New Jersey Assembly Democrats Craig Coughlin and Roy Freiman said Friday that the committee will begin a series of hearings next week focused on pharmacy benefit managers (PBMs) and their impact on prescription drug prices for New Jersey residents.
The first hearing is scheduled for April 10.
Pharmacy benefit managers are companies that work with health insurers, large employers, and other payers to manage their prescription drug benefits. In the 1960s, when U.S. insurers began including prescription drug coverage in their plans, PBMs were created to help set reimbursement rates, process claims, and pay pharmacies. Since then, their business model has become more complex, with PBMs adding other lines of business.
These hearings come as concern increases about the impact PBMs have on the health care system. PBMs were originally established to control drug costs and improve efficiency, however, recent federal investigations suggest that some of these businesses may in actuality be contributing to higher prescription prices and reduced medication access.
PBMs negotiate with drug manufacturers and pharmacies to set prices, determine patients’ access to different medications, and contract with pharmacies to participate in networks. Insurers pay fees to PBMs for doing this work. PBMs also derive revenue from receiving a share of the drug rebates they negotiate with pharmaceutical companies; they collect the difference between what insurers are reimbursed and the amount that pharmacies are paid; and they steer business to their affiliated pharmacies.
PBMs have faced increasing scrutiny about their role in rising prescription drug costs and spending because of the lack of transparency in how they conduct business and the impact they have on the total amount insurers pay, how much pharmacies are paid, and which drugs are available to patients.
“New Jersey families are struggling with the rising cost of prescription medications,” said Assembly Speaker Coughlin (D-Middlesex). “These hearings represent a critical step toward understanding the complex factors driving these increases. By bringing transparency to the role of PBMs in our health care system, we aim to develop solutions that will make medicines more affordable and accessible for all New Jerseyans.”
The hearings will explore key issues such as market concentration among PBMs and their affiliated entities; an examination of PBM business practices and compensation; and whether further reforms are needed to help control the costs of prescription drugs.
“Our goal is to conduct a thorough, fact-based examination of how PBMs operate within our health care marketplace,” said Assemblyman Freiman (D-Hunterdon, Mercer, Middlesex, Somerset) and chair of the Assembly Financial Institutions and Insurance Committee. “The dramatic consolidation we’ve seen in this sector raises serious questions about whether true competition exists and how that impacts what New Jersey residents pay at the pharmacy counter.”
The April 10 hearing will feature testimony from experts such as Rutgers University Law Professor Michael Carrier and Dr. Geoffrey Joyce, director of health policy at the University of Southern California Schaeffer Center.
