PBM Reform in New Jersey Could Bring Unprecedented Transparency

The Patient and Provider Protection Act (A1502) was recently passed in the New Jersey General Assembly, according to a news release from the New Jersey Legislative Assembly Democrats.¹ The proposed bill, still awaiting its Senate hearing,² is designed to increase transparency and accountability among pharmacy benefit managers (PBMs) and their relationships with pharmacies and other entities in the supply chain.

“New Jersey’s Patient and Provider Protection Act passed the Assembly on May 18, 2026, and is now headed to the Senate,” Jesse Dresser, Esq, partner in the Life Sciences Department and head of the Pharmacy Practice Group at Frier Levitt Attorneys at Law, told Drug Topics® in an exclusive interview. “If enacted, the bill would establish a reimbursement floor for pharmacies at the National Average Drug Acquisition Cost (NADAC) plus the Medicaid dispensing fee, require PBMs to reimburse all contracted pharmacies at the same rate regardless of ownership or affiliation, invalidate rebate agreements conditioned on excluding generics, and prohibit misleading marketing designed to steer patients toward particular network pharmacies.”

Assemblyman Roy Freiman, the primary sponsor of this legislation, argues that current PBM compensation structures reward higher drug prices by incentivizing the promotion of expensive medications to maximize profit margins. To counteract this, the New Jersey bill proposes moving PBMs to a flat-fee administrative model.^1,3

Freiman contends that this shift would create a fairer system that puts patients and transparency ahead of profit margins, ensuring that no patients’ access to medication is hindered by contracts that prioritize the bottom lines of major pharmaceutical middlemen.

READ MORE: The Impact of Closures, PBM Reform on Community Pharmacy

“Under the bill, New Jersey would continue to prohibit PBMs from excluding pharmacies willing to meet the PBMs’ network terms, which is critical to ensuring patients have sufficient access to quality pharmacy care throughout the entire state and not just the pharmacies preferred by the PBM, which are often directly affiliated PBM pharmacy operations,” Dae Lee, PharmD, Esq, CPBS, and Lucas Morgan, Esq, from Buchanan Ingersoll & Rooney, told Drug Topics®.

For independent pharmacists, the legislation addresses long-standing grievances regarding market consolidation and vertical integration. Brian Pinto, a leader with the New Jersey Pharmacists Association, noted that PBMs currently have the ability to value the same medication at vastly different dollar amounts depending on where the prescription is filled.^1,2,4

This practice allows PBMs to drive patients toward pharmacies they own while reimbursing themselves at inflated rates. The bill would prohibit such steering and require PBMs to pay pharmacies the same rates for identical medications.^2,3

Furthermore, it establishes a standard pharmacy fee of $10.92 for each prescription to help offset the financial pressures that have led to the closure of dozens of stores in the state last year.²

Governor Mikie Sherrill has also made PBM reform a top priority, recently highlighting the issue in her budget address. The governor pointed out that the state's Medicaid program could save an estimated $20 million if PBMs were prevented from inflating prices and retaining manufacturer rebates.^2,5

“Among the most critical additions to New Jersey’s current regulations are long-needed requirements that PBMs act as fiduciaries in the best interests of the various health plans they work on behalf of,” continued Lee and Morgan. “In most instances, this would be an assumption, but PBMs have historically denied having any fiduciary duties to plans and other third parties.”

Under A1502, PBMs would be legally required to act as fiduciaries, meaning they must operate in the best interest of the carriers they serve, including Medicaid and the State Health Benefits Program.^1,3

These state-level efforts coincide with a broader federal crackdown on the 3 largest PBMs—CVS Caremark, Express Scripts, and Optum Rx—which currently manage nearly 80% of all prescription drug claims in the US. The federal Consolidated Appropriations Act of 2026, or House Bill 7148, was recently enacted to similarly delink PBM compensation from drug prices in Medicare Part D.^4,6

“[A1502] directly targets the vertical integration that has allowed PBMs to favor their own pharmacy operations,” continued Dresser. “New Jersey is looking to join a rapidly expanding cohort of states taking on these PBM practices, such as Alabama, Louisiana, North Carolina, and Oklahoma.”

As the New Jersey bill moves toward the Senate, supporting organizations like BioNJ and the National Community Pharmacists Association continue to advocate for its passage. Debbie Hart, CEO of BioNJ, emphasized that the reform is critical because patients cannot wait for meaningful changes that ensure they receive medications when they need them.^3,5

Although critics in the insurance industry warn of potential cost increases for carriers, supporters believe the bill is a necessary step to restore accountability to New Jersey’s pharmaceutical supply chain.^2,6

Despite the state reportedly moving toward less PBM oversight, there are still various factors within the greater pharmacy industry that must be addressed, according to our experts.

“While this certainly marks a step in the right direction to ensure pharmacy providers are not paid below their acquisition costs, as we have already begun to see, the application of these frameworks to other pharmacy segments, like specialty pharmacies, requires a reassessment of the dispensing fees being paid and the costs to operate these high-touch pharmacies,” concluded Dresser.

READ MORE: PBM Reform Will Profoundly Reshape Pharmacy Business Models

REFERENCES

1. General Assembly advances ‘Patient and Provider Protection Act.’ News Release. New Jersey Legislative Assembly Democrats. May 18, 2026. Accessed May 20, 2026. https://www.assemblydems.com/m/newsflash/home/detail/13080

2. Stainton LH. NJ Assembly to vote on bill targeting pharmacy benefit managers. New Jersey Monitor. May 18, 2026. Accessed May 20, 2026. https://newjerseymonitor.com/briefs/nj-assembly-pharmacy-benefit-managers/

3. Fazelpoor M. NJ Assembly advances PBM reform bill to cut drug costs. NJBIZ. May 18, 2026. Accessed May 20, 2026. https://njbiz.com/nj-assembly-pbm-reform-drug-costs/

4. Freed M, Cubanski J, Williams E, et al. What to know about pharmacy benefit managers (PBMs) and federal efforts at regulation. KFF. February 9, 2026. Accessed May 20, 2026. https://www.kff.org/other-health/what-to-know-about-pharmacy-benefit-managers-pbms-and-federal-efforts-at-regulation/

5. New Jersey governor signals priority for PBM reform in Medicaid. News Release. NCPA. March 12, 2026. Accessed May 20, 2026. https://ncpa.org/newsroom/qam/2026/03/12/new-jersey-governor-signals-priority-pbm-reform-medicaid

6. Morgan L, Collins CM. Sweeping PBM reforms arrive: what the 2026 federal legislation means for pharmacies, patients and employers. Buchanan Ingersoll & Rooney PC. February 12, 2026. Accessed May 20, 2026. https://www.bipc.com/sweeping-pbm-reforms-arrive-what-the-2026-federal-legislation-means-for-pharmacies,-patients-and-employers