A1502 2R ACS

An Act concerning pharmacy benefits managers²[,] and² amending ²and supplementing² various parts of the statutory law²[ and supplementing P.L.2015, c.179 (C.17B:27F-1 et seq.)]².

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

1. (New section) The Legislature finds and declares:

a. Pharmacy benefits managers administer prescription drug benefits for health insurers, employers, union health plans, and public programs, and exercise substantial authority over formulary design, rebate negotiations, pharmacy reimbursement, and patient access to medications within the State of New Jersey.

b. Pharmacy benefits managers occupy a central position in the prescription drug supply chain, negotiating rebates and discounts with drug manufacturers, determining pharmacy network participation, and influencing the out-of-pocket costs borne by patients.

c. The 2024 bipartisan report issued by the U.S. House Committee on Oversight and ²[Accountability] Government Reform² entitled ²“²The Role of Pharmacy Benefit Managers in Prescription Drug Markets²”² found that the largest pharmacy benefits managers control a dominant share of prescription drug claims, are frequently vertically integrated with major insurers and affiliated pharmacies, and derive significant revenue from manufacturer-paid rebates and price concessions tied to formulary placement and list prices.

d. The Federal Trade Commission, in its first interim report ²“²Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies,²”² released in 2024, found that pharmacy benefits managers exercise significant market power, operate through opaque rebate and spread pricing arrangements, and may reimburse independent pharmacies at rates that threaten their viability while charging plans higher amounts.

e. In the Federal Trade Commission’s second interim report, released in 2025 and entitled ²“²Specialty Generic Drugs: A Growing Profit Center for Vertically Integrated Pharmacy Benefit Managers,²”² the commission found that vertically integrated pharmacy benefits managers may generate substantial profits through affiliated specialty pharmacies, including markups on specialty generic drugs, creating financial incentives to steer patients internally and maximize margin rather than minimize net cost.

f. The Federal Trade Commission documented that pharmacy steering, restrictive network design, differential cost-sharing, and internal transfer pricing arrangements may reduce patient choice, disadvantage independent and community pharmacies, and create conflicts of interest inconsistent with fiduciary standards.

g. Pharmacy benefits managers frequently receive compensation calculated as a percentage of a drug’s list price, rebate amount, wholesale acquisition cost, or utilization volume, thereby linking pharmacy benefits manager revenue directly to higher list prices and larger rebates².²

h. Compensation structures tied to rebates, discounts, list prices, or affiliated pharmacy margins create inherent conflicts of interest and may incentivize pharmacy benefits managers to favor higher-cost drugs or preferred internal dispensing channels over lower-cost or clinically appropriate alternatives².²

i. An article published in the Oxford Health Affairs Scholar, entitled ²“²The cost of misaligned incentives in the pharmaceutical supply chain,²”² discusses how research conducted by the University of Southern California’s Schaeffer Center for Health Policy & Economics estimates that delinking pharmacy benefits manager and other supply chain compensation from drug list prices and rebate-based incentives could reduce national prescription drug spending by approximately $95.4 billion annually, or nearly 15 percent of net spending, without undermining pharmaceutical innovation.

j. That research further concludes that fixed, transparent administrative fee models would eliminate incentives tied to list-price inflation and rebate magnitude, align pharmacy benefits manager incentives with lowest net cost objectives, and generate substantial savings for employers, public programs, and patients.

k. Congress enacted comprehensive pharmacy benefits manager reforms under the bipartisan “Consolidated Appropriations Act, 2026,” Pub. L. No. 119-75, to address compensation distortions, transparency deficiencies, and conflicts of interest in federal prescription drug programs.

l. The “Consolidated Appropriations Act, 2026” established a “bona fide service fee” model for Medicare prescription drug coverage, requiring pharmacy benefits manager compensation to consist solely of flat, fair-market-value administrative fees not contingent on list price, rebate value, utilization, or formulary placement, and requiring 100 percent pass-through of manufacturer rebates and price concessions.

m. The “Consolidated Appropriations Act, 2026” also strengthened transparency requirements, enhanced audit rights for plan sponsors, and reinforced “any willing pharmacy” protections to prevent discriminatory pharmacy steering and preserve access to community and rural pharmacies.

n. The bipartisan congressional reforms under the “Consolidated Appropriations Act, 2026” reflect a national consensus that pharmacy benefits manager compensation must be structurally delinked from rebates and price inflation, must be transparent and auditable, and must not reward spread pricing or conflicted pharmacy steering practices.

o. Pharmacy benefits managers owe a financial responsibility to clients, including employers; insurers; union plans; and public programs, to act in the best interests of plan participants and beneficiaries.

p. Aligning pharmacy benefits manager revenue with rebate magnitude, list price inflation, or affiliated pharmacy profit centers may materially conflict with those fiduciary obligations.

q. There exists a compelling State interest in ensuring that pharmacy benefits manager compensation is transparent, delinked from rebate and discount volume, free from conflicts of interest, protective of pharmacy access, and structured to reduce prescription drug costs for New Jersey residents.

2. Section 1 of P.L.2015, c.179 (C.17B:27F-1) is amended to read as follows:

1. As used in P.L.2015, c.179 (C.17B:27F-1 et seq.):

²“Affiliated pharmacy” means a contract pharmacy that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with a pharmacy benefit manager.²

"Anticipated loss ratio" means the ratio of the present value of the future benefits payments, including claim offsets after the point of sale, to the present value of the future premiums of a policy form over the entire period for which rates are computed to provide health insurance coverage.

"Average wholesale price" means the average wholesale price of a prescription drug determined by a national drug pricing publisher selected by a carrier. The average wholesale price shall be identified using the national drug code published by the National Drug Code Directory within the United States Food and Drug Administration.

