New York state proposes rules for pharmacy benefit managers

The New York State Department of Financial Service has proposed the nation’s most comprehensive set of market rules for pharmacy benefit managers in that state.

These regulations establish strong protections for consumers and small businesses including prohibiting abusive contract terms that raise drug costs for consumers and strain small pharmacies, as well as establish network adequacy standards to ensure consumers have access to affordable prescriptions where they live.

This is the latest in a series of three sets of regulations already adopted, making New York’s actions the most comprehensive rules surrounding PBMs in the nation. In May 2022, New York Gov. Kathy Hochul announced the creation of the Department of Financial Services' Pharmacy Benefits Bureau, tasked with licensing and supervising the PBM industry in that state. In January 2022, Hochul signed into law a bill providing for licensing and registration of PBMs in New York. The bill also sets forth duties and obligations that PBMs must follow when performing services and allows DFS to enforce the law and receive complaints from consumers, pharmacies and health care providers.

The regulations proposed today establish consumer, pharmacy and market protections including:

• Prohibiting deceptive marketing practices and establishing network adequacy standards to ensure patients have access to in-network pharmacies nearby and are not forced to travel long distances to get their medications.
• Banning abusive contract terms to ensure local pharmacies are paid fairly.
• Prohibiting PBMs from providing preferential treatment to their own affiliated pharmacies.
• Limiting further market concentration by requiring DFS approval of any merger or acquisition activity involving a PBM licensed in the state.

With today’s publication in the State Register, the proposed regulations are subject to a 60-day comment period. DFS will receive feedback on the proposed regulations during the comment period. For more information, a copy of the proposed regulations can be found on the DFS website.