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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 26, 2023

New York State Medicaid Transition From Managed Care to NYRx Will Subject Pharmacies to OMIG Audits—Compliance Vigilance Required!

Effective April 1, 2023, all New York State members enrolled in mainstream Medicaid managed care plans will receive their prescription drugs through NYRx, a fee-for-service (FFS) Medicaid pharmacy benefit program that carves out prescription drug coverage from managed care plans.

This long-awaited transition back to a FFS program has been welcomed by many community pharmacies. Transitioning all Medicaid members under the NYRx program allows for a single, uniform list of covered drugs and standardized, consistent rules and regulations. NYRx will pay pharmacies directly for Medicaid members’ drugs and supplies instead of paying the managed care plans and allowing pharmacy benefit managers (PBMs) to pay pharmacies.

Community pharmacies are looking forward to a respite from exclusionary and unfair practices that have long been the subject of a cry for PBM reform in New York State. PBM audits of pharmacies were meant to eliminate or reduce fraud, waste, and abuse, but investigations by the Federal Trade Commission and by the NYS Senate have revealed that these intermediaries used their benefit manager status to enrich themselves by looking for ways to recoup funds from community pharmacies and limit competition with their in-house chains and mail-order houses. Pharmacy owners were frequently diverted from their mission to provide health care, requiring them to review and defend claims at the sole direction of PBMs without justification and causing them to face termination from networks for minor findings that often resulted in large recoupment. Cutting out the PBM intermediaries will mean that PBMs will no longer be able to conduct audits (e.g., onsite, virtual, prescription, invoice reconciliation, investigation, etc.) that are related to prescription drug claims for Medicaid’s seven million members.

However, this curtailment of PBM audits related to Medicaid prescription drugs does not mean pharmacies can be complacent with their compliance policies and procedures. Rather, pharmacies will now face potential audits conducted by the New York State Office of the Medicaid Inspector General (OMIG), the New York State Medicaid Fraud Control Unit (MFCU), the New York State Board of Pharmacy (BOP), and other state agencies that will be policing New York State’s Medicaid drug spend. If a community pharmacy’s policies and procedures are not in place, are too loose to be effective, are inconsistent, or are not followed and complied with uniformly, the pharmacy will be exposed to audits. Consequently, this is a time for increased vigilance. Community pharmacies should immediately review their current policies to ensure they are compliant with the NYRx Medicaid Pharmacy Guidelines and the New York State Medicaid Update, which provide guidance on how the program will be administered.

Attorneys on Barclay Damon’s Health Care Controversies Team are experienced in assisting pharmacies with Medicaid pharmacy guideline compliance and responding to audits. If you are interested in learning more or need assistance, please contact one of our Health Care Controversies Team attorneys.

If you have any questions regarding the content of this alert, please contact Linda Clark, Health Care Controversies Team leader, at; Brad Gallagher, partner, at; James Ko, special counsel, at; or another member of the firm’s Health Care Controversies Team.

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