A battle for fair practices in the pharmacy industry has been fought by small California pharmacy owners, and the outcome is now being closely examined.
This summer, a pharmacy in Land Park faced closure due to the owner's claim of low medication reimbursements. In response, independent pharmacy owners across California united to advocate for new legislation addressing the industry's payment practices.
Two miles away, at the state Capitol, lawmakers debated a set of regulations targeting the middlemen between pharmacies, insurers, and drugmakers. In October, Governor Gavin Newsom signed a bill imposing restrictions on Pharmacy Benefits Managers (PBMs), the entities that manage prescription drug benefits for health insurers.
The new legislation prohibits PBMs from steering patients towards their affiliated pharmacies or reimbursing non-affiliated pharmacies less. It also bans spread pricing, where PBMs charge insurers more than they pay pharmacies.
Clint Hopkins, CEO and pharmacist at Pucci's Pharmacy, described the outcome as a "major win" for Californians and pharmacies, particularly highlighting the prohibition of spread pricing as a significant victory. Susan Bonilla, CEO of the California Pharmacists Association, echoed these sentiments, calling the legislation a "landmark bill."
However, not all independent pharmacy owners share the same enthusiasm. Some remain cautious, recognizing that the true impact of the regulations will only become apparent over time and that the changes may not significantly impact their financial bottom lines.
Bonilla acknowledged that some pharmacy owners were disappointed by the amendment that removed a provision setting minimum "dispensing fees" for medications covered by private insurance. Hopkins expects further legislative efforts next year to reintroduce provisions that were removed from Senate Bill 41.
"There's definitely going to be more legislation next year," Hopkins said.
Advocates for PBMs argue that the bill is misguided and will give drug companies more leverage to increase costs. The PBM industry has traditionally maintained that drug prices are set by pharmaceutical companies, a stance that has faced criticism and scrutiny in recent years.
PBMs have come under increased scrutiny as they have consolidated and merged with other healthcare companies. Pharmacy owners have complained that PBMs' low reimbursements threaten their survival. Owners report receiving reimbursements below their costs for certain medications, and some suggest that taking on more patients can sometimes mean taking on more losses.
"It used to be a volume game," said Jasmine Basrai, chief operating officer of Haller's Pharmacy and Medical Supply. "If I never had to fill a prescription again, I'd probably be much better off."
The debate over drug pricing and the role of PBMs has been ongoing nationally for over a decade, resulting in various state regulations, including PBM registration requirements, spread pricing bans, and increased transparency.
Paul Markovich, former CEO of Blue Shield of California and an advocate for industry changes, views the legislation as a "major breakthrough" despite recognizing that it won't immediately fix drug pricing issues.
Markovich sees the bill's passage as a reinforcement of Blue Shield's decision earlier this year to stop using its traditional PBM, CVS Caremark, for all but specialty drugs. The company now contracts directly with pharmaceutical companies for certain drugs and divides its pharmacy management responsibilities across multiple entities.
"We've been trying to push this rock up a hill for the better part of a decade," Markovich said.
Sonya Frausto, the Land Park pharmacist who closed her storefront, sold her pharmacy's inventory to Safeway and filed for bankruptcy to manage the business's remaining debts. She believes it will take until 2026 to measure the new law's effect, expressing cautious optimism.
"I think there is still some cautiousness for 2026, although it is good legislation. It's not everything that we want or deserve as pharmacy owners," Frausto said.
Despite the mixed reactions, independent pharmacists believe there has been an increase in public awareness about the complex payment, reimbursement, and rebate system they operate within.
"When I started working here, nobody knew what a PBM is. Now, when I go to D.C., you don't even have to explain it anymore," Basrai said.
The story of California's pharmacy owners fighting for fair practices highlights the ongoing struggle for balance in the healthcare industry, with the new legislation serving as a step towards addressing the concerns of independent pharmacies.
