Insurance Circular Letter No. 12 (2018)

September 19, 2018


All Insurers Authorized to Write Accident and Health Insurance in New York State, Article 43 Corporations, Health Maintenance Organizations (“HMOs”), Student Health Plans Certified Pursuant to Insurance Law § 1124, and Municipal Cooperative Health Benefit Plans


Formulary Tier Placement of Opioid and Non-Opioid Drugs Prescribed for Pain Management

STATUTORY REFERENCES: 11 NYCRR § 52.16(c); 42 U.S.C. § 18116; 45 C.F.R. Part 92; 45 CFR § 156.122; 45 C.F.R. § 156.125

I. Purpose

The opioid epidemic continues to have a devastating impact in New York State. As part of the continuing effort to address the epidemic, the Department of Financial Services (“Department”) seeks to ensure that consumers have affordable access, when medically appropriate, to less addictive types of opioids, such as buprenorphine, as well as affordable access to medically appropriate non-opioid pain medications. This circular letter reminds insurers authorized to write accident and health insurance in New York State, article 43 corporations, health maintenance organizations, student health plans certified pursuant to Insurance Law § 1124, and municipal cooperative health benefit plans (collectively, “issuers”) of their responsibilities when utilizing multi-tier prescription drug formularies in their prescription drug coverage under insurance policies or contracts delivered or issued for delivery in New York State.

II. Discussion

Often issuers utilize a multi-tier prescription drug formulary when providing prescription drug coverage in their insurance policies or contracts that are delivered or issued for delivery in New York State. Commonly, this may involve the use of three tiers of prescription drugs, with the first tier having the lowest level of copayment or coinsurance and the third tier having the highest level. The Department has received information that some issuers may be placing less addictive types of opioids and non-opioid pain medications on the higher tiers of their prescription drug formularies, based on the cost of the drug.

Consistent with Section 52.16(c) of 11 NYCRR 52 (Insurance Regulation 62), the anti-discrimination provisions of 42 U.S.C § 18116, 45 C.F.R. Part 92, and 45 C.F.R. § 156.125, and the prescription drug provisions in 45 C.F.R. § 156.122, the Department reminds issuers that tier placement of prescription drugs on a prescription drug formulary that includes varying levels of copayments or coinsurance for which a consumer is responsible may not be based on cost alone. Section 52.16(c) prohibits a policy or contract from limiting or excluding coverage by type of illness, accident, treatment or medical condition, except as described therein. Placing particular prescription drugs in tiers that expose the insured to the highest cost sharing based solely on the cost of the drug is a type of limitation prohibited by § 52.16(c). Tier placement should be determined using an evidence-based process that analyzes the safety and effectiveness of a drug or device in addition to its economic value relative to alternative therapies. Additionally, as described in 45 C.F.R. § 156.122, the issuer’s evidence-based process should assess peer-reviewed medical literature, pharmacoeconomic studies, and outcomes research data to determine formulary placement of a drug. For example, if an issuer is reviewing prescription drugs used in pain management, whether those drugs are opioids or non-opioids, for inclusion on its formulary and determining in which tier they should be placed, the issuer should not look only at the relative costs of each drug under consideration. The issuer should not place one drug in Tier 1 and another drug in Tier 3, for example, simply because the Tier 1 drug is less expensive than the Tier 3 drug. The issuer should also take into consideration the safety and effectiveness of each drug when determining tier placement. Further, when reviewing the safety of either an opioid or non-opioid prescription drug used for pain management, the issuer should consider the addictive or non-addictive qualities of the prescription drug under review.

Please direct any questions regarding this circular letter to Thomas Fusco, Supervising Insurance Attorney, Health Bureau, New York State Department of Financial Services, Walter J. Mahoney Office Building, 65 Court Street, Room 7, Buffalo, New York 14202 or by e-mail at [email protected].

Very truly yours,


Lisette Johnson
Bureau Chief, Health Bureau