A plan to require a $10.18 “dispensing fee” for filling drug prescriptions is back on the table in Albany – this time in the form of legislation rather than regulation.

The bill introduced this month targets pharmacy benefit managers, or PBMs, companies that manage drug benefits on behalf of nearly all health plans. The legislation would require PBMs to pay pharmacies a minimum price for each prescription, including a dispensing fee matching the amount paid by Medicaid, which is currently $10.18.

If applied to the millions of prescriptions that New Yorkers fill each year, the fee alone would add billions of dollars to health care costs.

A similar pricing rule was part of a package of regulations proposed last year by the Department of Financial Services – which was withdrawn in the face of broad opposition. The department later introduced a revised regulatory package that omitted the minimum pricing scheme and the dispensing fee.

With the $10.18 fee once again being debated, it’s worth revisiting the reaction the idea received last year.

A review of public comments on the original regulatory proposal – obtained by the Empire Center through a Freedom of Information Law request – shows that the minimum pricing scheme received little support from anyone other than the pharmacies who stood to benefit.

On the other side were an array of interests concerned about costs, including labor unions, public and private employers, and the health insurance industry.

The critics notably included one of DFS’s fellow state agencies, the Department of Civil Service, which manages the New York State Health Insurance Plan for employees of the state and many local governments.

“Effectively, these changes would directly increase costs for NYSHIP members,” the department warned – estimating that the dispensing fee alone would cost the plan $126 million annually. 

Also in opposition were some of the state’s largest and most influential unions, including the AFL-CIO, the health-care workers union 1199 SEIU, New York State United Teachers, the United Federation of Teachers, the New York State Nurses Association, the Civil Service Employees Association, the municipal workers union District Council 37, the New York City Building and Construction Trades, and other organizations representing police, firefighters, sanitation workers, plumbers, carpenters and building workers.

Other critics included six individual school districts, the New York State School Boards Association and the Association of School Business Officials; the New York City Office of Labor Relations; the New York State Association of Counties, the Associated General Contractors of New York, local chambers of commerce and several private employers, including Nokia, Russell Sage College in Troy and the Pilgrim Missionary Baptist Church in Buffalo.

Three elected officials weighed in against the proposal, including Republican state Senator Jacob Ashby of Rensselaer County and two Democrats: Assemblywoman Aileen Gunther of Sullivan County and former Suffolk County Executive Steven Bellone.

The Empire Center also submitted comments in opposition to the minimum pricing plan and dispensing fee.

Support predominantly came from pharmacies, including individual operators and industry organizations, such as the Pharmacists Society of the State of New York, the Community Pharmacists Association of New York State, and the National Association of Chain Drug Stores. 

There were also two dozen individual New Yorkers who expressed general support for the regulations as a way to protect their local drug store.

Overall, 56 percent of the comments were generally negative about the proposed regulation, 35 percent were generally positive, and the rest were mixed, focused on technical issues or non-committal. 

The new legislation is sponsored by Assemblyman John McDonald of Cohoes – a pharmacist and former* pharmacy owner – and Senator Neil Breslin of Albany. 

The sponsor’s memorandum says the bill is “intended to address the growing loss of community retail pharmacies throughout New York State.”

 

However, New York has the second-highest number of pharmacies per capita among the 50 states, according to statistics from the National Community Pharmacists Association.

Their ranks increased by 5 percent from 2014 to 2019, then decreased by 5 percent after that. The net change since 2014 has been less than 1 percent (see chart).

The number of independent pharmacies, defined as having no more than three locations, has risen by 324 or 14 percent since 2014.

*Correction: Assemblyman McDonald sold his interest in the family pharmacy in 2021

 

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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