Gov. Gavin Newsom (D) rejected a bill that would have overhauled the way the state monitors pharmacy benefit managers, as the industry increasingly comes under fire for its alleged role in inflating prescription drug prices.
Newsom acknowledged in a veto message to the legislature Saturday that drug prices are too high, and that pharmacy benefit managers should be held accountable. But he said he wasn’t convinced that the bill, which had overwhelming support from the legislature, would do the job.
He cited a need for more “granular information to fully understand the cost drivers in the prescription drug market” and pharmacy benefit managers’ role in pricing.
Newsom said he planned to direct the California Health and Human Services Agency to propose a “legislative approach” to gather data on pharmacy benefit managers that could be considered next year in conjunction with data from the rest of the state’s health care delivery system, including drug price data compiled under newly enacted state laws.
Sen. Scott Wiener (D), the bill’s sponsor, called the veto a “massive fail.”
“PBMs are driving up health care costs, destroying neighborhood pharmacies, and preventing Californians from receiving health care at their local pharmacies,” he said in a statement. “Today’s veto is a huge missed opportunity to control prescription drug costs and protect consumers from predatory behavior by PBMs.”
The bill would have established licensure and regulation requirements for pharmacy benefit managers under the state Department of Insurance; required pharmacy benefit managers to report certain information to the state, including aggregate amounts of the fees they charge pharmacies and the rebates they receive for drugs; and required them to pass on 100% of the prescription drug manufacturer rebates they receive from drug manufacturers to the health plan or insurer.
It also would have prohibited patient steering, a practice that forces patients to use only specified pharmacies that are also often owned by the pharmacy benefit managers.
Supporters included the Pharmaceutical Research and Manufacturers of America, the leading pharmaceutical industry trade group.
“Multiple investigations have revealed the many ways PBMs abuse patients which has fueled the widespread bipartisan support for holding these middlemen accountable,” PhRMA spokesman Reid Porter said in a statement. “We encourage policymakers to ensure this delay in action does not embolden PBMs to water down any meaningful reform policies for Californians.”
As of last year, 29 states required pharmacy benefit manager licensure and regulation, and 23 states had enacted legislation requiring them to report rebate or other information to the state, according to the National Academy for State Health Policy.
A bipartisan coalition of lawmakers in Washington, D.C., has targeted pharmacy benefit managers in hearings on health spending. It’s unclear if an effort will be made to do so during the lame duck period after the November elections.