BILL NUMBER: S438
SPONSOR: MYRIE
 
TITLE OF BILL:
An act to amend the insurance law, in relation to prescription drug
supply chain transparency; and to amend the state finance law, in
relation to deposits into the pharmacy benefit manager regulatory fund
 
PURPOSE:
This legislation requires registration by, and disclosures from, Pharma-
cy Services Administrative Organizations, switch companies, an d rebate
aggregators to the Department of Financial Services.
 
SUMMARY OF PROVISIONS:
Section 1 establishes that the act shall be known as the "Prescription
Drug Supply Chain Transparency Act".
Section 2 amends the insurance law by adding a new Article 30 of the
Insurance Law comprising sections 3001 through 3010 which provides defi-
nitions for "manufacturer," "pharmacy services administrative organiza-
tion," "rebate aggregator," and "switch company".
This section requires filings and submissions from registered companies
to DFS to be in electronic format, special reports from registered
companies and empowers the Superintendent of the Department of Financial
Services to investigate registered companies.
In addition, this section requires the registration of pharmacy services
administrative organizations, pharmacy switch companies, and rebate
aggregators, as well as certain disclosures by pharmacy services admin-
istrative organizations, pharmacy switch companies, and rebate aggrega-
tors.
Furthermore, this section requires fees and penalties collected accord-
ing to Article 30 of the Insurance Law to be deposited into the Pharmacy
Benefit Manager Regulatory Fund established according to
Section 99-00 of the State Finance Law.
Section 3 amends subdivision 3 of section 99-oo of the State Finance Law
which provides that fees and penalties collected according t o Article
30 of the Insurance Law be deposited into the Pharmacy Benefit Manager
Regulatory Fund.
Section 4 provides the effective date.
 
JUSTIFICATION:
For too many New Yorkers, the choice between putting food on the table
or buying life-saving prescription drugs is all too real. In addition to
the challenges posed by inflation, the ever-rising costs of prescription
drugs have put health and wealth beyond the reach of our middle-class,
working poor, and individuals on fixed incomes.
In recent years, the state has taken important steps to help ad dress
this problem, but intermediaries throughout the prescription drug supply
chain have escaped scrutiny for their role in this crisis, gained an
even more dominant position in the market, and, in some instances, used
this dominance to unfairly reap profits at the expense of manufacturers,
insurance plans, employers, pharmacies, and most importantly, every day
New Yorkers. These intermediaries, including Pharmacy Benefit Managers
(PBMs), Pharmacy Services Administrative Organizations (PSAOs), switch
companies, and rebate aggregators all play a role in the distribution
and sale of prescription drugs, but the overwhelming majority of the
public does not know they exist or how their actions impact the costs
they pay at the counter. These entities are unregulated at the federal
and state level, and in the absence of such regulation, have concealed
potential conflicts of interest, anticompetitive and deceptive business
practices, and perverse incentives to raise - and not lower as they were
ostensibly intended to do drug costs for consumers. This bill seeks to
detect and deter this behavior by requiring these entities to annually
register with the Department of Financial Services, disclose potential
conflicts of interest, and provide audited financials for the previous
fiscal year, among other requirements aimed at transparency and account-
ability.
These entities, to varying degrees, influence what drugs are covered by
which insurance, what price those drugs are listed for, how much to
reimburse pharmacies for dispensing those drugs, who the drug manufac-
turer sells to, and at what discount if any, and more; al l without
having to disclose the conflicts that arise when they are vertically
integrated in the supply chain and benefit financially from an action
that adversely affects another entity they are charged with serving.
These practices have drawn the attention of the Federal Trade Commission
("FTC") and the United States Congress. In June of 2022, the FTC voted
5-0 to open an inquiry into the "Prescription Drug Middlemen Industry,"
stating that the inquiry "will shine a light on these companies' prac-
tices and their impact on pharmacies, payers, doctors, and patients."(1)
In March of 2023, the House Committee on
Oversight and Accountability announced its own investigation, stating
that "Pharmacy Benefit Managers' anticompetitive tactics are driving up
health care costs for Americans and harming patient care."(2) New York
can lead the nation in finally bringing oversight to this segment of the
pharmaceutical industry.
With strict registration and reporting requirements, patients, doctors,
pharmacies, and manufacturers can begin to see where and when interme-
diaries are putting their profit before the people these prescription
drugs are intended to help.
 
LEGISLATIVE HISTORY:
S6738 of 2023-24: Passed Senate.
 
FISCAL IMPLICATIONS:
None. Fees and penalties established by this act would be deposited into
the Pharmacy Benefit Manager Regulatory Fund established under section
99-oo of the State Finance Law, which would pay the costs of operation-
alizing the law.
 
EFFECTIVE DATE:
This act shall take effect on the one-hundred-fiftieth day after it
shall have become a law.

Statutes affected:
S438: 99-oo state finance law, 99-oo(3) state finance law