"Brand-name drug" means a prescription drug marketed under a proprietary name or registered trademark name, including a biological product.

"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.

"Contracted pharmacy" means a pharmacy that participates in the network of a pharmacy benefits manager through a contract with²[:

a.]² the pharmacy benefits manager directly²[;

b.] or an intermediary, including but not limited to,² a pharmacy services administration organization; or

²[c.]² a pharmacy group purchasing organization², including rebate aggregators².

"Cost-sharing amount" means the amount paid by a covered person as required under the covered person's health benefits plan for a prescription drug at the point of sale.

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

"Department" means the Department of Banking and Insurance.

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

"Health benefits plan" means a benefits plan which pays hospital or medical expense benefits for covered services, or prescription drug benefits for covered services, and is delivered or issued for delivery in this State by or through a carrier or any other sponsor. For the purposes of P.L.2015, c.179 (C.17B:27F-1), health benefits plan shall not include the following plans, policies or contracts: accident only, credit disability, long-term care, Medicare supplement coverage; TRICARE supplement coverage, coverage for Medicare services pursuant to a contract with the United States government, the State Medicaid program established pursuant to P.L.1968, c.413 (C.30:4D-1 et seq.), coverage arising out of a worker's compensation or similar law, the State Health Benefits Program, the School Employees' Health Benefits Program, or [a self-insured health benefits plan governed by the provisions of the federal "Employee Retirement Income Security Act of 1974," 29 U.S.C. s.1001 et seq.,] ²a self-insured health benefits plan governed by the provisions of the federal "Employee Retirement Income Security Act of 1974," 29 U.S.C. s.1001 et seq.,² coverage under a policy of private passenger automobile insurance issued pursuant to P.L.1972, c.70 (C.39:6A-1 et seq.), or hospital confinement indemnity coverage. ²[For the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill), “health benefits plan” shall include the State Medicaid program established pursuant to P.L.1968, c.413 (C.30:4D-1 et seq.), the State Health Benefits Program, and the School Employees’ Health Benefits Program.]

“Manufacturer” means an entity that creates, makes, or produces drugs by compounding, growing, or other process. This definition shall apply to persons engaged in the drug manufacturing business who do not maintain a manufacturing location in this State. “Manufacturer” shall not apply to licensed pharmacies or to licensed professional individuals such as, but not limited to, pharmacists, physicians, dentists, or veterinarians when engaged in the lawful pursuit of their professions.²

"Maximum allowable cost" means the maximum amount a health insurer will pay for a generic drug or brand-name drug that has at least one generic alternative available.

"Network pharmacy" means a licensed retail pharmacy or other pharmacy provider that contracts with a pharmacy benefits manager either directly or by and through ²[a contract with] an intermediary, including but not limited to,² a pharmacy services administrative organization.

"Pharmacy" means any place in the State, either physical or electronic, where drugs are dispensed or pharmaceutical care is provided by a licensed pharmacist, but shall not include a medical office under the control of a licensed physician.

"Pharmacy benefits manager" means a corporation, business, or other entity, or unit within a corporation, business, or other entity, that, pursuant to a contract or under an employment relationship with a carrier, a self-insurance plan or other third-party payer, either directly or through an intermediary, administers prescription drug benefits on behalf of a purchaser.

"Pharmacy benefits manager [compensation] ²[fee] compensation²" means [the difference between: (1) the amount of payments made by a carrier of a health benefits plan to its pharmacy benefits manager; and (2) the value of payments made by the pharmacy benefits manager to dispensing pharmacists for the provision of prescription drugs or pharmacy services with regard to pharmacy benefits covered by the health benefits plan] ²[a payment that covers the cost of providing one or more pharmacy benefits management services and does not exceed the value of the service or services actually performed by the pharmacy benefits manager] the difference between: (1) the amount of payments made by a carrier of a health benefits plan to its pharmacy benefits manager; and (2) the value of payments made by the pharmacy benefits manager to dispensing pharmacists for the provision of prescription drugs or pharmacy services with regard to pharmacy benefits covered by the health benefits plan².

"Pharmacy benefits management services" means [the provision of any of the following services on behalf of a purchaser: 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]:

(1) negotiating the price of prescription drugs, including negotiating and contracting for direct or indirect rebates, discounts, or other price concessions;

(2) managing any aspects of a prescription drug benefit, including but not limited to, the processing and payment of claims for prescription drugs, the performance of utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to the prescription drug benefit, contracting with network pharmacies, controlling the cost of covered prescription drugs, managing data relating to the prescription drug benefit, or the provision of services related thereto;

(3) performing any administrative, managerial, clinical, pricing, financial, reimbursement, data administration or reporting, or billing service; and

(4) any other services as the department may define pursuant to rule or regulation.

"Pharmacy services administrative organization" means an entity operating within the State that contracts with independent pharmacies to conduct business on their behalf with third-party payers.

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

"Prescription drug benefits" means the benefits provided for prescription drugs and pharmacy services for covered services under a health benefits plan contract.

"Purchaser" means any sponsor of a health benefits plan who enters into an agreement with a pharmacy benefits management company for the provision of pharmacy benefits management services to covered persons.

²“Rebate aggregator” means a person or entity that provides formulary management and formulary rebate administrative services, or aggregates prescription drug utilization volume and distributes rebates to pharmacy benefit managers, or both.

