Optimizely CMS unfortunately used TinyMCE v4 which does not have this function.  The v4 docs are here: https://www.tiny.cloud/docs-4x/plugins/paste/#options

You may be able to get some of the desired effects with the paste_as_text and paste_data_images but you will need to experiment with these and see if this causes more issues for the CMS editors.

Thanks for that Mark, I completely missed I was looking at the wrong version. I have tried instead to use paste_as_text and paste_data_images but it seems to have no effect and does not disable the drag and drop of media items

                .AddPlugin("paste", (settings, content, propertyName) =>
                {
                    settings["paste_data_images"] = false;
                    settings["paste_as_text"] = true;
                })

Does anyone have any further ideas as to how I can go about disabling drag and drop in the tinyMCE editor??

You can use an editor descriptor to set the allowed types (AllowedTypes attribute does not work for XhtmlString). The example below makes so that only pages can be dragged and dropped into the text.

[EditorDescriptorRegistration(TargetType = typeof(XhtmlString), EditorDescriptorBehavior = EditorDescriptorBehavior.Default)]
public class XhtmlStringsEditorDescriptor : EditorDescriptor
{
    public XhtmlStringsEditorDescriptor()
    {
        AllowedTypes = new[] { typeof(PageData) };
    }
}