A bill that would regulate drug middlemen — known as pharmacy benefit managers, or PBMs — will head to California Gov. Gavin Newsom after state lawmakers passed the legislation Thursday.
Senate Bill 966, introduced by Sen. Scott Wiener and Sen. Aisha Wahab, would require PBMs to be licensed by the state insurance department and to disclose prices paid to drug makers and the discounts they negotiate with those companies.
PBMs have become a bogeyman of drug pricing, but the companies, aligned with some of the largest health insurers, have said they actually save money for their customers and, ultimately, patients.
The final bill, however, is missing a key provision to eliminate so-called “spread pricing” contracts. Spread pricing is the difference between what a PBM charges a health plan for a drug’s contracted price and the amount PBMs directly or indirectly pay pharmacies.
“California has been at the forefront of efforts to address the incentives in the drug pricing system that are driving the high price of medication. SB 966 continues that effort,” Robin Feldman, a professor at UC Law San Francisco, wrote in an email to the Business Times. “Pharmacy benefit managers sit at the center of the web. They can determine whether a patient gets access to a particular drug and how much that patient has to pay.”
The California Pharmacists Association, which supported the bill hailed the bill’s passage as an “amazing victory” in a LinkedIn post, but it noted it needed help convincing Newsom to sign the bill.
Newsom in 2021 vetoed legislation that would have prevented PBMs from “patient steering,” which forces patients to use only pharmacies owned by PBMs, according to CalMatters.
“The bottom line is (SB 966) does nothing to reduce prescription drug costs or improve patient access and safety,” Greg Lopes, a spokesperson for the PBM lobbying group the Pharmaceutical Care Management Association told CalMatters.
The sole vote in the Senate against the bill came from Sen. Marie Alvarado-Gil, a former Democrat from Jackson in the Central Valley who earlier this month switched to the Republican Party.
“PBMs should be helping to negotiate lower prices on behalf of the health plan and the plan’s patients,” Feldman said. “Unfortunately, under the current system, they benefit when drug prices rise. That perverse incentive has an outsized impact on the price of medicine.”