“Spread pricing” means the model of prescription drug pricing in which the pharmacy benefits manager or an affiliated intermediary, including a rebate aggregator, charges a health benefits plan, carrier, or purchaser a contracted price for prescription drugs, and the contracted price for the prescription drugs differs from the amount the pharmacy benefits manager directly or indirectly pays the pharmacist or pharmacy.²

(cf: P.L.2023, c.107, s.1)

²3. Section 2 of P.L.2015, c.179 (C.17B:27F-2) is amended to read as follows:

2. a. Upon execution or renewal of each contract, or at such a time when there is any material change in the term of the contract, a pharmacy benefits manager shall, with respect to contracts between a pharmacy benefits manager and a pharmacy services administrative organization, or between a pharmacy benefits manager and a contracted pharmacy:

[a.] (1) include in the contract the sources utilized to determine multiple source generic drug pricing, brand drug pricing, and the wholesaler in the State of New Jersey where pharmacies may acquire the product, including, but not limited to, the brand effective rate, generic effective rate, dispensing fee effective rate, maximum allowable cost or any other pricing formula for pharmacy reimbursement;

(2) update that pricing information every seven calendar days; [and]

(3) establish a reasonable process by which contracted pharmacies have a method to access relevant maximum allowable cost pricing lists, brand effective rate, generic effective rate, and dispensing fee effective rate, or any other pricing formulas for pharmacy reimbursement; and

(4) provide a reasonable administrative appeal procedure, including a right to appeal in accordance with section 4 of P.L.2015, c.179 (C.17B:27F-4), to allow pharmacies with which the carrier or pharmacy benefits manager has a contract to challenge maximum allowable costs for a specified drug.

b. [Additionally, a pharmacy benefits manager shall:] Upon execution or renewal of each contract, or at such a time when there is any material change in the term of the contract, a pharmacy benefits manager shall, with respect to contracts between a pharmacy benefits manager and a carrier:

(1) maintain a procedure to eliminate drugs from the list of drugs subject to multiple source generic drug pricing and brand drug pricing, or modify maximum allowable cost rates, brand effective rate, generic effective rate, dispensing fee effective rate or any other applicable pricing formula in a timely fashion and make that procedure easily accessible to the pharmacy services administrative organizations or the pharmacies that they are contractually obligated with to provide that information according to the requirements of this section; and

(2) provide an internal appeal mechanism to resolve any dispute raised by a carrier [or pharmacy], regardless of whether the carrier [or] and pharmacy benefits manager has a contract to challenge maximum allowable costs for a specified drug. Any dispute regarding the determination of an internal appeal conducted pursuant to this subsection concerning reimbursements may be referred to binding arbitration. The Commissioner of Banking and Insurance shall contract with a nationally recognized, independent organization that specializes in arbitration to conduct the arbitration proceedings.

c. The binding arbitration shall adhere to the following requirements:

(1) the party requesting arbitration shall notify the other party that arbitration has been initiated and state its final offer before arbitration;

(2) arbitration shall be initiated by filing a request with the department;

(3) the arbitration shall consist of a review of the written submissions by both parties, which shall include the final offer for the payment; and

(4) the arbitrator's decision shall be one of the two amounts submitted by the parties as their final offers and shall be binding on both parties. The decision of the arbitrator shall include detailed written findings and shall be issued within 30 days after the request is filed with the department. The detailed written findings shall be an analysis of the decision including, but not limited to, information concerning any databases, previous awards, or other documentation or arguments that contributed to the arbitrator's decision. The arbitrator's expenses and fees shall be split equally among the parties except in situations in which the arbitrator determines that the payment made by the pharmacy benefits manager was not made in good faith, in which case the pharmacy benefits manager shall be responsible for all the arbitrator's expenses and fees. Each party shall be responsible for its own costs and fees, including legal fees if any.

d. (1) The department may adopt rules and regulations governing the arbitration process, including setting minimum qualifications and conflict standards for arbitrators; establishing arbitration fees and minimum dispute thresholds for arbitration; and prohibiting bundling multiple disputes to meet such thresholds.

(2) Arbitration outcomes shall be reported to the department.

e. Nothing in this section shall be construed to diminish the department’s oversight or authority over licensed pharmacy benefits managers.²

(cf: P.L.2023, c.107, s.4)

²4. Section 3 of P.L.2023, c.107 (C.17B:27F-3.1) is amended to read as follows:

3. a. A carrier shall:

(1) monitor all activities carried out on behalf of the carrier by a pharmacy benefits manager if the carrier contracts with a pharmacy benefits manager and is related to a carrier's prescription drug benefits; and

(2) ensure that all requirements of this section are met.

b. A carrier that contracts with a pharmacy benefits manager to perform any activities related to the carrier's prescription drug benefits shall ensure that, under the contract, the pharmacy benefits manager acts as the carrier's agent in [good faith and fair dealing in] the performance of all of its contractual duties. All funds received by the pharmacy benefits manager in relation to providing pharmacy benefits management services shall be used or distributed only pursuant to the pharmacy benefits manager's contract with the health benefits plan or carrier or applicable law; including any administrative fee or payment to the pharmacy benefits manager expressly provided for in the contract to compensate the pharmacy benefits manager for its services. [Any funds received by the pharmacy benefits manager through spread pricing shall be subject to this subsection.]

c. (1) A pharmacy benefits manager interacting with a covered person shall have [the same duty to] a duty of good faith and fair dealing with the covered person [as the health benefits plan or carrier for whom it is] in performing pharmacy benefits management services.

(2) A pharmacy benefits manager shall have a [duty of good faith and fair dealing with all parties, including but not limited to covered persons and pharmacies, with whom it interacts in the performance of pharmacy benefits management services] fiduciary duty to act in the best interests of a carrier with which it contracts to allow that carrier to design plans in a manner that reduces premiums and out-of-pocket costs paid by covered persons.

