The Office of General Counsel issued the following opinion on August 3, 2005 representing the position of the New York State Insurance Department.

Re: One-time copay waiver/refund incentive

Question Presented:

May an insurer or pharmacy benefit manager offer and/or provide an insured an incentive to purchase prescriptions through the pharmacy benefit manager's mail order pharmacy in the form of a one-time waiver or reimbursement of the co-payment for the insured's first order?


Such an incentive may be offered or provided only if it is specified in the policy as a policy benefit.


The inquirer represents a pharmacy benefit manager (hereinafter "the PBM"). During a telephone conversation on April 26, 2005, the inquirer stated that the PBM pays pharmacy benefits as directed by the insurer pursuant to contract without any discretion or decision making authority and thus does not act as an independent adjuster. The inquirer also stated that the PBM operates a mail order pharmacy that sells prescription medications to insureds of client insurers.

The PBM would like to create an incentive program for insureds to utilize the PBMs mail order pharmacy service to purchase prescription maintenance medications used to treat chronic conditions. The incentive program would be offered to each insured who fills a prescription for a certain maintenance medication at a pharmacy. The incentive would provide a one-time co-payment waiver or reimbursement of the co-payment for the insured's first order from the mail order pharmacy. The incentive program is not currently provided for within the insurance policies.

The inquirer has raised two options for the offering of the incentive program. One option involves the insurers informing the insureds of the incentive program by letter; and the other involves the PBM doing so.


N.Y. Ins. Law § 4224(c) (McKinney Supp. 2005) provides, in relevant part, as follows:

(c) . . . no such insurer doing in this state the business of accident and health insurance and no officer, agent, solicitor or representative thereof, and no licensed insurance broker and no employee or other representative of any such insurer, agent or broker, shall pay, allow or give, or offer to pay, allow or give, directly or indirectly, as an inducement to any person to insure, or shall give, sell or purchase, or offer to give, sell or purchase, as such inducement, or interdependent with any policy of life insurance or annuity contract or policy of accident and health insurance, any stocks, bonds, or other securities, or any dividends or profits accruing or to accrue thereon, or any valuable consideration or inducement whatever not specified in such policy or contract; nor shall any person in this state knowingly receive as such inducement, any rebate of premium or policy fee or any special favor or advantage in the dividends or other benefits to accrue on any such policy or contract, or knowingly receive any paid employment or contract for services of any kind, or any valuable consideration or inducement whatever which is not specified in such policy or contract. (emphasis added)

Therefore, pursuant to N.Y. Ins. Law § 4224(c), if the incentive the inquirer has proposed is not provided for within the policy, neither the insurer nor its pharmacy benefits manager, as a representative of the insurer, may offer the incentive by sending a letter to insureds; and neither may provide such an incentive. To offer or provide such an incentive, the insurer would have to include the incentive as a benefit in its policies after receiving the appropriate approvals from the Department to do so. For instance, the policy could specifically provide that no co-payment will be required the first time the insured fills a prescription by mail order.

For further information one may contact Assistant Counsel Brenda M. Gibbs at the Albany Office.