California Law Will Put Limits on PBMs, Add Notice Requirements

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Pharmacy benefit managers (PBMs) will have to disclose some information about their compensation and relationships with payers.

A new law signed last weekend by California Governor Jerry Brown will put new requirements on pharmacy benefit managers (PBMs) operating in the state and add notice requirements, according to information from the California Pharmacists Association (CPhA), which backed the law.

The law bars “gag clauses” that have prevented pharmacies from telling consumers when they would save money by paying cash for a prescription instead of obtaining it through insurance with a higher co-payment. Under the California law, if the customer pays the retail price, the pharmacy can still put the claim through the insurer and credit the amount paid toward the customer’s deductible and out-of-pocket maximum.


The law defines who is covered by its requirements, including players in the pharmacy chain such as health benefit plan sponsors or other third-party players that contract with PBMs. Under the law, according to a CPhA information sheet, PBMs must spell out any practice that could represent a conflict of interest with the PBM’s duty to these payers to “exercise good faith and fair dealing.”

Additionally, the bill calls for several notice requirements for PBMs if the payers seek them:

  • Aggregate wholesale acquisition costs from the manufacturer for each category with 3 or more drugs
  • Aggregate amount of rebates to the PBM by therapeutic category
  • Administrative fees from a pharmaceutical manufacturer
  • Whether the PBM has exclusive deals with a manufacturer to dispense a drug in exchange for economic benefits
  • Aggregate prescription utilization data for the purchaser’s enrollees
  • Aggregate payments from the PBM to pharmacies controlled by the PBM; a key provision in the wake of recent or planned mergers.

The bill calls for pilot projects to occur in 2 California counties, one each in Northern and Southern California, but it was not immediately clear what those projects would entail. A call to CPhA was not returned. California regulators will have to submit a report to the legislature in 18 months.