Requires a pharmacy benefit manager to pay a participating pharmacy at minimum at the national average drug acquisition cost (NADAC) rate, or at the pharmacy acquisition cost rate if greater or there is not a NADAC rate, plus a professional dispensing fee that is at minimum the professional dispensing fee paid under the state medical assistance program.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A5882B
SPONSOR: McDonald TITLE OF BILL:
An act to amend the public health law and the insurance law, in relation
to payments by pharmacy benefit managers to participating pharmacies
PURPOSE OF THE BILL:
The Patient Access to Pharmacy Act (PAPA) seeks to simplify and change
the methodology for pharmacy reimbursement for commercial health plans
to a Cost-Plus model that is more transparent for patients, payors, and
pharmacies while saving costs through the process.
SUMMARY OF SPECIFIC PROVISIONS:
Section 1: Amends subdivision 1 of section 280-a of the public health
law by adding paragraphs (j) and (k). To define the Pharmacy Acquisition
Cost Rate as the cost a participating pharmacy pays to acquire drugs,
including generic, brand-name, biologics, and those produced through
genetic or biopharmaceutical processes, based on pharmacy cost invoices.
It also defines the National Average Drug Acquisition Cost as the month-
ly survey conducted by the Centers for Medicare and Medicaid Services
(CMS) to determine the average acquisition cost of Medicaid-covered
outpatient drugs.
Section 2: Amends subdivision 3 of section 280-a of the public health
law to add a paragraph (b). To prohibit pharmacy benefit managers from
substituting or altering prescription drugs without prescriber approval
or legal authorization. The superintendent and commissioner may issue
regulations on when substitutions are permitted. Additionally, pharmacy
benefit managers must reimburse participating pharmacies at least the
National Average Drug Acquisition Cost (NADAC) rate or the Pharmacy
Acquisition Cost Rate, whichever is higher, plus a professional dispens-
ing fee equal to that paid under the state medical assistance program.
For medications requiring specialized handling, distribution, adminis-
tration, patient education, care coordination, monitoring, special pack-
aging, or shipping, pharmacies must receive an additional dispensing fee
to ensure they are not reimbursed below their acquisition and dispensing
costs.
Section 3: Amends the opening paragraph of subdivision 4 of section
280-a of the public health law. To require pharmacy benefit managers to
establish a reasonable process for pharmacies or their contracting
agents to appeal, investigate, and resolve disputes over drug pricing
for multi-source generics, brand-name drugs, biologics, and drugs
produced through genetic or biopharmaceutical processes.
Section 4: Amends section 2911 of the insurance law to add a new
subsection (d) to ensure that pharmacy benefit managers reimburse phar-
macies fairly by covering the actual cost of acquiring and dispensing
medications. It mandates payment at either the National Average Drug
Acquisition Cost (NADAC) rate or the Pharmacy Acquisition Cost Rate, if
there is not a NADAC rate, along with a professional dispensing fee.
Additional compensation is required for drugs needing special handling,
administration, or monitoring. The amendment also establishes a stand-
ardized appeals process for pharmacies to dispute pricing issues. This
paragraph does not apply to prescriptions or prescription drugs that are
distributed or paid for by a trust fund established under the Labor
Management Relations Act, or provided through a health, welfare, or
pharmaceutical plan that has been created, adopted, or funded as part of
a collective bargaining agreement between an employer and a labor organ-
ization or certified employee organization.
Section 5: Sets Effective Date.
JUSTIFICATION:
The Patient Access to Pharmacy Act (PAPA) is part of a continued to
effort to lower prescription drug costs for patients, stabilize and
potentially improve pharmacy access in underserved areas, and provide
greater transparency on what plan sponsors/employers are paying for
prescription drug costs which will lead to cost savings. This is the
same reimbursement methodology adopted by New York State Medicaid in
2023 which has led to consistent patient coverage and enhanced rebate
revenues which has' stabilized the cost of, the prescription program.
