CHAPTER XXI: [OFFICE OF] PHARMACY BENEFITS BUREAU

The title of Part 450 is amended as follows:

Part 450: [Office of Pharmacy Benefits] General Provisions

Section 450.1 is amended as follows:

As used in this part:

(a) Board shall mean the Drug Accountability Board established by [Section 202 of the] Insurance Law section 202.

(b) [Office] Bureau shall mean the [Office of] Pharmacy Benefits Bureau established by this Part.

(c) Chair shall mean the chair of the Drug Accountability Board appointed by the superintendent.

The title and text of Section 450.2 are amended as follows:

Section 450.2 [Office] Bureau established.

(a) There is hereby established within the department [an Office of] a Pharmacy Benefits Bureau, which [office] bureau shall be responsible for the regulation of pharmacy benefits managers, conducting investigations with respect to prescription drugs, and other matters assigned by the superintendent. Except as may be limited by order of the superintendent, the [person appointed as director of the Office] deputy superintendent of pharmacy benefits shall be authorized to take any action that the superintendent is authorized to take under the Insurance Law or Public Health Law section 280-a, and any action authorized under any other provision of law with respect to investigations authorized under Insurance Law section 111.

(b) All documents submitted to the [Office] bureau shall be submitted electronically. The exemption provided for in 11 NYCRR 6.3 shall apply to all such documents as if those documents were specifically set forth in 11 NYCRR 6.2(a).

The title of Section 450.3 is amended as follows:

Section 450.3 Membership of the [board] Drug Accountability Board.

The title of Section 450.4 is amended as follows:

Section 450.4 Chair of the [board] Drug Accountability Board.

The title of Section 450.5 is amended as follows:

Section 450.5 Drug Accountability Board recusals.

Section 450.5(b) is amended as follows:

(b) The [office] bureau shall determine, before any materials are shared with the members of the board, if a conflict of interest, or appearance of a conflict of interest, arises with any member of the board and shall report the conflict to the chair for a determination.

The title of Section 450.6 is amended as follows:

Section 450.6 Meetings of the [board] Drug Accountability Board.

(d) Attendance at meetings.

(1) Pursuant to [section 202 of the] Insurance Law section 202, the meetings of the board shall be private and not subject to disclosure.

(2) No recordings of the meetings of the board shall be made by any person; however, an official set of minutes for the meetings may be recorded by a representative of the [office] bureau.

(3) No person shall be permitted to attend, view, or listen to any meeting of the board unless the person is:

(i) a member of the board;

(ii) a member of the [office] bureau; or

(iii) an expert engaged by the [office] bureau to provide a briefing to the board.

(4) The board may request a presentation on any subject relevant to any inquiry before the board from any state agency or authority. Such request shall be reviewed by the [office] bureau and if the [director] deputy superintendent of pharmacy benefits approves the request, the [office] bureau shall arrange an expert briefing to the board.

(e) Adoption of the report of the board. A report of a board may be adopted outside of a meeting of the board provided that all non-recused members of the board are provided the report at least two business days prior to the close of voting on adoption.

(1) Not less than seven days before the board adopts a report, the [office] bureau may convey to the person that was required to submit a written statement under [subsection (a) of] Insurance Law section [111] 111(a) anticipated findings provided by the board. Such person shall keep the proposed findings confidential and, pursuant to Insurance Law sections 111 and 202, such anticipated findings shall not be subject to disclosure. Such person may convey a response to the anticipated findings, and such response must be received by the board within seven days after the proposed findings are conveyed.

(2) No report of the board shall be adopted except by a majority vote of the non-recused members of the board.

(3) Any adopted report shall be an advisory report.

1. Statutory authority: Financial Services Law Sections 102, 201, 202, 203, 205, 301, 302, 305, and 306; Insurance Law Sections 110, 111, 202, 301, 306, 308, 316, 405, 2903, and 2906; Public Health Law Section 280-a; Part XX of Chapter 56 of the Laws of 2020, and Chapter 828 of the Laws of 2021, as amended by Chapter 128 of the Laws of 2022.

Part XX of Chapter 56 of the Laws of 2020 amended the Insurance Law to authorize the Superintendent of Financial Services (“Superintendent”) to conduct investigations with respect to prescription drugs price increases and establish a nine-member Drug Accountability Board (“DAB”). Section 3 of Part XX granted the Superintendent broad independent regulatory authority over the provisions of the Part, including a specific grant of authority to regulate the operations of the DAB. Chapter 828 of the Laws of 2021, as amended by Chapter 128 of the Laws of 2022, similarly amends the Insurance Law to authorize the Superintendent to regulate pharmacy benefits managers (“PBMs”) and provide the Superintendent with broad independent regulatory authority over PBMs, including the establishment of regulations regarding the registration, annual reporting, and licensing of PBMs.

