BILL NUMBER: S6161
SPONSOR: SKOUFIS
 
TITLE OF BILL:
An act to amend the insurance law, in relation to reducing pharmacy
benefit manager costs
 
PURPOSE:
Provides a pass-through pricing model for pharmacy benefit manager
services.
 
SUMMARY OF PROVISIONS:
Section 1: Amends the Insurance Law to add a new Section 3115, which
provides that any contract or other arrangement entered into by a health
insurer that provides for the provision and administration of pharmacy
benefit management services shall be based on a pass-through pricing
model.
Subpart 1 provides that payment to a pharmacy benefit manager(PBM) shall
be limited to the actual ingredient costs, dispensing fees paid to phar-
macies, and the administrative fee that covers the cost of providing PBM
services (the maximum for such administrative fee may be set by the
Department of Financial Services(DFS).
Subparts 2 and 3 require PBMs to identify and report to both DFS and the
health care plan all sources of income, payments, and financial benefits
received by them including any clawbacks, rebates, chargebacks, and fees
and pass through those financial benefits in full to the health care
plan to reduce the reportable ingredient cost.
Subpart 4 requires the PBM to identify all ingredient costs and dispens-
ing fees or similar payments made by the PBM to any pharmacy in
connection with the contract.
Subpart 5 prohibits spread pricing, which is defined as any amount
charged or claimed by the PBM in excess of the amount paid to the phar-
macies on behalf of the health care plan minus an administrative fee.
Subpart 5 also requires any excess amount to be remitted to the plan
quarterly.
Subpart 6a requires PBMs to make their payment model for administrative
fees available to the health care plan and DFS, and requires the plan,
if so, directed by DFS to make changes to the payment model and resubmit
an amended contract to DFS for review and approval. Subpart 6b subjects
any changes in premiums resulting from the contracts to approval by DFS.
Subpart 6c defines a pharmacy benefit manager to mean an entity that
contracts with pharmacies or pharmacy contracting agents on behalf of a
health plan, state agency, insurer, managed care organization, or other
third-party payer to provide pharmacy health benefit services or admin-
istration.
Section 2: Sets Effective Date.
 
JUSTIFICATION:
This bill expands upon a significant cost-saving measure from the FY
2019-20 Budget that prohibits the practice of spread pricing by PBMs
contracted with NYS Medicaid Managed Care Plans to all commercial insur-
ance plans.
In the 1960s, insurance companies began expanding their prescription
medication coverage. This coverage expansion led to increased caseloads
that put a significant administrative burden on the insurance industry.
Prescription drug coverage plans began to outsource the processing and
administration of claims to new companies called Pharmacy Benefit Manag-
ers (PBMs). As the price of prescription medications increased, PBMs
could wield their significant power within the prescription drug pricing
industry and act as a "middleman," negotiating discounts and rebates
with a manufacturer in exchange for a preferable position on an insur-
ance company's drug formulary. The savings from these rebates and
discounts are meant to pass through to patients, making drugs more
affordable.
PBMs negotiate rebates with the drug's manufacturer in exchange for a
favorable position on an insurance company's formulary. A favorable
position on a formulary makes it more affordable to consumers, thus
increasing the drug's market share. Although many PBMs claim to pass on
the savings from these rebates to the consumer, many PBMs hold on to
large portions or all of these rebates as profit.
PBMs also act on behalf of the insurance company to reimburse pharmacies
for the cost of purchasing the medication from the distributor and
dispensing the medication to the consumer. These costs, often a small
profit, are covered through the "administrative fee" charged to insur-
ance companies they are contracted with.
Oftentimes, PBMs will also markup - sometimes dramatically - the differ-
ence between the amount they reimburse the pharmacy and the amount they
charge their clients. These controversial practices, called "spread
pricing," "clawbacks," or "chargebacks," are most common with generic
drugs, which make up almost 901 of all prescriptions dispensed in the
United States and where most believe PBMs make their most significant
profit.
Ending these practices throughout the commercial insurance industry will
prevent overinflated and unjustifiable price markups, eliminate wasteful
spending, and ensure fair and affordable drug prices for all New York-
ers.
 
LEGISLATIVE HISTORY:
Senate
2019: S6297, Passed Senate
2020: S6297, Referred to Insurance
2021: S1768, Referred to Insurance
2022: S1768, Referred to Insurance
2023: S1888, Referred to Insurance
2024: S1888, Referred to Insurance
Assembly
2019: A8165, Referred to Insurance
2020: A8165, Referred to Insurance
2021: A291, Referred to Insurance
2022: A291, Referred to Insurance
2023: A6352, Referred to Insurance
2024: A6352, Referred to Insurance
 
FISCAL IMPLICATIONS:
To be determined.
 
EFFECTIVE DATE:
This act shall take effect immediately.