California legislators must protect patients from harmful health care middlemen

OPINION – Patients in California continue to struggle with balancing high health care costs with other daily essentials. Yet, little-known health industry middlemen called pharmacy benefit managers (PBMs) are making it harder for patients to get the care they need by raising costs at the pharmacy counter and threatening the viability of local pharmacies. As health care costs continue to rise, California lawmakers must support efforts to reform the insurance industry middlemen who are increasing costs and blocking access to necessary treatments.

PBMs are hired by health insurance companies to negotiate discounts and rebates on medications between drug manufacturers and the health plans they represent. Unfortunately, due to little transparency or oversight, PBMs now wield the power to dictate what drugs will be covered on a health plan’s formulary, how much California patients will be required to pay out of pocket for their treatments, and what they must do to gain access to the treatment.

Today, these middlemen have become one of the most influential stakeholders in the health care industry through several opaque schemes and practices that are intended to improve their own bottom lines. PBMs receive substantial discounts on treatments through negotiations, but often don’t pass those savings on to patients at the pharmacy counter, causing them to pay more for the care they need.

Just three PBMs – CVS Caremark, Express Scripts, and OptumRx – control nearly 80% of the prescription drug market and two of these PBMs also own large chain pharmacies. PBMs can require patients to fulfill prescriptions in pharmacies that they own, rather than the pharmacies that are most convenient for a patient, through a practice known as patient steerage.

In addition, many local mom-and-pop pharmacies across California are struggling to stay afloat due to predatory practices of PBMs. Reimbursements from a health plan for medication purchases are a main source of revenue for many pharmacies, who then reinvest those reimbursement back into care for their community. However, through a scheme called spread pricing, PBMs reimburse pharmacies for less than the original cost of treatment and pocket the difference at the expense of our state’s local pharmacies.

Fortunately, Senate Bill 966 (SB 966), introduced by Senator Scott Wiener, is a crucial step in addressing these challenges that PBMs are imposing on our health system. The bill would increase transparency in PBM practices and transactions, prohibit PBMs from steering patients to their own pharmacies, allowing patients use the pharmacy that meet their needs adequately. Additionally, SB 966 would prohibit spread pricing, helping to protect the community pharmacies across our state who are struggling to stay afloat as a result of PBM practices.

This bill comes at a pivotal time when patients need improved health care access and affordability. PBMs manage pharmaceutical benefits for 90% of Americans, enabling them to exert significant influence over how both pharmacies and patients access and pay for prescription medications.

The Federal Trade Commission (FTC) recently found that PBMs wield significant influence in what patients across the country pay at the pharmacy counter and that these middlemen are imposing harmful contractual terms that severely impact the ability for independent pharmacies to stay in business and serve their communities. The report also notes that PBMs continue to overcharge patients for critical treatments, including cancer medications.

Patients in California shouldn’t have to be subject to the “profit over patients” business model that PBMs continue to prioritize. Lawmakers must support SB 966 to curb the egregious and anti-competitive abuse of power by PBMs to increase access to care for patients and sustain the local pharmacies that continue to serve them. I urge California lawmakers to stand with patients and support this critical legislation. Otherwise, patients will lose out on the treatments they need.

Anthony Asadullah Samad, PhD, is the executive director of the Mervyn Dymally African American Political and Economic Institute (MDAAPEI) on the campus of California State University, Dominguez Hills.