Relates to reducing pharmacy benefit manager costs; defines "pharmacy benefit manager".
This bill would add a new section to the New York Insurance Law requiring health insurers that contract for pharmacy benefit management services to use a pass-through pricing model. Under the bill, pharmacy benefit managers (PBMs) could be paid only for actual ingredient costs, dispensing fees paid to pharmacies, and an administrative fee, with the Department of Financial Services authorized to set a maximum administrative fee. The bill also requires PBMs to disclose all sources and amounts of income or financial benefits tied to their services, including rebates, discounts, credits, clawbacks, fees, grants, chargebacks, and reimbursements, and to pass those amounts through in full to the health care plan.
The bill further prohibits spread pricing, which it defines as charging a plan more than the amount paid to pharmacies plus the administrative fee, and requires any excess to be remitted to the health care plan quarterly. PBMs would also have to disclose payment models for administrative fees, and insurers would need to submit contract changes for department review if directed. Any premium changes resulting from these contracts would be subject to department approval. The bill applies to health insurers under Articles 32 and 43 and defines PBMs broadly to include entities serving health plans, state agencies, insurers, managed care organizations, and other third-party payors.
If enacted, the bill would significantly change how pharmacy benefit manager contracts are structured in New York by mandating pass-through pricing and limiting PBM compensation. It would amend the Insurance Law to create new disclosure, reporting, and remittance obligations for PBMs, while giving the Department of Financial Services oversight authority over administrative fees, contract changes, and premium impacts. The measure would affect health insurers, PBMs, pharmacies, and health care plans by reducing the ability of PBMs to retain rebates or spread pricing revenue and by increasing regulatory transparency.
No committee transcript or vote record is available in the provided materials, so there is no direct record of debate or floor sentiment. Based on the bill text and caption, the measure appears aimed at lowering prescription drug costs and increasing transparency in PBM contracting, which suggests a consumer- and purchaser-friendly policy approach. The introduction by multiple senators also indicates at least initial legislative support, but no formal vote outcome is shown.
The main likely point of contention is the bill’s restriction on PBM business practices, especially the prohibition on spread pricing and the requirement that rebates and other financial benefits be passed through to health plans. PBMs may object to limits on compensation, mandatory disclosure of proprietary financial arrangements, and potential administrative fee caps, while insurers and health plans may support the transparency and cost-control measures. Another possible area of dispute is the Department of Financial Services’ authority to review and potentially require changes to payment models and premium changes.