Golden State Today

California Attorney General Rob Bonta and a bipartisan coalition of 39 attorneys general have called on Congress to pass legislation that would prohibit Pharmacy Benefit Managers (PBMs) and their affiliates from owning or operating pharmacies. The attorneys general argue that such a law is necessary to protect consumers and small businesses.

PBMs were originally established in the late 1960s to facilitate low-cost access to pharmaceutical care by negotiating discounts, rebates, and other cost-saving measures. However, according to the coalition, PBMs have grown to dominate the market, prioritizing profits over consumer interests. This dominance has led to manipulated prices, pharmacy deserts, and unavailability of some medications.

"PBMs’ priority is not consumers, but rather their own bottom line. They must be reined in," said Attorney General Bonta. He highlighted the urgent need for competition in the marketplace and criticized PBMs for exacerbating high drug prices. "A federal law prohibiting PBMs, and their parent companies or affiliates, from owning or operating pharmacies is long overdue," he added.

The attorneys general point out that horizontal consolidation and vertical integration have transformed PBMs into powerful entities with significant market control. Notably, CVS Caremark, Optum Rx, and Express Scripts, the three largest PBMs, process 80% of the nation's prescriptions and account for 70% of specialty drug revenue. Each of these entities operates its own affiliated pharmacies, and most are part of larger conglomerates with interests in insurance and health care clinics.

PBMs not only own pharmacies but also contract with independent pharmacies to form networks that determine drug prices and availability. This arrangement gives PBMs leverage over their competitors, often forcing small independent pharmacies to accept disadvantageous terms. As a result, about 10% of rural independent pharmacies in the U.S. have closed in the past decade, impacting consumers in underserved areas.

Attorney General Bonta is joined by attorneys general from multiple states and territories, including Alaska, Arizona, New York, Ohio, and Virginia, in this appeal to Congress.