Proposed New York state rule targets PBM ‘spread pricing’
The new state regulations are aimed at increased transparency to consumers and employers, as well as rooting out spread-pricing, which enables PBMs to charge pharmacists higher prices than they pay to manufacturers.
New York’s financial services watchdog is accepting public comments through Feb. 16 on proposed pharmacy benefit manager regulations that are intended to strengthen consumer protections and address anti-competitive conduct.
The proposed set of rules follows New York’s enactment of a 2021 law that is aimed at rooting out the former common practice of spread-pricing, which enables PBMs to charge pharmacists higher prices than they pay to manufacturers, yielding additional unknown profits.
The regulations proposed by New York State Department of Financial Services Superintendent Adrienne Harris would:
- Prohibit PBMs from barring any in-network pharmacies from providing mail order or delivery services;
- Increase transparency to consumers and employers by requiring PBMs to list formularies and pharmacy directories online and prohibiting PBMs from punishing a consumer who relies on said information;
- Require PBMs to post a telephone number and email address for consumers to direct their questions to, and PBMs must respond in a reasonable amount of time;
- Prohibit anti-competitive practices that steer consumers away from their community pharmacy to larger pharmacies affiliated with the PBM;
- Prohibit PBMs from unfairly passing losses onto pharmacies when the PBM mistakenly approved dispensing a drug and then seeks to retroactively deny reimbursement to the pharmacy;
- Reduce administrative burdens and costs on small pharmacies by allowing them to submit information to and receive information from PBMs electronically;
- Prevent the abuse of audits against small pharmacies who are not affiliated with a PBM by requiring PBMs to apply the same audit standards across all in-network pharmacies.
“It is no coincidence that as New Yorkers continue to pay more for life-saving medication each year, the PBM industry records billions in revenue with little regulatory oversight,” Harris said in a statement. “This proposed regulation seeks to put an end to unfair practices by the PBM industry, making prescription drugs more affordable and accessible for New Yorkers.”
In a legal alert, attorneys from Barclay Damon in Albany said the proposed rules “are comprehensive, albeit comparatively scaled back from regulations previously proposed” and withdrawn by DFS in October, after concerns were raised by the industry.
Related: House panel passes PBM bill that bans spread pricing, only allows a flat service fee
DFS said the more recently proposed rules were informed by “extensive outreach to industry, health plans, pharmacy groups, state and federal regulators, and the general public.”
“Overall, we believe the regulations, while not as comprehensive as the prior version, are a good start at curbing some of the behaviors independent pharmacies have been subjected to over the years,” Linda Clark and Brad Gallagher, of Barclay Damon’s health care controversies team, wrote. “The regulations, if implemented, will serve as a basis for protecting against some of the most egregious violations of the basic principles of good faith and due process.”