What's happening
This bill prohibits insurers and pharmacy benefit managers from charging consumers more for prescription drugs than the negotiated rate minus any rebates.
Why it matters
Directs insurers and pharmacy benefit managers (PBMs) to pass savings from negotiated drug prices and rebates directly to consumers at the point of sale, potentially lowering out-of-pocket costs for many prescription drugs.
Reduces opportunities for insurers or PBMs to profit from “spread pricing,” where the consumer pays more than the insurer or PBM actually pays the pharmacy for a drug, increasing transparency in pricing.
May encourage more competitive pricing and rebate negotiations between PBMs, insurers, and drug manufacturers, since consumers will directly benefit from rebates rather than those savings being retained by intermediaries.
Could impact how insurers and PBMs structure their contracts and cost-sharing arrangements, potentially leading to changes in insurance premiums, plan design, or pharmacy networks as companies adapt to reduced flexibility in setting consumer drug costs.
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Who cares
Insured prescription drug consumers
The bill would cap their drug charges at the insurer’s or pharmacy benefit manager’s negotiated reimbursement rate, minus rebates collected.
Pharmacy benefit managers
The bill would require them, in contracts with insurers, to ensure consumers’ copays and deductibles do not exceed the negotiated reimbursement rate minus rebates collected.
Health insurers and health maintenance organizations
The bill would prohibit charges above their own or their pharmacy benefit manager’s negotiated reimbursement rate minus rebates collected and require copays to be based on that net rate.
Headline styles
Cap Prescription Drug Charges
Plain English, a few words. Used as the page title.
Sponsors
1 Co-sponsor
History
- Referred to health
- Committed to rules
- Advanced to third reading
- 2nd report cal.
- 1st report cal.274
- Referred to health
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
2541
2017-2018 Regular Sessions
IN SENATE
January 13, 2017
Introduced by Sen. HANNON -- read twice and ordered printed, and when printed to be committed to the Committee on Health
AN ACT to amend the public health law and the insurance law, in relation to contracts between pharmacy benefit managers and health insurers to protect consumers
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Section 280-a of the public health law is amended by adding a new subdivision 3 to read as follows:
3. A pharmacy benefit manager shall, with respect to contracts between the pharmacy benefit manager and an insurer, ensure a prescription drug consumer is not charged, through either a co-pay or deductible, a cost that is higher than the negotiated reimbursement rate for the drug, less any rebate collected.
§ 2. Section 4406-c of the public health law is amended by adding a new subdivision 9 to read as follows:
9. No health maintenance organization shall require an enrollee to pay a cost higher than the health maintenance organization's or their pharmacy benefit manager's negotiated reimbursement rate for a prescription drug, less any rebates collected. Any co-payment charged under the contract shall also be based upon the negotiated rate, less any rebate collected.
§ 3. Section 3217-b of the insurance law is amended by adding a new subsection (k) to read as follows:
(k) No insurer shall require an insured to pay a cost higher than the insurer's or their pharmacy benefit manager's negotiated reimbursement rate for a prescription drug, less any rebates collected. Any co-payment charged under the policy shall also be based upon the negotiated rate, less any rebate collected.
§ 4. Section 4325 of the insurance law is amended by adding a new subsection (1) to read as follows:
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06850-02-7
S. 2541 2
(1) No corporation organized under this article shall require a covered person to pay a cost higher than the corporation's or their pharmacy benefit manager's negotiated reimbursement rate for a prescription drug, less any rebates collected. Any co-payment charged under the contract shall also be based upon the negotiated rate, less any rebate collected.
§ 5. This act shall take effect on the first of January next succeeding the date on which it shall have become a law.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the public health law and the insurance law, in relation to contracts between pharmacy benefit managers and health insurers to protect consumers
Purpose
The purpose of this bill is to prohibit the imposition of a charge for a prescription drug upon an insured individual, which exceeds the negotiated reimbursement rate.
