Will California finally license pharmacy benefit managers and rein in prescription drug costs?

This article was produced by Capital Main It is published here with permission Ten months ago California Gov Gavin Newsom vetoed a bill that would have forced prescription drug middlemen to be licensed and regulated through a state agency Now Newsom appears to be working in concert with the legislator who wrote that bill to do just that and push back on a business that critics say is significantly responsible for the state s soaring drug costs What happens next through both a Newsom budget measure and a legislative bill proposed by state Sen Scott Wiener D-San Francisco will determine whether California conclusively gets into gear and joins more than two dozen other states in licensing pharmacy benefit managers known broadly as PBMs Newsom s budget includes a provision for PBMs to be licensed through the state something Wiener has been trying to get done for two years and had included in this legislative session s bill With that aspect of the predicament now covered by the governor s plan Wiener s proposal Senate Bill slaps other key guardrails on the industry that could drive down drug prices for Californians It can t happen too soon For years the cost of prescription drugs has been running away from individuals and soundness plans alike Between and strength plan spending on drug costs in California skyrocketed by to billion according to the state s Department of Managed Wellbeing Care A major culprit pharmacy benefit managers who are part of the great food chain of profit made off of drug sales The PBMs buy prescription drugs from manufacturers and wholesalers and sell them to pharmacies and wellness plans often setting the price in the process But it s nowhere near that simple These middle operators charge fees for the provision and often withhold for themselves the rebates that pharmaceutical companies offer for certain drugs sometimes pushing more expensive brands in order to get them And they ve become powerfully consolidated with just three industry giants CVS UnitedHealthcare and Cigna controlling about of all prescription states They ve leveraged that power by favoring their own pharmacies often the mail-order variety over local drugstores and squeezing the latter via blisteringly low reimbursement rates PBMs negative impacts on prescription drug affordability and competition are widespread and well documented declared a state budget request earlier this year California is already behind other states in collecting and analyzing information about PBMs role in the prescription drug marketplace Into this breach came a legislative bill by Wiener who has made medical approach a cornerstone of his years in office Senate Bill would have required the pharmacy benefit managers to be licensed by the California Department of Insurance disclose the prices they paid to drug manufacturers and pass on to consumers the rebates or discounts they received from the drug companies The measure sailed through the state Legislature with near unanimous bipartisan assistance When it hit Newsom s desk though the ride ended The governor rejected the law writing that he was not persuaded the bill s expansive licensing scheme would achieve the objective of holding pharmacy benefit managers accountable It was the second time in four years that Newsom declined to approve legislative guidelines on PBMs In vetoing Wiener s bill Newsom reported that the state needed more granular information to understand how all parts of the drug industry not just PBMs were driving rapidly rising drug costs Obviously we disagreed with the veto and we decided to take another run at it and make the scenario to the governor Wiener notified Capital Main this week And the good news is that the governor came to us with the proposal to take the licensing piece that was in the bill and put that in the budget The senator revealed that by doing so Newsom was ensuring that the licensing operation could be put in place more rapidly than via state measure The reason for Newsom s change of heart isn t clear His PBM licensing plan is precisely what Wiener s bill last year would have created albeit under a different department When appealed by Capital Main whether Newsom had received the drug pricing information that he noted last fall he needed the governor s office did not respond UnitedHealthcare has made several contributions to Newsom s campaigns in past years Newsom s PBM budget plan though imposes a fiduciary duty on PBMs in California meaning they d have to act in the interests of consumers and vitality plans in order to operate legally in the state The Governor s revised budget led efforts to license and regulate PBMs for the first time increasing transparency and accountability in the pharmacy supply chain reported Elana Ross a spokesperson for Newsom Licensing the benefit managers is key Wiener revealed but it s not enough His new bill goes several moves further It prohibits the practice of steering by which PBMs direct patients to pharmacies they own and drugs from which they may profit the the greater part and it bans spread pricing through which PBMs charge a fitness plan more for a drug than they pay the pharmacy Like last year s measure it forces the managers to pass along to consumers any rebates or discounts they receive The two main harms that PBMs are causing are inflating prescription drug prices and destroying neighborhood pharmacies Wiener explained The bill focuses on banning those abusive practices The industry itself applauds Newsom s move toward licensure but opposes Wiener s more specific constraints on the PBMs lucrative way of doing business We agree with Gov Newsom s budget item Unfortunately all SB does is help Big Pharma keep prices high disclosed Greg Lopes a spokesman for the Pharmaceutical Care Management Association a powerful national lobbying group The bill would not lower prices for patients Instead it would take away tools that employers use to manage the costs for the prescription drug benefits they provide employees Lopes also reiterated a long-held contention by PBMs that high drug prices are set by the pharmaceutical companies themselves We urge the governor and Legislature to expand transparency and reporting to the entire drug supply chain he mentioned At the end of the day Big Pharma sets the price and everything starts with that A account earlier this year by the Federal Pact Commission though revealed that PBMs impose markups of hundreds and thousands of percent on specialty generic drugs dispensed at their own pharmacies that the matter is growing at an alarming rate and that there is an urgent need for policymakers to address it Wiener acknowledged that last year s bill received fierce pushback from Lopes group as well as from the California Chamber of Commerce In fact certain key provisions of that bill were deleted en path to its final passage including a prohibition on spread pricing This summer will be no different in terms of opposition It s not surprising that when you re trying to regulate an industry that used to be almost totally unregulated the industry is going to fight you Wiener stated Between his bill and Newsom s budget though there s a real chance for the state to place various checks on the power of pharmacy benefit managers to drive up drug prices on Californians Capital Main is an award-winning nonprofit publication that reports from California on the greater part pressing economic environmental and social issues of our time including economic inequality setting change vitality care threats to democracy hate and extremism and immigration Copyright Capital Main