May 5, 2022
RE: Notice to Pharmacy Benefit Managers Regarding Mandatory Registration and First Annual Report With NYS Department of Financial Services Pursuant to Insurance Law §§ 2902-2904
The purpose of this Industry Letter is to provide guidance on the applicability of the recently enacted Pharmacy Benefit Managers (“PBM”) laws found in Article 29 of the Insurance Law and section 280-a of the Public Health Law. Specifically, this Industry Letter addresses some of the most frequently asked questions related to the filing of the mandatory registration and first annual report for PBMs.
MANDATORY REGISTRATION FAQ’s:
What is the deadline for obtaining a PBM registration?
June 1, 2022.
If I submit my application on June 1, 2022, will I have a valid registration for purposes of Insurance Law § 2902(a)?
So long as the PBM submits an application on or before June 1, 2022, including payment of the non-refundable registration application fee, the PBM shall be deemed to hold a temporary registration valid from June 1, 2022, and expiring seven days after the New York State Department of Financial Services’ (DFS) Pharmacy Benefits Bureau makes a determination on the registration application.
Who is required to file?
Every PBM operating in New York is required to file an application for registration with the Department.
Under the statute a “pharmacy benefit manager” is any entity that performs pharmacy benefit management services (“PBM services”) for a health plan. Critically, the definition applies to entities acting “for a health plan.” The requirement, therefore, does not include individual employees of a PBM nor does it include units/groups/divisions or other groups of employees of a health plan which perform PBM services for that health plan. A health plan that performs PBM services for another health plan, however, would meet the definition of pharmacy benefit manager and would be required to register.
What are pharmacy benefit management services?
Under the statute PBM services means the management or administration of prescription drug benefits for a health plan, directly or through another entity.
Any of the following services, individually or in combination constitute PBM services:
- claims processing, retail network management, or payment of claims to pharmacies for dispensing prescription drugs;
- clinical or other formulary or preferred drug list development or management;
- negotiation or administration of rebates, discounts, payment differentials, or other incentives, for the inclusion of particular prescription drugs in a particular category or to promote the purchase of particular prescription drugs;
- patient compliance, therapeutic intervention, or generic substitution programs;
- disease management for prescription drug benefits;
- drug utilization review or prior authorization for drug benefits;
- adjudication of appeals or grievances related to prescription drug coverage;
- contracting with and or managing the relationship with network pharmacies including mail service pharmacy agreements; and
- drug benefit design including methods for the controlling of cost of covered prescription drugs.
Therefore, if you have agreed to perform at least one of those functions for a health plan you are performing PBM services.
What is a health plan for these purposes?
“Health plan” is defined broadly under the statute. It includes any entity that approves, provides, arranges for, or pays or reimburses for prescription drugs. To be covered under the statute a health plan must cover a “substantial number of beneficiaries who work or reside in this state.”
The Department has clarified that “a substantial number of beneficiaries who work or reside in this state” means “50 percent or more of the beneficiaries of the plan work or reside in New York”.
Is an entity that provides pharmacy benefit management services exclusively in the workers’ compensation industry required to file with the Department as a PBM?
Yes. Workers’ Compensation plans provide benefits which include payment for prescription drugs. Therefore, the broad definition of health insurance policy in the law which includes any policy or plan that provides prescription drug coverage, includes workers’ compensation plans. PBMs that provide services only for workers’ compensation plans in New York are required to file a registration.
Is a PBM that provides services exclusively for self-insured plans required to file with the Department as a PBM?
Yes, self-insured plans are health plans under the statute, therefore an entity that provides PBM services to a self-insured health plan must register.
Is a PBM that provides services exclusively for Medicare Part D required to file with the Department as a PBM?
Yes, the term health plan covers Medicare Part D plans. The Department will provide additional direction on the application of other portions of the law on PBMs acting for Medicare Part D plans in future guidance, but for purposes of registration providing PBM services to Medicare Part D plans which are health plans will require registration.
Where can I find the PBM registration application?
Each entity seeking to register as a PBM must electronically file with the Department an application on the Department’s website. Access to the electronic filing system will be available before June 1. If you would like an email notification when the system becomes live, please email [email protected] and request a notification.