The methodology is known as Cost-Plus. Pharmacy Benefit Managers (PBMs)
serve an important part of delivering pharmacy services as they work on
behalf of the plan sponsors or employers to manage the pharmacy benefit.
Historically their purpose is to process claims; however, over the past
20 years they have negotiated in an opaque environment with the pharma-
ceutical companies for rebates which are alleged to lower the cost of
prescription benefits.
However, the cost-savings is not realized with patients or those paying
for the pharmacy benefit cost. Year over year insurance premiums for
commercial health plans rise between 8-13% of which pharmaceutical
companies being blamed as the main culprit..This is despite the fact
that in 2024, average brand-name drugs' list prices grew by only 2.3%.
After adjusting for overall inflation, brand-name drug net prices
dropped for an unprecedented seventh consecutive year according to
industry analysts. This is due to the rebate pumping phenomenon where
the PBMs solicit a rebate from the manufacturer, the manufacturer raises
the price and the PBM solicits a greater rebate creating the gross-tonet
bubbled In light of the fact that PBMs are licensed and monitored by the
New York State Department of Financial Services (DFS), it is time to
continue to shine light on the true cost of drug costs by using a
national standard for determining cost benchmarks for pharmacy
reimbursement by using the National Average Drug Acquisition Cost
(NADAC) which is a national monthly survey of actual costs incurred by
pharmacies to acquire medications.
The Cost-Plus methodology moves away from the prior Average Wholesale
Price (AWP) - reimbursement which was grossly overinflated as well as
the Wholesaler Acquisition Cost (WAC) and Maximum Acquisition Cost (MAC)
pricing methodology which were not consistent and did not provide an
actual picture of pharmaceutical costs. NADAC is a nationally accepted
benchmark, so recognized that the three major PBMs that control over 80%
of all pharmacy claims have announced that they are moving to the Cost-
Plus model for commercial plans in 2026.
The PAPA is also important considering the years of findings established
in a bi-partisan manner by the US Congress and the Federal Trade Commis-
sion (FTC) which have found that PBMs have established reimbursement
methodologies that reimburse their own pharmacies more than traditional
independent pharmacies or direct high-cost specialty business to their
own operations. Although the big 3 PBMs deny this accusation, the FTC
has been highly critical of their activities and the current 119th
Congress is pursuing methods to provide greater scrutiny, transparency,
and stewardship of public dollars. Passage of the PAPA will provide a
very clear guide for reimbursement of pharmaceuticals which will benefit
both the patient and the payor while providing stable reimbursement to
pharmacies regardless of their owner or location.
LEGISLATIVE HISTORY:
2023-2024: A.10327/S.9570
FISCAL IMPLICATIONS:
None to the state
EFFECTIVE DATE:
This act shall take effect January 1, 2026 and apply to all policies and
contracts issued, renewed, modified, altered or amended on and after
such date.
STATE OF NEW YORK
________________________________________________________________________
5882--B
2025-2026 Regular Sessions
IN ASSEMBLY
February 24, 2025
___________
Introduced by M. of A. McDONALD, WOERNER, BOLOGNA, DAIS, GRIFFIN, HEVE-
SI, STIRPE, LEE, KAY, BRABENEC, BUTTENSCHON, SHIMSKY, GLICK, McMAHON,
MANKTELOW, ANGELINO, K. BROWN, BLANKENBUSH, ROMERO, OTIS, PAULIN,
DINOWITZ, SOLAGES, SAYEGH, GALLAHAN, JONES, SIMONE, ALVAREZ, RAJKUMAR,
REYES, BURDICK, LASHER, LUPARDO, BARRETT, RA, ROSENTHAL, SIMON, McDO-
NOUGH, BENEDETTO, ZACCARO, DeSTEFANO, BLUMENCRANZ -- Multi-Sponsored
by -- M. of A. LEVENBERG -- read once and referred to the Committee
on Health -- committee discharged, bill amended, ordered reprinted as
amended and recommitted to said committee -- again reported from said
committee with amendments, ordered reprinted as amended and recommit-
ted to said committee
AN ACT to amend the public health law and the insurance law, in relation
to payments by pharmacy benefit managers to participating pharmacies
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivision 1 of section 280-a of the public health law is
2 amended by adding two new paragraphs (j) and (k) to read as follows:
3 (j) "Pharmacy acquisition cost rate" means the cost paid by a partic-
4 ipating pharmacy to acquire generic, brand name drugs, or biologic
5 products, or drugs produced through genetic technology or biopharmaceu-
6 tical processes pursuant to cost invoices from the pharmacy.
