What is California SB 966

What Is California SB 966

SB-966 is a bill that will require Pharmacy Benefit Managers (PBM) to be licensed and regulated by California’s Department of Insurance. The Bill will also require the PBM to disclose basic information regarding their business practices. The Bill also enacts pro-consumer requirements and prohibitions such as:

Prohibits steering patients to affiliated pharmacies and instead allows patients to choose which in-network pharmacy best meets their needs.

Prohibits spread pricing, where PBMs charge a plan more for a drug than it pays a pharmacy.

Requires that the PBM pass through all negotiated drug rebates to the payers or patients.

Outlaws making any untrue, deceptive, or misleading statements.

Prohibits PBMs from negotiating exclusive arrangements with manufacturers for drugs, devices, or other products.

Limits how fees may be charged and requires transparency in fees.

Current Status of CA SB-966: Passed the Senate with a unanimous vote. In the Assembly, referred to Assembly Health and Judiciary Committees.

The Bill for the most part is requiring pharmacy benefit managers (PBM) to apply for and obtain a license from the DOI to operate as a PBM no later than January 1, 2027.

From an employer’s group health plan standpoint – the following is noted in the Bill. Existing law requires a health care service plan contract or health insurance policy that provides coverage for outpatient prescription drugs to cover medically necessary prescription drugs and subjects those policies to certain limitations on cost sharing and the placement of drugs on formularies. Existing law limits the maximum amount an enrollee or insured may be required to pay at the point of sale for a covered prescription drug to the lesser of the applicable cost-sharing amount or the retail price and requires that payment apply to the applicable deductible. Existing law requires a plan or insurer that reports rate information to report specified prescription drug information to the relevant department no later than October 1 of each year.

This bill would prohibit a health care service plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2025, that provides prescription drug coverage from calculating an enrollee or insured’s cost sharing at an amount that exceeds the actual rate paid for the prescription drug. The bill, for a preexisting contract between a pharmacy benefit manager and a health care service plan or health insurer authorizing spread pricing, would prohibit an amendment or renewal of the contract from authorizing spread pricing. The bill would prohibit a contract between a pharmacy benefit manager and a health care service plan or health insurer that is executed on or after January 1, 2025, from authorizing spread pricing. The bill would require a plan or insurer to include additional information in its annual prescription drug data reporting, including the aggregate amount of rebates received by the pharmacy benefit manager for each drug. By expanding the scope of a crime under the Knox-Keene Act, the bill would impose a state-mandated local program.

Resources with more detail:

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