Press Release
April 30, 2019


“Gag Clauses” Preventing Pharmacists from Disclosing Drug Prices Violate State Laws

Consumers Are Within Their Rights to Obtain Price Information for Prescription Drugs to Ensure that They Are Not Paying More than Retail Price

Acting Financial Services Superintendent Linda A. Lacewell today announced that the Department of Financial Services (DFS) has instructed health insurers to make certain that the cost of a consumer’s co-payment doesn’t exceed the retail price of a prescription drug.  So-called “gag clauses”, which prevent pharmacists from providing pricing information to insured consumers violate New York Law.

“DFS expects insurers to take immediate steps to make sure that consumers are being treated fairly and that they are not being ripped off when they buy prescription medication,” Acting Superintendent Lacewell said. “Consumers should not be penalized when buying medications with a retail price that is lower than the amount of the co-pay and should only be paying the lower retail price.”

DFS acted after being contacted by pharmacists who complained that, in some cases, copayments being charged to consumers exceeded the retail prices of drugs. A copayment is the fixed out-of-pocket charge paid by a consumer for a health care service.

New York law prohibits insurers from requiring consumers to pay a copayment that exceeds the price of a drug.  New York law also requires a pharmacist to notify consumers when a copayment exceeds the price of a drug and to charge consumers the pharmacy’s retail price, when the retail price is lower than the copayment.  However, pharmacists have complained that “gag clauses” in contracts between pharmacy benefit managers and insurers prevented pharmacists from disclosing actual drug prices to consumers.  Pharmacy benefit managers are third-party administrators used by insurance plans to develop drug formularies, negotiate discounts and rebates from drug manufacturers and process and pay for drug claims.

“Insurers are responsible for complying with New York State laws regardless of whether they contract with third-parties, such as pharmacy benefit managers, to administer policy benefits,” Acting Superintendent Lacewell said. “Consumers have every right to ask about and receive information about prescription drug pricing and to be charged fairly.”

DFS is also concerned by reports that pharmacy benefit managers are threatening or taking retaliatory action against pharmacists who are fulfilling their obligations under New York law.  In the circular letter issued today, the Department reminds insurers that it will take all appropriate action in response to retaliatory actions by any insurer, its contracted pharmacy benefit manager or any other agents against pharmacists for complying with the law. 

A copy of the circular letter can be found here.

Consumers who believe that they have been overcharged are encouraged to file a complaint with DFS by logging onto  or calling the DFS Hotline at (800) 342-3736 (Monday through Friday, 8:30 AM to 4:30 PM).