New York Announces Establishment of New Bureau Responsible for PBM Oversight

Multiple states across the country have recently taken action and enacted new legislation to regulate Pharmacy Benefit Managers (“PBMs”). New York is no exception. Earlier in 2022, New York enacted comprehensive laws governing PBMs. More recently, New York’s Governor, Kathy Hochul, announced the establishment of a new Pharmacy Benefits Bureau with responsibility for supervision and oversight of PBMs.

The new PBM bureau, which is established under New York’s Department of Financial Services, will have several responsibilities as a PBM “watchdog” including establishing standards to protect consumers and independent small businesses. This is especially meaningful for Independent Pharmacies which often have little to no bargaining power vis-à-vis PBM contracts. PBMs are some of the largest companies in the country. PBMs exist in a highly consolidated marketplace where only three PBMs (CVS Caremark, Express Scripts, and OptumRx) control nearly 80% of our nation’s prescription volume. Independent Pharmacies are forced to accept unfair and unconscionable contract terms or risk going out of business. New York’s new law includes enhanced regulations of Maximum Allowable Cost (“MAC”) and a provision which states that “[a] [PBM] shall have a duty of good faith and fair dealing with all parties, including . . . covered individuals and pharmacies[.]” New York’s new law and Pharmacy Benefits Bureau aim to level the playing field. Independent Pharmacies must ensure they understand these laws and the PBMs’ obligations under these laws to obtain the maximum protection.

As New York State Senator Neil D. Breslin noted in announcing the Bureau’s establishment, “[t]he PBM industry had gone unregulated long enough.” Since the monumental U.S. Supreme Court decision Rutledge v. PCMA, several states, similar to New York, have taken steps to enact reasonable PBM regulations with the understanding from Rutledge that reasonable regulations will not violate certain federal laws (e.g., ERISA) and will be upheld.

How Frier Levitt Can Help

Frier Levitt represents thousands of pharmacies across the United States, and emphasizes PBM issues (including in New York), and has successfully taken on some of the most troubling PBM tactics including improper PBM audit and recoupment practices, PBM network access issues, DIR fees and PBM reimbursement issues. Frier Levitt has extensive knowledge of all aspects of PBMs as it relates to their relationships with Payors and Pharmacies. Contact us today to speak with an attorney about how Payors and Pharmacies can leverage the various laws and protections afforded to such entities, including these important new laws now in effect in New York.