Patient Access to Pharmacy Act (PAPA) Would Establish Minimum Pharmacy Reimbursement and Dispensing Fee Requirements

On June 5, the New York State Assembly passed S.5939C/A.5882C, commonly referred to as the Patient Access to Pharmacy Act (PAPA), sending the pharmacy benefit manager (PBM) reimbursement legislation to Governor Kathy Hochul for consideration. The Senate previously passed the measure on May 28.

The bill would establish minimum reimbursement requirements for PBMs paying participating pharmacies in New York, including reimbursement based on the National Average Drug Acquisition Cost (NADAC) and a professional dispensing fee at least equal to the fee paid by the New York State Medicaid program. The requirements would apply broadly to PBM-pharmacy reimbursement arrangements, subject to federal law. However, the bill expressly exempts prescriptions and payments made through certain collectively bargained health plans, union trust funds, welfare and pharmaceutical plans, and collectively bargained multiemployer plans, including plans governed by ERISA or other federal statutes. The bill does not contain a blanket exemption for all ERISA-governed employer plans; rather, its express ERISA-related exemption is tied to collectively bargained and multiemployer arrangements.

If enacted, the legislation would take effect January 1, 2026, and apply to policies and contracts issued, renewed, modified, altered, or amended on or after that date.

Pharmacy Reimbursement

Under the legislation, PBMs would be required, to the extent permitted under federal law, to reimburse participating pharmacies at no less than NADAC. If no NADAC rate is available, reimbursement would be based on the pharmacy's acquisition cost.

The legislation would also prohibit PBMs from reimbursing participating pharmacies below their acquisition cost; PBMs could require pharmacies to substantiate acquisition costs through invoices.

This legislation includes exemptions for certain prescriptions and payments associated with collectively bargained health plans, welfare funds, and certain multi-employer plans.

Professional Dispensing Fee

In addition to the drug acquisition cost, PBMs would be required to pay participating pharmacies a professional dispensing fee of at least the amount paid under the New York State Medicaid program.

New York Medicaid currently pays a professional dispensing fee of $10.18 per covered outpatient prescription, when applicable. By comparison, commercial dispensing fees in New York average approximately $2 per prescription, according to an analysis by the Empire Center for Public Policy. The proposed minimum would therefore represent roughly a fivefold difference from the current average commercial dispensing fee.

The Pharmaceutical Care Management Association (PCMA) has estimated that increasing the commercial dispensing fee to the Medicaid level would add approximately $570 million annually to prescription drug costs for health plans, employers, and consumers. The Empire Center characterized the change as approximately a 400% increase over current average commercial dispensing fees.

The dispensing fee requirement could therefore have significant implications for health plans and plan sponsors. Unlike current commercial arrangements, where dispensing fees are established through contracts between PBMs and pharmacies, the legislation would establish a statutory floor tied to the Medicaid reimbursement methodology.

Additional Dispensing Costs

The bill provides for additional reimbursement when certain medications require pharmacy services that cost more than the standard Medicaid dispensing fee. These may include generic or brand-name medications, biologic products, and other drugs that require specialized handling, distribution or administration, patient education, care coordination, monitoring, packaging, or shipping.

In those circumstances, participating pharmacies would be entitled to a professional dispensing fee sufficient to ensure that they are not reimbursed below their cost to acquire and dispense the medication.

Pharmacy Appeals

The legislation would also require PBMs to maintain a reasonable process for pharmacies to appeal, investigate, and resolve drug-pricing disputes. The requirement would apply to disputes involving multi-source generic drugs, brand-name drugs, biologic products, and drugs produced through genetic technology or biopharmaceutical processes.

What Comes Next

PAPA has passed both chambers of the New York Legislature and awaits action by Governor Hochul. If signed into law, its reimbursement and dispensing fee requirements would apply beginning January 1, 2026, to applicable policies and contracts issued, renewed, modified, altered, or amended on or after that date.