S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                    950
 
                        2023-2024 Regular Sessions
 
                             I N  S E N A T E
 
                              January 9, 2023
                                ___________
 
 Introduced  by  Sen.  THOMAS -- read twice and ordered printed, and when
   printed to be committed to the Committee on Health
 
 AN ACT to amend the public health law, in relation to  pharmacy  benefit
   managers
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:

   Section 1. Section 280-a of the public health law, as added by chapter
 828 of the laws of 2021, subdivisions 1, 2, 3 and 5 as amended by  chap-
 ter 128 of the laws of 2022, is amended to read as follows:
   §  280-a.  Pharmacy benefit managers.  1. Definitions. As used in this
 section, the following terms shall have the following meanings:
   (a) "Health plan" means an entity for which a pharmacy benefit manager
 provides pharmacy benefit management services and that is a health bene-
 fit plan or other entity that approves, provides, arranges for, or  pays
 or  reimburses in whole or in part for health care items or services, to
 include at least prescription drugs, for a substantial number of benefi-
 ciaries who work or reside  in  this  state.  The  superintendent  shall
 determine,  in  his or her sole discretion, by regulation how the phrase
 "a substantial number of beneficiaries who work or reside in this state"
 shall be interpreted.
   (b) "Pharmacy benefit management services"  means  the  management  or
 administration of prescription drug benefits for a health plan, directly
 or  through another entity, and regardless of whether the pharmacy bene-
 fit manager and the health plan are related, or associated by ownership,
 common ownership, organization or otherwise; including  the  procurement
 of prescription drugs to be dispensed to patients, or the administration
 or  management  of prescription drug benefits, including but not limited
 to, any of the following:
   (i) mail service pharmacy;
   (ii) claims processing,  retail  network  management,  or  payment  of
 claims to pharmacies for dispensing prescription drugs;
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD01957-01-3
              

 S. 950                              2
 
   (iii)  clinical  or other formulary or preferred drug list development
 or management;
   (iv)  negotiation  or  administration  of  rebates, discounts, payment
 differentials, or other incentives,  for  the  inclusion  of  particular
 prescription  drugs  in a particular category or to promote the purchase
 of particular prescription drugs;
   (v) patient compliance, therapeutic intervention, or  generic  substi-
 tution programs;
   (vi) disease management;
   (vii) drug utilization review or prior authorization;
   (viii)  adjudication  of appeals or grievances related to prescription
 drug coverage;
   (ix) contracting with network pharmacies; and
   (x) controlling the cost of covered prescription drugs.
   (c) "Pharmacy benefit manager" means any entity that performs pharmacy
 benefit management services for a health plan.
   (d) "Maximum allowable  cost  price"  means  a  maximum  reimbursement
 amount  set  by  the pharmacy benefit manager for therapeutically equiv-
 alent multiple source generic drugs.
   (e) "Controlling person" means any person or other entity who or which
 directly or indirectly has the power to direct or cause to  be  directed
 the management, control or activities of a pharmacy benefit manager.
   (f)  "Covered  individual"  means  a  member,  participant,  enrollee,
 contract holder or policy holder or beneficiary of a health plan.
   (g) "License" means a license to be a pharmacy benefit manager,  under
 article twenty-nine of the insurance law.
   (h)  "Spread pricing" means the practice of a pharmacy benefit manager
 retaining an additional amount of money in addition to the  amount  paid
 to the pharmacy to fill a prescription.
   (i) "Superintendent" means the superintendent of financial services.
   (J) "PHARMACY ACQUISITION COST" MEANS THE AMOUNT THAT A PHARMACEUTICAL
 WHOLESALER CHARGES FOR A PHARMACEUTICAL PRODUCT AS LISTED ON THE PHARMA-
 CY'S BILLING INVOICE.
   (K)  "PHARMACY  BENEFIT MANAGER AFFILIATE" MEANS A PHARMACY OR PHARMA-
 CIST THAT DIRECTLY OR INDIRECTLY, THROUGH  ONE  OR  MORE  INTERMEDIARIES
 OWNS  OR  CONTROLS, IS OWNED OR CONTROLLED BY, OR IS UNDER COMMON OWNER-
 SHIP OR CONTROL WITH A PHARMACY BENEFIT MANAGER.
   (L) "PHARMACY BENEFITS PLAN OR PROGRAM" MEANS A PLAN OR  PROGRAM  THAT
 PAYS  FOR,  REIMBURSES,  COVERS  THE  COST OF, OR OTHERWISE PROVIDES FOR
 PHARMACIST SERVICES TO INDIVIDUALS WHO RESIDE IN OR ARE EMPLOYED IN THIS
 STATE.
   2. Duty, accountability and transparency. (a) (i) The pharmacy benefit
 manager shall have a duty and obligation  to  perform  pharmacy  benefit
 management  services  with care, skill, prudence, diligence, and profes-
 sionalism.
   (ii) In addition to the duties as  may  be  prescribed  by  regulation
 pursuant to article twenty-nine of the insurance law:
   (1)  A  pharmacy benefit manager interacting with a covered individual
 shall have the same duty to a covered individual as the health plan  for
 whom it is performing pharmacy benefit management services.
   (2)  A  pharmacy  benefit  manager shall have a duty of good faith and
 fair dealing with all parties, including  but  not  limited  to  covered
 individuals and pharmacies, with whom it interacts in the performance of
 pharmacy benefit management services.
   (b)  All funds received by the pharmacy benefit manager in relation to
 providing pharmacy benefit management services shall be received by  the
 S. 950                              3
 