(3) A pharmacy benefits manager shall not engage in any marketing activity that uses inaccurate or misleading information to convince or attempt to convince covered persons to use a contracted or network pharmacy.

d. A carrier or pharmacy benefits manager shall not require a covered person to make a payment at the point of sale for a covered prescription drug in an amount greater than the lesser of:

(1) the applicable cost-sharing amount for the prescription drug; or

(2) the amount a covered person would pay for the prescription medication if the covered person purchased the prescription medication without using a health benefits plan.

e. A carrier shall provide a reasonably adequate retail pharmacy network for the provision of prescription drugs for its covered persons.

f. For the purposes of this section, "health benefits plan" shall include the State Health Benefits Plan, the School Employees' Health Benefits Plan, the State Medicaid program established pursuant to P.L.1968, c.413 (C.30:4D-1 et seq.), or a self-insured health benefits plan governed by the provisions of the federal "Employee Retirement Income Security Act of 1974," 29 U.S.C., ss.1001 et seq.²

(cf: P.L.2023, c.107, s.3)

²[3.] 5.² Section 7 of P.L.2023, c.107 (C.17B:27F-3.3) is amended to read as follows:

7. a. A carrier, or a pharmacy benefits manager under contract with a carrier, shall establish a pharmacy and therapeutics committee responsible for managing the formulary system.

b. A carrier, or a pharmacy benefits manager under contract with a carrier, shall not allow a person with a conflict of interest to be a member of its pharmacy and therapeutics committee.

A carrier, or a pharmacy benefits manager under contract with a carrier, shall require that its pharmacy and therapeutics committee meet the requirements for conflict of interest as set by the Centers for Medicare and Medicaid Services or meets the accreditation standards of the National Committee for Quality Assurance or another independent accrediting organization.

c. ²[A pharmacy benefits manager shall not provide recommendation, advice, or counsel to a plan sponsor or carrier concerning the inclusion of a prescription drug in a formulary system, or in a particular tier of the formulary system, that places a prescription drug with a higher cost to the patient, including but not limited to coinsurance, copayments, deductibles, and other cost-sharing, in a more favorable position than a generic or biosimilar prescription drug with a lower cost, if the recommendation, advice, or counsel is based solely on the cost of the prescription drug and not on another factor.

d. The provisions of this section shall apply to contracts between a pharmacy benefits manager and the State Health Benefits Program or School Employees’ Health Benefits Program.] A pharmacy and therapeutics committee shall ensure that no decision concerning the inclusion of a prescription drug in a formulary system, or in a particular tier of the formulary system, places a prescription drug with a higher cost in a more favorable position than a generic or biosimilar prescription drug with a lower cost.²

(cf: P.L.2023, c.107, s.7)

²[4.] 6.² Section 9 of P.L.2023, c.107 (C.17B:27F-3.4) is amended to read as follows:

9. a. If a carrier uses a pharmacy benefits manager to administer or manage the prescription drug benefits of covered persons, any pharmacy benefits manager [compensation] fee, for purposes of calculating a carrier's anticipated loss ratio or any loss ratio calculated as part of any applicable medical loss ratio filing or rate filing, shall:

(1) constitute an administrative cost incurred by the carrier in connection with a health benefits plan; and

(2) not constitute a benefit provided under a health benefits plan. A carrier shall claim only the amounts paid by the pharmacy benefits manager to a pharmacy or pharmacist as an incurred claim.

b. Any rate filing submitted by a carrier with respect to a health benefits plan that provides coverage for prescription drugs or pharmacy services and that is administered or managed by a pharmacy benefits manager shall include:

(1) a memorandum prepared by a qualified actuary describing the calculation of the pharmacy benefits manager [compensation] fee; and

(2) any records and supporting information as the department reasonably determines is necessary to confirm the calculation of the pharmacy benefits manager [compensation] fee.

c. Upon request, a carrier shall provide any records to the department that relate to the calculation of the pharmacy benefits manager and pharmacy services administrative organization [compensation] fee.

d. A pharmacy benefits manager and pharmacy services administrative organization shall provide any necessary documentation requested by a carrier that relates to pharmacy benefits manager [compensation] fees in order to comply with the requirements of this section.

e. No pharmacy benefit manager may derive income from pharmacy benefits services provided to a carrier or health benefits plan in this State except for income derived from a pharmacy benefits manager fee. The amount of any pharmacy benefits manager fees shall be set forth in the agreement between the pharmacy benefits manager and the carrier or health benefits plan.

f. The pharmacy benefits manager fee charged or paid to a pharmacy benefits manager from a carrier or health benefits plan shall not be directly or indirectly based or contingent upon:

(1) the acquisition cost or any other price metric of a drug;

(2) the amount of savings, rebates, or other fees charged, realized, or collected by or generated based on the activity of the pharmacy benefits manager; or

(3) the amount of premiums, deductibles, or other cost sharing or fees charged, realized, or collected by the pharmacy benefits manager from patients or other persons on behalf of a patient.

g. Upon request by the department or a purchaser, a pharmacy benefits manager shall disclose to the department or purchaser the amount of any fees paid by the pharmacy benefits manager to a third party broker.

h. Subsections e. and f. of this section shall also apply to a contract between a pharmacy benefits manager and the State Health Benefits Program ²[or] ,² the School Employees’ Health Benefits Program², or the State Medicaid program established pursuant to P.L.1968, c.413 (C.30:4D-1 et seq.)².

i. Each pharmacy benefits manager authorized to operate in this State pursuant to P.L.2015, c.179 (C.17B:27F-1 et seq.) shall certify to the commissioner, by December 31st of each year, that the pharmacy benefits manager has fully and completely complied with the requirements of this section during the prior calendar year. Each certification submitted pursuant to this subsection shall be signed by the chief executive officer or chief financial officer of the pharmacy benefits manager.

