BILL NUMBER: S6738A
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, Pharmacy Services Administrative Organizations, switch companies
and rebate aggregators to the Department of Financial Services.
 
SUMMARY OF PROVISIONS:
Section 1 establishes that the act shall be known and may be cited 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 provide 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 Finan-
cial 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 pursuant
to Article 30 of the Insurance Law to be deposited into the Pharmacy
Benefit Manager Regulatory Fund established pursuant to section 99-oo 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 pursuant to 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 address this problem, but inter-
mediaries 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), Phar-
macy 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 do 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 interests, anticompetitive and deceptive business prac-
tices, 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 interests, 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; all 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 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 Manag-
ers' anticompetitive tactics are driving up health care costs for Ameri-
cans and harming patient care."(2) New York can lead the nation in
finally bringing oversight to this segment of the pharmaceutical indus-
try.
With strict registration and reporting requirements, patients, doctors,
pharmacies, and manufacturers can begin to see where and when interme-
diaries are putting their own profit before the people these
prescription drugs are intended to help.
 
LEGISLATIVE HISTORY:
New bill.
 
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 immediately.
1 https://www.ftc.gov/news-events/news/press-releases/
2022/06/ftc-launches-inquiry-prescription-drug-middlemen-industry
2 https://oversight.house.gov/release/ comer-launches-investigation-
into-pharmacy-benefit-
managers-role-in-rising-health-care-coste/oEFABF/013C/

Statutes affected:
S6738: 99-oo state finance law, 99-oo(3) state finance law
S6738A: 99-oo state finance law, 99-oo(3) state finance law