On June 5, the New York State Assembly unanimously passed the Patient Access to Pharmacy Act (PAPA), advancing one of the most sweeping PBM reimbursement reform measures to clear both chambers in the state in recent years.
The bill previously passed the New York Senate and now awaits action by Governor Kathy Hochul. If signed into law, PAPA would amend the New York Public Health Law and Insurance Law to establish statutory minimum reimbursement standards for pharmacy benefit managers (PBMs) and require payment structures tied directly to drug acquisition costs and dispensing services.
The legislation reflects a broader national trend of states imposing cost-based reimbursement floors and expanding pharmacy dispute and appeals rights in response to longstanding concerns over PBM pricing practices.
Statutory Reimbursement Floors and Dispensing Fee Requirements
PAPA would require PBMs to reimburse pharmacies at no less than the national average drug acquisition cost (NADAC) for covered drugs. Where NADAC is unavailable, reimbursement would be based on the pharmacy’s actual acquisition cost, supported by standard documentation such as invoices or other verifiable cost records.
In addition, PBMs would be required to pay a processional dispensing fee at least equal to the dispensing fee paid under the New York State Medicaid Program.
The bill also creates an enhanced reimbursement framework for specialty and complex drugs, such as biologics. These provisions are intended to account for additional pharmacy services, including specialized handling, storage, shipping, patient counseling, monitoring, and care coordination.
PAPA would further require PBMs to implement a formal appeals process allowing pharmacies to challenge reimbursement determinations, including alleged underpayments and pricing disputes.
If enacted, the statute would effectively impose a reimbursement floor for many commercially insured prescriptions in New York State, significantly limiting PBM discretion in setting pharmacy payment rates.
Legislative Status and Effective Date
PAPA has passed both the New York Senate and Assembly in substantially similar form and is expected to be transmitted to Governor Hochul for consideration.
Under New York State procedure, the governor generally has 10 days (excluding Sundays) to sign or veto legislation once it is formally delivered, subject to constitutional timing rules if the legislature has adjourned.
The legislation’s effective date of January 1, 2026, is expected to apply to policies, contracts, and agreements issued, renewed, modified, or amended on or after that date. Given the timing of enactment and enrollment, the provision may require technical clarification or administrative guidance following signature.
Key Implications for Pharmacies
Pharmacies should begin preparing for potential implementation now, particularly in light of increased documentation and reimbursement enforcement requirements.
Key considerations include:
- Ensuring acquisition cost documentation, including invoices and pricing records, is organized and readily available to support reimbursement disputes and appeals.
- Reviewing PBM agreements and upcoming renewals for provisions that may conflict with statutory reimbursement floors or restrict appeals rights.
- Identifying prescriptions that are consistently reimbursed below acquisition cost or subject to post-payment adjustments.
- Evaluating specialty pharmacy workflows to determine whether services may qualify for enhanced dispensing fee reimbursement under the statute.
- Preparing internal processes for use of the statutory appeals mechanism, including documentation standards and escalation procedures.
Broader Context
PAPA is part of a broader wave of state-level PBM reform legislation focused on reimbursement transparency, pharmacy appeals rights, and cost-based payment methodologies. Similar reforms have been enacted or considered in multiple states, although New York’s proposed legislation is among the more aggressive in directly tying commercial reimbursement to NADAC and Medicaid-based dispensing fee benchmarks.
If enacted, PAPA would represent a significant shift in PBM reimbursement regulation in New York State, particularly for independent and community pharmacies that have faced sustained pressure from below-cost reimbursement and post-payment adjustments.
How Barclay Damon Can Help You
Barclay Damon’s national Pharmacy Team regularly advises independent pharmacies, specialty pharmacies, and pharmacy operators on PBM reimbursement disputes, audit defense, network participation matters, regulatory compliance, and pharmacy business operations.
As New York State moves toward potential enactment of PAPA, pharmacies should evaluate how the legislation may affect reimbursement structures, contracting strategy, documentation practices, and dispute resolution workflows.
Attorneys on Barclay Damon’s Pharmacy Team will be available at the Pharmacists Society of the State of New York, Inc.’s (PSSNY) Annual Convention this weekend at table 42 to discuss the potential impact of PAPA and other emerging pharmacy regulatory developments.
If you have any questions regarding the content of this alert, please contact Brad Gallagher or Linda Clark, co-leaders of the Pharmacy Team, at bgallagher@barclaydamon.com and lclark@barclaydamon.com; Alix Hirsh, associate, at ahirsh@barclaydamon.com; or another member of the firm’s Pharmacy Team.