Summary of provisions
Section one amends Public Health Law § 280-a by adding a new subdivision 3 to require pharmacy benefit managers (PMB) to ensure that a prescription drug consumer is not charged an amount, through either a co-pay or deductible, higher than the negotiated reimbursement rate for the drug, less any rebate collected.
Read the full memo (823 words)
Section two amends Public Health Law § 4406-c by adding a new subdivision (9) requiring that no health maintenance organization may require an enrollee to pay a cost higher than the health maintenance organization's or their pharmacy benefit manager's negotiated reimbursement rate for a prescription drug, less any rebates collected.
Section three amends Insurance Law § 3217-b by adding a new subsection (k) requiring that no insured pay a cost higher than the negotiated reimbursement rate of the insurers' or their PBMs, less any rebates collected.
Section four amends Insurance Law § 4325 by adding a new subsection (l) requiring that no corporation organized under this article may require a covered person to pay a cost higher than the corporation's or their PBMs negotiated reimbursement for a prescription drug, less any rebates collected.
Section four provides the effective date.
Justification
This legislation ensures savings received by pharmacy benefit managers (PBMs), and in turn insurers, from rebates for prescription drugs, make it back to the consumer. The complexity of drug pricing, which involves PBMs who negotiate drug prices and rebates, and changes in the insurance market with more individuals enrolled in high, deductible plans, has resulted in many consumers paying the full sticker price of a drug out-of-pocket when their insurer, who does not pay for the drug, receives a rebate for the medication.
Example: Epi-Pens have a sticker price of $600. The PBM, on behalf of the insurer, negotiates a $300 rebate. If the consumer has met the deductible, the insurer pays $600 and gets back $300 from the manufacturer through the PBM. The consumer may be responsible for a co-payment. If the consumer has not met the deductible, the consumer pays $600 and the insurer still receives a $300 rebate through the PBM.
Recent trends show that PBMs have been a big beneficiary of soaring drug prices burdening not only New Yorkers, but Americans as a whole. Rising drug prices are the single largest increasing cost placing stress on insurers and the state Medicaid Program. While drug manufacturers such as Valeant and Turing Pharmaceuticals have, for good reason, been much of the focus of federal officials, PBMs have also profited from these skyrocketing prices. Due to their large market share, opacity and complexity, PBMs have been a large beneficiary of soaring prices while avoiding the same intense scrutiny of drug manufacturers. This has started to change, with PBMs having recently drawn the attention of prosecutors as well as federal and state regulators.
Typically, a PBM contracts with an insurer and the insurer contracts with the drug consumer. The PBM and the drug companies negotiate a rebate to bring down the cost of pharmaceuticals. Often times, insurers do not know how much drugs cost the PBM once it has negotiated its own rebate with a drug company-they just know how much they're paying a PBM.
With more and more individuals enrolling in high deductible health plans, the result is that insured consumers are often paying out-of-pocket the full cost of medications that the PBM receives a rebate for. According to the Kaiser Foundation, a quarter of workers in employer plans have to pay the full cost for prescription drugs before their coverage kicks in. Many pharmaceutical companies indicate that their contacts with PBMs and insurers generally require rebates be paid to them on all prescriptions, even when the patient pays the full cost because of high deductibles. In such cases, the PBM and ultimately the insurer receives the rebates even though they have not paid a dime.
Drug makers give insurers and PBMs more than $100 billion a year in rebates and other discounts to reduce the skyrocketing cost of drugs. PBMs are required to pass these rebates onto the insurance company but there is currently no requirement that the insurer pass this savings onto the consumer. The current reimbursement practices have not kept pace with the evolving system, which has resulted in unintended costs to consumers. This legislation ensures these savings are passed on to the consumer.
Legislative history
New bill.
Fiscal implications
None to the state.
Effective date
This act shall take effect on the first of January next succeeding the date on which it shall have become a law.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.