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Committee adopts and releases committee substitute to realign PBM incentives; advocates and industry clash over costs and dispensing fee
Summary
After hours of testimony, the committee adopted and released the A1502 committee substitute aimed at PBM reform—establishing NADAC‑based reimbursement plus a $10.92 dispensing fee, imposing fiduciary duties, and delinking PBM compensation—but opponents warned the changes could raise patient costs while supporters said it would restore transparency and protect independent pharmacies.
The Assembly Financial Institutions and Insurance Committee adopted and released the committee substitute for A1502, the Patient and Provider Protection Act, after extensive testimony from drug manufacturers, PBMs, insurers, pharmacy groups and industry trade associations.
Chair summarized the bill’s three pillars: set a pharmacy reimbursement floor (NAADAC plus a dispensing fee), impose a fiduciary responsibility where appropriate, and delink PBM compensation from the price of medication to reduce perverse incentives. Ian McLaughlin of BioNJ supported the measure as a way to ensure patients—not intermediaries—benefit from pharmaceutical innovation. "This bill takes steps towards addressing these perverse incentives," McLaughlin said.
PBM representatives and their trade association (PCMA) strongly opposed the committee substitute. Matt Greller of PCMA said the draft would "cost residents more while padding the profits of big pharma and pharmacists" and described the $10.92 dispensing fee as a potential point‑of‑sale increase that would be borne by patients. PBM and payer witnesses warned that delinking could weaken negotiating leverage that currently produces rebates the health plans use to lower net costs.
Independent‑pharmacy advocates and the Healthcare Institute of New Jersey urged adoption to protect local pharmacies and make reimbursement transparent through NADAC; Anthony Resnick cited New York Medicaid reforms and an internal estimate claiming $655 million in nonfederal savings after structural changes in that state’s Medicaid pharmacy program. Committee members pressed witnesses for dollar‑by‑dollar evidence and implementation timelines; some members abstained on release votes while a majority voted to adopt and release the substitute.
The committee’s action advances the bill to the next legislative steps, but witnesses on both sides signaled further technical negotiations and potential legal challenges on ERISA preemption and implementation timing.
