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Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

April 13, 2020

COVID-19: NYS Medicaid Reformed to Control PBMs in Budget Bill

In our previous “A Silver Lining: COVID-19 Offers Independent Pharmacies a Chance to Shine” alert, we highlighted the amazing care being delivered by independent pharmacies during the COVID-19 pandemic, discussed the newly enacted emergency measures affecting the pharmaceutical industry, and called on the government to restrict the power of pharmacy benefit managers (PBMs).

We were hopeful last year that PBM reform was coming, as the NYS Legislature passed cutting-edge legislation that would have provided greater oversight and regulation of PBM activities that severely impact independent pharmacies’ (i.e., our clients’) ability to operate their businesses. The legislation would have helped protect against the shadowy dealings of PBMs that ultimately lead to higher prescription drug prices. Unfortunately, the legislation was vetoed by Governor Cuomo in December 2019.

Amid a flurry of COVID-19-related changes in pharmacy law, New York State provided some necessary and very timely PBM reform with regard to the NY Medicaid Program as part of the 2021 Budget Bill. Beginning in April 2021, PBMs will be removed from Medicaid managed care benefit packages. The hope is that this will provide greater transparency in drug pricing and have a reimbursement level that is based on actual acquisition costs and dispensing fees.

The move follows the broad publication of studies showing that state Medicaid programs have been getting fleeced by PBMs for tens of millions. In fact, a recent study of NYS Medicaid prescription claims noted that PBMs had a spread of 32 percent between the reported cost and the amount reimbursed to independent pharmacies. Therefore, in a state facing a massive deficit due to its Medicaid spend, self-interested, anti-competitive PBM behavior within the Medicaid program was ripe for reform.

It is to be determined whether new measures to control PBMs in the Medicaid program will result in increased reimbursement rates for independent pharmacies when they become effective. New York State also slashed its Medicaid spending and will likely look to keep as much of the spread as possible for itself because of the budget issues and the COVID-19 pandemic. However, the 2021 Budget Bill is progress and provides hope to independent pharmacies—particularly those that focus their services on Medicaid beneficiaries.

Barclay Damon represents independent pharmacies and other stakeholders across the United States. Its attorneys actively monitor the changing landscape and are experienced in handling issues arising out of those stakeholders relationships with PBMs.

If you have any questions regarding the content in this alert, please contact Linda Clark, Health Care Controversies Team leader, at lclark@barclaydamon.com; Brad Gallagher, counsel, at bgallagher@barclaydamon.com; or another member of the firm’s Health Care Controversies Team.

We also have a specific team of Barclay Damon attorneys who are actively working on assessing regulatory, legislative, and other governmental updates related to COVID-19 and who are prepared to assist clients. You can reach our COVID-19 Response Team at COVID-19ResponseTeam@barclaydamon.com.

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