NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A6352
SPONSOR: Weprin TITLE OF BILL:
An act to amend the insurance law, in relation to reducing pharmacy
benefit manager costs
PURPOSE:
Provides for a pass-through pricing model for pharmacy benefit manager
services
SUMMARY OF PROVISIONS:
This bill amends the Insurance Law to add a new section 3114.
Section 1 of this bill amends the Insurance Law to add a new Section
3114, which provides that any contract or other arrangement entered into
by a health insurer that provides for the provision and administration
of pharmacy benefit management services shall be based on a pass-through
pricing model.
Subpart 1 provides that payment to a pharmacy benefit manager (PBM)
Shall be limited to the actual ingredient costs, dispensing fees paid to
pharmacies, and the administrative fee that covers the cost of providing
PBM services (the maximum for such administrative fee may be set by the
Department of Financial Services (DFS)).
Subparts 2 and 3 requires PBMs to identify and report to both DFS and
the health care plan all sources of income, payments, and financial
benefits received by them (including any clawbacks, rebates, charge-
backs, fees, etc.) and pass through those financial benefits in full to
the health bare plan to reduce the reportable ingredient cost.
Subpart 4 requires the PBM to identify all ingredient costs and dispens-
ing fees or similar payments made by the PBM to any pharmacy in
connection with the contract.
Subpart 5 prohibits the practice of spread pricing, which is defined to
mean any amount charged or claimed by the PBM in excess cf the amount
paid to the pharmacies on behalf of the health care plan less an admin-
istrative fee. Subpart 5 also requires any excess amount to be remitted
to the plan on a quarterly basis.
Subpart 6a requires PBMs to make their payment model for administrative
fees available to the health care plan and DFS, and requires the plan,
if so directed by DFS, to make change to the payment model and resubmit
an amended contract to DFS for review and approval. Subpart 6b subjects
any changes in premiums resulting from the contracts to approval by DFS.
Subpart 6c defines pharmacy benefit manager to mean an entity that
contracts with pharmacies or pharmacy contracting agents on behalf of a
health plan, state agency, insurer, managed care organization, or other
third-party payer to provide pharmacy health benefit services or admin-
istration.
Section 2 provides the effective date, such that the act would take
effect immediately.
JUSTIFICATION:
This bill expands upon a significant cost-saving measure from the FY
2019-20 Budget that prohibits the practice of spread pricing by PBMs
contracted with NYS Medicaid Managed Care Plans to all commercial insur-
ance plans.
In the 1960s, insurance companies began to expand their coverage of
prescription medications. This expansion of coverage led to increased
caseloads that put a significant administrative burden on the insurance
industry. Prescription drug coverage plans began to outsource the proc-
essing and administration of claims to new companies called Pharmacy
Benefit Managers (PBMs). As the price of prescription medications
increased, PBMs were able to wield their significant power within the
prescription drug pricing industry and act as a "middleman," negotiating
discounts and rebates with a manufacturer in exchange for a preferable
position on an insurance company's drug formulary. The savings from
these rebates and discounts are meant to pass through to patients making
drugs more affordable.
PBMs negotiate rebates with the drug's manufaCturer in exchange for a
favorable position on an insurance company's formulary. A favorable
position on a formulary makes it more affordable to consumers thus
increasing the drug's market share.. Despite the fact that many PBMs
claim to pass on these savings from these rebates to the consumer, many
PBMs hold on to large portions or all of these rebates as profit.
PBMs also act on behalf of the insurance company to reimburse pharmacies
for the cost of purchasing the medication from the distributor and
dispensing the medication to the consumer. These costs, and often a
.small profit, are covered through the "administrative fee" charged to
insurance companies they are contracted with.
Oftentimes, PBMs will also markup - sometimes dramatically - the differ-
ence between the amount they reimburse the pharmacy and the amount they
charge their clients. These controversial practices, called "spread
pricing," "claw backs," or "chargebacks," are most common with generic
drugs, which make up almost 90% of all prescriptions dispensed in the
United States, and where most believe PBMs. make their greatest profit.
Ending these practices throughout the commercial insurance industry will
prevent overinflated and unjustifiable price markups, eliminate wasteful
spending, and' ensure fair and affordable drug prices for all New York-
ers.
LEGISLATIVE HISTORY:
2019-2020: A.8165 - Referred to Insurance
FISCAL IMPLICATIONS:
To be determined.
EFFECTIVE DATE:
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
6352
2023-2024 Regular Sessions
IN ASSEMBLY
April 5, 2023
___________
Introduced by M. of A. WEPRIN -- read once and referred to the Committee
on Insurance
AN ACT to amend the insurance law, in relation to reducing pharmacy
benefit manager costs
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The insurance law is amended by adding a new section 3115
2 to read as follows:
3 § 3115. Pharmacy benefit management services. (a) Any contract or
4 other arrangement entered into by a health insurer offering health
5 insurance under article thirty-two or forty-three of this chapter for
6 the provision and administration of pharmacy benefit management services
7 shall be based on a pass-through pricing model and include the following
8 requirements:
9 (1) Payment to the pharmacy benefit manager for pharmacy benefit
10 management services shall be limited to the actual ingredient costs,
11 dispensing fees paid to pharmacies, and an administrative fee that
12 covers the cost of providing pharmacy benefit management services pursu-
13 ant to a contract described in this subsection. The department may
14 establish a maximum administrative fee;
15 (2) The pharmacy benefit manager shall identify all sources and
16 amounts of income, payments, and financial benefits to the pharmacy
17 benefit manager related to the provision and administration of pharmacy
18 benefit management services on behalf of the health care plan, includ-
19 ing, but not limited to, any pricing discounts, rebates of any kind,
20 inflationary payments, credits, clawbacks, fees, grants, chargebacks,
21 reimbursements, or other benefits and shall ensure that any portion of
22 such income, payments, and financial benefits is passed through to the
23 health care plan in full to reduce the reportable ingredient cost;
24 (3) The pharmacy benefit manager shall fully disclose to the depart-
25 ment and to the health care plan the sources and amounts of all income,
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD04651-01-3
A. 6352 2
1 payments, and financial benefits referred to in paragraph two of this
2 subsection received by the pharmacy benefit manager;
3 (4) The pharmacy benefit manager shall identify all ingredient costs
4 and dispensing fees or similar payments made by the pharmacy benefit
5 manager to any pharmacy in connection with the contract or other
6 arrangement;
7 (5) The pharmacy benefit manager shall not utilize any form of spread
8 pricing in any contract or other arrangement with health care plans. For
9 purposes of this subsection "spread pricing" means any amount charged or
10 claimed by the pharmacy benefit manager in excess of the amount paid to
11 pharmacies on behalf of the health care plan less an administrative fee
12 as described in this subsection. Any such excess amount shall be remit-
13 ted to the health care plan on a quarterly basis;
14 (6) Pharmacy benefit managers shall make their payment model for
15 administrative fees available to the health care plan and to the depart-
16 ment. The health care plan shall, if so directed by the department,
17 make changes to the payment model and resubmit an amended contract or
18 contracts to the department for review and approval.
19 (b) Any changes to premiums resulting from such contracts shall be
20 subject to the approval of the department.
21 (c) For the purposes of this section, the term "pharmacy benefit
22 manager" means an entity that contracts with pharmacies or pharmacy
23 contracting agents on behalf of a health plan, state agency, insurer,
24 managed care organization, or other third-party payor to provide pharma-
25 cy health benefit services or administration.
26 § 2. This act shall take effect immediately.
