Assemblyman Neil M. Cohen

COHEN COMMENCES LEGISLATIVE INVESTIGATION TO REGULATE PHARMACY BENEFITS MANAGEMENT COMPANIES

(TRENTON) - Chairman of the Assembly Financial Institutions and Insurance Committee, Assemblyman Neil M. Cohen is sponsoring legislation to regulate pharmacy benefits management (PBM) companies that manage prescription drug benefits for sponsors of health care plans in New Jersey.

For Release:
January 30, 2006

Contact:
Assemblyman Cohen
(908) 624-0880

COHEN COMMENCES LEGISLATIVE INVESTIGATION TO REGULATE PHARMACY BENEFITS MANAGEMENT COMPANIES

(TRENTON) - Chairman of the Assembly Financial Institutions and Insurance Committee, Assemblyman Neil M. Cohen is sponsoring legislation to regulate pharmacy benefits management (PBM) companies that manage prescription drug benefits for sponsors of health care plans in New Jersey.

The committee held the measure for a future vote after hearing testimony from various interest groups, including pharmacists, representatives of national PBMs and consumer organizations. Over 30 states have filed suits against PBMs for questionable business practices.

PBMs contract with various organizations in the state, including managed care organizations, self-insured employers, insurance companies, and Medicaid and Medicare managed care plans. The issue of PBMs and how they work was raised during the 2005 Governor's race. Republican gubernatorial candidate Doug Forrester owned and operated a PBM and the practices of PBMs became an issue.

"PBMs remain the only unregulated industry directly involved in the delivery and cost of prescription drug benefits to New Jerseyans," said Deputy Speaker Cohen. "With their ability to control approved drug lists and unilaterally switch or swap drugs for prescribed treatments without medical authorization, PBMs require regulation to ensure patient safety."

Under the bill (A-320), PBMs managing the prescription drug benefits for New Jersey health care providers would receive a renewable three-year certification from the New Jersey Department of Banking and Insurance (DOBI), which also would oversee the regulation.

The legislation would define the business activities that a DOBI-certified PBM may conduct in the state, as well as the disclosures a PBM would be required to make to individuals whose pharmacy benefits they manage. PBMs also would be required to reveal rebates and discounts to clients as they relate to health benefits plans that have purchased PBM services.

One of the ways PBMs operate is by creating formularies - lists of approved drugs that can be utilized by insurance companies and their clients - which allow PBMs to realize cost savings for their contracted clients. This is done by encouraging the usage of certain drugs, usually the generic brand, over others within a formulary, by restricting use of certain prescription drugs not included in the formulary or by substituting prescribed medication with medication contained within the formulary. Currently, this is done with no notification or oversight by doctors or pharmacists, who traditionally have a hand in shaping and creating formularies for insurance companies.

Questions have been raised in lawsuits around the country, alleging PBMs steer preference for drugs to their own mail order companies and to favorite pharmaceutical companies who give the PBMs a higher rebate in their pocket.

The bill would require PBMs to make additional disclosures to health care practitioners, like doctors, nurses and pharmacists, covered persons, and purchasing agents if the PBM seeks to substitute a prescribed drug. It would also create guidelines and procedures under which a prescribed drug may be substituted for another.

The Commissioner of DOBI would be authorized to deny, suspend, or revoke the certification of any PBM in New Jersey and would be responsible for assessing fines of $250 to $10,000 a day to any PBM operating in violation of this measure.

"We simply want to make sure PBMs operating in New Jersey provide high quality pharmaceuticals to patients without endangering their safety," said Cohen (D-Union). "At the same time, we also need to ensure that PBMs pass cost savings onto us - the patients and consumers - instead of quietly enriching themselves under the guise of making prescription drugs more affordable."

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