Bill to regulate pharmacy benefit managers advances in California

The California bill requires PBMs to annually obtain a license from the Department of Managed Health Care.
The California bill requires PBMs to annually obtain a license from the Department of Managed Health Care. | File photo

A bill mandating pharmacy benefit managers (PBM) obtain a license to conduct business in California and release information to health plans and other purchasers is moving through the state's legislature.

AB 315, which passed several committees in the House and Senate, originally included provisions that would have led to PBMs being licensed by the state's Board of Pharmacy. Opponents of the bill objected, claiming the original would have meant those most opposed to PBMs controlling the licensing.

The bill now with the Senate Appropriations Committee requires PBMs to annually obtain a license from the Department of Managed Health Care. It also requires them, on a quarterly basis, to disclose to purchasers, including health plans, information on their deals with drug companies, including acquisition cost, rebates and rates negotiated with pharmacies.

Supporters of the bill claim transparency is needed, but John D. Jones, a pharmacist and attorney who lectures in pharmacy and ethics at several California colleges, believes there is already a mechanism for plans to find out information: the contracts between the PBMs and the plans.

"That contract includes audit rights," Jones told American Pharmacy News. "That exists in the contract."

Jones warned that if the disclosure is more broad — open to more parties or the public — then others could be more aggressive in negotiating terms.

"My understanding about (the bill's) structure is that there will be a significant amount of disclosure," Jones said. "That is anti-competitive. How are you going to get the best terms if the parties do not believe others will not see them?"

Jones welcomed, to an extent, the amendment that means the Board of Pharmacy will not ultimately be involved in licensing.

Opponents of that provision likened it to the fox looking after the henhouse. The argument is that pharmacists are often the most vocal in complaining that PBMs negotiate big rebates from drug companies but do not pass them on, essentially pocketing the spread.

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