Assembly committee holds first hearing to examine impact of Pharmacy Benefits Managers on drug price
NEW JERSEY — The Assembly Financial Institutions and Insurance Committee, led by Chair Assemblyman Roy Freiman, held a hearing this week focused on examining Pharmacy Benefits Managers (PBMs) and their impact on prescription drug prices paid by New Jersey residents. T
These hearings come amid growing national concern about the role PBMs play in the healthcare system. Today’s meeting included testimony from experts on PBMs’ function, including Michael Carrier, Rutgers University Law Professor Michael Carrier, and Dr. Geoffrey Joyce, Director of Health Policy at the University of Southern California Schaeffer Center, Freiman said.
“PBMs are meant to make sure that necessary medications are both accessible and affordable,” said Assemblyman Freiman (D-Hunterdon, Mercer, Middlesex, Somerset). “However, PBMs may now be contributing to higher prescription prices and reduced medication access.”
PBMs are third-party administrators of prescription drug programs, acting as intermediaries between health insurance companies, pharmaceutical manufacturers, and the pharmacists who dispense the prescriptions. A July 2024 report from the U.S. Federal Trade Commission found that PBMs manage 79 percent of prescription drug claims for around 270 million people, meaning that four out of every five prescriptions are linked to the contracts established by PBMs, Freiman said.
Assemblyman Freiman has been looking into the role of PBMs for some time and recently introduced A4953, known as the “Patient and Provider Protection Act.” This bill would require PBMs to make decisions based on what is best for the patient. This would ensure PBMs do not agree to contracts with manufacturers that exclude the PBM from covering generic, cheaper medication over brand-name, costly drugs. They would also have to pay pharmacies fairly, and in cases of a contract disagreement, it would be assumed to be unfair to the pharmacy. Additionally, PBMs would not be able to prohibit out-of-network pharmacies from offering prescription drugs at the same price as in-network pharmacies.
“If these are drugs where you could be saving money and you’re not, something is wrong,” said Professor Carrier. “I would posit that the PBM’s are playing a critical role in us all paying high drug prices.”
PBMs select which prescription drugs receive coverage under health plans they manage, and they negotiate the rebates and discounts for those same prescription drugs with the manufacturers. Once a medication is prescribed, PBMs step in to process the drug claims from networks or retail, mail-order, and specialty pharmacies they have approved to be used by the health plan members. Often, PBMs also operate their own mail order and specialty pharmacies, increasing the chances that they will be the approved provider to dispense the medication, Freiman said.
“What’s the PBM’s role in drug distribution?” asked Dr. Joyce. “They orchestrate this supply chain. They’re the conductors who have proprietary private contracts with manufacturers on rebates and discounts. They have proprietary or private contracts with pharmacies of how much they’re going to reimburse them and they have proprietary contracts with the health plan or the employer group that they’re representing of how much they’re going to charge them for a drug.”
“What a patient needs should be a decision between the doctor and the patient, not determined by a PBM,” Freiman added.
