California Governor Signs Bill to Regulate Prescription Drug Prices
SACRAMENTO – California Governor Gavin Newsom today signed Senate Bill 41, legislation aimed at curbing inflated prescription drug costs by regulating pharmacy benefit managers (PBMs).
The bill, authored by Senator Scott Wiener (D-San Francisco), enacts significant reforms to PBM business practices. It requires PBMs to be licensed by the Department of Managed Health Care (DMHC), as outlined in accompanying trailer bill legislation passed earlier this year. Key provisions prohibit “spread pricing” – a practice where PBMs charge health plans more for drugs than they reimburse pharmacies – and mandate that manufacturer rebates be passed directly to health plans. PBMs will now be limited to charging administrative fees for their services to health plans and insurers.
These changes are expected to lower prescription drug costs for millions of Californians, who have long faced some of the highest drug prices in the nation. The legislation aims to increase transparency in the pharmaceutical supply chain and ensure that more savings are passed on to consumers. For more information on pharmacy benefit managers, see the Centers for Medicare & Medicaid Services website.
Governor Newsom’s office stated that the bill is a crucial step towards making healthcare more affordable in California, building on other efforts to lower healthcare expenses. The DMHC will now begin the process of licensing and overseeing PBMs to ensure compliance with the new regulations.
