursements using an automated technology platform that allows for online comparison of PBM reimbursements and auditing of other aspects of the services provided by the PBM; and

(v) conform to pricing restrictions of federal and State government.

Related professional services shall include, at a minimum, technical assistance to the State to evaluate the qualifications of bidders on a PBM procurement, to provide online automated reverse auction services to support the Department of the Treasury in comparing the pricing for the PBM procurement, and any other services deemed necessary by the Department of Treasury; and

(2) a PBM and related services via a reverse auction process through the expedited procurement process, as provided in subsection b. and subsection c. of this section, no later than January 1, 2021.

b. Except as otherwise provided in subsection c. of this section, the division shall procure the services outlined in subsection a. of this section without the need for formal advertisement, but through the solicitation of proposals from professional services vendors.

c. Notwithstanding the provisions of any other law to the contrary, for the purpose of expediting the procurements required pursuant to subsection a. of this section, the following provisions shall apply as modifications to law or regulation that may interfere with the expedited award of the outlined services:

(1) the timeframes for challenging the specifications shall be modified as determined by the division;

(2) in lieu of advertising in accordance with sections 2, 3, and 4 of P.L.1954, c.48 (C.52:34-7, C.52:34-8, and C.52:34-9), the division shall advertise the request for proposals for the above services and any addenda thereto on the division’s website;

(3) the period of time that the State Comptroller has to review the request for proposals for these professional services procurements for compliance with applicable public contracting laws, rules and regulations, pursuant to section 10 of P.L.2007, c.52 28 (C.52:15C-10), shall be 10 business days or less if practicable, as determined by the State Comptroller;

(4) the timeframes for submission under section 4 of P.L.2012, c.25 (C.52:32-58) and section 1 of P.L.1977, c.33 (C.52:25-24.2) shall be extended to prior to the issuance of a Notice of Intent to Award;

(5) the provisions of section 1 of P.L.2005, c.92 (C.52:34-13.2) shall not apply to technical and support services, under this section, provided by a vendor using a “24/7 follow-the-sun model” as long as the contractor is able to provide such services in the United States during the business day; and

(6) the term “bids” in subparagraph (f) of subsection a. of section 7 of P.L.1954, c.48 (C.52:34-12) shall not include pricing which will be revealed to all responsive bidders during the negotiation process.

d. The division may, to the extent necessary, waive or modify any other law or regulation that may interfere with the expeditious procurement of these services.

e. For the purposes of this section:

“Reverse auction” means an automated bidding process conducted online that starts with an opening price and allows qualified bidders to counter offer a lower price, for as many rounds of bidding as determined by the division.

“Price” means the projected cost of a PBM bid for administering prescription drug services provided under the Medicaid program based on automated re-pricing of PBM bids for purposes of comparison of PBM proposal costs to the State over the duration of the contract.

6. This act shall take effect immediately.

STATEMENT

The bill requires the Department of Human Services (DHS) to transition Medicaid prescription drug services from a managed care to a fee-for-service (FFS) delivery system, and provides for the procurement by the State of a pharmacy benefits manager (PBM) to administer those FFS Medicaid benefits. As defined by the bill, “reverse auction” means an automated bidding process conducted online that starts with an opening price and allows qualified bidders to counter offer a lower price, for as many rounds of bidding as determined by the Division of Purchase and Property in the Department of the Treasury.

The transition to a FFS delivery system is expected to generate significant prescription drug savings under the Medicaid program due to lower overall spending and a reduction in program administration costs. West Virginia’s Medicaid agency implemented a similar transition in July 2017, anticipating a $30 million savings for the state. In March 2019, the West Virginia Bureau for Medical Services released a report showing actual savings of $54.4 million to the state Medicaid program for the first year of the carve-out. It is further anticipated that the implementation of a reverse auction from the PBM contract will save additional public funds, similar to the reduced costs of prescription drugs achieved within the State Health Benefits Program and School Employees’ Health Benefits Program through the PBM reverse auction conducted in 2017.

