Reform of “insurance middlemen” is overdue for Californians

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OPINION – Many Californians are being forced to choose between affording health care or putting food on the table thanks to health industry middlemen who are raising costs for consumers. For patients living with mental health disorders, who often rely on multiple prescriptions to prevent life-threatening crises, health care affordability is not optional—it is essential. Yet unregulated pharmacy benefit managers (PBMs) practices are driving up medication costs at the expense of patients. Now is the time to rein in drug costs and protect thousands of Californians.

PBMs work between insurance companies and drug manufacturers to determine which drugs are covered by health insurance plans, negotiate pricing, and process claims. Based on negotiated prices and rebates, PBMs can dictate which drugs appear on the list of medicines (formularies) covered by a health insurance plan, what the out-of-pocket costs are, and what patients must do to gain access to a provider-prescribed medication.

In theory, PBMs should lower costs for patients, however, in practice, their business model often does the opposite. Over time, and with little transparency or oversight, PBMs have become one of the most influential stakeholders in the healthcare industry. PBMs frequently pocket rebates and discounts intended for patients, impose additional fees, and steer consumers toward higher-priced medications to maximize their profits. Their practices raise health care costs for California and has a disproportionate impact on patients who rely on expensive, specialized treatments, including many living with serious mental health conditions.

Between 2017 and 2023, prescription drug spending in California rose by nearly $9 billion—a 56% increase in just six years. For patients, this is more than just a statistic. This increase represents impossible choices for patients: skipping doses, rationing medications, or going without treatment entirely. For individuals living with mental health disorders, such disruptions in care can mean hospitalization, job loss, and devastating declines in quality of life.

Fortunately, California lawmakers have recognized the impact onerous PBM practices have on our community and introduced Senate Bill 41 (SB 41). The bill would require PBMs to be licensed through California’s Department of Managed Health Care and disclose critical operational and financial information to improve transparency. Most importantly, it establishes a fiduciary duty, requiring PBMs to act in the best interest of health plans and patients. By prohibiting PBMs from prioritizing profits before patients, SB 41 ensures that rebates, discounts, and negotiated savings are passed on to patients to lower health care costs across the state.

Beyond transparency and accountability, SB 41 curbs harmful practices such as “patient steering,” where PBMs push patients toward certain pharmacies or medications that maximize their profits rather than meet medical needs. Just three PBMs—CVS Caremark, Express Scripts, and OptumRx—control more than 80% of the market, giving them extraordinary power to dictate prices and choices. SB 41 restores balance by holding these powerful corporations accountable and prioritizing patients’ needs.

Californians should not have to choose between food, rent, and life-saving medications. Holding PBMs accountable is not just good policy—it is an urgent need. Patients deserve a health care system that values health, fairness, and affordability over profit. Governor Newsom must sign SB 41 into law. It is a commonsense solution to stop PBMs from imposing their “profits over patients” business model on us all.

Debbie Shaeffer is executive director of the International Bipolar Foundation and resides in San Diego, California.