§ 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 benefit 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 beneficiaries 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
benefit 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;

(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
substitution 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
equivalent 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.

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
professionalism.

(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
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
limitations 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,
chargebacks, reimbursements, or other benefits received by the pharmacy
benefit 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
designated 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
prosecute or defend any legitimate legal claim or cause of action.
Designation 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
dispensing a prescription, or alter or cause the altering of the terms
of a prescription, except with the approval of the prescriber or as
explicitly 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,
alternatively, 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. 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
processing 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
indicating 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
pharmacy benefit manager or covered entity shall adjust the maximum
allowable 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
identify the national drug code of a therapeutically equivalent drug, as
determined by the federal Food and Drug Administration, that is
available for purchase by pharmacies in this state from wholesalers
registered 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
maximum allowable cost for that drug as determined by the pharmacy
benefit manager.

5. Contract provisions. No pharmacy benefit manager shall, with
respect to contracts between such pharmacy benefit manager and a
pharmacy or, alternatively, such pharmacy benefit manager and a
pharmacy's contracting agent, such as a pharmacy services administrative
organization:

(a) prohibit or penalize a pharmacist or pharmacy from disclosing to
an individual purchasing a prescription medication or service
information regarding:

(i) the cost of the prescription medication or service to the
individual, or the cost of the prescription medication or service to the
pharmacy and the pharmacy's reimbursement for that prescription
medication or service; or

(ii) the availability of any therapeutically equivalent alternative
medications or alternative methods of purchasing the prescription
medication, 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
adjudicated costs and the pharmacy benefit manager shall not redact or
recoup the adjudicated cost.