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NEW YORK STATE PASSES LANDMARK PBM LEGISLATION

 2022 is here, and brings welcome news for independent pharmacies: New York State Governor Kathy Hochul has signed landmark legislation providing for oversight of pharmacy benefit managers, described as being "the most comprehensive regulatory framework in the country for Pharmacy Benefit Managers. "The new law should significantly benefit independent pharmacies, both directly and indirectly.

The new law's starting point is something long denied by PBMs: that they have any legal or fiduciary duty to pharmacies regarding the PBM's activities. Under the new law, PBMs have a legal duty and obligation to the pharmacy to perform PBM services with care, skill, prudence, diligence, and professionalism. Moreover, funds held by the PBM in relation to pharmacies are deemed to be held in trust by such PBM – another significant legal duty now placed on PBMs.

PBMs are now also required to register and be licensed with the New York State Superintendent of Insurance. The new law addresses historical complaints by the independent pharmacy industry about PBM practices, by directing the Superintendent to establish minimum standards for the issuance of such PBM license. These include standards pertaining to PBM conflicts of interest, deceptive practices, anti-competitive practices, and unfair claims practices. The new law also provides for increased financial transparency between PBMs and pharmacies, and requires PBMs to disclose certain conflicts of interest.

Critically, the law appears to provide strong enforcement mechanisms that were absent from PBM laws passed by other states or the federal government. The Superintendent is authorized to receive complaints about PBM practices and revoke or suspend a PBM's license based upon fraudulent practices, incompetence, financial irresponsibility, intentional misrepresentation, unfair trade practice and fraud, or violation of other standards. The law also appears to entitle an injured pharmacy to equitable and legal relief against unlawful PBM practices.

Now that the legislation has been signed into law, the next, highly anticipated step will be issuance of regulations and standards by the Superintendent, which will implement the broad intent of the legislation. We are closely monitoring regulatory developments, and will provide updates as they come.

If you have any questions or require legal guidance with respect to the new PBM law, or a PBM audit or any other legal issues facing your pharmacy please do not hesitate to call one of our experienced healthcare attorneys at 212.668.0200 or email the firm at info@mdrxlaw.com.

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Wednesday, October 05, 2022