BILL NUMBER: S5939BREVISED 6/9/2025
SPONSOR: SKOUFIS
 
TITLE OF BILL:
An act to amend the public health law and the insurance law, in relation
to payments by pharmacy benefit managers to participating pharmacies
 
PURPOSE OF THE BILL:
This bill seeks to simplify and change the methodology for pharmacy
reimbursement for commercial health plans to a Cost- Plus model that is
more transparent for patients, payors, and pharmacies while saving costs
through the process.
 
SUMMARY OF SPECIFIC PROVISIONS:
Section 1: Amends subdivision 1 of section 280-a of the public health
law by adding paragraphs (j) and (k). To define the Pharmacy Acquisition
Cost Rate as the cost a participating pharmacy pays to acquire drugs,
including generic, brand-name, biologics, and those produced through
genetic or biopharmaceutical processes, based on pharmacy cost invoices.
It also defines the National Average Drug Acquisition Cost as the month-
ly survey conducted by the Centers for Medicare and Medicaid Services
(CMS) to determine the average acquisition cost of Medicaid-covered
outpatient drugs.
Section 2: Amends subdivision 3 of section 280-a of the public health
law to add a paragraph (b). To prohibit pharmacy benefit managers from
substituting or altering prescription drugs without prescriber approval
or legal authorization. The superintendent and commissioner may issue
regulations on when substitutions are permitted. Additionally, pharmacy
benefit managers must reimburse participating pharmacies at least the
National Average Drug Acquisition Cost (NADAC) rate or the Pharmacy
Acquisition Cost Rate, whichever is higher, plus a professional dispens-
ing fee equal to that paid under the state medical assistance program.
For medications requiring specialized handling, distribution, adminis-
tration, patient education, care coordination, monitoring, special pack-
aging, or shipping, pharmacies must receive an additional dispensing fee
to ensure they are not reimbursed below their acquisition and dispensing
costs.
Section 3: Amends the opening paragraph of subdivision 4 of section
280-a of the public health law. To require pharmacy benefit managers to
establish a reasonable process for pharmacies or their contracting
agents to appeal, investigate, and resolve disputes over drug pricing
for multi-source generics, brand-name drugs, biologics, and drugs
produced through genetic or biopharmaceutical processes.
Section 4: Amends section 2911 of the insurance law to add a new
subsection (d) to ensure that pharmacy benefit managers reimburse phar-
macies fairly by covering the actual cost of acquiring and dispensing
medications. It mandates payment at either the National Average Drug
Acquisition Cost (NADAC) rate or the Pharmacy Acquisition Cost Rate, if
there is not a NADAC rate, along with a professional dispensing fee.
Additional compensation is required for drugs needing special handling,
administration, or monitoring. The amendment also establishes a stand-
ardized appeals process for pharmacies to dispute pricing issues. This
paragraph does not apply to prescriptions or prescription drugs that are
distributed or paid for by a trust fund established under the Labor
Management Relations Act, or provided through a health, welfare, or
pharmaceutical plan that has been created, adopted, or funded as part of
a collective bargaining agreement between an employer and a labor organ-
ization or certified employee organization.
Section 5: Sets Effective Date.
 
JUSTIFICATION:
This bill is part of an ongoing effort to reduce prescription drug costs
for patients, enhance pharmacy access in underserved areas, and increase
transparency regarding the costs that plan sponsors and employers are
paying for prescription drugs, ultimately leading to significant cost
savings. This initiative adopts the Cost-Plus reimbursement methodology,
which New York State Medicaid implemented in 2023. This approach has
resulted in consistent patient coverage, enhanced rebate revenues, and a
stabilization of prescription drug costs.
Pharmacy Benefit Managers (PBMs) play a crucial role in delivering phar-
macy services, working on behalf of plan sponsors or employers to manage
pharmacy benefits. Historically, PBMs were primarily responsible for
processing claims. However, over the past two decades, they have oper-
ated in a largely opaque environment, negotiating rebates with pharma-
ceutical companies intending to reduce prescription costs. Unfortunate-
ly, the savings from these rebates have not been passed on to patients
or those paying for pharmacy benefits. Year after year, insurance premi-
ums for commercial health plans have risen by 8-13%, with pharmaceutical
companies being blamed as the primary driver of these increases. This is
despite the fact that, in 2024, the list prices for average brand-name
drugs grew by only 2.3%. After adjusting for overall inflation, the net
prices of brand-name drugs have actually dropped for seven consecutive
years. This discrepancy is largely attributed to the "rebate pumping"
phenomenon, where PBMs negotiate higher rebates by increasing drug pric-
es, creating a gross-to-net pricing bubble.
Given that PBMs are licensed and monitored by the New York State Depart-
ment of Financial Services (DFS), the time has come to bring greater
transparency to the actual cost of prescription drugs. By adopting the
National Average Drug Acquisition Cost (NADAC) as a national standard
for determining pharmacy reimbursement, we can more accurately reflect
the costs incurred by pharmacies to acquire medications. The Cost-Plus
methodology moves away from the previously used Average Wholesale Price
(AWP) model, which was often inflated, as well as the Wholesaler Acqui-
sition Cost (WAC) and Maximum Acquisition Cost (MAC) pricing methodol-
ogies, which were inconsistent and did not accurately capture pharmaceu-
tical costs. NADAC, a nationally recognized benchmark, is so widely
accepted that the three major PBMs, which control over 80% of all phar-
macy claims, have announced plans to adopt the Cost-Plus model for
commercial plans by 2026.
The bill is also critical in light of years of bipartisan findings by
the U.S. Congress and the Federal Trade Commission (FTC). It highlights
how PBMs have established reimbursement practices that favor their phar-
macies over independent pharmacies and steer high-cost specialty drugs
to their operations. Despite denials from the major PBMs, the FTC has
been highly critical of these practices, and the 119th Congress is
actively exploring measures to increase scrutiny, transparency, and
accountability in the management of public funds.
The passage of the this bill will provide a clear, standardized frame-
work for pharmaceutical reimbursement that benefits both patients and
payors. This legislation will ensure stable reimbursement to pharmacies
regardless of ownership or location. It represents a significant step
toward creating a more transparent, equitable, and sustainable pharma-
ceutical pricing system.
 
LEGISLATIVE HISTORY:
Senate
2023: N/A
2024: S9570, Referred to Health
Assembly
2023: N/A
2024: A10327, Referred to Health
 
FISCAL IMPLICATIONS:
None to the state
 
EFFECTIVE DATE:
This act shall take effect January 1, 2026 and apply to all policies and
contracts issued, renewed, modified, altered or amended on and after
such date.

Statutes affected:
S5939: 280-a public health law, 280-a(1) public health law, 280-a(3) public health law, 280-a(4) public health law, 2911 insurance law
S5939A: 280-a public health law, 280-a(1) public health law, 280-a(3) public health law, 280-a(4) public health law, 2911 insurance law
S5939B: 280-a public health law, 280-a(1) public health law, 280-a(3) public health law, 280-a(4) public health law, 2911 insurance law