Press Release

Senator Wiener Applauds Governor Newsom’s Move To License PBMs, Looks Forward to Working with Governor to Advance Legislation to End PBM Abusive Practices

SACRAMENTO – This morning, Governor Gavin Newsom announced that he plans to enact regulations to combat rising prescription drug prices as part of the state budget. The proposal, which would require the middlemen known as pharmacy benefit managers (PBMs) to be licensed by the state, would enact one piece of Senator Scott Wiener’s (D-San Francisco) Senate Bill 41, a broader effort to rein in PBM abuses that is currently in the Senate Appropriations Committee. SB 41, in addition to requiring licensure, bans abusive practices by PBMs that increase drug costs and kill community pharmacies.

Other states have enacted a series of regulations to rein in PBM abuses after a series of investigations by the New York Times, the Wall Street Journal, and the Federal Trade Commission revealed the middlemen’s role in rising prescription drug prices. Twenty-five states now require PBMs to be licensed by state boards, and many also prohibit specific PBM practices that have been shown to drive up costs for consumers and restrict access to medications. 

Senator Wiener’s SB 41 would establish California as a national leader on reining in prescription drug prices by prohibiting these abusive behaviors, including spread pricing, patient steering, pocketing rebates, and more. The Legislature approved SB 41’s licensure proposal and consumer protections in a near unanimous vote last year under a previous version of the legislation authored by Senator Wiener.

“The Governor’s announcement is a solid step toward ending the PBM abuses that are driving up drug costs. I commend the Governor for acting, and I look forward to working with him on SB 41 and broader action against PBM abuses,” said Senator Wiener. “Licensure will finally give state regulators a tool to rein in the abusive behavior by PBMs that drive costs up for families. To fully address PBMs’ effect on rising costs however, we must go further by enacting clear rules governing their behavior. PBMs should not pocket rebates they negotiate on behalf of consumers, they shouldn’t steer patients toward more expensive drugs and their affiliated pharmacies in pursuit of profit, and they should compensate pharmacies and doctors fairly. I look forward to building on today’s announcement by enacting these clear prohibitions to protect consumers from predatory behavior in the prescription drug market.”

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 have grown to provide drugs to nearly all insured Americans. As the middlemen of the pharmaceutical industry, they buy prescription drugs from manufacturers and wholesalers and then sell them to pharmacies and health plans. In recent years, PBMs have increasingly taken advantage of their position as essential go-betweens to steer patients to higher-cost drugs and pharmacies, charge high administrative fees, and charge pharmacies more – sometimes much more – 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.

The result is that the share of total spending on prescription drugs that goes to drug manufacturers has declined, while over half of every dollar spent on brand medicines goes to pharmaceutical industry middlemen like PBMs.

SB 41 Reins In PBM Abuses

SB 41 enacts pro-consumer requirements and prohibitions:

  • Prohibits steering patients to affiliated pharmacies and instead allows patients to choose which in-network pharmacy best meets their needs.
  • Prohibits spread pricing, where PBMs charge a plan more for a drug than it pays a pharmacy.
  • Requires that the PBM pass through all negotiated drug rebates to the payers or patients.
  • Outlaws making any untrue, deceptive, or misleading statements.
  • Prohibits PBMs from negotiating exclusive arrangements with manufacturers for drugs, devices, or other products.
  • Limits how fees may be charged and requires transparency in fees.

SB 41 is sponsored by the California Pharmacists Association, the San Francisco AIDS Foundation, the Los Angeles LGBT Center, and the California Chronic Care Coalition.

READ MORE ON PBM ABUSES: 

-The Opaque Industry Secretly Inflating Prices for Prescription Drugs, New York Times, 6/21/24

-Mail-Order Drugs Were Supposed to Keep Costs Down. It’s Doing the Opposite, Wall Street Journal, 6/25/24

 

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