²j. As used in this section, “pharmacy benefits manager fee” means a payment that covers the cost of providing one or more pharmacy benefits management services and shall not exceed the bona fide value of the itemized service or services actually performed by the pharmacy benefits manager on behalf of the carrier or health benefits plan that the carrier or health benefits plan would otherwise perform or contract for in the absence of the service arrangement, whether or not the carrier or health benefits plan takes title to the prescription drug. The value of the service or services shall be based on the value to the carrier or health benefits plan.²

(cf: P.L.2023, c.107, s.9)

²[5. a. A pharmacy benefits manager shall have a fiduciary duty to act in the best interests of a carrier with which it contracts. A pharmacy benefits manager shall also, in connection with a contract, have a fiduciary duty to act in the best interests of the State Health Benefits Program ¹[and] ,¹ School Employees’ Health Benefits Program¹, and State Medicaid program¹. Nothing in this subsection shall be construed as creating, establishing, or authorizing a private cause of action by an aggrieved subscriber, enrollee, or covered person against a pharmacy benefits manager who has violated, or is alleged to have violated, the provisions of this subsection.

b. A pharmacy benefits manager shall not engage in any marketing activity that uses inaccurate or misleading information to convince or attempt to convince covered persons to use a contracted or network pharmacy.]²

²[6. (New section) An agreement between a pharmacy benefits manager and a manufacturer shall not be valid if the contract conditions any rebate on the exclusion of generic drugs from coverage.]²

²[7. (New section) a. A contract between a pharmacy benefits manager and a contracted pharmacy or network pharmacy shall, in the event of a dispute, be presumed to be a “contract of adhesion.”

b. ¹(1)¹ A pharmacy benefits manager shall, for a prescription drug, reimburse ¹pharmacies at¹ the State fee-for-service benchmark of the National Average Drug Acquisition Cost (NADAC) plus the prevailing State defined Medicaid professional dispensing fee. ¹[If the NADAC is not established for a specific national drug code, the ingredient reimbursement rate shall default to the Wholesale Average Cost (WAC), or the Suggested Wholesale Price (SWP). The provisions of this subsection shall not apply to a pharmacy in which the]

(2) If a¹ pharmacy benefits manager or its affiliate maintains an ownership interest or control ¹of a pharmacy, the pharmacy benefits manager shall reimburse the pharmacy, for a prescription drug, at the State fee-for-service benchmark of the NADAC.

(3) Pursuant to paragraphs (1) and (2) of this subsection, if the NADAC is not established for a specific national drug code, the ingredient reimbursement rate shall default to the Wholesale Average Cost (WAC) or the Suggested Wholesale Price (SWP)¹.

c. A pharmacy benefits manager shall not engage in differential payment pricing, including differential payment pricing based on ownership or affiliation.

d. A pharmacy benefits manager shall not deny a pharmacy or pharmacist the right to participate as a contract pharmacy under a policy or plan if the pharmacy or pharmacist agrees to the terms and conditions established for participation in the network of the carrier, pharmacy benefits manager, health plan, or other administrator.

e. A pharmacy benefits manager shall not:

(1) require a covered person to use a pharmacy, including a mail-order or specialty pharmacy, in which the pharmacy benefits manager or its affiliate maintains an ownership interest or control; or

(2) offer or implement a plan design that encourages a covered person to use a pharmacy, including a mail-order or specialty pharmacy, in which the pharmacy benefits manager or an affiliate maintains an ownership interest or control.

¹f. The provisions of subsections d. and e. of this section shall not apply to a self-insured health benefits plan governed by the provisions of the federal “Employee Retirement Income Security Act of 1974,” 29 U.S.C. s.1001 et seq.¹]²

²[8. This act shall take effect on the first day of the seventh month next following the date of enactment and shall apply to contracts and agreements entered into, renewed, modified, or amended on or after the effective date, but the Commissioner of Banking and Insurance may take such anticipatory administrative action in advance thereof as shall be necessary for the implementation of the act.]²

²7. Section 4 of P.L.2015, c.179 (C.17B:27F-4) is amended to read as follows:

4. All contracts between a pharmacy benefits manager and intermediaries, including a rebate aggregator, and a pharmacy services administrative organization, or its contracted pharmacies, and all contracts directly between a pharmacy benefits manager and a pharmacy shall include a process to appeal, investigate, and resolve disputes regarding brand and multiple source generic drug pricing, including, if applicable, brand effective rate, generic effective rate, dispensing fee effective rate, and any other pricing formula for pharmacy reimbursement. The contract provision establishing the process shall include the following:

a. The right to appeal shall be limited to 14 calendar days following the initial claim;

b. The appeal shall be investigated and resolved by the pharmacy benefits manager through an internal process within 14 calendar days of receipt of the appeal by the pharmacy benefits manager;

c. A telephone number at which a pharmacy services administrative organization, or a pharmacy may contact the pharmacy benefits manager and speak with an individual who is involved in the appeals process; and

d. (1) If the appeal is denied, the pharmacy benefits manager shall:

(a) provide the reason for the denial to the pharmacy services administrative organization and its contracted pharmacies, and the pharmacy services administrative organization shall inform its contracted pharmacies of the availability, location and pricing of the appealed drug in the State;

(b) provide the reason for the denial directly to a pharmacy, if it contracts directly with a pharmacy benefits manager;

(c) identify the national drug code of a drug product that is available for purchase by the specific contracted pharmacy appealing the claim in this State from wholesalers registered pursuant to P.L.1961, c.52 (C.24:6B-1 et seq.) at a price which is available to the specific contracted pharmacy appealing the claim and which is equal to or less than the maximum allowable cost or the brand effective rate, generic effective rate or other pricing for the appealed drug as determined by the pharmacy benefits manager; and

