Senate Bill S2541

                                 BILL NUMBER:  S2541

 TITLE OF BILL :

An act to amend the public health law and the insurance law, in
relation to contracts between pharmacy benefit managers and health
insurers to protect consumers

 PURPOSE :

The purpose of this bill is to prohibit the imposition of a charge for
a prescription drug upon an insured individual, which exceeds the
negotiated reimbursement rate.

 SUMMARY OF PROVISIONS :

Section one amends Public Health Law § 280-a by adding a new
subdivision 3 to require pharmacy benefit managers (PMB) to ensure
that a prescription drug consumer is not charged an amount, through
either a co-pay or deductible, higher than the negotiated
reimbursement rate for the drug, less any rebate collected.

Section two amends Public Health Law § 4406-c by adding a new
subdivision (9) requiring that no health maintenance organization may
require an enrollee to pay a cost higher than the health maintenance
organization's or their pharmacy benefit manager's negotiated
              

reimbursement rate for a prescription drug, less any rebates
collected.

Section three amends Insurance Law § 3217-b by adding a new subsection
(k) requiring that no insured pay a cost higher than the negotiated
reimbursement rate of the insurers' or their PBMs, less any rebates
collected.

Section four amends Insurance Law § 4325 by adding a new subsection
(l) requiring that no corporation organized under this article may
require a covered person to pay a cost higher than the corporation's
or their PBMs negotiated reimbursement for a prescription drug, less
any rebates collected.

Section four provides the effective date.

 JUSTIFICATION :

This legislation ensures savings received by pharmacy benefit managers
(PBMs), and in turn insurers, from rebates for prescription drugs,
make it back to the consumer. The complexity of drug pricing, which
involves PBMs who negotiate drug prices and rebates, and changes in
the insurance market with more individuals enrolled in high,
deductible plans, has resulted in many consumers paying the full
sticker price of a drug out-of-pocket when their insurer, who does not
pay for the drug, receives a rebate for the medication.

Example: Epi-Pens have a sticker price of $600. The PBM, on behalf of
the insurer, negotiates a $300 rebate. If the consumer has met the
deductible, the insurer pays $600 and gets back $300 from the
manufacturer through the PBM. The consumer may be responsible for a
co-payment. If the consumer has not met the deductible, the consumer
pays $600 and the insurer still receives a $300 rebate through the
PBM.

Recent trends show that PBMs have been a big beneficiary of soaring
drug prices burdening not only New Yorkers, but Americans as a whole.
Rising drug prices are the single largest increasing cost placing
stress on insurers and the state Medicaid Program. While drug
manufacturers such as Valeant and Turing Pharmaceuticals have, for
good reason, been much of the focus of federal officials, PBMs have
also profited from these skyrocketing prices. Due to their large
market share, opacity and complexity, PBMs have been a large
beneficiary of soaring prices while avoiding the same intense scrutiny
of drug manufacturers. This has started to change, with PBMs having
recently drawn the attention of prosecutors as well as federal and
state regulators.

Typically, a PBM contracts with an insurer and the insurer contracts
with the drug consumer. The PBM and the drug companies negotiate a
rebate to bring down the cost of pharmaceuticals. Often times,
insurers do not know how much drugs cost the PBM once it has
negotiated its own rebate with a drug company-they just know how much
they're paying a PBM.

With more and more individuals enrolling in high deductible health
plans, the result is that insured consumers are often paying
out-of-pocket the full cost of medications that the PBM receives a
rebate for. According to the Kaiser Foundation, a quarter of workers
in employer plans have to pay the full cost for prescription drugs
before their coverage kicks in. Many pharmaceutical companies indicate
that their contacts with PBMs and insurers generally require rebates
be paid to them on all prescriptions, even when the patient pays the
full cost because of high deductibles. In such cases, the PBM and
ultimately the insurer receives the rebates even though they have not
paid a dime.

Drug makers give insurers and PBMs more than $100 billion a year in
rebates and other discounts to reduce the skyrocketing cost of drugs.
PBMs are required to pass these rebates onto the insurance company but
there is currently no requirement that the insurer pass this savings
onto the consumer. The current reimbursement practices have not kept
pace with the evolving system, which has resulted in unintended costs
to consumers. This legislation ensures these savings are passed on to
the consumer.

 LEGISLATIVE HISTORY :

New bill.

 FISCAL IMPLICATIONS :

None to the state.

 EFFECTIVE DATE :
This act shall take effect on the first of January next succeeding the
date on which it shall have become a law.