What's happening
This bill establishes strict registration, licensing, accountability, and transparency requirements for pharmacy benefit managers operating in New York.
Why it matters
Stronger oversight and consumer protection. By requiring pharmacy benefit managers (PBMs) to register and obtain licenses, the bill creates mechanisms for the state to monitor PBMs' actions, enforce standards, and penalize misconduct. This addresses concerns about PBM practices that may drive up drug costs or interfere with patient care.
Transparency in drug pricing and PBM practices. The bill mandates detailed annual and quarterly reporting by PBMs, including disclosure of financial incentives, contracts, and potential conflicts of interest. This could expose hidden arrangements that affect which drugs are covered or how much consumers pay, helping policymakers and insurers identify and address unfair or anti-competitive behavior.
Empowering pharmacies and patients. The bill prohibits PBMs from contractually silencing pharmacists about cheaper drug options or requiring patients to pay more than the pharmacy’s cost for a medication. This ensures patients can receive honest information about their choices and may reduce out-of-pocket costs.
Accountability and fiduciary responsibility. PBMs will be legally obligated to act in the best interests of health insurers (and by extension, their members), including treating funds as held in trust and periodically accounting for them. This change aims to realign incentives so PBMs cannot prioritize their own profits over the needs of insurers, pharmacies, or patients.
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Who cares
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License Pharmacy Benefit Managers
Plain English, a few words. Used as the page title.
Sponsors
History
- Referred to insurance
- Referred to insurance
Full text
10 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
6274
2019-2020 Regular Sessions
IN SENATE
May 31, 2019
Introduced by Sen. BRESLIN -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance
AN ACT to amend the insurance law, in relation to registration and licensing of pharmacy benefit managers; and to amend the public health law, in relation to the substitution of prescriptions by pharmacy benefit managers
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The insurance law is amended by adding a new article 29 to read as follows:
ARTICLE 29
PHARMACY BENEFIT MANAGERS Section 2901. Definitions.
2902. Acting without a registration.
2903. Registration requirements for pharmacy benefit managers.
2904. Reporting requirements for pharmacy benefit managers.
2905. Acting without a license.
2906. Licensing of a pharmacy benefit manager.
2907. Revocation or suspension of a registration or license of a
pharmacy benefit manager.
2908. Penalties for violations.
2909. Stay or suspension of superintendent's determination.
2910. Revoked registrations or licenses.
2911. Change of address.
2912. Applicability of other laws.
2913. Assessments.
2914. Duty, accountability and transparency.
2915. Contract provisions.
§ 2901. Definitions. For purposes of this article:
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD13127-01-9
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(a) "Controlling person" is any person or other entity who or which directly or indirectly has the power to direct or cause to be directed the management, control or activities of a pharmacy benefit manager.
(b) "Health insurer" means an insurance company authorized in this state to write accident and health insurance, a company organized pursuant to article forty-three of this chapter, a municipal cooperative health benefit plan established pursuant to article forty-seven of this chapter, an organization certified pursuant to article forty-four of the public health law, an institution of higher education certified pursuant to section one thousand one hundred twenty-four of this chapter, or the New York state health insurance plan established under article eleven of the civil service law.
(c) "Pharmacy benefit management services" means directly or through an intermediary, managing the prescription drug coverage provided by a health insurer under a contract or policy delivered or issued for delivery in this state or a plan subject to section three hundred sixty-four-j of the social services law, including the processing and payment of claims for prescription drugs, the performance of drug utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to prescription drug coverage, contracting with network pharmacies, negotiation of rebates, and controlling the cost of covered prescription drugs.
(d) "Pharmacy benefit manager" means a person, firm, association, corporation or other entity that, pursuant to a contract with a health insurer provides pharmacy benefit management services, except that term shall not include:
(1) an officer or employee of a registered or licensed pharmacy benefit manager; or
(2) a health insurer, or any manager thereof, individual or corporate, or any officer, director or regular salaried employee thereof, providing pharmacy benefit management services under a policy or contract issued by the health insurer.
§ 2902. Acting without a registration. (a) No person, firm, association, corporation or other entity may act as a pharmacy benefit manager prior to January first, two thousand twenty without having a valid registration as a pharmacy benefit manager filed with the superintendent in accordance with this article and any regulations promulgated thereunder.
(b) Prior to January first, two thousand twenty, no health insurer may pay any fee or other compensation to any person, firm, association, corporation or other entity for performing pharmacy benefit management services unless the person, firm, association, corporation or other entity is registered as a pharmacy benefit manager in accordance with this article.
(c) Any person, firm, association, corporation or other entity that violates this section shall, in addition to any other penalty provided by law, be liable for restitution to any insurer or insured harmed by the violation and shall also be subject to a penalty of the greater of (1) two thousand dollars for the first violation and five thousand dollars for each subsequent violation or (2) the aggregate economic gross receipts attributable to all violations.
