By Kristen Hwang

WHAT THE BILL WOULD DO

Pharmacy benefit managers work as middlemen between insurance companies and drug manufacturers. They process claims, negotiate drug prices and help determine the list of drugs that health insurance plans cover. 

SB 966 by Sen. Scott Wiener, a Democrat from San Francisco, would prohibit pharmacy benefit managers from restricting where patients can fill prescriptions and mandate that 100% of discounts negotiated with drug manufacturers be passed onto health insurance plans. It would also require the state insurance department to license pharmacy benefit managers and improve price transparency.

WHO SUPPORTS IT

The measure is co-sponsored by the California Pharmacists Association, California Chronic Care Coalition, Los Angeles LGBT Center and San Francisco AIDS Foundation. Supporters say exclusionary practices have forced the closure of 300 pharmacies across the state and limited drug access. It is also supported by Pharmaceutical Research and Manufacturers of America, which represents drug companies.

WHO IS OPPOSED

Health plans and trade organizations representing pharmacy benefit managers are the primary opponents to the measure. They say preferred pharmacy networks, formularies and discounts are all strategies that allow pharmacy benefit managers to keep prices reasonable. They blame drug companies for driving up prices and say this legislation would increase premiums by $1.7 billion in the first year.

WHY IT MATTERS

Spending on prescription drugs in California ballooned 39% in just five years, according to the most recent state data. State and federal regulators are increasingly concerned about tactics used by pharmacy benefit managers to generate profits. A report from the Federal Trade Commission, which is investigating the middlemen, suggests that the largest organizations may be engaging in practices specifically to evade regulation, such as moving portions of their operations out of the country. Research also suggests consolidation drives prescription drug prices higher with the three biggest companies — CVS Caremark, Express Scripts and OptumRx — controlling 80% of the market. 

GOVERNOR’S CALL ❌

Newsom announced Sept. 28 he vetoed the bill. In his veto message, he said while prescription drug prices are too high and there needs to be more transparency, “I am not convinced that SB 966’s expansive licensing scheme will achieve such results.” Instead, he said he’s directing the California Health and Human Services Agency to “propose a legislative approach to gather much needed data on PBMs next year.”