New York is creating new oversight for pharmacy benefit managers with the creation of the Department of Financial Services’ Pharmacy Benefits Bureau.

Pharmacy benefit managers are intermediaries in the prescription drug supply chain that have, without regulatory oversight, long controlled the price of drugs for health plans and reimbursement rates for pharmacies. The new bureau will be tasked with licensing and supervising the industry, watching pharmacy benefit managers’ impact on consumers and the cost of health care.

“As we continue our comeback from the COVID-19 pandemic, it’s crucial that we take every opportunity to improve the health care system and reduce costs for New Yorkers,” said Gov. Kathy Hochul. “This landmark regulatory body will provide careful oversight to protect consumers from predatory practices in the largely unregulated pharmacy benefits managers industry. My administration remains committed to doing everything in its power to reduce the burden of health insurance and prescription drug costs on New Yorkers.”

Earlier this year, Hochul signed into law the most comprehensive regulatory regime for pharmacy benefit managers in the country, assigning DFS new authority to license and supervise the industry. DFS now has the power to address the widely reported problematic practices in the PBM industry which in turn will help lower drug and health insurance costs, protect New Yorkers accessing those drugs, and support New York’s pharmacies, many of which are independent small businesses.

Additionally, with the passage of the enacted 2023 state budget, Hochul secured a $5 million appropriation to fund and staff the new bureau. Costs to administer this initiative will be offset through the application of fees, assessments, and penalties directly on the industry. The state Department of Financial Services also has the authority to investigate drug price spikes, with that authority falling under the supervision of the new Pharmacy Benefits Bureau. DFS will continue to review reporting, monitor the market conduct and ensure proper enforcement of consumer protections in New York.

Pharmacy benefit managers will have to register with the bureau by June 1 and submit their first annual report by July 1. The bureau has released guidance on both registration and the annual report on the DFS website.