Lowering Drug Costs: Governor Hochul Issues New Regulations to Protect Consumers From 'Middlemen' Who Hike the Cost of Prescription Medication

Lowering Drug Costs: Governor Hochul Issues New Regulations to Protect Consumers From 'Middlemen' Who Hike the Cost of Prescription Medication

Governor Kathy Hochul today announced new State regulations to protect New Yorkers from sky-high drug costs by taking on business practices that lead to higher costs for consumers. New York will adopt new market conduct regulations to govern the Pharmacy Benefit Managers operating in New York State, helping to protect New Yorkers' access to prescription drugs, prohibiting business practices that increase the cost of certain drugs, and ensuring that small, independent pharmacies compete on a fair playing field with large pharmacies affiliated with Pharmacy Benefit Managers.

"New Yorkers deserve access to affordable and fair-priced prescription drugs, and today's regulations ensure that consumers and small pharmacies are protected from unfair business practices," Governor Hochul said. "We are leveling the playing field for independent pharmacies, while promoting competition and empowering consumers. These new measures will improve access to essential medications, eliminate anti-competitive practices, and make certain that the health care system works for everyone, not just the big players."

In 2021, Governor Hochul signed landmark legislation to bring transparency and a comprehensive regulatory structure to otherwise unregulated Pharmacy Benefit Managers (PBMs). The legislation requires licensure for PBMs and specifies their duties and obligations as service providers. This piece of legislation also allows the Department of Financial Services to receive complaints when a PBM violates the law and will ensure PBMs abide by standards established by law and regulation.

Additionally, Governor Hochul directed the Department of Financial Services (DFS) to develop regulations that would address conflicts of interest and unfair claims practices by these companies.

The market conduct regulations require the following:

• Allow Home Delivery - Prohibit PBMs from barring any in-network pharmacies from providing mail order or delivery services, which will increase patients' access to home delivery from their community pharmacy;
• List Pharmacy Directories - Increase transparency to consumers and employers by requiring PBMs to list formularies and pharmacy directories online, and prohibiting PBMs from punishing a consumer who relies on said information;
• Address Consumer Inquiries - Require PBMs to post a telephone number and email address for consumers to direct their questions to, and PBMs must respond in a reasonable amount of time;
• Prohibit Steering - Prohibit anti-competitive practices that steer consumers away from their community pharmacy to larger pharmacies affiliated with the PBM;
• Treat Pharmacies Fairly - Prohibit PBMs from unfairly passing losses onto pharmacies when the PBM mistakenly approved dispensing a drug and then seeks to retroactively deny reimbursement to the pharmacy;
• Allow Electronic Submissions - Reduce administrative burdens and costs on small pharmacies by allowing them to submit information to and receive information from PBMs electronically; and
• Apply Same Standards - Prevent the abuse of audits against small pharmacies who are not affiliated with a PBM by requiring PBMs to apply the same audit standards across all in-network pharmacies.

A copy of the adopted regulations can be found on the Department's website. They will be published in the State Register on November 27, 2024.

Pharmacist Society of the State of New York President Danny Dang said, "The Pharmacists Society of the State of New York (PSSNY) has been in support of the registration and regulation of pharmacy benefit managers (PBM) for decades. Our members have seen the results of PBM abuses and the unfair treatment of patients and pharmacists. PSSNY wholeheartedly supports the adoption of the new DFS regulations and thanks Governor Hochul for taking what we hope is a first step in protecting the public and pharmacists."

State Senator Gustavo Rivera said, "I commend these new regulations, which will provide much-needed transparency, protect small businesses, and ensure that independent pharmacies can compete on a fair playing field. Every step we take to ease the extreme financial distress caused by the ever-rising cost of healthcare is important. I want to thank Governor Hochul and Superintendent Harris for continuing their work to protect New Yorkers from unnecessarily high drug prices."

Assemblymember Nily Rozic said, "Lowering drug costs and protecting consumers is a priority we should all stand behind. I am grateful for Governor Hochul's leadership in regulating PBMs, ensuring consumers affordable access to prescription medications while supporting local, independent pharmacies."

Assemblymember David Weprin said, "These new regulations bring essential transparency to pharmacy benefit managers, controlling costs and empowering patients in their healthcare choices. Governor Hochul has shown strong leadership in protecting New Yorkers' access to affordable, life-saving medications."

The public is reminded that the DFS Pharmacy Benefits Bureau is always available to accept and investigate complaints of PBM misconduct via email at [email protected]. Additionally, DFS is empowered to investigate significant spikes in the price of prescription drugs. Anyone experiencing a spike in the cost of drugs is encouraged to reach out at [email protected].