New York Withdraws Proposed Market Conduct Regulations for PBMs, Adopts Licensure Rules - McDermott Will & Emery

New York Withdraws Proposed Market Conduct Regulations for PBMs, Adopts Licensure Rules


On October 31, 2023, the New York State Department of Financial Services (DFS) released a notice withdrawing its proposed market conduct rules for pharmacy benefit managers (PBMs). The proposed rules, announced August 16, 2023, would have significantly increased the state’s oversight of PBMs. At the same time, DFS finalized licensure rules for PBMs, to be effective November 15, 2023.

In Depth


Before withdrawing them, DFS described the proposed market conduct rules as “the most comprehensive set of market conduct rules for pharmacy benefit managers in the country.” Proposed areas of regulation included:

  • Contracting with network pharmacies
  • Prohibiting preferential treatment of pharmacies owned or affiliated with PBMs
  • Requiring prior approval for acquisitions of PBMs
  • Imposing consumer protection requirements such as prohibiting market conduct practices deemed unfair, deceptive or abusive
  • Requiring network adequacy standards

A full summary of the proposed market conduct rules is available in our previous article here.

The notice of withdrawal states DFS is “reconsidering” the proposed rules. Although the withdrawal and reconsideration does not eliminate the possibility of re-proposal, it does mean that the proposed January 2024 effective date will no longer apply. DFS did not provide any additional information regarding the withdrawal.


DFS finalized a different proposed rule regulating PBM licensure, effective November 15, 2023. The Licensing of Pharmacy Benefit Managers Rule does not overlap substantively with the proposed market conduct rules, except that it adopts several definitions that were also proposed in the proposed market conduct rules.

The Licensing of PBMs Rule also addresses:

  • Assessments for DFS operating expenses. The rule sets forth how PBMs licensed or registered pursuant to New York Insurance Law Article 29 will be assessed by the DFS superintendent for the operating expenses of DFS that are attributable to regulating PBMs. Licensed and registered PBMs will be billed five times per year, consisting of four quarterly assessments (each approximately 25% of the anticipated annual amount of operating expenses), with a final true-up assessment based on the actual total operating cost for the fiscal year. The rule details how assessments will be computed and provides penalties for non-compliance. The rule also sets forth a process for special assessments to an individual licensee or registrant when the DFS superintendent determines that the expenses associated with a specific examination, investigation or review are best allocated solely to an individual licensee or registrant subject to such examination or investigation.
  • Filings and requirements for issuing and maintaining a PBM license. The rule sets forth the information and documentation required to be provided with the initial license application. The rule also requires that changes to information and documentation contained in the initial license application be reported to DFS within 30 days of the change. Required documentation includes company organizational documents, bylaws or other documents governing the internal affairs of the PBM, as well as lists of pharmacists, pharmacies, pharmacy administrative services organizations, rebate aggregators, switch companies, wholesalers and health plans with which the PBM contracts, including identifying whether the PBM has ownership interests in, or affiliations with, such entities. The rule also requires PBMs to comply with certain cybersecurity requirements and file for a certification of compliance with these requirements prior to applying for a license.
  • Reporting and recordkeeping requirements. The rule also sets forth reporting and recordkeeping requirements for PBMs. Records that must be maintained include copies of any document necessary to respond to a health plan’s request for an accounting pursuant to 11 NYCRR Part 452; records of health plan requests for an accounting pursuant to 11 NYCRR Part 452; copies of audited financial statements; and all documents and information related to or used in denying a maximum allowable cost appeal under New York Public Health Law 280-a(4)(E). The rule sets forth timeframes for document retention of these records and requires PBMs to provide copies of such records to DFS within 15 business days of a request from DFS. Finally, the rule sets forth standards for the maintenance and reproduction of records, including requiring PBMs to maintain and establish a records-retention plan to safeguard against the alteration of records.


Stakeholders should continue to monitor regulatory activity in New York related to PBMs, particularly as the new legislative session begins in January 2024.

Please contact the authors or your regular McDermott lawyer with any questions related to New York’s PBM regulations.