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 a key Senate committee today. The bill is sponsored by Senator M. Teresa Ruiz, Senator Joe Cryan, Senator Jim Beach, and Senator Shirley Turner.

“In this day and age, when many people are looking to cut costs wherever possible, this legislation can prevent consumers from paying more than they have to on their prescription medication,” said Senator Ruiz (D-Essex). “Allowing pharmacists to inform customers of the availability of less expensive options will help to minimize individuals’ healthcare expenses.”

“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 really offensive, especially when the insurance company pockets the difference.”

The bill, S-2690, approved by the Senate Commerce Committee, 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 to allow pharmacists to inform customers about less expensive drug options.

“According to a University of Southern California analysis, as many as 23 percent of prescriptions in 2013 involved a clawback payment greater than $2,” said Senator Beach (D-Burlington/Camden). “That can add up, especially for seniors with multiple medications and who live on fixed incomes.”

“There are almost always generic versions of name brand prescriptions, with a much lower copay, but if a customer doesn’t ask for it, the doctors won’t prescribe it and the pharmacist can’t offer 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.