Governor Gavin Newsom has announced a plan to regulate pharmacy benefit managers (PBMs), which he blames for increasing prescription drug costs. This initiative, part of a revised state budget proposal, aims to license PBMs through California’s Department of Managed Health Care. It will require them to report their operational and financial details, including drug pricing data, to increase transparency and reduce costs.
Newsom’s plan comes less than a year after he vetoed a similar bill, citing the need for more detailed information on cost drivers in the prescription drug market. According to CalMatters, the proposal will allow the state to review PBM contracts, perform financial audits, and issue penalties for violations. Additionally, PBMs will be required to act in the best interest of health plans and clients, establishing a fiduciary duty.
The proposal is part of a broader effort to address rising drug costs in California, where prescription drug spending has increased 56% since 2017. Newsom’s plan also includes expanding the role of CalRx to purchase brand-name drugs, giving the state more tools to respond to supply chain disruptions and market manipulation.
Critics argue that more stringent regulations could increase health insurance premiums. However, Bill Head, assistant vice president for the Pharmaceutical Care Management Association, expressed support for Newsom’s goal to lower drug prices but blamed pharmaceutical manufacturers for rising costs. According to the association, PBMs are projected to save Californians $108 billion over the next decade.
The proposal is expected to face challenges from the powerful industry lobby, which has previously thwarted similar legislative efforts. Nonetheless, Newsom’s announcement marks a significant step toward improving prescription drug affordability in California. The full budget proposal will be unveiled on Wednesday.
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