Press Release

Assembly Passes Senator Wiener’s Bill Holding Prescription Drug Middlemen Accountable For Rising Prices

SACRAMENTO –  In a bipartisan vote, the Assembly passed Senator Scott Wiener’s (D-San Francisco) Senate Bill 966, legislation to rein in anticompetitive practices by pharmacy benefit managers (PBMs). PBMs are middlemen in the pharmaceutical industry that contribute significantly to rising drug costs, according to recent New York Times and Wall Street Journal exposes. SB 966 would enact the nation’s strongest regulations to rein in exploitative behavior. The bill passed 67-0 and heads next to the Senate for a final confirmation vote before heading to the Governor.

“This is a major step to rein in middlemen abuses driving up drug prices, not only for California, but for the entire country,” said Senator Wiener. “PBMs’ behavior has drawn scrutiny from both sides of the aisle, FTC regulators, and most recently major New York Times and Wall Street Journal exposes. It’s time we rein in these abusive companies and enact strong protections for patient safety-and given the size of our market, that has implications for all Americans.”

Virtually unregulated in California, PBMs have grown to provide drugs to nearly all insured Americans. As the middlemen of the pharmaceutical industry, they buy and negotiate prescription drugs from manufacturers and wholesalers on behalf of pharmacies and health plans. In recent years, PBMs have increasingly taken advantage of their position as essential negotiators to steer patients to higher-cost drugs and pharmacies, charge high administrative fees, and charge pharmacies more – sometimes double – for drugs than they paid for them. The result is that PBMs – which play no role in producing prescription drugs – are capturing a larger and larger share of total prescription drug spending at a time when prices are rising precipitously.

Families in California are struggling to afford the swiftly rising cost of medications. In 2022, drug spending in California grew by 12%–much faster than the overall rate of inflation–while total health premiums rose by just 4%. Last year, more than half of Californians either skipped or postponed mental and physical healthcare due to cost, putting their safety and wellbeing at risk. One in three reported holding medical debt, including half of low-income Californians.

PBMs Are Going Unregulated in California

PBMs have become a major focus of regulation in recent years, with the FTC investigating anticompetitive practices in the industry and multiple bipartisan efforts moving through Congress. PBMs are staffing up their teams of lobbyists to navigate the heightened scrutiny.

States across the country have taken action to combat the growing challenge presented by PBMs, with Michigan and Florida enacting recent landmark packages. Fifteen states ban spread pricing, while California does not. One challenge is the lack of a clear regulator for PBMs. 25 states require PBMs to be licensed by state boards, but California requires a less stringent form of registration under the Department of Managed Health Care. 

SB 966 Reins In PBM Abuses

SB 966 creates a new regulator housed within the California Department of Insurance to require that all PBMs be licensed and disclose basic information regarding their business practices to the licensing entity. The Attorney General will enforce the bill’s requirements, as they do in a variety of healthcare contexts.

In addition, SB 966 enacts other pro-consumer requirements and prohibitions:

  • Requires all PBMs to be licensed through the California Department of Insurance
  • Prohibits steering patients to affiliated pharmacies and instead allows patients to choose which in-network pharmacy best meets their needs.
  • Requires that the PBMs transmit 100%all negotiated drug rebates to the health plan/insurer for the sole purpose of off-setting cost-sharing for enrollees
  • Outlaws making any untrue, deceptive, or misleading statements.
  • Prohibits PBMs from negotiating exclusive arrangements with manufacturers for drugs, devices, or other products.
  • Requires PBMs to report all types of fees that they receive, and  how the fees are calculatedThis bill is sponsored by the California Pharmacists Association, the California Chronic Care Coalition, the Los Angeles LGBT Center, and the San Francisco AIDS Foundation.

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