Press Release

Senate Passes Nation-Leading Senator Wiener Bill to Tackle Rising Prescription Drug Prices By Reining in Pharmacy Benefit Managers

SACRAMENTO – The Senate passed Senator Scott Wiener’s (D-San Francisco) Senate Bill 966, which would enact the nation’s strongest protections against anticompetitive practices by pharmacy benefit managers (PBMs), which are a significant contributor to rising drug costs. The bill passed 39-0 and heads next to the Assembly, where it must pass by August 31.

“Pharmacy benefit managers play a huge role in our health care system, particularly around drug pricing, and it’s time to license them and create basic standards of conduct to reduce health care costs and protect patients,” said Senator Wiener. “Tackling the rise in drug prices requires that we look at every layer of the supply chain, including pharmacy benefit managers. I look forward to working with my colleagues in the Assembly to advance California’s leadership on lowering prescription drug prices.”

“We are at a crucial time in community pharmacy, we can no longer allow pharmacy benefits managers to operate in the state of California with no oversight. The unfair business practices of some PBMs are making it almost impossible for pharmacies that are not owned by a PBM to keep their doors open,” says Melissa Kimura, Pharm D, President of the California Pharmacists Association,  “Pharmacy closures can have devastating impacts on patients, especially for those without the means to travel to a pharmacy outside of their community, which can lead to interruptions in treatment. We appreciate Senator Wiener’s strong leadership and willingness to take on this important issue.”

“SB 966 is a top priority for California patients, who are regularly harmed by the State’s lack of oversight of PBMs. By creating transparency, commonsense safeguards, and properly aligned incentives, SB 966 will improve patients’ access to critical care and make health care more affordable,”stated Liz Helms, President and CEO of the California Chronic Care Coalition. “For years, we have pursued piecemeal solutions to curb the worst PBM abuses. However, it is clear that without sufficient insight into the PBM industry PBM’s will continue to morph in ways that make access more difficult and out-of-pocket costs more onerous. The sunlight created by SB 966 will allow comprehensive improvements that benefit all Californians. We are grateful to Senator Wiener for championing this important legislation.”  

Laura Thomas, Senior Director of HIV & Harm Reduction Policy with the San Francisco AIDS Foundation says, “SFAF appreciates the leadership of Sen. Wiener and his team in moving forward this important legislation to ensure continued affordable access to medications for people living with HIV and at risk of HIV.” 

Virtually unregulated in California, PBMs have grown to provide drugs to nearly all insured Americans. As the middlemen of the pharmaceutical industry, they exercise massive control of drug formularies and drug pricing. They create formularies for health plans, they negotiate drug prices with pharmaceutical companies, they help determine what health plans pay for drugs and what pharmacies get paid, and so forth. 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.

PBMs are also capturing other sectors of the health care industry, including purchasing their own pharmacies — which they then favor over other pharmacies — and even owning or merging with their own health plans.

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.
  • 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.

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