LEGISLATIVE FISCAL ESTIMATE

[Second Reprint]

SENATE, No. 1423

STATE OF NEW JERSEY

219th LEGISLATURE

 

DATED: NOVEMBER 15, 2021

 

 

SUMMARY

 

Synopsis:

Requires carriers to pass prescription drug savings to consumers.

Type of Impact:

Annual impact on State and local government expenditures.

Agencies Affected:

Division of Pensions and Benefits, Department of the Treasury; local government entities

 

 

Office of Legislative Services Estimate

Fiscal Impact

Year 1 

Year 2 

Year 3 

 

State Cost Impact

May or may not increase or decrease healthcare premiums for SHBP

 

Local Cost Impact

May or may not increase or decrease healthcare premiums for SHBP-local and SEHBP

 

 

 

 

·         The Office of Legislative Services (OLS) determines that the fiscal impact of the bill depends on the terms and conditions negotiated for “compensation” in the contracts between the State, which is a self-insured employer, and the health insurance carriers, and the pharmacy benefits manager, and how the provisions in the bill would interact with and change how “compensation” is shared among the interested parties, including the State and local government employers, the health insurance carriers, the pharmacy benefits managers and ultimately participants of the State Health Benefits Program and School Employees’ Health Benefits Program through copays.

 

·         Prescription drug rebates serve to reduce premiums as evidenced by information in the annual Rate Renewal Reports.  How other items of compensation are shared is not disclosed in other public documents.

 

·         Without information from the Administration, the effects of this bill cannot be determined.

BILL DESCRIPTION

 

      This bill requires carriers to pass prescription drug savings on to consumers.  The bill provides that all compensation paid by a pharmaceutical manufacturer to a pharmaceutical benefits manager as a result of negotiations of a reduced price for a pharmaceutical between a pharmacy benefits manager and a manufacturer, in relation to a contract between a pharmacy benefits manager and a carrier related to its insured prescription drug benefits, must be remitted to and retained by the carrier and must be used by the carrier to lower the premium for covered persons under the carrier’s health benefits plan or to allow for remittance directly to the covered person at the point of sale to reduce the insured’s out of pocket costs.

      In addition, the bill provides that a carrier must annually file with the commissioner a report demonstrating how the carrier has complied with the provisions of the bill.

      Under the bill, “compensation” is defined as any direct or indirect financial benefit, but shall not include any performance compensation agreement paid by a manufacturer, developer or labeler.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS determines that this bill may or may not increase or decrease healthcare premiums for healthcare plans offered by the State Health Benefits Program and the School Employees’ Health Benefits Program.  The fiscal impact of the bill depends on the terms and conditions negotiated for “compensation” in the contracts between the State, which is a self-insured employer, and the health insurance carriers and the pharmacy benefits manager, and how the provisions in the bill would interact with and change how compensation is shared among the interested parties, including the State and local government employers, the health insurance carriers, the pharmacy benefits managers and ultimately participants of the State Health Benefits Program and School Employees’ Health Benefits Program through copays. 

      Currently the State negotiates to optimize pharmacy benefits manager savings in order to reduce premiums and keep prescription drug copays low.  This is evidenced in the reduction of prescription drug costs by prescription drug rebates in the annual Rate Renewal Reports.  How “compensation” other than rebates is shared is not disclosed in any other public documents.  Without contract information from the Executive Branch regarding how items of “compensation” such as discounts, credits, fees, grants, charge-backs, or other payments or benefits of any kind are shared or not shared among the interested parties, the OLS cannot determine whether this bill will serve to increase or decrease healthcare premiums and ultimately State General Fund and local government expenditures.

Section:

State Government

Analyst:

Aggie Szilagyi

Section Chief

Approved:

Thomas Koenig

Legislative Budget and Finance Officer

 

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).