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Ensure that pharmacy benefit managers work on behalf of their clients and not prescription drug companies

September 8, 2004
The Honorable Arnold Schwarzenegger
Governor of California
State Capitol
Sacramento, CA 95814
Re: Request for Signature on AB 1960 (Pavley)
Dear Governor Schwarzenegger:
Consumers Union, the nonprofit publisher of Consumer Reports magazine, respectfully requests your signature on AB 1960 (Pavley). The bill would help ensure that pharmacy benefit managers (PBMs) work on behalf of their clients and not on behalf of prescription drug companies.
PBMs serve as fiscal intermediaries between prescription drug companies and their clients. Such clients include third-party payers or purchasers such as employers or labor unions and all types of health insurers. PBMs administer and manage the prescription drug benefits for clients by processing prescription drug claims, creating networks of pharmacies, developing formularies, and negotiating discounts from prescription drug companies.
Existing law, however, does not regulate PBMs. In recent years, allegations have arisen that PBMs have not acted in the best interests of their clients. For example, PBMs have been accused of failing to pass on to clients the savings or rebates they negotiate from drug companies and pharmacies. Much of the problem is caused because PBMs are not required, and routinely do not, disclose to clients their financial arrangements with drug companies, claiming that such information is confidential.
This bill provides a simple remedy to address this problem. It would allow PBM clients to get better information from PBMs about their financial dealings. By providing greater sunshine on PBMS, the bill would help ensure PBMs accomplish what they promise to accomplish for their clients. This a consumer issue as well as one for PBM clients because ultimately the cost of prescription drugs is paid by consumers. By ensuring greater accountability by PBMs, this bill would help in the fight to contain rising prescription drug prices.
Earl Lui
Senior Attorney
cc: Assembly Member Pavley