Governor Brown Signs Legislation Aimed at Addressing Skyrocketing Prescription Drug Costs

As prescription drug prices continue to increase, the Governor Jerry Brown signed AB 315 by Assemblymember Jim Wood to bring more transparency to Pharmacy Benefit Managers (PBMs).
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For Immediate Release: Saturday, September 29, 2018

CONTACT: 

Anthony Wright, Executive Director, Health Access California, awright@health-access.org, 916-870-4782 (cell)

Rachel Linn Gish, Director of Communications, Health Access California, rlinngish@health-access.org, 916-532-2128 (cell)

GOVERNOR BROWN SIGNS LEGISLATION INCREASING OVERSIGHT ON PRESCRIPTION DRUG COSTS 

  • Governor Brown signs  AB 315 (Wood) adding additional oversight to pharmacy benefit managers (PBMs), to help ensure savings in negotiating prescription drug discounts is passed onto purchasers and patients.
  • This new law helps to address skyrocketing cost of prescription drugs, building off of last year’s landmark drug price transparency law, SB 17
  • AB 315 is part of the #Care4AllCA package of legislation to create a more affordable and accessible health care system

SACRAMENTO, CA – As prescription drug prices continue to increase, the Governor Jerry Brown signed AB 315 by Assemblymember Jim Wood to bring more transparency to Pharmacy Benefit Managers (PBMs).

AB 315 (Wood) requires PBMs to register with the Department of Managed Health Care and disclose information about drug acquisition costs and negotiated rates to purchasers. PBMs (like Express Scripts and CVS) are intermediaries between purchasers such as health plans and drug manufacturers. These intermediaries negotiate lower drug costs through rebates, discounts, and other price concessions. PBMs play a big role in designing drug cost sharing, yet, unlike health plans or medical groups, they are not licensed or regulated. By regulating PBMs and requiring disclosure of information on rebates and discounts to purchasers, this new law will help ensure that consumers and purchasers actually benefit from savings that are reaped by PBMs. 

“In 2014, the combined revenues of the three largest PBM’s exceeded $270 billion,” said Assemblymember Jim Wood (D-Santa Rosa), author of AB 315. “With that kind of revenue and no oversight, that’s a big concern for me and shows why this new law is sorely needed. If the PBMs are, in fact, negotiating the best pricing and doing right by consumers, they should have no concern with allowing us to ‘look under the hood’ and understanding their business model.”

“Pharmacy benefit managers keep about 35% of total net profit of prescription drug expenditures under private insurance,” said Wright. “It is unclear how much of the savings PBMs negotiate is actually passed through to the purchasers of coverage, and how much individual consumers benefit is even less obvious. AB 315 will bring much needed oversight that will help us continue to tackle the problem of rapidly rising prescription drug prices. When prescription drug discounts are negotiated, we want to make sure the savings is passed on to purchasers and patients.”

AB 315 is one of eight bills that are part of the Care4All California package that have been signed by Governor Brown. Together these bills take key steps to make our health system more universal, accountable, and affordable.

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