(d) provide the name of wholesalers registered under P.L.1961, c.52 (C.24:6B-1 et seq.) from which the appealing pharmacy can obtain the brand or multiple source generic drug at or below the brand effective rate, generic effective rate, dispensing fee effective rate, maximum allowable cost or any other pricing formula for pharmacy reimbursement;

(2) If the appeal is approved, the pharmacy benefits manager shall make the price correction, permit the reporting pharmacy to reverse and rebill the appealed claim, and make the price correction effective for all similarly situated pharmacies from the date of the approved appeal.

e. A pharmacy benefits manager shall not terminate a pharmacy licensed in the State of New Jersey solely on the basis that the pharmacy offers and provides store direct delivery and mail prescriptions to an insured as an ancillary service.

f. Any dispute regarding the determination of an appeal conducted pursuant to this section may be referred to binding arbitration conducted in a manner consistent with the provisions of subsection b. of section 2 of P.L.2015, c.179 (C.17B:27F-2). The Commissioner of Banking and Insurance shall contract with a nationally recognized, independent organization that specializes in arbitration to conduct the arbitration proceedings.²

(cf: P.L.2019, c.274, s.4)

²8. Section 1 of P.L.2019, c.257 (C.17B:27F-6) is amended to read as follows:

1. a. A pharmacy benefits manager, in connection with any contract or arrangement with a private health insurer, prescription benefit plan, or the State Health Benefits Program or School Employees' Health Benefits Program, shall not require a covered person to make a payment at the point of sale for any amount for a deductible, coinsurance payment, or a copayment for a prescription drug benefit in an amount that exceeds the amount permitted pursuant to subsection d. of section 3 of P.L.2023, c.107 (C.17B:27F-3.1).

b. A pharmacy benefits manager shall not prohibit a network pharmacy from, and shall not apply a penalty or any other type of disincentive to a network pharmacy for:

(1) disclosing to a covered person lower cost prescription drug options, including those that are available to the covered person if the covered person purchases the prescription drug without using health insurance coverage;

(2) providing a covered person with the option of paying the pharmacy provider's cash price for the purchase of a prescription drug and not filing a claim with the covered person's health benefits plan if the cash price is less than the covered person's cost-sharing amount;

(3) providing information to a State or federal agency, law enforcement agency, or the department when such information is required by law; or

(4) applying a discounted price generated by a healthcare platform, as defined pursuant to section 2 of P.L.2003, c.280 (C.45:14-41), to the payment of a covered person with an account or membership to the healthcare platform for a prescription drug, even if the covered person maintains health insurance coverage.

c. A pharmacy benefits manager, in connection with any contract or arrangement with a carrier, health benefits plan, or prescription benefit plan, shall not:

(1) transfer or share records relative to prescription information containing patient-identifiable or prescriber-identifiable data to an affiliated pharmacy for any commercial purpose; provided, however, that nothing in this paragraph shall be construed to prohibit the exchange of prescription information between a pharmacy benefits manager and an affiliated pharmacy for the limited purposes of providing or administering pharmaceutical benefit services for a covered person, providing pharmacy reimbursement, engaging in formulary compliance, or conducting permitted utilization review;

(2) knowingly make a misrepresentation to a covered person, pharmacist, or pharmacy;

(3) charge a fee to a pharmacy in connection with network enrollment;

(4) remove a drug from a formulary or deny coverage of a drug for the purpose of incentivizing a covered person to seek coverage from a different health benefits plan;

(5) require a covered person to utilize an affiliate pharmacy or otherwise offer or implement a plan design that encourages a covered person to use an affiliated pharmacy unless the pharmacy benefits manager can show that the pharmacy delivers lower costs or higher quality services to covered persons; or

(6) withhold coverage or require prior authorization for a lower cost, therapeutically equivalent drug available to a covered person or fail to reduce a covered person’s cost sharing amount when a covered person selects a lower cost, therapeutically equivalent drug.

d. Any provision of a contract that conflicts with the provisions of subsection b. or c. of this section shall be void and unenforceable.

[d.] e. A violation of this section shall be an unlawful practice and a violation of P.L.1960, c.39 (C.56:8-1 et seq.), and shall also be subject to any enforcement action that the Commissioner of Banking and Insurance is authorized to take pursuant to section [5] 10 of P.L.2015, c.179 [(C.17B:27F-5)] (C.17B:27F-10).²

(cf: P.L.2023, c.221, s.1)

²9. (New section) After the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), a pharmacy benefits manager shall not enter into an agreement with a manufacturer or intermediary, such as a rebate aggregator, that conditions any rebate on the exclusion of therapeutically equivalent generic drugs from coverage, or if the contract conditions any rebate on the inclusion of any other unrelated drugs.²

²10. (New section) a. When conducting an audit of a pharmacy under contract with the network of a pharmacy benefits manager, a pharmacy benefits manager shall:

(1) notify the pharmacy, or pharmacy services administrative organization, no later than 15 days before the date of the initial audit. Notification to the contracted pharmacy shall be addressed to the supervising pharmacist of record and to the pharmacy corporate office, if applicable, and be sent by a means that allows tracking and delivery;

(2) limit the audit period to 24 months after the date a claim is submitted to or adjudicated by the pharmacy benefits manager;

(3) include in the written advance notice of the audit the list of masked prescription numbers or the date range to be included in the audit, if applicable;

(4) use the written and verifiable records of a licensed hospital, physician, or other health care provider, which are to be transmitted by any means of communication, to validate pharmacy records in accordance with State or federal law;

