NY Regulator Wants to Rein in ‘Abusive’ Prescription Drug Pricing

New York’s financial regulator wants to regulate the companies that help set prescription drug costs.

The New York Department of Financial Services (NYDFS) announced Wednesday (Aug. 16) that it had proposed regulations governing the conduct of pharmacy benefit managers (PBMs) operating in the state.  

“These regulations 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 access to affordable prescriptions where they live,” the department said in a news release. 

PBMs are companies that help employers and insurers pick medications for their health plans, and also set payment terms for pharmacies that buy those medications.  

As NPR noted earlier this year, these companies are essentially “the dominant middlemen” among drug companies, drugstores, insurance providers, employers and patients. While there are around 70 PBMs in the U.S., just three – CVS Caremark, Optum Rx, and Express Scripts — control 80% of the prescription drug market. 

“PBMs are the only thing we have to lower brand-name drug prices and prevent the drug industry from charging whatever they want,” Benjamin Rome, an internist and health policy researcher at Harvard Medical School, told NPR. 

At the same, that report said, PBM’s dominance has other healthcare players – such as mom-and-pop drug stores – worried. The situation has left Congress considering a host of laws designed to rein in the sector. 

The NYDFS said it’s noted concerns about the industry as well, saying it had received more than a hundred complaints from pharmacies and pharmacy associations in the last year dealing with PBM conduct and practices. 

The department said its proposed regulations would bar “deceptive marketing practices” and make sure patients have access to in-network pharmacies nearby and are not forced to travel to get their medications. 

The rules would also ban “abusive contract terms to ensure local pharmacies are paid fairly,” and keep PBMs from giving preferential treatment to their own affiliated pharmacies. The state also wants to be able to approve mergers and acquisitions by PBMs licensed in New York. 

The debate about PBMs is happening as companies like Amazon, Walmart and other retailers are upping their healthcare investments to offer affordable care, as PYMNTS wrote Wednesday. 

That report was inspired by Amazon Pharmacy’s announcement earlier this week of the launch of automatic, manufacturer-sponsored coupons to help protect patients from the high costs of insulin and other diabetes-care items. 

For its part, Walmart said earlier this year it will double its number of health center numbers amid continued expansion into the wellness space.