Cost-Saving Bill For Prescription Drugs Goes To Governor
Assembly Approves Sweeney-Greenstein Legislation That Will Save $200 million In Pharmaceutical Benefit Costs for Public Employees
TRENTON – The Assembly today approved a plan that would save at least $200 million in prescription drug costs by rooting out profiteering by drug companies and the “pharmaceutical benefit manager” responsible for purchasing and supplying medications for public employees in New Jersey. The reforms are contained in legislation, S-2749/A-4328, sponsored by Senate President Steve Sweeney and Senator Linda Greenstein in the Senate and Assembly Speaker Vincent Prieto in the Assembly, that was approved with a vote of 71 – 0 . It now goes to the governor.
The State of New Jersey is losing hundreds of millions of dollars in potential savings on prescription drug spending for public sector workers, Senator Sweeney said. Drug benefits now total close to $2 billion annually.
“This is good for the taxpayers because it will produce real and lasting savings and it is good for public employees because it will make the system stronger while maintaining the same level of prescription drug benefits,” said Senator Sweeney, who worked on the plan for more than six months in partnership with the public employee unions, government officials and with America’s Agenda, the nonprofit health care coalition.
New Jersey would be the first state in the nation to put this program in place.
Senator Sweeney said the plan will save at least $200 million a year by eliminating overcharges and other wasteful spending for state, county and municipal government workers and teachers in New Jersey.
“We will make use of new technologies to perform ‘reverse auctions’ to identify savings and eliminate waste,” said Senator Sweeney. “This will make the system more efficient and more effective by getting the best prices for the right medications.”
“These reforms will serve the needs of the public employees and their families who rely on quality health care and prescription drugs,” said Senator Greenstein. “It will make the system stronger so that the benefits will always be there.”
Under the bill, the state would hire a benefits manager to employ “reverse auction” services to audit spending and to perform instant price comparisons to ensure that the right medicines are being purchased at the right costs. Essentially, an online competitive bidding process, this electronic monitoring of drug costs will save at least $200 million annually at the same time it preserves employee drug benefits. It will cover state and local government workers, including teachers and other educators, in the State Health Benefits Plan and the School Employees Health Benefits Plan.
This would use modern technology that enables the review and ranking of PBM bids. This is a “dynamic process” that performs automated, online price comparisons in which PBM bidders compete anonymously against one another’s proposals to provide services at the lowest price in accordance with the union contracts.
Under the plan, the state would hire a technology firm with the capacity to electronically audit all prescriptions, compare them against the prices that should be charged, and flag overcharges before the bills are paid by the state, without any change in the quality or cost of that health care to public employees, Senator Greenstein said.
This technological innovation enables the PBM reverse auction process to re-pricing the bids of competing PBMs using common pricing assumptions, prescription drug price lists, and prescription drug price data sources to generate “apples-to-apples” comparisons of actual drug costs. It also enables real-time, electronic audits of PBM invoices so that any errors or overcharges are identified before the bills are paid. This technology is already being used by large public employers like the University of California and Fortune 100 corporate employers like American Airlines.
To put the cost controls in place, the state will procure a professional services contractor to provide these technical services. It will take effect for next PBM contract, according to the bill.