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Bill Prohibiting Prescription Drug ‘Clawback’ Schemes & ‘Gag’ Clauses Signed into Law

Ruiz, Cryan, Beach & Turner Measure Will Protect Against Overcharges, Inform Patients

Trenton – Legislation that will help protect consumers from being overcharged for prescription medications and ensure pharmacists can inform customers of lower cost options was signed into law. The legislation is sponsored by Senate President Pro Tempore M. Teresa Ruiz, Senator Joe Cryan, Senator James Beach and Senator Shirley Turner.

“People look to cut costs wherever possible. This will allow pharmacists to tell customers if there are less expensive options available to them, which would help reduce their medical expenses,” said Senator Ruiz (D-Essex). “This legislation will help consumers make more informed decisions in regards to their prescription drugs.”

“Patients should not be forced to overpay for their medications when less costly options are available,” said Senator Cryan (D-Union). “These clawback practices that have customers pay higher co-pays than the drugs actually cost is offensive, especially when the insurance company pockets the difference.”

The law will prohibit the “clawback” schemes, which enable insurance plans to charge co-pays that are more than the customer would pay outside of their coverage plan. Additionally, it will require Pharmacy Benefits Managers (PBM) to allow pharmacists to inform customers about less expensive drug options.

“A University of Southern California study found that in 2013 as many as 23 percent of prescriptions involved a clawback payment greater than $2,” said Senator Beach (D-Burlington/Camden). “That adds up quickly, especially for seniors taking multiple medications and living on fixed incomes.”

“For most name brand prescriptions, there are generic versions available at a much lower cost but patients have to request them or the doctors won’t prescribe them,” said Senator Turner (D-Hunterdon/Mercer). “Allowing pharmacists to inform customers that there is a generic version of their medication available will save New Jerseyans significant amounts of money.”

A “clawback” is when a patient’s copayment on a drug is greater than the price the PBM or insurer has negotiated with the pharmacy for the product. The insurer requires the pharmacy to pay to them the difference between the patient’s copayment and the negotiated price. “Gag” clauses are contract provisions used by PBMs and insurers to prohibit pharmacists from telling customers that the cash price of a medication is less than the copayment.