Golden State Today

California’s Senate has passed S.B. 966, legislation aimed at curbing the anticompetitive behavior of pharmacy benefit managers (PBMs). The bill now awaits the governor's approval.

According to a press release by Sen. Scott Wiener (D-San Francisco), the bill, which passed the Senate 39-1, would be the toughest in the nation to address PBMs, middlemen in the pharmaceutical industry that have been linked to rising drug costs.

Wiener's press release states that S.B. 966 creates a new regulator within the California Department of Insurance that requires PBMs to be licensed and disclose basic information on their business practices. It also allows patients to select their own in-network pharmacy rather than steering patients to affiliated pharmacies. Additionally, it prohibits PBMs from negotiating exclusive arrangements with manufacturers for drugs, devices, or other products and from making any untrue, deceptive, or misleading statements.

According to a report by the Daily Breeze, Bay Area independent pharmacists like Jay Patel have experienced an ever-increasing squeeze from PBMs. With their ties to large healthcare companies, PBMs have exerted increasing influence, which they use to steer patients to affiliated pharmacies, including CVS. If PBMs squeeze independent pharmacies out of business, consumer choice decreases.

The Daily Breeze reports that PBMs negotiate rebates on the "sticker price" of prescription medications. While they pass some of these savings on to insurers and employers, PBMs make a profit by keeping a portion for themselves. They have been accused of steering patients toward more expensive drugs, which bring higher rebates and profits to the PBMs.

Additionally, according to the Daily Breeze, PBMs have forced some patients to order their medications via PBM-affiliated mail-order delivery services—eliminating the role of local pharmacies. They impose low reimbursements and high fees on independent pharmacies. Patel paid $15,000-$20,000 in PBM fees in 2012 when his company opened its doors; today he pays more than $100,000 annually in fees.