§ 2903. Registration requirements for pharmacy benefit managers. (a) Every pharmacy benefit manager that performs pharmacy benefit management services prior to January first, two thousand twenty-one shall register with the superintendent in a manner acceptable to the superintendent, and shall pay a fee of two thousand dollars for each year or fraction of
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a year in which the registration shall be valid. The superintendent, in consultation with the commissioner of health, may establish, by regulation, minimum registration standards required for a pharmacy benefit manager. The superintendent can reject a registration application filed by a pharmacy benefit manager that fails to comply with the minimum registration standards.
(b) For each business entity, the officer or officers and director or directors named in the application shall be designated responsible for the business entity's compliance with the financial services and insurance laws, rules and regulations of this state.
(c) Every registration will expire on December thirty-first, two thousand twenty regardless of when registration was first made.
(d) Every pharmacy benefit manager that performs pharmacy benefit management services at any time between January first, two thousand nineteen and June first, two thousand nineteen, shall make the registration and fee payment required by subsection (a) of this section on or before September first, two thousand nineteen. Any other pharmacy benefit manager shall make the registration and fee payment required by subsection (a) of this section prior to performing pharmacy benefit management services.
(e) Registrants under this section shall be subject to examination by the superintendent as often as the superintendent may deem it necessary. The superintendent may promulgate regulations establishing methods and procedures for facilitating and verifying compliance with the requirements of this article and such other regulations as necessary to enforce the provisions of this article.
§ 2904. Reporting requirements for pharmacy benefit managers. (a)(1) On or before July first of each year, beginning in two thousand twenty, every pharmacy benefit manager shall report to the superintendent, in a statement subscribed and affirmed as true under penalties of perjury, the information requested by the superintendent including, without limitation, disclosure of any financial incentive or benefit for promoting the use of certain drugs and other financial arrangements affecting health insurers or their policyholders or insureds and any information relating to the business, financial condition, or market conduct of the pharmacy benefit manager. The superintendent also may require the filing of quarterly or other statements, which shall be in such form and shall contain such matters as the superintendent shall prescribe.
(2) The superintendent also may address to any pharmacy benefit manager or its officers any inquiry in relation to its provision of pharmacy benefit management services or any matter connected therewith. Every pharmacy benefit manager or person so addressed shall reply in writing to such inquiry promptly and truthfully, and such reply shall be, if required by the superintendent, subscribed by such individual, or by such officer or officers of the pharmacy benefit manager, as the superintendent shall designate, and affirmed by them as true under the penalties of perjury.
(b) In the event any pharmacy benefit manager or person does not submit the report required by paragraph one of subsection (a) of this section or does not provide a good faith response to an inquiry from the superintendent pursuant to paragraph two of subsection (a) of this section within a time period specified by the superintendent of not less than fifteen business days, the superintendent is authorized to levy a civil penalty, after notice and hearing, against such pharmacy benefit manager or person not to exceed one thousand dollars per day for each
S. 6274 4
day beyond the date the report is due or the date specified by the superintendent for response to the inquiry.
(c) All information disclosed by a pharmacy benefit manager shall be deemed confidential and not subject to disclosure unless the superintendent determines that such disclosure is in the public interest, or is necessary to carry out this article or to allow the department to perform examinations or investigations authorized by law.
§ 2905. Acting without a license. (a) No person, firm, association, corporation or other entity may act as a pharmacy benefit manager on or after January first, two thousand twenty-one without having authority to do so by virtue of a license issued in force pursuant to the provisions of this article.
(b) No health insurer may pay any fee or other compensation to any person, firm, association, corporation or other entity for performing pharmacy benefit management services on or after January first, two thousand twenty-one unless the person, firm, association, corporation or other entity is licensed as a pharmacy benefit manager in accordance with this article.
(c) Any person, firm, association, corporation or other entity that violates this section shall, in addition to any other penalty provided by law, be subject to a penalty of the greater of (1) two thousand dollars for the first violation and five thousand dollars for each subsequent violation or (2) the aggregate gross receipts attributable to all violations.
§ 2906. Licensing of a pharmacy benefit manager. (a) The superintendent may issue a pharmacy benefit manager's license to any person, firm, association or corporation who or that has complied with the requirements of this article, including regulations promulgated by the superintendent. The superintendent, in consultation with the commissioner of health, may establish, by regulation, minimum standards for the issuance of a license to a pharmacy benefit manager.
(b) The minimum standards established under this subsection may address, without limitation:
(1) conflicts of interest between pharmacy benefit managers and health insurers;
(2) deceptive practices in connection with the performance of pharmacy benefit management services;
(3) anti-competitive practices in connection with the performance of pharmacy benefit management services;
(4) unfair claims practices in connection with the performance of pharmacy benefit management services; and
(5) protection of consumers.
