After New York Governor Kathy Hochul created a new Pharmacy Benefits Bureau within the Department of Financial Services specifically charged with regulating and licensing Pharmacy Benefit Managers (PBMs), the Bureau recently (Oct. 31) completed multiple rounds of solicitation of public comment on various topics, including patient steering by PBMs and documented examples of adverse pharmacy reimbursement practices.
In light of rising prescription drug prices, declining patient access, and the closing down of many independent pharmacies, the Governor signed legislation S.3762/A.1396 at the end of 2021, a part of the pharmacy rescue package, providing the Department of Financial Services with authority to prescribe rules to bring transparency to a murky industry. Among the specific grants of regulatory authority, the Department may address “anti-competitive practices” and “unfair claims practices.”
Although PBMs generate significant revenue and have usurped a huge role in drug pricing and reimbursement, PBMs have been largely invisible, unlicensed and unregulated, in stark contrast to pharmacies, health plans, and pharmaceutical companies – the more prominent members of the drug supply chain among which PBMs operate largely behind the scenes.
New York enacted what it refers to as the most comprehensive regulatory framework in the country after a 2019 investigation into PBM practices by the New York Senate Committee on Investigations & Government Operations. The investigation launched by Committee Chair Senator James Skoufis culminated in a comprehensive report urgently calling for transparency and oversight.
PBMs have faced increasing scrutiny from federal and state authorities, accused of unfair practices, such as steering patients to their own pharmacies. The three largest PBMs manage 80% of all adjudicated claims. Each of the top three owns and operates mail order pharmacy services. Many PBMs own, or are affiliated with, large chain pharmacies. The New York Senate report noted a “strong possibility of a conflict of interest” and “an opportunity to manipulate drug dispensing at their mail order pharmacies to enhance their own profits” when PBMs both administer pharmacy benefits and dispense prescription drugs.
Harris Beach attorney Marina Plotkin, who is also a registered pharmacist and formerly owned a community pharmacy, is monitoring developments with PBM regulations. She said the State has received numerous examples of anti-competitive practices. Marina is a Board Member of the New York City Pharmacists Society. For more information, please reach out to her at (212) 313-5409 – mplotkin@harrisbeachmurtha.com.
This alert is not a substitute for advice of counsel on specific legal issues.
Harris Beach has offices throughout New York state, including Albany, Buffalo, Ithaca, New York City, Rochester, Saratoga Springs, Syracuse, Uniondale and White Plains, as well as Washington D.C., New Haven, Connecticut and Newark, New Jersey.