What information am I required to file?
The application form for a PBM registration will require the PBM to submit the following information:
- The contact information for: the PBM, the PBM’s primary contact responsible for regulatory compliance for the PBM, and the PBM’s agent for service of process.
- The PBM’s federal employer identification number.
- The name, position and contact information of each individual who is a “controlling person” of the PBM, as that term is defined in the statute.
- A summary of the PBM’s business plan including information on staffing levels and activities proposed in NY and nationwide proving a sufficient number of experienced and qualified personnel, not to exceed 4,000 characters.
- The number or total enrollees/beneficiaries that are served by the PBM nationwide and in New York.
- A list of all health plans on whose behalf the PBM has contracts or agreements to provide PBM services to NY enrollees/beneficiaries.
- A list all jurisdictions in which the PBM is or has been registered, licensed or certified to transact business as a PBM within the past ten (10) years.
- Whether any administrative action has been taken against the PBM in any other jurisdiction.
- Whether the PBM has been refused a registration, license, or certification to act as a PBM, or has had any registration, license or certification to act as such been denied, suspended, revoked or non-renewed in any state.
- Whether the PBM or any owner, partner, officer or director of the PBM, or member or manager of a limited liability company, a party to, or ever been found liable in, any lawsuit or arbitration proceeding involving allegations of fraud, misappropriation or conversion of funds, misrepresentation or breach of fiduciary duty.
- Whether the PBM had a business relationship with an insurance company terminated for any alleged fraudulent, illegal or dishonest activities in connection with the administration of pharmacy benefits management services.
- Whether any demand has been made, or judgment rendered against the PBM or any owner, partner, officer, or director for overdue monies by an insurer, insured or producer, or whether the PBM has ever been subject to a bankruptcy proceeding.
What document am I required to file?
Each PBM seeking to register with the Department must also file the following documents with their application for a registration:
- The PBM’s primary organizational document adopted or filed in connection with the creation, formation, or organization of the PBM entity. For example, the PBM’s operating agreement, articles of incorporation, articles of association, partnership agreement, trade name certificate, trust agreement, shareholder agreement, or certificate of existence from the New York secretary of state and all amendments to such document.
- The bylaws or other primary document regulating the internal affairs and operations of the PBM.
- A copy of the PBM’s primary template document that the PBM uses for contracts entered into by the PBM with pharmacists, pharmacies or pharmacy service administration organizations in New York in administration of pharmacy benefits for insurers.
Is there a fee for filing an application?
Yes, a PBM applying for a registration prior to January 1, 2023 shall pay to the superintendent a non-refundable registration application fee of $8,000. A PBM that begins operating in New York on or after January 1, 2023 shall pay to the superintendent a non-refundable registration application fee of $4,000 with its registration application.
Who can enforce the violation, penalty and damages provision of Insurance Law § 2902(b)?
After notice and a hearing, the superintendent is authorized to enforce the violations, penalty and damages provision located in § 2902(b) of the Insurance Law. This provision does not create a private cause of action.
If any health plan, pharmacy or covered individual, or other person believes they have been harmed by a PBM as a result of that PBM acting without a registration under this section, they should notify the Department by email at [email protected] and the Department will review and take any appropriate enforcement action.
FIRST ANNUAL REPORT FAQ’s:
What is the deadline for filing a first annual report?
July 1, 2022.
Who is required to file a first annual report?
Every PBM operating in New York.
Where can I find the PBM annual report?
The first annual report documents are on the Department’s website.
How do I file a first annual report?
The primary contact person listed in the PBM registration application will receive a link shortly after the application is submitted to file the Annual Report. If a link is not received within one week of submission, contact the Department.
What form am I required to file?
Each PBM is required to submit both the Annual Report Form and the Annual Report Spreadsheet.
Which health plans am I required to report information about when I file?
