SACRAMENTO--On Tuesday, April 18, AB 315, a bill intended to uncover the mystery of how pharmacy benefit managers (PBMs) affect escalating pharmaceutical drug prices, will be presented by its author Assemblymember Jim Wood (D-Healdsburg) to the Assembly Business & Professions Committee.
“Drug prices are out of control,” said Wood. “Consumers are paying the price – literally – in escalating out-of-pocket costs and health insurance premium increases. We have to understand this marketplace so that we can fix it.”
Pharmacy benefit managers play a key role in this marketplace initially formed about 40 years ago as a “middleman,” hired by health insurance plans and other payers to manage their prescription drug plans and negotiate prices with drug companies.
Today, after a series of mergers and acquisitions, three PBMs have nearly 80% of the market share with revenues exceeding $270 billion. Some are continuing that consolidation by merging with drug companies and large pharmacy chains and some are establishing their own specialty pharmacies. This practice can lead to PBMs steering patients to their company-owned community or mail-order pharmacies, calling into question their ability to fairly represent the employers, providers, and the patients they are serving.
“That narrowing of the market is concerning enough,” said Wood, “but combine that with not being regulated, and you get a mysterious black box that is in desperate need of oversight and transparency so that we can understand how their business model works and how it affects consumers.”
Only 14 states license, regulate or require PBM transparency. Assemblymember Wood’s bill would allow for a “look under the hood” of these companies. “We fundamentally don’t understand how the money flows,” said Wood. “There are rebates that go back and forth between manufacturers and pharmacy benefit managers and health plans. How does the consumer benefit from that?”
AB 315 is supported by Consumers Union, the California Medical Association, the California Pharmacists Association, and the San-Francisco-based HIV/AIDS advocacy group Project Inform. To date, the only opposition is coming from the PBM industry and the health plans.
The U.S. Justice Department fined two major PBMs, Express Scripts and Medco, for taking kickbacks and engaging in drug switching, where patients were driven toward higher priced drugs. “PBMs portray themselves as white knights, saving health care dollars,” said Wood, “but that just doesn’t align with what we know – and the more I try to learn about how PBMs operate, the more I come up against a wall preventing me from accessing the information we need. It’s a mystery that needs to be solved, and needs to be solved soon.”
Assemblymember Jim Wood (D- Healdsburg) represents the 2nd Assembly District, which includes all of Del Norte, Trinity, Humboldt and Mendocino counties, plus northern and coastal Sonoma County, including the northern half of Santa Rosa.