New Yorkers know the affordability crisis all too well: Rent is among the highest in the country, taxes take a hefty bite out of paychecks, and even routine household expenses can feel like luxury purchases. For many New Yorkers, prescription drugs are another unavoidable expense, with the average person spending over $100 a month on their medications.
Yet lawmakers in Albany and beyond aren’t looking for ways to make medicine cheaper. Instead, they’re pursuing policies that could undermine patient access to local pharmacies and discourage the development of new treatments in America. Politicians want to micromanage the pharmaceutical supply chain — even if that brings about higher prices.
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The New York state legislature has sent a bill to Gov. Kathy Hochul’s (D-NY) desk that would require pharmacy benefit managers to reimburse pharmacies at a minimum rate tied to a federal benchmark, plus a $10.18 dispensing fee for each prescription. The proposal is expected to cost roughly $576 million, which lawmakers insist pharmacies and PBMs will absorb rather than pass on to consumers.
It’s another piece of legislation in a long list of state and federal proposals to scapegoat PBMs for the high cost of various prescription drugs. But PBMs aren’t the villain. They perform a function that the pharmaceutical market actually needs.
PBMs aggregate millions of prescriptions and negotiate with drugmakers and pharmacies on behalf of insurers, employers, and patients. Their purchasing power allows them to bargain over prices, build pharmacy networks, and manage prescription benefits at a scale that individual patients and small employers simply cannot match.
Rather than seeking how to leverage this business savvy for greater cost-savings, including in government services such as the Medicaid system, the New York bill would saddle these financial operators with part of the bill for all New Yorkers’ medication orders. As a result, drug prices will only inflate, and many integrated pharmacies may leave the state.
This isn’t an unfamiliar story. In Arkansas, Gov. Sarah Huckabee Sanders (R-AR) signed legislation barring companies such as CVS, Cigna, and UnitedHealth from owning both a PBM and a pharmacy — alleging that this vertical integration distorts drug prices and squeezes out smaller, independent pharmacies. While the law is in court, CVS has explicitly stated that the legislation may force them to close all 23 of their retail pharmacy locations in the state and lay off over 500 workers if implemented.
Sixteen states have already enacted similar mandates to New York, with fees up to $15 per prescription. Some politicians are even calling for more extreme proposals, such as Michigan Democratic Senate nominee Abdul el Sayed suggesting a total ban on PBMs in his crusade to socialize healthcare. But the fact that politicians across the country are reaching for the same lever doesn’t make the lever work. Before Albany joins in the chorus, lawmakers should ask the obvious question: Will patients actually get cheaper prescriptions?
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Lawmakers should turn their attention to the constraints on the new drug approval process, limited domestic pharmaceutical manufacturing, and other regulations, such as those on transportation, affecting the supply chain. If Albany wants cheaper medicine, it should focus on expanding supply and competition rather than dictating how much pharmacies and PBMs must pay each other.
Pharmacies need to stay open. Patients need affordable access to medicine. PBMs need the freedom to use their purchasing power to negotiate lower prices. Those goals are not contradictory. New Yorkers don’t need Albany to negotiate their prescriptions for them. They need Albany to let the market negotiate a better deal.
Sam Raus is the David Boaz resident writing fellow at Young Voices. Follow him on X: @SamRaus1.