 pharmacy  benefit manager in trust and shall be used or distributed only
 pursuant to the pharmacy benefit manager's contract with the health plan
 or applicable law; including any administrative fee or  payment  to  the
 pharmacy  benefit  manager  expressly  provided  for  in the contract to
 compensate the pharmacy benefit manager  for  its  services.  Any  funds
 received by the pharmacy benefit manager through spread pricing shall be
 subject  to  this paragraph. In addition to any other power conferred by
 law the superintendent shall  have  the  authority  to  prescribe  rules
 concerning pharmacy benefit manager administrative fees, including limi-
 tations on their form and use.
   (c)  The  pharmacy  benefit  manager  shall  account, annually or more
 frequently to the health plan for any pricing discounts, rebates of  any
 kind,  inflationary  payments, credits, clawbacks, fees, grants, charge-
 backs, reimbursements, or other benefits received by the pharmacy  bene-
 fit  manager.  The  health  plan  shall have access to all financial and
 utilization information of the pharmacy benefit manager in  relation  to
 pharmacy benefit management services provided to the health plan.
   (d)  The  pharmacy  benefit  manager  shall disclose in writing to the
 health plan the terms and conditions  of  any  contract  or  arrangement
 between  the pharmacy benefit manager and any party relating to pharmacy
 benefit management services provided to the health  plan  including  but
 not limited to, dispensing fees paid to the pharmacies.
   (e)  The  pharmacy  benefit  manager  shall disclose in writing to the
 health plan any activity, policy, practice, contract or  arrangement  of
 the  pharmacy  benefit  manager that directly or indirectly presents any
 conflict of interest with the pharmacy  benefit  manager's  relationship
 with or obligation to the health plan.
   (f)  Any  information  required  to be disclosed by a pharmacy benefit
 manager to a health plan under this section that  is  reasonably  desig-
 nated  by  the  pharmacy  benefit manager as proprietary or trade secret
 information shall be kept confidential by the  health  plan,  except  as
 required  or  permitted by law, including disclosure necessary to prose-
 cute or defend any legitimate legal claim or cause of  action.    Desig-
 nation  of  information as proprietary or trade secret information under
 this subdivision shall have no effect on the obligations of any pharmacy
 benefit manager or health  plan  to  provide  that  information  to  the
 department of health or the department of financial services.
   (g) The superintendent, in consultation with the commissioner may make
 regulations defining, limiting, and relating to the duties, obligations,
 requirements  and other provisions relating to pharmacy benefit managers
 under this subdivision.
   3. Prescriptions. A pharmacy benefit manager  may  not  substitute  or
 cause  the substituting of one prescription drug for another in dispens-
 ing a prescription, or alter or cause the altering of  the  terms  of  a
 prescription, except with the approval of the prescriber or as explicit-
 ly required or permitted by law, including regulations of the department
 of  financial  services  or the department of health. The superintendent
 and commissioner, in coordination with each  other,  are  authorized  to
 promulgate  regulations  to  determine when substitution of prescription
 drugs may be required or permitted.
   4.  Appeals.  A  pharmacy  benefit  manager  shall,  with  respect  to
 contracts between a pharmacy benefit manager and a pharmacy or, alterna-
 tively,  a  pharmacy benefit manager and a pharmacy's contracting agent,
 such as a  pharmacy  services  administrative  organization,  include  a
 reasonable process to appeal, investigate and resolve disputes regarding
 multi-source  generic  drug  pricing, INCLUDING BEING BELOW THE PHARMACY
 S. 950                              4
 
