The NYC Health Department, where I previously served as commissioner, has an annual budget of about $2 billion. The city’s annual contribution to NYC Health + Hospitals, the public healthcare system that serves more than 1 million New Yorkers a year, is also about $2 billion. Yet the city’s single biggest health line item dwarfs both of those budgets combined: NYC spends more than $8 billion a year on employee and retiree health benefits.
Are our teachers, nurses, firefighters, and sanitation workers getting the care they need and deserve? Are we as a city getting our money’s worth?
The city took an important step in addressing costs in January, transitioning to a self-insured structure for health benefits, eliminating the role of a large corporation previously serving as middleman. But the city can do more to improve healthcare access and squeeze out waste, particularly when it comes to prescription medicines.
The NYC Employees PPO plan covers more than 1.2 million employees, retirees, and dependents. If the city joined forces with New York State, that would increase to about 2.5 million people — larger than almost all private employer groups nationally. This collective purchasing power positions us to demand “best-in-market” terms and pricing for drugs.
Ideally with New York State — but even on its own — the city could take three actions to capitalize on this leverage.
First, the city should thoroughly review its existing contract with Prime Therapeutics, the private pharmacy benefit manager (PBM) for enrollees, to ensure it’s getting a fair deal. For instance, the contract should prohibit the use of “spread pricing,” where the PBM pockets the difference between the price paid to a pharmacy and the price charged to the city.
Second, Mayor Mamdani should charge the Office of Healthcare Accountability within the Health Department to propose new payment models for high-priority medicines. Antivirals that cure hepatitis C, HIV prevention medicines, and GLP-1 medications like semaglutide (Ozempic) would yield dramatic health improvements if they reached more New Yorkers.
By pursuing creative arrangements such as a so-called “Netflix model” piloted in Louisiana and Washington, the city could leverage direct negotiations with drug makers to achieve lower costs through a fixed subscription fee. Importantly, the city could structure these arrangements to open access to all residents, not just those in the city health plan.
Third, the city should begin exploring a true public PBM model. Just as it eliminated a corporate middleman for overall health benefits administration, it should examine doing so for drugs. A public PBM would pass drug rebates and negotiated savings directly back to the city and its beneficiaries, rather than giving a cut to a private intermediary.
Several states have already banded together to run PBM services through a coalition called ArrayRx (though it still subcontracts a number of functions to a private PBM). The NYC Commission on Government Efficiency reviewing the City Charter should focus on a rigorous estimate of net savings and potential legal hurdles.
In my own clinical practice, I’ve cared for patients who left diabetes medications at the pharmacy counter because they couldn’t cover the cost that month — and who returned with complications that were far more expensive than the prescription would ever have been.
We can deploy contracting discipline, purchasing scale, and institutional creativity to lower drug prices, putting New York at the vanguard of approaches that deliver both affordability and access.
Chokshi, a former NYC health commissioner, is a physician at Bellevue Hospital, Sternberg Family professor at the City College of New York, and co-chairs the Health & Political Economy Project.