New York State Introduces New Regulations for Pharmacy Benefit Managers

ALBANY, N.Y. — New York State’s top financial services regulator has announced new “market conduct” guidelines for pharmacy benefit managers (PBMs) aimed at enhancing consumer protections and curbing anti-competitive practices. Public input on these proposed regulations will be accepted by the Department of Financial Services (DFS) until February 16.

“As prescription costs for New Yorkers continue to rise, the PBM industry has amassed substantial profits with minimal regulatory scrutiny,” Superintendent Adrienne Harris stated. “These proposed regulations are designed to end unfair practices by PBMs, making essential medications more affordable and accessible for residents of New York.”

New York’s efforts to tackle “spread pricing” began with a 2021 law aimed at addressing this widespread practice, where PBMs charge benefit plans more for a drug than they reimburse pharmacies, keeping the difference as profit. In a Congressional hearing last September, Hugh Chancy, owner of a small community pharmacy chain in Georgia, criticized PBMs for practices that drive up drug costs and harm patients and taxpayer-funded programs.

The issue has also drawn criticism from PhRMA, a leading U.S. pharmaceutical trade group. PhRMA argues that PBMs’ earnings often depend on drug prices, creating “misaligned incentives.” Additionally, PBMs aren’t required to share negotiated rebates and discounts with their clients, such as insurers, employers, state agencies, or patients. The practice of “spread pricing,” in which PBMs retain the difference between the amount they bill and what they pay pharmacies, remains largely hidden from clients and patients.

In response, the 2021 New York law directed DFS to create regulations addressing conflicts of interest, deceptive practices, and anti-competitive actions by PBMs. Harris noted that the proposed regulations would enhance access to prescription drugs for New Yorkers, eliminate practices that increase drug costs, and ensure fair competition for small independent pharmacies alongside larger, PBM-affiliated chains.

Key elements of the proposed regulations include:

• Increased Access to Delivery Services: PBMs would be prohibited from stopping any in-network pharmacy from offering mail order or delivery services, expanding patients’ access to home delivery from local pharmacies.
• Enhanced Transparency: PBMs would be required to provide online access to formularies and pharmacy directories, and consumers relying on this information could not be penalized.
• Consumer Support: PBMs would need to display a contact number and email for consumer inquiries and respond promptly.
• Restrictions on Anti-Competitive Practices: PBMs would be barred from directing consumers away from community pharmacies toward affiliated large chain pharmacies.
• Fair Reimbursement Practices: PBMs would be prohibited from shifting losses onto pharmacies due to errors in approving drug dispensing, preventing retroactive denial of pharmacy reimbursements.
• Reduced Administrative Burden: Small pharmacies would be allowed to submit and receive information from PBMs electronically, cutting administrative costs.
• Audit Standards: PBMs would be required to use consistent audit standards across all in-network pharmacies, preventing audit abuse against small, unaffiliated pharmacies.

Harris noted that input from various stakeholders, including pharmaceutical companies, health plans, pharmacy groups, regulators, and the public, contributed to the development of these proposed rules. Following an initial 10-day pre-proposal comment period, a 60-day comment window will open once the regulations are published in the State Register. DFS welcomes public feedback, which will be reviewed before the final regulation is issued or revised.

These proposed regulations are critical for local, community-focused pharmacies like Mediserv Pharmacy, located in the Bronx, New York. As a trusted pharmacy in the area, Mediserv Pharmacy is dedicated to providing affordable and accessible medications, and these new guidelines could greatly support their efforts. By curbing unfair PBM practices, the regulations aim to create a more level playing field, ensuring that independent pharmacies like Mediserv Pharmacy can better serve their communities without the challenges posed by anti-competitive actions.