The Office of General Counsel issued the following opinion on August 30, 2004, representing the position of the New York State Insurance Department.

Re: Usual Customary & Reasonable (UCR), Prescription Drugs


If a pharmacist has contracted with an insurer to provide prescription drugs to the insurer's insureds or subscribers and the contract provides that the pharmacist will grant volume or prompt pay discounts, does such action affect the pharmacist's UCR charges with respect to other insurers, where the pharmacist is not a participating provider?


Such contractual discounts would not necessarily affect the pharmacist’s UCR, provided the pharmacist does not conceal such discounts.


This is a general inquiry, no facts were furnished.


The compensation of participating health care providers, including pharmacists, by health insurance companies, including Health Maintenance Organizations, is governed by a contract between the health care provider and the insurer. It has been represented that it is usual for the insurer to request a discount from the pharmacist because the insurer is purchasing in bulk. In addition, insurers may request a discount if they make payment to the pharmacy before the statutorily or contractually mandated payment date.

The Insurance Law does not mandate how UCR should be defined. In addition, unlike Medicare under the Medicare Prescription Drug, Improvement and Modernization Act, Public Law No. 108-173 (2003), where bulk discounts, 42 C.F.R. § 414.804(a)(2)(i) (2004), and prompt pay discounts, 42 C.F.R. § 414.804(a)(2)(ii), are regulated, the Insurance Law does not regulate such discounts.

In accordance with New York Insurance Law § 3224-a(a) (McKinney 2000), insurers are required to make payments on "clean claims" to health care providers within 45 days. By contract, a health care provider and insurer might agree that prompt payment of a claim requires payment sooner than 45 days. An insurer might further request that, where it makes payment well in advance of the statutorily or contractually required date, it receive a discount.

Provided that the discounts are transparent, i.e. another insurer is or can become aware of the existence of and conditions of the discount to the first insurer, so that the second insurer may reflect any discount in its calculation of UCR; the Department would not regard such discounts as inappropriate.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.