Guidance on Rx Drug Copayments that Exceed the Drug’s Cost and PBM Gag Clauses

On April 30, 2019, the New York Department of Financial Services (DFS) published Circular Letter No. 7 (2019). The letter provides guidance on prescription drug copayments that exceed the cost of the drug and on pharmacy benefit manager (PBM) so-called “gag clauses.” According to the letter, DFS has become aware that some individuals may be paying a copayment for a prescribed drug that is more than the price of the drug, and that the problem is compounded due to gag clauses that some carriers and/or PBMs may be attempting to impose on their health care provider contracts that seek to prohibit participating pharmacies from discussing drug prices with individuals.

The letter reminds carriers that under NY law, where an individual’s copayment for a medication exceeds the corresponding retail price for the same medication on the pharmacy’s drug retail price list, the individual shall only be responsible to pay the retail price for the drug. If the medication that the individual is purchasing is not on the drug retail price list, then the individual may only be charged the lesser of the individual’s copayment or the pharmacy’s usual and customary price for that drug (the price the pharmacy charges an individual who purchases the drug without insurance).

The letter also reminds carriers and PBMs that NY law (insurance and public health law) prohibits clauses in health care provider contracts with pharmacies that prohibit a pharmacist from disclosing to the individual that the price of the drug is less than the required copayment. According to the letter, carriers are required to take immediate steps to ensure their health care provider contracts with pharmacists (either directly or through a PBM) contain no gag clauses, and to ensure they are otherwise complying with NY law in regards to prescription drug cost-sharing.

The letter imposes no new requirements or action items for employers, but employers should be aware of the letter as it relates to the prescription drug cost sharing under fully insured plans for employees and their dependents.

Circular Letter No. 7 (2019) »