The New York Legislature recently passed legislation which it has now sent to the Governor, Kathy Hochul, for signature. If signed, the “Pharmacy Rescue Package” will provide new opportunities for NY-based pharmacies and will provide much-needed oversight of pharmacy benefit managers (“PBMs”). In January 2020, Frier Levitt discussed former Governor Cuomo’s veto of legislation that required PBMs to eliminate conflicts of interest, deceptive practices, conduct fair audits, disclose contract terms, and give patients/pharmacies harmed by PBMs the right to sue. Almost two years later, the New York Legislature has again passed legislation that revisits these objectives.
The suite of bills the legislature passed includes S3762, which relates to PBM regulation; S3566, which amends the anti-mandatory mail order (“AMMO”) law; S6603, which protects access to pharmacy services; and S4807, which expands the immunization authorization of pharmacists. Importantly, S3762 provides patients and pharmacies a private right of action to sue PBMs for relief from PBMs’ failure to comply with their duties, obligations, and responsibilities under the new law. The comprehensive Bill also provides, among other things, new definitions related to PBMs that will help ensure PBMs are covered by the law. Crucially, the Bill defines “health plan or provider” in a manner making clear that PBMs shall have legal responsibilities to the pharmacies with which they contract. The Bill mandates a duty of care, skill, diligence, prudence, and professionalism between the PBM and plans, providers, and covered individuals. This is a substantial legal duty that will require PBMs to act in the best interests of these parties, with covered individuals taking first preference. In other words, PBMs cannot act in a self-interested manner when dealing with pharmacies, but must place the pharmacies’ best interests over the PBM’s own interests. The Bill also provides substantial enumerated protections and transparency requirements in favor of independent pharmacies.
Among other duties set forth in the Bill, a PBM must annually account for pricing discounts, rebates, clawbacks, fees, or other benefits received by the PBM, and these discounts must be passed through to the health plan or provider in full to reduce ingredient costs. PBMs must also grant providers access to all financial and utilization information maintained by PBMs that relate to the services provided; and disclose conflicts of interest. While not expressly stated in the Bill, these transparency requirements can be interpreted as a right of pharmacies to audit PBMs. The law also provides for Maximum Allowable Cost (“MAC”) appeals and procedures. PBMs will require licensure and the Superintendent of Finance must promulgate minimum standards that address conflicts of interest, deceptive practices, anti-competitive practices, unfair claims practices, and consumer protection. These new regulations, once promulgated, will be enforceable pursuant to the Bill’s private right of action. Additionally, PBMs may not include contract provisions requiring accreditation or recertification more stringent than state or federal licensing requirements.
Regarding the other bills in the package, S3566 seeks to amend the AMMO law to require the same reimbursement amount for both mail order and non-mail order pharmacies. While the current AMMO law already provides some protection, S3566 redefines “same reimbursement amount” to mean PBMs must use the same index and benchmarks for both pharmacies, including the same Average Wholesale Price (“AWP”) and MAC lists. Pharmacist groups believe this will reduce instances of patient “steering” practices employed by vertically integrated PBM/Plans/Pharmacies, and will provide much needed transparency in drug pricing.
Another of the package of bills, S6603, will increase reimbursement rates paid to retail pharmacies under the Medicaid managed care program by reducing administrative fees paid to managed care providers and PBMs and, participating pharmacies will be paid a professional dispensing fee and drug acquisition cost for each outpatient drug dispensed at no less than the amount established under the State’s fee-for-service program. This Bill also precludes managed care providers or PBMs from reimbursing affiliated pharmacies more than non-affiliated pharmacies.
This new legislation, if signed into law by the Governor, will fundamentally alter the relationship between PBMs and independent pharmacies in New York, offering much needed relief for those independent pharmacies struggling with predatory pricing and onerous PBM contracts. The suite of bills, which passed unanimously in the Senate and nearly unanimously in the Assembly, awaits only the Governor’s signature.
Frier Levitt urges New York independent pharmacies and their patients to contact Governor Hochul and encourage her to sign this Bill into law. The Governor’s office can be reached here, where constituents may fill out a form explaining their views. The Governor’s office may also be contacted by phone at 1-518-474-8390 between 9am and 5pm or by mail at:
The Honorable Kathy Hochul
Governor of New York State
NYS State Capitol Building
Albany, NY 12224
How Frier Levitt Can Help
Frier Levitt has extensive experience leveraging State pharmacy protection laws like the New York Bill. Our attorneys also assist pharmacies in developing strategies to combat abusive PBM practices. If your pharmacy is experiencing issues related to contracting, network access, reimbursement, PBM audits, MAC appeals or any other improper PBM tactics, we strongly encourage you to seek advice of counsel or contacting Frier Levitt to speak with an attorney.