7 (k) "National average drug acquisition cost" means the monthly survey
8 of retail pharmacies conducted by the federal Centers for Medicare and
9 Medicaid Services (CMS) to determine average acquisition cost for Medi-
10 caid covered outpatient drugs.
11 § 2. Subdivision 3 of section 280-a of the public health law, as
12 amended by chapter 128 of the laws of 2022, is amended to read as
13 follows:
14 3. Prescriptions. (a) A pharmacy benefit manager may not substitute or
15 cause the substituting of one prescription drug for another in dispens-
16 ing a prescription, or alter or cause the altering of the terms of a
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD01972-08-5
A. 5882--B 2
1 prescription, except with the approval of the prescriber or as explicit-
2 ly required or permitted by law, including regulations of the department
3 of financial services or the department of health. The superintendent
4 and commissioner, in coordination with each other, are authorized to
5 promulgate regulations to determine when substitution of prescription
6 drugs may be required or permitted.
7 (b) To the extent permitted under federal law, a pharmacy benefit
8 manager shall pay a participating pharmacy at minimum at the national
9 average drug acquisition cost (NADAC) rate or at the pharmacy acquisi-
10 tion cost rate if there is not a NADAC rate, plus a professional
11 dispensing fee that is at minimum the professional dispensing fee paid
12 under the state medical assistance program. For generic, brand name
13 medications, biologic products, or drugs produced through genetic tech-
14 nology or biopharmaceutical processes as required by a manufacturer, a
15 federal or state regulatory agency, or accrediting body that require
16 unique handling, distribution or administration, in-depth patient teach-
17 ing, coordination of care, or frequent or special monitoring to ensure
18 successful use, special packaging, shipping or other costs to be
19 incurred by the pharmacy for the dispensing process that is greater than
20 the professional dispensing fee paid by the state medical assistance
21 program, participating pharmacies shall be paid a professional dispens-
22 ing fee for these costs to ensure a participating pharmacy is not paid
23 less than its cost to acquire and dispense medications. A pharmacy
24 benefit manager shall not pay a participating pharmacy below its pharma-
25 cy acquisition cost but may require demonstration of such cost through
26 the provision of pharmacy invoices. Provided, however, this paragraph
27 shall not apply to prescriptions, prescription drugs, or payments for
28 prescription drugs, distributed, or paid for in whole or in part, by a
29 trust fund established or maintained under the Labor Management
30 Relations Act (29 U.S. Code § 186), pursuant to coverage required by the
31 terms of a collective bargaining agreement between an employer and a
32 labor organization or certified employee organization; or pursuant to a
33 health plan, welfare fund, pharmaceutical plan, or other form of medical
34 or prescription coverage established, adopted, utilized, funded, or
35 agreed upon by an employer and a labor organization or certified employ-
36 ee organization pursuant to a collective bargaining agreement; or, where
37 the plan, coverage, fund, or program has been collectively bargained and
38 pertains to a sponsored multi-employer plan, including but not limited
39 to, plans developed under article five-G of the general municipal law,
40 articles forty-four and forty-seven of the insurance law, or any plans
41 created pursuant to the Internal Revenue Code, Employee Retirement
42 Income Security Act or any applicable federal statute that provides such
43 benefits to employee and retiree groups.