 ACQUISITION COST.   The appeals  process  shall  include  the  following
 provisions:
   (a)  the  right  to  appeal  by  the  pharmacy  and/or  the pharmacy's
 contracting agent shall be limited to thirty days following the  initial
 claim submitted for payment;
   (b)  a  telephone  number through which a network pharmacy may contact
 the pharmacy benefit manager for the purpose of filing an appeal and  an
 electronic  mail  address of the individual who is responsible for proc-
 essing appeals;
   (c) the pharmacy benefit manager shall send an electronic mail message
 acknowledging receipt of the appeal. The pharmacy benefit manager  shall
 respond  in  an electronic message to the pharmacy and/or the pharmacy's
 contracting agent filing the appeal within seven business days  indicat-
 ing  its  determination.  If  the  appeal is determined to be valid, the
 maximum allowable cost for the drug shall be adjusted for the  appealing
 pharmacy effective as of the date of the original claim for payment. The
 pharmacy benefit manager shall require the appealing pharmacy to reverse
 and  rebill  the  claim  in  question  in  order to obtain the corrected
 reimbursement;
   (d) if an update to the maximum allowable cost is warranted, the phar-
 macy benefit manager or covered entity shall adjust the  maximum  allow-
 able cost of the drug effective for all similarly situated pharmacies in
 its  network  in  the  state on the date the appeal was determined to be
 valid; and
   (e) if an appeal is denied, the pharmacy benefit manager shall identi-
 fy the national drug code  of  a  therapeutically  equivalent  drug,  as
 determined  by  the federal Food and Drug Administration, that is avail-
 able for purchase by pharmacies in this state  from  wholesalers  regis-
 tered  pursuant to subdivision four of section sixty-eight hundred eight
 of the education law at a price which is equal to or less than the maxi-
 mum allowable cost for that drug as determined by the  pharmacy  benefit
 manager.
   4-A.  MAXIMUM  ALLOWABLE  COSTS.  (A) IF THE NATIONAL DRUG CODE NUMBER
 PROVIDED BY THE PHARMACY BENEFIT MANAGER  IS  NOT  AVAILABLE  BELOW  THE
 PHARMACY  ACQUISITION  COST FROM THE PHARMACEUTICAL WHOLESALER FROM WHOM
 THE PHARMACY OR PHARMACIST PURCHASES THE MAJORITY OF PRESCRIPTION  DRUGS
 FOR  RESALE,  THEN THE PHARMACY BENEFIT MANAGER SHALL ADJUST THE MAXIMUM
 ALLOWABLE COST ABOVE THE  CHALLENGING  PHARMACY'S  PHARMACY  ACQUISITION
 COST  AND  PERMIT THE PHARMACY TO REVERSE AND REBILL EACH CLAIM AFFECTED
 BY THE INABILITY TO PROCURE THE DRUG AT A COST THAT IS EQUAL TO OR  LESS
 THAN THE PREVIOUSLY CHALLENGED MAXIMUM ALLOWABLE COST.
   (B) A PHARMACY BENEFIT MANAGER SHALL NOT REIMBURSE A PHARMACY OR PHAR-
 MACIST  IN  THIS  STATE AN AMOUNT LESS THAN THE AMOUNT THAT THE PHARMACY
 BENEFIT MANAGER REIMBURSES A  PHARMACY  BENEFIT  MANAGER  AFFILIATE  FOR
 PROVIDING THE SAME PHARMACIST SERVICES.
   (C)  THE  AMOUNT  SHALL BE CALCULATED ON A PER UNIT BASIS BASED ON THE
 SAME GENERIC PRODUCT IDENTIFIED OR GENERIC CODE NUMBER.
   (D) A PHARMACY OR PHARMACIST MAY DECLINE  TO  PROVIDE  THE  PHARMACIST
 SERVICES  TO  A PATIENT OR PHARMACY BENEFIT MANAGER IF, AS A RESULT OF A
 MAXIMUM ALLOWABLE COST, A PHARMACY OR PHARMACIST IS TO BE PAID LESS THAN
 THE PHARMACY ACQUISITION  COST  OF  THE  PHARMACY  PROVIDING  PHARMACIST
 SERVICES.
   5.  Contract  provisions.  No  pharmacy  benefit  manager  shall, with
 respect to contracts between such pharmacy benefit manager and a pharma-
 cy or, alternatively, such pharmacy benefit  manager  and  a  pharmacy's
 S. 950                              5
 
 contracting  agent, such as a pharmacy services administrative organiza-
 tion:
   (a)  prohibit  or penalize a pharmacist or pharmacy from disclosing to
 an individual purchasing a prescription medication  information  regard-
 ing:
   (i) the cost of the prescription medication to the individual, or
   (ii)  the  availability  of any therapeutically equivalent alternative
 medications or alternative methods of purchasing the prescription  medi-
 cation, including but not limited to, paying a cash price; or
   (b)  charge or collect from an individual a copayment that exceeds the
 total submitted charges by the pharmacy for which the pharmacy is  paid.
 If an individual pays a copayment, the pharmacy shall retain the adjudi-
 cated  costs and the pharmacy benefit manager shall not redact or recoup
 the adjudicated cost.
   6. PHARMACY BENEFIT MANAGER  ADDITIONAL  DUTIES.  A  PHARMACY  BENEFIT
 MANAGER SHALL:
   (A)  PROVIDE ACCESS TO ITS MAXIMUM ALLOWABLE COST PRICES TO EACH PHAR-
 MACY SUBJECT TO THE MAXIMUM ALLOWABLE COST PRICE; AND
   (B) UPDATE ITS MAXIMUM ALLOWABLE COST PRICES ON A TIMELY BASIS, BUT IN
 NO EVENT LONGER THAN SEVEN CALENDAR DAYS FROM AN INCREASE OF TEN PERCENT
 OR MORE IN THE PHARMACY ACQUISITION COST FROM SIXTY PERCENT OR  MORE  OF
 THE PHARMACEUTICAL WHOLESALER DOING BUSINESS IN THE STATE OR A CHANGE IN
 THE METHODOLOGY ON WHICH THE MAXIMUM ALLOWABLE COST PRICE IS BASED OR IN
 THE VALUE OF A VARIABLE INVOLVED IN THE METHODOLOGY.
   § 2. This act shall take effect immediately.