California Gov. Gavin Newsom vetoed bipartisan legislation on Saturday that would have reformed pharmacy benefit managers in the state, prompting the bill’s author to call the decision “a massive fail.”
Democrat state Sen. Scott Wiener’s bill would’ve required PBMs to obtain state licenses and provide more transparency on how much they pay drugmakers. The bill would have also prohibited health insurers from charging more than the price that they paid for the drug.
“This veto is nearly certain to kneecap the Governor’s own CalRx plan to have the state directly manufacture affordable generic insulin,” Wiener said in a statement.
In a veto message, the governor questioned whether the licensure effort is the right mechanism to keep prescription drugs accessible and affordable.
Newsom also wrote that he was directing the California Health and Human Services Agency to propose new legislation that would gather more data on PBMs in 2025. Newsom felt that the state needed “more granular information to fully understand the cost drivers in the prescription drug market and the role that PBMs play in pricing.”
Other stakeholders who lined up in support of the bill voiced their frustration through Wiener’s office.
Melissa Kimura, president of the California Pharmacists Association, said her organization was “incredibly disappointed” in the governor. The head of the California Chronic Care Coalition said the veto was “a victory for predatory middlemen and corporate profits.” Spokespeople for the San Francisco AIDS Foundation and Los Angeles LGBT Center also opposed the veto.
A CVS Health spokesperson, however, told Endpoints News via email, “We share Governor Newsom’s focus on improving access to and lowering the cost of prescription drugs, and appreciate his thoughtful approach to better understand the drug supply chain before implementing legislation that may have unintended consequences.”
Spokespeople for two of the other three largest PBMs — Optum Rx and Express Scripts — did not immediately respond to a request for comment.
It’s at least the second time that Newsom vetoed a bill that would clamp down on PBM practices after he axed a 2021 measure that would’ve restricted health plans from steering patients to specific pharmacies.
The latest bill garnered significant bipartisan support, even for a Democratic stronghold. The third reading of the bill in the state assembly earned 70 yes votes and 9 abstentions. The final vote in the state Senate had 38 votes in favor and two against.
The PBM industry has been able to largely withstand a groundswell of momentum against it, despite public hearings in Congress and, most recently, a lawsuit from the Federal Trade Commission over insulin prices. Federal legislation to rein in PBMs’ predatory practices is also under consideration and may come up for passage after the November election.