Financial Services Law Section 202 establishes the office of the Superintendent.

Financial Services Law Section 302 and Insurance Law Section 301 authorize the Superintendent to effectuate any power accorded to the Superintendent by the Financial Services Law, Insurance Law, or any other law, and to prescribe regulations interpreting the Insurance Law.

Financial Services Law Section 102 consolidates the Departments of Insurance and Banking into the Department of Financial Services (“DFS” or “Department”).

Financial Services Law Section 201 authorizes the Superintendent to take actions as necessary to eliminate financial fraud or other criminal abuse or unethical conduct in the industry.

Financial Services Law Section 203 authorizes the Superintendent to appoint any employee that the Superintendent deems necessary for the efficient administration of DFS. Any employee shall perform such duties as assigned by the Superintendent and any compensation of such employee shall be determined by the Superintendent in accordance with law.

Financial Services Law Section 205 authorizes the Superintendent to establish any bureau, division or unit within DFS that is necessary for the administration and operation of DFS and the proper exercise of its powers and performance of its duties. The Superintendent may determine the official function of such bureau, division or unit. Further, Section 205 requires that there shall be a head of each bureau, division or unit to be appointed by the Superintendent.

Financial Services Law Section 305 authorizes the Superintendent to conduct hearings on investigations pursuant to the Insurance Law. Any persons conducting the hearing shall have the power to administer oaths, examine witnesses and receive documentary evidence, which shall be used as the basis of a report to the Superintendent of any findings.

Financial Services Law Section 306 provides the authority to the Superintendent, or the person authorized by the Superintendent, to conduct a hearing to subpoena witnesses, compel the attendance of witnesses, administer oaths, examine any person under oath and to compel any person to subscribe to his or her testimony, and to require the production of any books, papers, records, correspondence, or other such documents that the Superintendent deems necessary.

Insurance Law Section 110 allows the Superintendent to cooperate with other regulatory agencies by sharing documents, materials and other information in order to assist in the performance of duties and may enter into agreements governing sharing and use of documents, materials and information.

Insurance Law Section 111 authorizes the Superintendent, when it shall appear to the Superintendent from an advertisement, purchase or sale within the State of any prescription drug, which drug is anticipated to be paid for under an insurance policy or contract approved by DFS, that the prescription drug has increased over the course of twelve months by 50% to an amount greater than five dollars, and the circumstances are such that the Superintendent believes it is in the public interest to commence an investigation, to investigate and require the entity to file with the Department a statement in writing concerning all the facts and circumstances regarding the price increase that the Superintendent deems relevant.

Insurance Law Section 301 authorizes the Superintendent to prescribe regulations governing the practices of the Department.

Insurance Law Section 306 provides immunity to the Superintendent from prosecution in accordance with NY CPL Section 50.20, which provides that any witness in a legal proceeding may refuse to give evidence on the ground that it may tend to incriminate him.

Insurance Law Section 308 authorizes the Superintendent to inquire of any health insurer or health maintenance organization, among others, about its transactions or condition or any matter connected therewith. Insurance Law Section 316 authorizes the Superintendent to promulgate regulations that require an insurer or other person making a filing with the Superintendent to do so by electronic means.

Insurance Law Section 405 requires that any person licensed under the Insurance Law or any person engaged in the business of insurance, who has reason to believe that an insurance transaction may be fraudulent or has knowledge that a fraudulent insurance action is about to take place, shall make a report to the Superintendent within 30 days.

Insurance Law Section 2903 authorizes the Superintendent to establish, by regulation, minimum registration standards required for a pharmacy benefit manager.

Insurance Law Section 2906 authorizes the Superintendent to establish, by regulation, minimum standards for the issuance of a license to a pharmacy benefit manager.

Public Health Law Section 280-a authorizes the Superintendent to make regulations defining, limiting, and relating to the duties, obligations, requirements and other provisions relating to pharmacy benefit managers.

2. Legislative objectives: In accordance with Chapter 828 of the Laws of 2021, as amended by Chapter 128 of the Laws of 2022, the legislative objectives are to empower the Superintendent to establish, by regulation, registration standards required for a PBM, including the methods and procedures for facilitating and verifying compliance with those requirements, and to establish licensing standards for PBMs, including the broad regulatory authority to implement minimum standards for the issuance of licenses to PBMs.