Specifically, under the bill, the Division of Medical Assistance and Health Services in the DHS is required to take all necessary actions to transition all prescription drug services provided under the Medicaid program via a managed care delivery system to a fee-for-service delivery system by December 31, 2020. This bill explicitly states that this transition does not apply to the provision of prescription drug benefits under section 340B of the federal Public Health Service Act (42 U.S.C. s.2566). Beginning January 1, 2021, the division is required to provide all prescription drug services under the Medicaid program, except those benefits exempt as identified above, via a fee-for-service delivery system

Furthermore, notwithstanding the provisions of any other law to the contrary, the Division of Purchase and Property in the Department of the Treasury is required to conduct a reverse auction for the purposes of awarding a contract to a Pharmacy Benefits Manager (PBM) to administer the Medicaid prescription drug services provided under the fee-for-service delivery system.

The bill directs the division to procure from qualified vendors the following services based upon price and other factors:

(1) a technology platform required to conduct a reverse auction and any related professional services through an expedited procurement process, as outlined in the bill, no later than July 1, 2020. The contract for such services shall not be awarded to a vendor that is a PBM, is a subsidiary or affiliate of a PBM, is managed by a PBM, or receives remuneration from a PBM for aggregating clients into a contractual relationship with a PBM. The vendor may not outsource any part of the reverse auction or the automated, real-time, electronic, line-by-line, review of PBM prescription drug reimbursements.

The technology platform is required, at a minimum, to possess the ability to: conduct an automated, online, reverse auction of PBM services; automate re-pricing of PBM proposals for Medicaid prescription drug spending using Medicaid claims data and other nationally-accepted data sources, as determined by the Commissioner of Human Services, for comparisons of the costs of PBM proposals; produce an automated report and analysis of PBM bids, including the ranking of bids, based on the comparative costs and qualitative aspects thereof, within a 48-hour time period following close of each round of reverse auction bidding; perform real-time, electronic, line-by-line, review of PBM Medicaid prescription drug reimbursements using an automated technology platform that allows for online comparison of PBM reimbursements and auditing of other aspects of the services provided by the PBM; and conform to pricing restrictions of federal and State government.

Any related professional services are to include, at a minimum, technical assistance to the State to evaluate the qualifications of bidders on a PBM procurement, to provide online automated reverse auction services to support the Department of the Treasury in comparing the pricing for the PBM procurement, and any other services deemed necessary by the Department of Treasury; and

(2) a PBM and related services via a reverse auction process through the expedited procurement process, as provided in subsection b. and subsection c. of this section, no later than January 1, 2021.

The bill also establishes an expedited process for the procurement of the services outline in the bill. For example, except as otherwise provided below, the division is required to procure these services without the need for formal advertisement, but through the solicitation of proposals from professional services vendors.

In addition, notwithstanding the provisions of any other law to the contrary, the bill provides for the following modifications to law or regulation that may interfere with the expedited award of the outlined services:

(1) the timeframes for challenging the specifications are to be modified as determined by the division;

(2) in lieu of advertising in accordance with sections 2, 3, and 4 of P.L.1954, c.48 (C.52:34-7, C.52:34-8, and C.52:34-9), the division is required to advertise the request for proposals for the above services and any addenda thereto on the division’s website;

(3) the period of time that the State Comptroller has to review the request for proposals for these professional services procurements for compliance with applicable public contracting laws, rules and regulations, pursuant to section 10 of P.L.2007, c.52 28 (C.52:15C-10), is to be 10 business days or less if practicable, as determined by the State Comptroller;

(4) the timeframes for submission under section 4 of P.L.2012, c.25 (C.52:32-58) and section 1 of P.L.1977, c.33 (C.52:25-24.2) are to be extended to prior to the issuance of a Notice of Intent to Award;

(5) the provisions of section 1 of P.L.2005, c.92 (C.52:34-13.2) are to not apply to technical and support services, under this section, provided by a vendor using a “24/7 follow-the-sun model” as long as the contractor is able to provide such services in the United States during the business day; and

(6) the term “bids” in subparagraph (f) of subsection a. of section 7 of P.L.1954, c.48 (C.52:34-12) is to not include pricing which will be revealed to all responsive bidders during the negotiation process.

The bill further authorizes the division, to the extent necessary, to waive or modify any other law or regulation that may interfere with the expeditious procurement of these services.