The first annual report for a PBM will require the PBM to submit information regarding State-regulated health plans. A State-regulated health plan is defined as an insurance company that is an authorized insurer under the insurance law, a company organized pursuant to article forty-three of the insurance law, a municipal cooperative health benefit plan established pursuant to article forty-seven of this the insurance law, an entity certified pursuant to article forty-four of the public health law, an institution of higher education certified pursuant to section one thousand one hundred twenty-four of the insurance law, the state insurance fund, or the New York state health insurance plan established under article eleven of the civil service law.
What information am I required to file?
The first annual report for a PBM will require the PBM to submit the following information on the Annual Report Form and by completing each tab on the Annual Report Spreadsheet:
- The PBM’s full legal name.
- The New York State PBM registration number.
- A list of the companies and percentage of ownership for each company in which the PBM has a 10% or greater direct ownership interest.
- A list of all individuals and entities that have 10% or greater direct ownership of the PBM and percentage of ownership for each.
- A list of all pharmacies located in New York State with which the PBM has (a) contract(s) or arrangement(s), whether directly or through a pharmacy services administrative organization (PSAO).
- A list of the person(s) currently responsible for and authorized to approve contracts or arrangements entered into or agreed upon between the PBM and pharmacies, pharmacy services administrative organizations (PSAO), or other providers.
- For each State-regulated health plan, a list of the ten (10) drugs with the highest total claims cost from the prior calendar year. For each of these drugs, the manufacturer name, all NDCs, and the total dollar amount of all rebates received by the PBM for the drug.
- For each State-regulated health plan and each of the ten (10) drugs that generated the most rebate amounts from the prior calendar year. For each of these drugs, the manufacturer name, all NDCs, the total dollar amount of all rebates received, the total dollar amount of all rebates passed on to the health plan, the total dollar amount of any administrative fees kept by the PBM, the source of the rebates, the total dollar amount received by the PBM for the drug from the health plan, the total dollar amount of claim reimbursement paid by the PBM to pharmacists/pharmacies, and the total dollar amount of dispensing fees paid by the PBM to pharmacists/pharmacies.
- A list of any current civil litigation or alternative dispute resolution processes, including but not limited to arbitration, that the PBM or any controlling person is currently the subject of. The list must include location(s)/jurisdiction(s), court(s), index or other identifying filing number(s), and a short description of the matter(s).
- A list of any individual who is an officer/director, or similar executive level member, partner, or manager who has had any criminal convictions in the 12 months preceding the report. The list must include location(s)/jurisdiction(s), court(s), index or other identifying filing number(s), and a short description of the matter(s).
- A list of any current challenges, appeals, or complaints against the PBM before a New York State government agency or body, specifically the New York State Office of the Attorney General, the New York Department of State's Division of Consumer Protection, or another agency/body. The list must include the name of complainant, which agency the complaint was submitted to, and a short description of the matter(s).
What document am I required to file?
Each PBM must file the following documents with their first annual report (in addition to the Annual Report Form and Annual Report Spreadsheet):
- A detailed corporate/ownership organizational chart (schematic or table format) displaying a reporting and relationship hierarchy and structure beginning at the PBM and continuing until no party owns 10% or greater of the previous company.
- A copy of each contract or arrangement entered into or agreed upon between the PBM and a State-regulated health plan that was in effect during the prior calendar year.
- The most recently concluded fiscal year-end financial statement for the PBM prepared on a generally accepted accounting basis including assets, liabilities, and net worth (balance sheet); and the results of operations (income statement).
Who can sign the annual report?
The first annual report must be signed and sworn to by the Chief Executive of the PBM or an officer, director, member, partner, or manager that holds the highest-ranking executive role of the PBM.
Has the Department issued guidance on PBM disclosures to health plans in the Public Health Law?
Yes, the Department exercised its statutory authority in section 280-a(2) of the Public Health Law to limit the duties, obligations, and requirements relating to PBMs. With the need for detailed guidance on compliance with the requirements set forth in the Public Health Law, the Department has determined that a PBM will not be required to make these statutory disclosures to health plans until January 1, 2023. The Department will provide additional direction, including when and how these disclosures must be made by a PBM to health plans, in future guidance.
For any further questions regarding the PBM Registration Application or First Annual Report, email [email protected].