New York state regulators are setting new rules to rein in the behavior of
Regulations taking effect this month will make
While PBMs were originally intended to save money for consumers, "as the market has become more vertically integrated and evolved and matured, really what we see is the opposite happening," said Adrienne Harris, superintendent of the New York State Department of Financial Services.
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PBMs manage drug plans for employers and health insurers. They negotiate discounts with drugmakers and pay pharmacies for dispensing drugs. The three largest PBMs, divisions of CVS, Cigna and UnitedHealth, are wrapped into larger companies that operate insurance companies, pharmacies, and medical providers.
The industry has faced intensifying scrutiny in Washington and state capitals, with authorities accusing PBMs of driving up patients' costs and quashing competition from local drugstores. CVS, Cigna and UnitedHealth are fighting lawsuits brought by the Federal Trade Commission and state governments that claim the companies inflated insulin prices, assertions the companies call unfounded.
State regulators like New York's Department of Financial Services once had limited authority over the industry. But a Supreme Court ruling in 2020 gave states more power. Laws on PBMs have proliferated, with all 50 states passing legislation.
State leaders are responding to public pressure, according to Hemi Tewarson, executive director of the National Academy of State Health Policy. "Drugs are not affordable to consumers," she said. "They would really like to see that changed."
Tewarson said 17 states enacted laws regulating PBMs this year, and more are expected in 2025.
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New York passed a law that Harris called "the most comprehensive" PBM regulations in the country. One of the early steps required licensing PBMs at the state level. The new set of rules, which will take effect when the state officially publishes them later this month, aim to police how the companies behave in the marketplace.
Harris said the agency, which also regulates banks and insurance companies, fielded a growing number of complaints about PBMs from consumers and independent pharmacies — more than 300 since May 2022.
"It was clear to us that it was just really time to add some transparency to the space," Harris said.
While state insurance and financial regulators typically don't have jurisdiction over large, multistate employer health plans, Harris said New York state lawmakers intended to give DFS the authority to regulate PBMs' conduct in those plans in the state as well.
The largest trade association for PBMs argued that New York State is exceeding its authority by applying rules to PBMs even when they're working for health plans that are regulated at the federal level. The group, the Pharmaceutical Care Management Association, also said the rules would "establish highly invasive government regulations" for drug benefits that would ultimately raise costs for clients and members by "multiple billions" annually.
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In response, Harris said, the state added provisions asking PBMs to show the cost of complying with the new regulations.
New York state originally proposed a version of the regulations last year, but it was withdrawn after pushback from the industry. The agency revived a modified version of them earlier this year, dropping a requirement for a $10 dispensing fee to be paid to pharmacies by PBMs.
Two key provisions will require PBMs to publish information about which drugs they cover and which pharmacies are in their network.
Other rules aim to level the playing field for local pharmacies. PBMs won't be able to keep them from offering mail-order or home delivery — methods of dispensing medication that PBMs themselves offer. They'll be barred from steering patients to their affiliated pharmacies and will have to follow new rules for auditing and clawing back mistaken payments.
Harris said the new rules set the stage for greater enforcement, including examinations of PBMs, requests for correction and potentially stronger steps.
"Where we see recidivist conduct or things that are just really malicious behavior, we will bring enforcement actions," she said.
