A package of proposed regulations that included a $10.18 fee for filling most drug prescriptions was withdrawn Tuesday by the Department of Financial Services in the face of broad opposition.

The rules would have governed the practices of pharmacy benefit managers or PBMs, companies that process drug claims on behalf of health plans. As proposed, PBMs would have been required to pay pharmacies minimum benchmark prices for drugs plus a “dispensing fee” of $10.18 for each prescription.

The fee alone would have cost the companies billions per year, an expense that was likely to be passed along to health plans, employers and consumers.

The DFS proposals were supported by pharmacies, who contended that PBMs exercise too much market power and pay unfairly low reimbursements to maximize their own profits.

But a range of other stakeholders – including insurers, employers and labor unions – argued the dispensing fee and other regulations would inevitably drive up health-care costs which they are already struggling to afford.

In its comments to the department, the United Federation of Teachers warned that the dispensing fee “will irreparably  harm – and likely bankrupt – union benefit funds.” It estimated the cost to the UFT Welfare Fund at more than $20 million annually.

The New York Health Plan Association called the regulations “profoundly anti-consumer.”

They would increase the cost of pharmacy coverage for employers, union benefit funds, insurers, and individual consumers – many of whom are medically vulnerable or seniors – by an enormous amount that, in the aggregate, would be in the billions of dollars annually. The cost impact of the proposal is not speculative or subject to actuarial debate. It is basic arithmetic that is easily calculated.

The Empire Center submitted comments focused on the dispensing fee, saying the provision would “push up the cost of coverage for New Yorkers, who already pay some of the highest health premiums in the country.”

“Even if other parts of the proposed regulations lead to savings, those savings would be offset if not eliminated by the expense of mandatory dispensing fees,” the center said.

DFS gave no explanation for its decision to withdraw the regulations, which was posted 15 days after the close of the comment period on Oct. 16.

Also on Tuesday, the department announced its final adoption of separate regulations relating to the licensing of PBMs, including the reports they must file and the registration fees they must pay.

The department’s push to regulate PBMs grew out of licensing legislation that was enacted in 2021 and amended in 2022. That law called for the estate to regulate PBM pricing practices generally, but made no specific mention of establishing a dispensing fee – meaning DFS could drop that provision from future regulatory proposals.

 

About the Author

Bill Hammond

As the Empire Center’s senior fellow for health policy, Bill Hammond tracks fast-moving developments in New York’s massive health care industry, with a focus on how decisions made in Albany and Washington affect the well-being of patients, providers, taxpayers and the state’s economy.

Read more by Bill Hammond

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