New York is stepping up its oversight of pharmacy benefit managers with a new bureau in the state's main insurance regulator as part of an effort to lower the cost of prescription drugs. 

The new Pharmacy Benefit Bureau at the state Department of Financial Services was announced Wednesday by Gov. Kathy Hochul as part of an effort to license and supervise an industry that is little seen by consumers, but can play a major role in the cost of prescription drugs. 

"As we continue our comeback from the COVID-19 pandemic, it's crucial that we take every opportunity to improve the health care system and reduce costs for New Yorkers," Hochul said. "This landmark regulatory body will provide careful oversight to protect consumers from predatory practices in the largely unregulated Pharmacy Benefits Managers industry. My administration remains committed to doing everything in its power to reduce the burden of health insurance and prescription drug costs on New Yorkers."   

Pharmacy benefit managers are key middlemen in the supply chain for prescription drugs and manage benefits on behalf of insurers. They have long been blamed for the high cost of some prescription drugs, especially in the Medicaid program, by small and independent pharmacists. 

The state budget approved last month included $5 billion in spending to staff and fund the new bureau with the oversight power. The bureau will eventually be funded through the application of fees, assessments and penalties directed at the industry. 

The bureau will work alongside the existing authority by insurance regulators to investigate when drug prices show large increases. 

"The health and wellness of New Yorkers depends on having access to fairly priced prescription drugs," said Financial Services Superintendent Adrienne Harris. "With regulatory oversight of the Pharmacy Benefits Industry, DFS will increase transparency and accountability across the industry, ultimately putting more money in New Yorkers' pockets."