SACRAMENTO—Yesterday, two bills authored by Assemblymember Jim Wood (D-Healdsburg) to fight escalating prescription drug costs received approval, each in a different committee.
AB 265, a bill to prohibit the use of drug manufacturer coupons for brand name drugs for which there is a less expensive and therapeutically equivalent generic version, received approval from the Assembly Health Committee and now moves to the Assembly Appropriations Committee.
AB 315, a bill to regulate pharmacy benefit managers (PBMs), which are currently unregulated, also received approval today from the Assembly Business & Professions Committee and will move to the Assembly Appropriations Committee.
“Today was a good day for consumers,” said Wood who is a health care provider and chairs the Assembly Health Committee. “Pharmaceutical drugs prices are escalating out of control and there are many entities that play a role, including pharmaceutical manufacturers and pharmacy benefit managers.”
In recent years, there has been a proliferation of prescription coupons and discounts offered by the manufacturers of prescription drugs to encourage the use of their products which are often expensive. In the short term, these coupons and discounts can reduce a patient’s out-of-pocket costs for a prescription drug, but in the long term, this practice can raise the cost of providing coverage for health and prescription benefits, which in turn results in higher health care premium costs for all consumers.
PBMs were initially formed over 40 years ago and are contracted by health plans, self- insured employers, and government payers to assist insurers and employers in managing prescription drug benefit programs acting as third party administrators. They achieved success and were effective in negotiating prices with pharmaceutical manufacturers and reducing prescription drug prices.
Today, it is estimated that the three largest PBMs manage prescription drug coverage to more than 180 million Americans or roughly 78 percent of Americans. In 2014, the combined revenues of the three largest PBM’s exceeded $270 billion. “With that kind of revenue and no oversight, that’s a big concern for me,” said Wood. “If the PBMs are, in fact, negotiating the best pricing and doing right by consumers, they should have no concern with us ‘looking under the hood’.”
PBMs generate revenue from pharmaceutical manufacturers through two main types of payments: formulary payments to obtain preferred formulary status, and market-share payments to encourage utilization of their drugs relative to competitors, typically referred to as rebates.
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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.