Superintendent of Financial Services Adrienne A. Harris recently announced proposed regulations to govern the conduct of PBMs operating in New York state. If adopted, these regulations would establish strong protections for consumers and small businesses, including prohibiting abusive contract terms that raise drug costs for consumers and strain small pharmacies as well as establish network adequacy standards to ensure consumers have local access to affordable prescriptions.

The proposed regulations would establish important consumer, pharmacy and market protections, including:

• Prohibiting deceptive marketing practices and establishing network adequacy standards to ensure patients have access to in-network pharmacies nearby and are not forced to travel long distances to get their medications;
• Banning abusive contract terms to ensure local pharmacies are paid fairly;
• Prohibiting PBMs from providing preferential treatment to their own affiliated pharmacies; and
• Limiting further market concentration by requiring Department approval of any merger or acquisition activity involving a PBM licensed in the state.

This new proposal follows other recently adopted regulations, including regulations amending regulation 219 (11 NYCRR Part 451), which requires registration of PBMs conducting business in New York state, and an amendment to Insurance Regulation 219 (11 NYCRR Part 450), which established within DFS a Pharmacy Benefits Bureau responsible for the regulation of PBMs and conducting investigations with respect to prescription drugs and other matters assigned by the superintendent.

These new laws require the superintendent of DFS to establish minimum standards for issuance and maintenance of the PBM license. They also require the superintendent to address conflicts of interest between PBMs and health plans, deceptive practices, anti-competitive practices, unfair claim practices, pricing models used by PBMs, and standards and practices used in creating pharmacy benefit networks and pharmacy contracting. These two regulatory amendments were adopted on Aug. 31, 2022. Registration began in June of 2022, but PBMs must secure licenses by 2024.

With the publication in the State Register, the proposed regulations are subject to a 60-day comment period concluding on Oct. 16, 2023. For more information, a copy of the proposed regulations can be found on the DFS website.