(5) limit the number of prescriptions audited to no more than 250 prescriptions selected in a 12-month period, unless fraudulent activity or systemic abuse is reasonably suspected;

(6) provide the pharmacy, or pharmacy services administrative organization, with a copy of the preliminary audit report no later than 45 days after the conclusion of the audit;

(7) provide the pharmacy, or pharmacy services administrative organization, with the ability to provide documentation to address a discrepancy or audit finding, provided that the documentation is received by the pharmacy benefits manager no later than the 45th day after the preliminary audit report was provided to the pharmacy or its contracting agent. The pharmacy benefits manager shall consider a reasonable request from the pharmacy, or pharmacy services administrative organization, for an extension of time to submit documentation to address or correct any findings in the report; and

(8) provide the pharmacy, or pharmacy services administrative organization, with the final audit report no later than 60 days after the preliminary audit report was provided to the pharmacy.

b. A pharmacy benefits manager conducting an audit of a contracted pharmacy pursuant to subsection a. of this section shall not:

(1) conduct more than two audits per 12-month period; or

(2) recover costs for clerical or record-keeping errors, including typographical errors; scriveners’ errors; and computer errors on a required document or record, unless the error resulted in overpayment or clinical harm.

c. This section shall not apply to an audit that involves probable or potential fraud or willful misrepresentation by a pharmacist or pharmacy.²

²11. (New section) a. A contract that is executed on or after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), between a pharmacy benefits manager and a pharmacy, rebate aggregator, or health benefits plan shall not authorize spread pricing and a pharmacy benefits manager or representative of a pharmacy benefits manager shall not engage in spread pricing.

b. A pharmacy benefits manager or its affiliates shall not engage in differential payment pricing based on the ownership or affiliation of an intermediary including a drug manufacturer, a rebate aggregator, a pharmacy services administrative organization, or a contracted pharmacy.

c. Beginning on March 1 next following the effective date of P.L. , c. (pending before the Legislature as this bill), and annually thereafter, a pharmacy benefits manager shall file with the department a report explaining how the pharmacy benefits manager has complied with the provisions of this section. The report shall be written in a manner and form determined by the department.²

²12. (New section) a. Beginning on March 1 next following the effective date of P.L. , c. (pending before the Legislature as this bill), and annually thereafter, a pharmacy benefits manager shall report to the department discounts, dispensing fees, reimbursements, and other fees negotiated in the prior calendar year with pharmacies, prescription drug networks, or pharmacy services administrative organizations for each drug and drug group identified for that year by the Division of Consumer Affairs in the Department of Law and Public Safety pursuant to P.L.2023, c.106 (C.45:14-82.2 et seq.) and set forth the difference, if any, between those discounts, dispensing fees, reimbursements, and other fees and the National Average Drug Acquisition Cost (NADAC) plus the prevailing State defined Medicaid professional dispensing fee.

b. (1) Within six months of the effective date of P.L. , cm, (pending before the Legislature as this bill), and updating annually thereafter, the department shall determine the 10 highest priced prescription drugs relative to the NADAC and publish and maintain the list of those prescription drugs on its Internet website in a manner that is accessible to the public. For any prescription drug included on this list that is prescribed for a person with coverage under the State Medicaid program established pursuant to P.L.1968, c.413 (C.30:4D-1 et seq.):

(a) a pharmacy benefits manager shall, for a prescription drug, reimburse pharmacies at the State fee-for-service benchmark of the NADAC plus the prevailing State defined Medicaid professional dispensing fee.

(b) if a pharmacy benefits manager or its affiliate maintains an ownership interest or control of a pharmacy, the pharmacy benefits manager shall reimburse the pharmacy, for a prescription drug, at the State fee-for-service benchmark of the NADAC.

(2) Pursuant to subparagraphs (a) and (b) of paragraph (1) of this subsection, if the NADAC is not established for a specific national drug code, the ingredient reimbursement rate shall default to the Wholesale Average Cost (WAC) or the Suggested Wholesale Price (SWP).

c. No later than one year after the department’s receipt of the information that a pharmacy benefits manager is required to report pursuant to subsection a. of this section, and annually thereafter, the department shall prepare and submit a report to the Governor, and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), concerning:

(1) reimbursement and fees for all plans and drugs;

(2) the required reimbursement rate or dispensing fee for the prescription drugs identified pursuant to subsection b. of this section;

(3) trends in reimbursement rates and dispensing fees relative to NADAC for all prescription drugs, or if the NADAC is not established for a specific national drug code, the relative to the Wholesale Average Cost (WAC) or the Suggested Wholesale Price (SWP);

(4) information on the efficacy of the requirements of subsection b. of this section and any recommendations to modify or expand those requirements; and

(5) any additional information as required by the Commissioner of Human Services.²

²13. (New section) In order to carry out the purposes of P.L.2015, c.179 (C.17B:27F-1 et seq.), as amended and supplemented, the commissioner shall assess fees that shall be payable by pharmacy benefits managers and pharmacy services administrative organizations in connection with the performance of the commissioner’s duties under P.L.2015, c.179 (C.17B:27F-1 et seq.), as amended and supplemented, and in accordance with regulations adopted by the commissioner.²

²14. (New section) a. After the effective date of P.L. , c. (pending before the Legislature as this bill), any contract into entered by the Department of Human Services with a pharmacy benefits manager to administer pharmacy benefits for Medicaid recipients, including those enrolled in a managed care organization by that date with whom the department contracts for the delivery of Medicaid services, shall:

(1) require the use of pass-through pricing to be applied by the department to offset the costs of providing the delivery of Medicaid services;

(2) require transparency in drug costs, rebates collected and paid, dispensing fees paid, and other compensation; and

(3) prohibit the use of spread pricing.

b. Upon request by the Department of Human Services, a pharmacy benefits manager shall disclose to the department the amount of any fees paid by the pharmacy benefits manager to affiliates and group purchasing organizations.

c. The Commissioner of Human Services shall apply for any State plan amendments or waivers as may be necessary to implement the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) and to secure federal financial participation for State Medicaid expenditures under the federal Medicaid program.

d. As used in this section:

“Compensation” means any direct or indirect financial benefit, including, but not limited to, rebates, discounts, credits, fees, grants, chargebacks or other payments or benefits of any kind, that is attributed to, directly or indirectly, the utilization of a health benefits plan or enrollment in a health benefits plan, regardless of how the benefits are otherwise characterized by a pharmacy benefits manager and relevant third parties.

