BILL NUMBER: S9191
SPONSOR: HINCHEY
 
TITLE OF BILL:
An act to amend the general obligations law, in relation to providing
limitations on overlapping control between insurance companies and phar-
macy benefits managers and pharmacies
 
PURPOSE:
To prohibit monopolistic behavior between insurance companies and phar-
macy benefit managers and pharmacies.
 
SUMMARY OF PROVISIONS:
Section 1 amends the General Obligations Law by adding a new section
5-338 to prohibit monopolistic behavior between insurance companies,
pharmacies and pharmacy benefit managers. Subdivision 1 sets forth the
definitions to be used in this section as follows:
(a) Pharmacy has the same meaning of section 3302 of the Public Health
Law
(b) Pharmacy benefit managers means a 3rd-party administrator that
manages prescription drug programs for health plans, negotiating costs
and ensuring access to medications.
(c) Indirect control means any agreement, arrangement, contract, owner-
ship stake, or other relationship that gives an owner or operator of a
pharmacy the ability to influence or direct the operations of any insur-
ance company or pharmacy benefits manager in the state.
Subdivision 2: It shall be unlawful for any person or entity to both
directly or indirectly own, operate, control, or direct the operation of
the whole or any part of an insurance company and/or a pharmacy benefit
manager and/or a pharmacy or any combination thereof.
Subdivision 3 states that no later than 3 years after the effective date
of this section, any person or entity in violation of subdivision 2 of
this section shall divest from such pharmacy, insurance company, and/or
pharmacy benefit manager.
Subdivision 4 allows the Attorney General to bring a civil action
against any person or entity in violation of this section and may
recover the following:
(a) a civil penalty of $10,000 per day; and
(b) costs and reasonable attorneys' fees.
Section 2 sets forth the effective date which shall take effect imme-
diately.
 
JUSTIFICATION:
The purpose of Pharmacy Benefit Managers (PBMs) is to negotiate a better
price with drug manufactures and pass these savings onto consumers.
This does not always happen as expected. And most of the time, the proc-
ess lacks transparency. Most PBMs operate on a spread basis, meaning
that they do not pass along the entire savings to consumers. Instead,
they take a cut off the top and charge an additional amount to the phar-
macy above what they have negotiated for a particular drug. Others work
on a "pass through" basis, in which they pass through the full savings
to the consumer less a flat fee, which is paid monthly.
The "Big 3" PBMs are CVS Caremark (owned by CVS Health), OptumRx (owned
by UnitedHealth Group), and Express Scripts (owned by The Cigna Group),
which collectively manage approximately 80% of the U.S. prescription
drug market.
CVS Health, a multinational healthcare company and the parent company of
retail pharmacy chain CVS, owns CVS Caremark. It also owns the health
insurer Aetna. This means that CVS Health has full vertical integration
because it owns its entire supply chain. UnitedHealth Group owns the PBM
Optum Rx and UnitedHealthcare, the largest insurer in the United States.
It also recently acquired health care providers Crystal Run and Care-
Mount Medical in the Hudson Valley and is known as Optum.
The Cigna Group owns major insurer Cigna Healthcare, in addition to the
PBM Express Scripts. While Cigna does not own physical pharmacies, it
owns specialty and home delivery pharmacies, including Accredo and
Express Scripts Pharmacy, which are part of its Evernorth Health
Services division.
Ten per cent of the PBM market is owned by Prime Therapeutics, which
itself is owned by the insurer Blue Cross Blue Shield. The problem with
this vertical integration, whether it is full or partial, is that there
are inherent conflicts up and down the supply chain.
A July, 2026 article in Forbes spelled out this problem:
"After two years of research, the Federal Trade Commission's recent
interim report on Pharmacy Benefit Managers has authoritatively docu-
mented the multiple ways in which the three largest PBMs have contrib-
uted to the rising cost of drugs. This investigation has shone a spot-
light on a list of questionable practices that have long been the
subject of complaints from consumers, independent pharmacies, pharmaceu-
tical manufacturers, employers and other stakeholders...
Their interim report alleges that this oligopoly of PBMs, functioning in
the shadows as intermediaries, has used its extraordinary market power
to extract revenue from other stakeholders at the expense of drug pric-
es, patient care and market competition."
The article goes on to identify "a complex web of financial maneuvers,"
including rebates from drug manufacturers that actually encourage drug
companies to inflate prices, knowing PBMs will negotiate them down. More
crucially, PBMS use these to influence formulary (drug list) design.
This determines which prescription drugs are covered, and it has a major
impact on the accessibility and cost of medications for consumers.
And vertical integration means that PBMs can set reimbursement rates to
favor their parent companies. This is where, as the article puts it,
"PBMs have perfected the art of the squeeze," driving down reimbursement
rates for independent pharmacies rates so much that they are often paid
less for a prescription than it cost them to acquire it. This systematic
underpayment is already forcing the closure of independent pharmacies.
This bill would prohibit such monopolistic behavior between insurance
companies, pharmacies, and pharmacy benefit managers. It would untangle
the web of conflicts and prevent a person or entity from directly or
indirectly owning, operating, or otherwise controlling any part of an
insurance company and/or pharmacy benefit manager and/or pharmacy or any
combination thereof.
 
LEGISLATIVE HISTORY:
None. New bill.
 
FISCAL IMPLICATIONS:
None.
 
EFFECTIVE DATE:
This act shall take effect immediately.