Price caps, benefits oversight and more in plan. But some want controls on manufacturers

Gov. Phil Murphy has outlined proposals to cap co-pays on several life-saving medicines, increase transparency around pharmaceutical pricing and beef up oversight of supply-chain middlemen in hopes of making prescription drugs more affordable for New Jerseyans.

The concepts, based largely on previous proposals in New Jersey and other states, are contained in an 800-word memo obtained by NJ Spotlight News that is now circulating among New Jersey lawmakers, staffers and stakeholders. Legislation is now being developed, sources said, and Murphy hopes to formally announce the plan at a South Jersey media event in the weeks to come.

Memo on Gov. Murphy’s proposals for prescription drug pricing and transparency

Murphy’s office declined to comment on the memo Tuesday, but the governor tipped his hand during his State of the State speech in January.

“This effort will be centered on making pricing across the entire supply chain more transparent, so we can see what drives drug prices higher, and so we can lower them,” he said in the Jan. 11 address, in which he highlighted the need to make New Jersey more affordable.

“Lower costs will save families hundreds, if not thousands, of dollars a year. But, across the programs our state administers (like Medicaid and FamilyCare), lower costs can save us, and you, untold millions in tax dollars,” Murphy continued. “Containing and lowering health care and prescription drug costs isn’t just good for your family’s health and bottom line, it’s also good for our state’s.”

Prices are key issue

Health care advocates welcomed Murphy’s pledge to address the long-standing issue and the boost his leadership could provide to the reform effort, adding they were eager to review actual legislation. But some worried that these proposals, as presented, still won’t get to the heart of the matter: the price set by drugmakers, many of them based in New Jersey.

“Any plan that doesn’t get at the high prices set by manufacturers will be a band-aid on the problem,” said Crystal McDonald, associate state director of advocacy for AARP New Jersey, which has championed prescription-drug affordability for years. Other stakeholders shared this concern, but declined to speak on the record before reviewing draft legislation.

Rising drug costs continue to be a growing concern for families and taxpayers and remain a priority among voters in New Jersey and elsewhere. Murphy’s memo notes that a 2020 poll said that one in five New Jerseyans declined to fill prescriptions or take medicines as prescribed because of cost concerns.

Nationwide, since 2014 prescription-drug prices have risen by nearly one-third, a rate 20 times inflation, according to the Campaign for Sustainable Rx Pricing, a federal advocacy group. Drug prices in New Jersey appear to be rising even faster than in many other states, some studies indicate.

Mixed approach

Murphy’s approach is designed to pair “immediate consumer relief” with longer-term measures to increase transparency in the hope it will help consumers and policymakers better understand how profits are generated across the pharmaceutical supply chain, according to the memo.

“This proposal brings New Jersey in line with the efforts of other states and sheds light on state-specific price trends. Early evidence suggests that year-over-year price increases are slowing down following the implementation of robust state transparency programs,” it states, citing “notable” price declines in Vermont and Oregon.

Murphy’s proposal for consumer relief calls for limiting out-of-pocket costs for asthma inhalers ($50), EpiPens ($25) and a 30-day supply of insulin ($35), something the governor said 15 other states have now done. A bipartisan bill from 2016 — sponsored by two now-former state senators, Loretta Weinberg (D-Bergen) and Tom Kean Jr. (R-Union) — pursued a similar approach and former Senate President Steve Sweeney (D-Gloucester) sought to cap the co-pay on insulin last year.

The memo also recommends the state increase reporting requirements for drugmakers, distributors and other companies that serve as purchasing middlemen, as well as insurance companies, so officials can better understand how the supply chain affects cost. The state Division of Consumer Affairs would then prepare an annual report based on this data.

A third element in Murphy’s proposal would prompt the state to increase its scrutiny of PBMs, or pharmacy benefit managers, the companies that negotiate bulk purchases and serve as middlemen in the prescription-drug supply chain. The idea is to set standards for certain business practices and greatly increase transparency around an industry that embodies the hidden, black-box nature of prescription costs.

AARP’s McDonald welcomed the opportunity to increase transparency but stressed that knowledge alone won’t solve the problem. Co-pay caps are popular with consumers, but also don’t address the root cause, she said. “They just move the cost and we’re going to see it increased in premiums or somewhere else down the line,” she explained.

Drug affordability board

Advocates — including AARP — favor the creation of a drug affordability board, a panel of experts who could assess which medications are truly straining consumers’ budgets, determine the reason and recommend steps the state could take in response. Legislation to create such a board — sponsored by Sen. Troy Singleton (D-Burlington), who has long led lawmakers’ prescription-drug efforts — was reintroduced in January after it failed to pass last year.

The pharmaceutical industry has opposed this and other measures they believe are unfairly restrictive, claiming that price controls are not the answer. The cost of prescriptions reflects the high expense involved in developing new medicines, they note, adding that capping prices would only harm those who depend on highly specialized formulas to treat rare diseases.

The drug affordability board is one of a half-dozen bills Singleton has reintroduced this year to address the high cost of medications. He has also proposed measures to increase transparency in the supply chain, require savings to be passed on to consumers and allow the state to negotiate drug prices through bulk-purchase arrangements, among other ideas, some of which date back several years.

In 2018 Singleton backed a bill that would have allowed New Jersey to set prices for certain drugs based on rates negotiated in other countries, based largely on a federal proposal championed by former presidential candidate Sen. Bernie Sanders (D-VT). “No one should have to live in fear that they will go bankrupt if they get sick,” Singleton said at the time.

Singleton was unavailable Tuesday to discuss the governor’s proposal, his staff said.

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