The Assembly has unanimously passed legislation that, if enacted, will save taxpayers and businesses millions of dollars a year by shedding light on the practice of pharmacy benefit managers (PBMs) and requiring PBMs to work for the benefit of their client health plans.

PBMs are companies that manage prescription drug benefit programs for health plans. They have promised to save health plans and their members money. But in reality, their negotiations are very secretive. PBMs commonly pocket payments from drug manufacturers that ought to be used to lower drug prices, and they accept payments in exchange for giving preference to more expensive drugs. The bill, modeled on recent legislation in Maine , would require that PBM act not in their own best interest, but rather in the interest of the health plan and its beneficiaries.

Assembly Member Richard N. Gottfried (D, WF – Manhattan), chair of the Assembly Committee on Health and the sponsor of this legislation, said, “This legislation will shed light on an industry that has repeatedly been found to be abusing the public trust and has been allowed to spend millions of dollars of taxpayer money with no regulation for too long.”

In New York , this lack of transparency has resulted in several major lawsuits. In June of 2004, then-Attorney General Eliot Spitzer settled a claim with MedCo Health Services, Inc. for illegal drug switching. The State of New York is also currently involved in a pending lawsuit against ExpressScripts, Inc., alleging that the company inflated the cost of drugs paid for by the state health plan and illegally diverted rebates due to the plan. The legislation passed by the Assembly would eliminate the ability of these companies to hide such practices.

According to the National Conference of State Legislatures (NCSL), nine states and the District of Columbia have passed PBM transparency laws. Twenty-seven other states, including New York , are considering taking this step.

In June of 2006, the Supreme Court upheld the State of Maine ’s right to pass legislation regulating pharmacy benefit managers by refusing to hear arguments in Pharmaceutical Care Management Association v. Rowe. The New York legislation is closely modeled after that legislation.

The bill is sponsored in the Senate by Senator James Seward.

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Assembly Health Committee Chair Richard N. Gottfried
822 Legislative Office Building, Albany , NY 12248 – Tel: 518-455-4941
250 Broadway, #2232, New York , NY 10007 – Tel: 212-312-1492
GottfrR@assembly.state.ny.us