A bill headed for New York Gov. Kathy Hochul’s desk would provide a boost to pharmacies across the state, but critics fear it could lead to higher prices for consumers.
The state Legislature passed a measure earlier this month that would require pharmacy benefit managers to pay a roughly $10-per-prescription dispensing fee and standardize the price they pay to pharmacies for particular drugs.
Benefit managers act as middlemen that negotiate with pharmacies, insurers and drug manufacturers. They’re in charge of negotiating rebates with drug makers and processing claims from pharmacies.
The bill is designed to shift money from those benefit managers to the pharmacies themselves and assist independent pharmacies that are in competition with major conglomerates like CVS, which owns one of the big three benefit managers.
But benefit managers and health insurers are urging Hochul to veto the bill. They warn the measure will force New Yorkers to pay more for their drugs and insurance premiums at a time when many public officials, including Hochul, are emphasizing issues of affordability.
“ It’s going to result in hundreds of millions of dollars in new costs that will have to be built into premiums, which means employers and consumers will pay those costs,” said Eric Linzer, president of the New York Health Plan Association, which represents private insurers.
Independent pharmacies have been pushing for the changes for years, arguing that the current system allows benefit managers, known as PBMs, to profit at their expense.
Parthiv Shah, president of the state Pharmacists Society, said pharmacies are sometimes reimbursed by benefit managers at rates lower than what it actually costs them to fill a prescription.
‘[Pharmacies] are being asked to do more for patients while being paid less than it costs to provide that care,” he said at a news conference at the state Capitol earlier this year. “And who's profiting? The PBMs. Billions of dollars.”
The Pharmaceutical Care Management Association, which represents an array of benefit managers including giants CVS and Express Scripts, says the bill would have a major cost.
Johnny Garcia, the association’s assistant vice president of policy, said the group estimates it would add $576 million in costs. The average dispensing fee now is about $2, he said, far less than the roughly $10 fee required in the bill.
”It’s a bad bill because it's a prescription tax, basically,” Garcia said.
If Hochul signs the bill, benefit managers would have to pay pharmacies at a rate calculated by an existing survey by the federal government that attempts to determine the average cost of the drug. That, along with the proposed $10 dispensing fee, would put them in line with the state Medicaid program.
“That's what we're looking to do on the commercial side: Make sure that pharmacists are not going out of business, and that PBMs absorb some of these costs as they make record multibillion-dollar profits,” said state Sen. James Skoufis, a Hudson Valley Democrat who sponsors the bill.
A 2022 state law says benefit managers have “a duty of good faith and fair dealing” with pharmacies, health plans and more. Skoufis said he believes that duty would require them to absorb the added costs.
But Garcia said the fee increase is “not something that a PBM is going to be able to absorb.”
“It's going to be burdened either by the patient or the employer that's paying for these benefits,” he said. “PBMs don't make as much as other companies, like drug manufacturers.”
The number of licensed pharmacies has ping-ponged up and down in recent years.
As of May 1, there were 5,380 pharmacies in New York state, according to the state Education Department, which handles professional licensing. That’s a drop of 102 from the prior year — when Rite Aid closed all of its locations — but roughly the same number as in August 2024.
A handful of states passed similar measures in recent years. And in 2023, the New York State Department of Financial Services proposed something similar, as well.
But that effort came to a halt after various labor unions objected, arguing that the new rates would cause their health plans to take on millions of dollars in new costs, according to the Empire Center, a fiscally conservative think tank that obtained the letters under a public records request.
New York lawmakers passed the bill earlier this year before ending their legislative session in June. But the current measure carved out health plans that are collectively bargained by unions, an amendment the bill’s sponsors said was necessary to ensure the measure had enough votes to pass.
“ I personally think they would benefit from it,” said Assemblymember John McDonald, the Albany-area Democrat who is a practicing pharmacist and sponsors the bill in his house.
Bill Hammond, the Empire Center’s senior fellow for health policy, has been critical of the bill. He says the labor union carveout is evidence that it’s a bad idea.
“ I would call it a shocking thing to do, except you see it a lot in Albany,” Hammond said. ”The unions went on the record [in 2023] about how much this was going to add to their bill, and the Legislature still went ahead and imposed it on everyone except the unions.”
Hochul, a Democrat who has centered her reelection campaign on issues of affordability, has not yet weighed in on the bill. She has until the end of the year to sign or veto the measure.
“The governor will review the legislation,” said Nicolette Simmonds, a spokesperson for Hochul.
