BOOM… California, the biggest market in the U.S., just passed PBM reform. And sizzle, this is hot.
While some of this will not survive ERISA challenges based on PCMA v. Mulready, other provisions will likely take effect.
The package includes the following:
Pricing
Spread pricing ban: PBMs are prohibited from charging plans more than the amount they pay pharmacies for a drug.
- It’s funny because someone yesterday messaged me that some people love to encourage higher spending so they can find savings.
- I’ll admit, it will be great to see the lines add up in my analytics software, but it will be much less exciting to see $12 million in easy savings for employers.
- I guess I’m a bit of an asshole. 🙂
Mandates pass-through: Requires a pass-through pricing model and that rebates be passed through to payers, not retained by the PBM except for a defined service fee.
- Importantly, plans can now request that pharma open their books to review the pass-through.
- Did GPOs fail to protect PBMs from regulation? Maybe
- Watch this one closely in case Pharma decides to claim “trade secrets.”
Transparency and reporting Section:
Comprehensive disclosure: PBMs have increased disclosure obligations regarding their finances and practices.
- Again, whether these will survive trade secret challenges will be interesting.
Annual reporting: PBMs must report payments to pharmacies and rebates annually to the state Department of Managed Health Care (DMHC).
- I love a good tracker. I’ve been on a kick about building a rebate tracker. Hit me up if you are a PBM/Pharma Company or employer who wants this technology.
- Why do you need a tracker as a PBM? Because now plans AND the state can ask to reconcile (you know that pain in the ass term from finance) the Pharma payments to your books.
Pharmacy network and access:
Prohibits patient steering: Bans PBMs from steering patients to their affiliated pharmacies or restricting non-affiliated pharmacies from offering mail-order services.
This will not survive both Part D plan and ERISA challenges.
Fair reimbursements: Ensures pharmacies receive fair reimbursement and protects them from retroactive claim reductions and unfair payment practices.
Limitations on limited distribution networks: Pharmaceutical companies seeking to utilize limited distribution networks will require stronger clinical justification.
Patient cost-sharing:
Aligns cost-sharing: Patient cost-sharing, including deductibles and copayments, cannot exceed the actual amount the plan pays for a prescription drug OR the retail price.
- Remember the big Cigna announcement that they wouldn’t be using rebates anymore?
- Well, I guess they got word that this bill was going to pass because the lowering of patient cost-sharing was a big part of the announcement.
- If you are a Cigna shareholder, don’t worry, they advised their shareholders that they will drive similar profitability in 2026, even as ESI profits might be dampened slightly by the new “rebate-free” model.
PBM licensure and oversight:
State licensure: Requires PBMs to be licensed by the state and be subject to oversight by the DMHC.
- This is good law from Rutledge v. Pharmaceutical Care Management Association.
Fiduciary duty:
Fiduciary obligations: Establishes enforceable fiduciary duties that PBMs owe to self-insured employer plans, including auditing and conflict-of-interest reporting.
- This will be interesting to see if PBMs challenge this portion and how they challenge it.
Enforcement:
Enforcement tools: Provides the Attorney General with enforcement tools, including civil penalties and other relief, to ensure compliance with the law.
- See the Oklahoma PBM Attorney’s office and the enforcement they have in place.
Cigna’s 2026 pharmacy profits could be dampened by transition to rebate-free model | Healthcare Dive