44 § 3. The opening paragraph of subdivision 4 of section 280-a of the
45 public health law, as added by chapter 828 of the laws of 2021, is
46 amended to read as follows:
47 A pharmacy benefit manager shall, with respect to contracts between a
48 pharmacy benefit manager and a pharmacy or, alternatively, a pharmacy
49 benefit manager and a pharmacy's contracting agent, such as a pharmacy
50 services administrative organization, include a reasonable process to
51 appeal, investigate and resolve disputes regarding multi-source generic,
52 brand name, and biologic product, and drugs produced through genetic
53 technology or biopharmaceutical processes drug pricing. The appeals
54 process shall include the following provisions:
55 § 4. Section 2911 of the insurance law is amended by adding a new
56 subsection (d) to read as follows:
A. 5882--B 3
1 (d) To the extent permitted under federal law, a pharmacy benefit
2 manager shall pay a participating pharmacy at minimum at the national
3 average drug acquisition cost (NADAC) rate, as defined in subdivision
4 one of section two hundred eighty-a of the public health law, or at the
5 pharmacy acquisition cost rate, as defined in subdivision one of section
6 two hundred eighty-a of the public health law, if there is not a NADAC
7 rate, plus a professional dispensing fee that is at minimum the profes-
8 sional dispensing fee paid under the state medical assistance program.
9 For generic, brand name medications, biologic products, or drugs
10 produced through genetic technology or biopharmaceutical processes as
11 required by a manufacturer, a federal or state regulatory agency, or
12 accrediting body that require unique handling, distribution or adminis-
13 tration, in-depth patient teaching, coordination of care, or frequent or
14 special monitoring to ensure successful use, special packaging, shipping
15 or other costs to be incurred by the pharmacy for the dispensing process
16 that is greater than the professional dispensing fee paid by the state
17 medical assistance program, participating pharmacies shall be paid a
18 professional dispensing fee for these costs to ensure a participating
19 pharmacy is not paid less than its cost to acquire and dispense medica-
20 tions. A pharmacy benefit manager shall not pay a participating pharmacy
21 below its pharmacy acquisition cost but may require demonstration of
22 such cost through the provision of pharmacy invoices. A pharmacy benefit
23 manager shall, with respect to contracts between a pharmacy benefit
24 manager and a pharmacy or, alternatively, a pharmacy benefit manager and
25 a pharmacy's contracting agent, such as a pharmacy services administra-
26 tive organization, include a reasonable process to appeal, investigate
27 and resolve disputes regarding multi-source generic, brand name, biolog-
28 ic product, and drugs produced through genetic technology or biopharma-
29 ceutical processes drug pricing. The appeals process shall be considered
30 within the existing appeals process under section two hundred eighty-a
31 of the public health law. Provided, however, this paragraph shall not
32 apply to prescriptions, prescription drugs, or payments for prescription
33 drugs, distributed, or paid for in whole or in part, by a trust fund
34 established or maintained under the Labor Management Relations Act (29
35 U.S. Code § 186), pursuant to coverage required by the terms of a
36 collective bargaining agreement between an employer and a labor organ-
37 ization or certified employee organization; or pursuant to a health
38 plan, welfare fund, pharmaceutical plan, or other form of medical or
39 prescription coverage established, adopted, utilized, funded, or agreed
40 upon by an employer and a labor organization or certified employee
41 organization pursuant to a collective bargaining agreement; or, where
42 the plan, coverage, fund, or program has been collectively bargained and
43 pertains to a sponsored multi-employer plan, including but not limited
44 to, plans developed under article five-G of the general municipal law,
45 articles forty-four and forty-seven of the insurance law, or any plans
46 created pursuant to the Internal Revenue Code, Employee Retirement
47 Income Security Act or any applicable federal statute that provides such
48 benefits to employee and retiree groups.
49 § 5. This act shall take effect January 1, 2026 and shall apply to all
50 policies and contracts issued, renewed, modified, altered or amended on
51 and after such date.
