The New York State Department of Financial Services has issued draft proposed comprehensive regulations of Pharmacy Benefit Managers (PBMs) in an attempt to eliminate anti-competitive activity and control prescription drug pricing for consumers.

The proposed regulations, open for comment until February 16, seek to implement a law passed in 2021 that regulates PBMs, to eliminate anti-competitive behavior such as spread pricing and unfair or deceptive practices, which New York regulators believe drive up prescription drug prices. The new regulations are scaled back from those previously proposed and pulled back last fall after stakeholder outcry.

There long have been concerns about PBMs – largely unregulated third-party companies that function as intermediaries between insurance companies and pharmacy providers – hurting independent pharmacies and driving up costs for consumers. PBMs own, or are affiliated with, competing chain pharmacies. The three largest PBMs – Express Scripts, CVS Caremark and OptumRx – control approximately 89% of the market and prefer to incentivize patients to use the PBM-owned pharmacies.

New York’s answer was the 2021 law. But the initial set of proposed regulations issued by New York’s Department of Financial Services were pulled back in October 2023 despite enormous support by pharmacy organizations. While the current proposed PBM rules are not as strict, they are still substantive:

  • Prohibiting anti-competitive practices that steer consumers away from community pharmacies and to larger pharmacies affiliated with the PBMs
  • Requiring PBMs to apply the same audit standards to smaller pharmacies that they apply to PBM-affiliated pharmacies
  • Prohibiting PBMs from passing losses to pharmacies when the PBM mistakenly approves a drug, but then later seeks to deny reimbursement to the pharmacy
  • Requiring PBMs to list formularies and pharmacy directories online to increase transparency, and prohibiting them from punishing consumers who rely on that information
  • Requiring PBMs to post a telephone number and email address for consumer questions and to respond to those questions in a reasonable timeframe
  • Requiring PBMs to allow small pharmacies to submit and receive information electronically, thereby reducing administrative costs
  • Prohibiting PBMs from barring in-network pharmacies from providing mail order or delivery services, thereby increasing consumer access to home delivery from community pharmacies

Importantly, if passed, pharmacies will be allowed to share with their patients information about the cost of the medications and the availability of therapeutically equivalent alternative medications.

The proposed rules are good news for independent pharmacies and their patients. The state will accept comments on the proposed regulations through February 16, and stakeholders can submit their opinion or ask questions at PBMRegs@dfs.ny.gov.

Our Pharmacy Law team is watching this regulation and related matters and will report out new developments. With years of experience in pharmacy ownership and supervision, our New York pharmacy attorneys are led by a pharmacist-attorney within the Medical and Life Sciences Industry Team at Harris Beach. Drawing on insights gleaned from both scientific and legal credentials, our New York pharmacy lawyers have earned a national reputation for providing general business counsel and successfully defending some of the largest entities in the pharmaceutical industry.

For more information, please reach out to Harris Beach Attorney Marina Plotkin at (212) 313-5409 and mplotkin@harrisbeach.com, Attorney Roy W. Breitenbach at (516) 880-8378 and rbreitenbach@harrisbeach.com, or to the Harris Beach attorney with whom you most frequently work.