(c)(1) Any such license issued to a firm or association shall authorize all of the members of the firm or association and any designated employees to act as pharmacy benefit managers under the license, and all such persons shall be named in the application and supplements thereto.
(2) Any such license issued to a corporation shall authorize all of the officers and any designated employees and directors thereof to act as pharmacy benefit managers on behalf of such corporation, and all such persons shall be named in the application and supplements thereto.
(3) For each business entity, the officer or officers and director or directors named in the application shall be designated responsible for the business entity's compliance with the insurance laws, rules and regulations of this state.
(d)(1) Before a pharmacy benefit manager's license shall be issued or renewed, the prospective licensee shall properly file in the office of
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the superintendent a written application therefor in such form or forms and supplements thereto as the superintendent prescribes, and pay a fee of two thousand dollars for each year or fraction of a year in which a license shall be valid.
(2) Every pharmacy benefit manager's license issued to a business entity pursuant to this section shall expire on the thirtieth day of November of even-numbered years. Every license issued pursuant to this section to an individual pharmacy benefit manager who was born in an odd-numbered year, shall expire on the individual's birthday in each odd-numbered year. Every license issued pursuant to this section to an individual pharmacy benefit manager who was born in an even-numbered year, shall expire on the individual's birthday in each even-numbered year. Every license issued pursuant to this section may be renewed for the ensuing period of twenty-four months upon the filing of an application in conformity with this subsection.
(e)(1) If an application for a renewal license shall have been filed with the superintendent before October first of the year of expiration, then the license sought to be renewed shall continue in full force and effect either until the issuance by the superintendent of the renewal license applied for or until five days after the superintendent shall have refused to issue such renewal license and given notice of such refusal to the applicant.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the insurance law, in relation to registration and licensing of pharmacy benefit managers; and to amend the public health law, in relation to the substitution of prescriptions by pharmacy benefit managers
Purpose or general idea of bill
To require the registration and licensure of pharmacy benefit managers (PBMs).
Summary of specific provisions
The insurance law is amended by adding a new article 29.
Read the full memo (603 words)
SECTION 1
Section 2901. For the purposes of this article defines controlling person, health insurer, pharmacy benefit management services, and phar- macy benefit manager.
Section 2902. Provides that no person, firm, corporation, or other enti- ty may act as a PBM prior to January 1st, 2020 without having registered as a PBM with the New York State Department of Financial Services.
Section 2903. Outlines the registration requirements for PBMs.
Section 2904. Outlines the reporting requirements for PBMs.
Section 2905. Provides that no person,firm, association,corporation or other entity may act as a PBM on or after January 1st 2021 without a license issued from the Department of Financial Services and establishes penalties for violations of this section.
Section 2906. Outlines the requirements for the licensing of a pharmacy benefit manager.
Section 2907. Outlines the terms and conditions with respect to the revocation or suspension of a registration or license of a pharmacy benefit manager.
Section 2908, 2909 and 2910. Establishes penalties for violations of this article, the stay or suspension of the superintendent's determi- nation and the revocation of registrations or licenses.
Section 2911. A registrant or licensee shall inform the superintendent of a change of address within 30 days of the change.
Section 2912. Nothing in this article shall exempt PBMs from complying with provisions of articles 21 and 49 of this chapter and article 49 of the public health law or any other provision of this chapter or the financial services law.
Section 2913. Provides for assessments of PBMs by the superintendent of financial services.
Section 2914. Provides for duty, accountability and transparency included in that the PBM shall have a fiduciary relationship with and obligation to the health insurer and shall perform PPM management services with care, skill, prudence, diligence and professionalism.
Section 2915. Specifies allowable contract provisions.
SECTION 2
Section 280-a of the public health law is amended by adding a new subdi- vision 5 which states that a PPM may not substitute or cause the substi- tuting of one prescription drug for another in dispensing a prescription or alter or cause the altering of the terms of a prescription, except with the approval of the prescriber.
SECTION 3
Subsection (b) of section 2402 of the insurance law, as amended by section 71 of part A of chapter 62 of the laws of 2011 is amended to add section 2902 and 2905 to defined violations.
SECTION 4
Effective Date
Justification
A PBM is an administrator of prescription drug programs. PBMs are responsible for developing and maintaining formularies and other clin- ical management programs, processing prescription drug claims for insur- ance companies or corporations, and negotiating contracts with pharma- cies and pharmaceutical manufacturers. Despite their farreaching role in our health care delivery system they are largely unregulated.
This legislation increases transparency while providing the appropriate regulation and oversight over PBMs through licensure and registration within the New York State Department of Financial Services.
Prior legislative history
This is a new bill.
Fiscal implications for state and local governments
None
Effective date
This act shall take effect immediately and shall have been deemed to have been in full force and effect on or after July 1, 2019.
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