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Bill Would Protect Against ‘Clawback’ Schemes & ‘Gag’ Clauses for Prescription Drugs

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

TRENTON – Legislation that would help protect consumers from being overcharged for prescription medications and make sure that pharmacists can keep their customers informed about lower cost options was approved by the Senate today. The bill is sponsored by Senator M. Teresa Ruiz, Senator Joe Cryan, Senator James Beach, and Senator Shirley Turner.

“Many people are looking to cut costs whenever possible, allowing pharmacists to tell customers if there are less expensive options can help reduce their medical expenses,” said Senator Ruiz (D-Essex). “This legislation will help consumers to make more informed decisions in regard 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 bill, S-2690, would prohibit the “clawback” schemes that enable insurance plans to charge co-pays that are more than the customer would pay outside of their coverage plan and would require Pharmacy Benefits Managers (PBM) to allow pharmacists to inform customers about less expensive drug options.

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

“For most name brand prescriptions, there are generic versions available at a much lower cost, but patients have to ask for it or the doctors won’t prescribe it,” 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 same product and the insurer requires the pharmacy to pay to them the difference between the patient’s copayment and the negotiated price for the drug. “Gag” clauses are contract provisions used by PBMs and insurer to prohibit pharmacists from telling customers that the cash price of a medication is less than the copayment.

The bill was released from the Senate by a vote of 35-0.