3. Needs and benefits: A bill was advanced and passed in the Executive Budget, taking into account that PBMs previously have been largely unregulated in this State and such regulation is a priority of the Superintendent. Chapter 828 of the Laws of 2021, as amended by Chapter 128 of the Laws of 2022, extends the regulation of PBMs beyond those activities related to insurance plans overseen by DFS, and authorizes the Superintendent to regulate conduct of PBMs outside of the health insurance market. Approximately 33% of the commercial market for health insurance is outside of DFS’s reach due to preemption by the federal Employee Retirement Income Security Act of 1974, 29 U.S.C. 18. As a result, there is a need for the regulation of PBMs. Chapter 828 of the Laws of 2021, as amended by Chapter 128 of the Laws of 2022, authorizes the Superintendent to create the Pharmacy Benefits Bureau, which will be charged with regulating the conduct of PBMs, including that additional 33%. This regulation establishes the bureau that will carry out the responsibilities and powers granted in Insurance Law Sections 111, 2903 and 2906 and Public Health Law Section 280-a. The regulation was contemplated by the legislature as indicated in Chapter 828 of the Laws of 2021, as amended by Chapter 128 of the Laws of 2022.

4. Costs: The regulation will not impose any additional costs on any person or entity outside the Department. It is anticipated that the Department will be able to absorb in its ordinary budget any costs incurred by the Department to implement this regulation, such as staff time needed to carry out the powers accorded to the Superintendent under the recent amendments to the Insurance Law.

5. Local government mandates: The regulation does not impose any program, service, duty, or responsibility upon a county, city, town, village, school district, fire district, or other special district.

6. Paperwork: The regulation does not impose any reporting, recordkeeping, or other compliance requirements on any person or entity outside the Department. To the extent that Insurance Law Sections 111, 2903 and 2906 and Public Health Law Section 280-a grants powers to the Department that require the production of books and records, it is the statutes and not the regulation that creates the obligation.

7. Duplication: The regulation does not duplicate or conflict with any existing state or federal rules or other legal requirements.

8. Alternatives: Promulgation of the regulation is required under Chapter 828 of the Laws of New York 2021, as amended by Chapter 128 of the Laws of New York 2022. Without the regulation, the Department would not be able to effectuate its new statutory powers and responsibilities; therefore, the alternative of not promulgating a regulation was rejected.

9. Federal standards: The regulation does not exceed any minimum standards of the federal government for the same or similar subject areas.

10. Compliance schedule: The regulation will take effect immediately upon publication of the Notice of Adoption in the State Register.

This rule establishes the Pharmacy Benefits Bureau (“PBB”) as a bureau within the Department of Financial Services (“Department”). The PBB will provide the Department with the staff necessary to regulate pharmacy benefits managers as set forth in Insurance Law Sections 111, 2903, and 2906 and Public Health Law Section 280-a.

This amended Part establishes rules to operate the PBB, which bureau will be situated within the Department. Therefore, the rule will not impose any reporting, recordkeeping, or other compliance requirements, or have any impact, including any adverse impact, on any small business or local government.

The Department of Financial Services (“Department”) has determined that the rule will not adversely impact any rural area in New York State. The rule establishes the Pharmacy Benefits Bureau (PBB) within the Department. The PBB will provide the Department with the staff necessary to regulate pharmacy benefits managers as set forth in Insurance Law Sections 111, 2903, and 2906 and Public Health Law Section 280-a.

This amended Part establishes rules to operate the PBB, which bureau will be situated within the Department. Therefore, the rule will not impose any compliance requirements on any persons or entities outside the Department. The Department has determined that the rule will not have any adverse impact on rural areas as defined by State Administrative Procedure Act Section 102(10).

The Department of Financial Services (“Department”) has determined that the rule will not adversely impact jobs or employment opportunities in New York State. The rule establishes the Pharmacy Benefits Bureau (PBB) as a bureau within the Department. The PBB will provide the Department with the staff necessary to regulate pharmacy benefits managers as set forth in Insurance Law Sections 111, 2903, and 2906 and Public Health Law Section 280-a.

This amended Part establishes rules to operate the PBB, which bureau will be situated within the Department. Therefore, the rule will not impose any compliance requirements on any persons or entities outside the Department. The Department has determined that the rule will not have any impact on jobs or employment opportunities.