NJ Takes Action On Prescription Drug Costs: Caps, More Oversight

WEST ORANGE, NJ — One of the “most comprehensive prescription drug price transparency programs in the country” has crossed the finish line in New Jersey, its supporters say.

On Monday, Gov. Phil Murphy signed a package of bills into law in the name of “health care affordability.” The bills will work together to establish greater oversight of pharmacy benefit managers, and promote transparency across the pharmaceutical supply chain.

The legislation also makes New Jersey the second state in the nation to cap out of pocket costs for asthma inhalers and EpiPens, in addition to capping consumer costs for insulin. The caps will apply to New Jersey residents on state-regulated or public worker health plans. The changes will take effect in early 2024, with price controls taking effect beginning in the 2025 plan year, the New Jersey Monitor reported.

According to the governor’s office, here are some details about the new laws:

• S-1614 – Caps out-of-pocket costs for many residents by extending Medicare’s new $35/month insulin out of pocket cap to state-regulated markets and NJ public employee plans, as well as capping out of pocket costs for EpiPens and asthma inhalers at $25 and $50 respectively for a month’s supply.
• S-1615 – Creates a new data and transparency system within the Division of Consumer Affairs to collect, analyze, and report on the entire process of drug pricing across the supply chain in an effort to gain greater insight into drugs with high price increases and launch prices. The bill also establishes a Drug Affordability Council to formulate legislative and regulatory policy recommendations that help advance the goal of prescription drug affordability and accessibility.
• A-536/2841 – Establishes greater oversight of Pharmacy Benefit Managers (PBMs), the third-party companies who manage many prescription-drug plans, to prevent certain practices that drive up costs. This bill requires rebates to be used to lower premiums and out-of-pocket costs for consumers and prevents the practice of spread pricing (when a PBM pockets the difference between what it charges a health plan and reimburses a pharmacy). It also requires PBMs to apply for a license from the NJ Department of Banking and Insurance to strengthen regulatory oversight.

Appearing alongside several of the sponsoring lawmakers at a news conference in West Orange, the governor said the bills are a “huge step forward” for families who are struggling to afford critical medications.

According to a recent study, more than half of New Jersey residents said they are “somewhat worried” or “very worried” about the price of prescription drugs. About one in four people said they were recently forced to skip a prescription, cut pills in half or skip a dose because they couldn’t afford it.

• See Related: NJ Lawmakers Aim To Cap Costs Of Lifesaving Medications

“I am proud to sign nation-leading legislation that will make a real difference in the lives of New Jerseyans as we continue to work towards making prescription drugs and other health care services more affordable and accessible to everyone,” Murphy said.

To further advance prescription affordability, the governor also included funding in the Fiscal Year 2024 budget to expand eligibility for the Pharmaceutical Assistance for the Aged and Disabled (PAAD) program, which further cuts the costs of life-enhancing and life-saving prescription drugs for seniors and residents with disabilities.

• See Related: NJ Budget Approved; Latest Spending Bill Is Largest In State History
• See Related: $54B New Jersey State Budget Gets Mixed Reaction (See The Highlights)

Several community leaders and elected officials stepped forward to cheer Monday’s announcement.

“These reforms help to address the burdensome high cost of prescription drugs that consumers face across our state,” New Jersey Department of Banking and Insurance Acting Commissioner Justin Zimmerman said, citing “greater oversight and increased transparency” among the benefits of the new laws.

“Additionally, the department will now require Pharmacy Benefits Managers to meet stringent standards for licensure to prevent practices that can drive up prescription drug costs,” Zimmerman said.

“Many consumers have struggled to afford necessary medicine,” said Assemblyman John McKeon, a former mayor of West Orange who sponsored one of the new laws.

“The legislation being signed into law will help us understand what’s behind the rise in drug prices and allow us to develop policies focused on affordability, while keeping those in the industry accountable for their actions,” McKeon said.

According to Crystal McDonald, AARP New Jersey associate state director of advocacy, high prescription drug prices hit older Americans particularly hard.

“More than two out of three New Jersey voters 50-plus are concerned they won’t be able to afford the medicines they need in the future,” McDonald said.

• See Related: NJ Expands Access To Prescription Drug Discount Programs
• See Related: NJ Families Bash 'Unethical' Insulin Prices, Plead For $35 Cap

While Monday’s bill signing saw a big round of applause in New Jersey, it also got a more wary reception from some pro-business advocates.

New Jersey Business & Industry Association (NJBIA) President and CEO Michele Siekerka issued the following statement about the bills:

“The NJBIA can appreciate the intent of these bills signed today, as we continuously advocate for high-quality, cost-effective health care for businesses throughout the state. The pharmaceutical industry, however, plays a major part in New Jersey’s economy. And the pricing of health care is much more complex than setting a mechanism to establish price controls for one segment of a multi-level health care sector. By setting data reporting requirements and establishing a council that presumes to control these costs, we have concerns these provisions will send a message to R&D companies that New Jersey is not the best state to invest in. For the good of New Jersey’s economy, we should make sure we’re not inhibiting private investment and research from the pharmaceutical industry.”

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