New Jersey lawmakers are considering a handful of bills to make prescription drugs more affordable, including several proposals championed by Gov. Phil Murphy. NJ Spotlight News convened a panel of experts early this month to discuss these initiatives. The interactive online roundtable also sought to engage the audience, some of whom submitted questions before or during the event.
We selected several of these audience questions that were not addressed during the forum and asked panelists to respond in writing. Below are their answers to inquiries the impact these proposals would have on the drug industry, how prescriptions compare to other health care costs and the Murphy administration’s health care affordability quest in general, among other things.
Shabnam Salih, director, Office of Health Care Affordability and Transparency, governor’s office, State of New Jersey
Question: Part of your office’s wider efforts to address health care affordability involve working with various stakeholders to set cost-growth targets, or benchmarking. How might it be possible that insurers and hospitals who are so responsible for high costs can get together and restrain costs?
Answer: The Health Care Affordability, Responsibility, and Transparency (HART) program is focused on data, transparency and creating a shared understanding of health care cost-growth in our state in order to spur innovative action. This work builds from our common concern that the trajectory of health care cost-growth is simply unsustainable, far outpacing wages and overall economic growth in New Jersey. Cost-growth targets provide a shared goal for payers, providers and the state to work toward and track progress against. The HART program will allow and create a foundation for public accountability and support data-driven and smart policy making to mitigate the unsustainable rate of cost-growth in our state, while creating a market-driven opportunity for health care leaders to come together from across the health care landscape to develop strategies that put consumer affordability front and center to restrain cost-growth, while maintaining quality and access of care.
As a first step, in December, a diverse group of stakeholders, including hospitals and providers, insurers, employers and advocates, signed a stakeholder compact committing to take action toward keeping health care-cost growth below the benchmark targets.
Question: What impact will the governor’s pharmaceutical affordability legislation have on the drug industry in New Jersey?
Answer: The health and wellbeing of many of our residents depends on access to their medications and access for many of us means the ability to afford those medications. According to a 2020 survey, one in five New Jersey residents has not taken their medication as prescribed due to cost. This legislative package builds a new foundation and understanding of prescription drug affordability for New Jersey and enhances state oversight of critical pieces of the supply chain, such as pharmacy benefits managers.
Improving prescription drug affordability is key not only to the overall wellbeing of our residents, families and communities but also to ensuring a long-term sustainable health care system that does not bankrupt families, employers and other purchasers, including the State. A more sustainable health care system is critical to industry as well. Here in New Jersey, we are proud that we are home to many global pharmaceutical innovators who are developing vital treatments to help patients. We believe through continued state leadership and industry commitment New Jersey can continue to advance access to affordable, quality and equitable health care and medications for all residents.
Ward Sanders, president, New Jersey Association of Health Plans
Question: How do pharmaceutical costs compare to the overall health care costs charged by hospitals, ERs, diagnostic centers, and the like?
Answer: NJAHP uses data from the State’s Medicaid actuary to provide a picture of the health care “dollar” in Medicaid. That data shows that prescription drugs represent 20% of every dollar spent in the program – up from 11% a few years ago — for outpatient drugs only. Medications provided at hospitals and other in-patient settings are an additional cost . You can find a representation of that dollar on the NJAHP website here.
Similarly, AHIP, the national trade organization for health insurance providers, also publishes information about the health care “dollar.” Based on the data it reviewed, AHIP estimates prescription drugs represent 21.5% of the health care dollar nationwide. You can find the AHIP dollar here.
It’s hard to compare costs among different services and supplies. While much of health care costs are subject to market competition, that is not always the case with prescription drugs, where patent protection and exclusivity limit competitive forces.
Question: Why do health plans have prescription drug “tiers”? Tier 5 medications have out-of-sight pricing and make access to care overwhelming.
Answer: Under your insurance plan design, the prescription medicines available to you may be split into tiers, which then determine your out-of-pocket cost. A plan’s formulary might have three, four or even five tiers, depending on the market and the plan option selected by the policyholder. Each plan decides which drugs on its formulary go into which tiers, based on cost and other factors. In general, the lowest-tier drugs are the lowest cost. Plans negotiate pricing with drug companies. If a plan negotiates a lower price on a particular drug, then it may place it in a more preferred tier and thus provide savings to its members.
Also, it should be noted that rules governing New Jersey’s state-regulated commercial insurance markets (which cover about 1.2 million of the state’s 9.2 million residents) require health plans to create no more than three tiers. Rules also require plans to cap both co-pays (no more than $25, $50 and $75, depending on the tier) and co-insurance (no more than 50%) and overall out-of-pocket maximums.
Lastly, we would agree that “out-of-sight pricing” by manufactures continues to be a problem and hope that is addressed in some fashion by New Jersey policymakers.
Maura Collinsgru, director of Policy and Advocacy, New Jersey Citizen Action
Question: Why aren’t we following the lead of other states? Could we jumpstart the effort by joining states that have passed legislation to allow collective purchasing power to lower drug spending or to set up a program to buy drugs from Canada?
Answer: We should absolutely be learning from and following the lead of other states who have produced real savings for their residents. New Jersey needs to do more. A Prescription Drug Affordability Board with a team of experts would put New Jersey ahead of the curve. (Legislation to create such a board is now advancing in Trenton.) Solutions like wholesale negotiation by the state, importing drugs from Canada, setting payment limits and more would all be on the table to ensure meaningful relief for New Jersey patients at the pharmacy counter. A PDAB is the only policy being considered by the Legislature that would mandate action toward these solutions, or any others that lower the cost of prescription drugs for all New Jerseyans. People can’t afford to wait any longer. The time is now for real action and reform.
