ASSEMBLY, No. 2246

 

STATE OF NEW JERSEY

 

INTRODUCED JULY 18, 1996

 

 

By Assemblymen DORIA and KELLY

 

 

An Act providing for the certification of pharmacy benefit managers 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 Benefit Manager Act."

 

    2. The Legislature finds and declares that:

    a. Pharmacy benefit managers 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 raise serious questions about their role and impact with respect to health care services delivery in this State and nationally.

    c. It is the purpose of this act to provide for appropriate regulation of pharmacy benefit managers 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 benefit manager services.

 

    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.

    "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.

    "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 licensed to write prescriptions.

    "Pharmacy benefit manager" means a corporation, business or other entity, or unit within a corporation, business or other 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.

    "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, any contract or other arrangement under which a pharmacy benefit manager, hereinafter referred to as a PBM, manages prescription drug benefits for a health benefits plan which covers residents of this State shall be invalid unless the PBM meets the requirements for certification established by the director in accordance with the provisions of this act, except that a PBM which is operated by a health maintenance organization solely for the benefit of its enrollees is exempted from the provisions of this act.

    b. An application for a certificate shall be submitted on such a form, and in such a manner, as the director requires, 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.

    c. 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.

    d. Upon receipt of an application for a certificate, the director shall transmit a copy thereof to the Commissioner of Insurance, whose approval shall be required to the extent that the PBM involves the doing of an insurance business or a contract with an insurance company, a hospital service, medical service or health service corporation, or a health maintenance organization.

    e. 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 of Insurance.

    f. A certificate issued pursuant to subsection a. of this section 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.

    g. 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.

 

    5. A PBM certified pursuant to this act 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 prescription drug 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.

 

    6. a. The director may require the reporting to the division by a PBM certified pursuant to this act of such information on an annual or periodic basis regarding any activities conducted pursuant to section 5 of this act, as well as 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 certified pursuant to this act shall provide to each person covered 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 5 of this section, and includes such other information as the director may require.


    7. 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.

 

    8. 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,” N.J.S.2A:58-1 et seq.

 

    9. 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.

 

    10. 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 Benefit Manager Act," requires that a pharmacy benefit manager (PBM) managing prescription drug benefits for a health benefits plan which covers 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 pursuant to P.L.1973, c.337 (C.26:2J-1 et seq.).

    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.

    According to a 1995 report by the United States General Accounting Office (GAO), it is estimated that PBM's provide services for health benefits plans covering about half of the population nationally. The report indicated that some of the largest pharmaceutical manufacturers have recently merged or formed alliances with some of the largest PBM's, raising questions about their effect on competition in markets for drug manufacturers' products and PBM services. The report recommended that the Federal Trade Commission monitor "ventures involving drug manufacturers and PBM's to assure participants in the PBM and prescription drug markets that these markets remain competitive."

 

 

                             

"Pharmacy Benefit Manager Act."