“Pass-through pricing” means a transparent pharmacy benefit manager contract model whereby compensation remitted by or on behalf of a pharmaceutical manufacturer, developer or labeler, directly or indirectly through an intermediary such as a rebate aggregator, to a carrier or to a pharmacy benefits manager under contract with a carrier related to prescription drug benefits is directly passed through to the State Medicaid program.

“Pharmacy benefits manager” means the same as that term is defined in section 1 of P.L.2015, c.179 (C.17B:27F-1).

“Rebate aggregator” means a person or entity that provides formulary management and formulary rebate administrative services, or aggregates prescription drug utilization volume and distributes rebates to pharmacy benefit managers, or both.

²15. Section 3 of P.L.2023, c.106 (C.45:14-82.4) is amended to read as follows:

3. a. A pharmacy benefits manager shall, to the extent allowed by law, report to the division the following minimum data, and other data that may be specified by the division. The division shall annually notify pharmacy benefits managers of the specific drugs or drug groups for which reporting is required and a pharmacy benefits manager shall have 60 days following such notification to report to the division the following:

(1) minimum and maximum WAC for each indicated drug and drug group for which the pharmacy benefits manager has negotiated directly with the manufacturer in the last calendar year, related to prescriptions under an insurance policy issued in the State;

(2) volume in pricing units of each indicated drug and drug group that the pharmacy benefits manager negotiated directly with the manufacturer in the last calendar year, for business in the State, in total and for each payer type as relevant;

(3) total rebates, discounts, and price concessions received or negotiated directly with the manufacturer for each drug and drug group as indicated by the division in the last calendar year, for business in the State, in total and for each payer type as relevant;

(4) total discounts, dispensing fees, and other fees negotiated last year with pharmacies, prescription drug networks, or pharmacy services administrative organizations for each drug and drug group as indicated by the division in the last calendar year, for business in the State, in total and for each payer type as relevant; [and]

(5) total net income received in the last calendar year for each drug and drug group as indicated by the division, for business in the State, in total and for each payer type as relevant; and

(6) the fee structures agreed to between a pharmacy benefits manager and the carriers and health benefits plan with which it contracts.

b. Disclosure of all information reported under this section shall be subject to protections defined in section 9 of P.L.2023, c.106 (C.45:14-82.10).²

(cf: P.L.2023, c.106, s.3)

²16. (New section) The Drug Affordability Council, established pursuant to section 10 of P.L.2023, c.107 (C.45:14-82.11), shall undertake a study of the fee structures utilized by pharmacy benefits managers and develop one or more alternative fee arrangements within 18 months of the date of enactment of P.L. , c. (pending before the Legislature as this bill). The arrangements shall be structured in a manner that ties compensation received by a pharmacy benefits manager to reductions of the total net costs paid by covered persons.²

²17. (New section) a. As used in this section:

“Compensation” means any direct or indirect financial benefit, including, but not limited to, rebates, discounts, credits, fees, grants, chargebacks or other payments or benefits of any kind, that is attributed to, directly or indirectly, the utilization of a State Health Benefits Plan or School Employees’ Health Benefits Plan or enrollment therein, regardless of how the benefits are otherwise characterized by a pharmacy benefits manager and relevant third parties.

“Pass-through pricing” means a transparent pharmacy benefit manager contract model whereby compensation remitted by or on behalf of a pharmaceutical manufacturer, developer or labeler, directly or indirectly, through an intermediary such as a rebate aggregator, to a carrier or to a pharmacy benefits manager under contract with a carrier related to prescription drug benefits is directly passed through to the State Health Benefits Program or School Employees’ Health Benefits Program.

“Pharmacy benefits manager” means the same as that term is defined in section 1 of P.L.2015, c.179 (C.17B:27F-1).

b. After the effective date of P.L. , c. (pending before the Legislature as this bill), any contract entered by the State Health Benefits Commission or the School Employees’ Health Benefits Commission with a pharmacy benefits manager to administer pharmacy benefits for the State Health Benefits Program or School Employees’ Health Benefits Program shall:

(1) require the use of pass-through pricing to be applied by the division to offset the costs of providing benefits under the State Health Benefits Program or School Employees’ Health Benefits Program;

(2) require transparency in drug costs, rebates collected and paid, dispensing fees paid, and other compensation; and

(3) prohibit the use of spread pricing.

c. Upon request by the Division of Pensions and Benefits, a pharmacy benefits manager shall disclose to the division the amount of any fees paid by the pharmacy benefits manager to affiliates and group purchasing organizations.²

²18. This act shall take effect immediately, except sections 3 through 11 shall remain inoperative until the first day of the seventh month next following the date of enactment and shall apply to contracts and agreements entered into, renewed, modified, or amended on or after the effective date, but the Commissioner of Banking and Insurance may take such anticipatory administrative action in advance thereof as shall be necessary for the implementation of the act.²