California has taken a significant step towards health care equality with Governor Gavin Newsom inking his signatory on Senate Bill 786 (SB 786), as of October 7, 2023. This milestone legislation is a prohibitive mandate against pharmacy benefit managers (PBMs) discriminating against covered entities involved in the 340B Program. As reported by McDermott Will & Emery, this law has broad implications for the future of health care services.
For those unfamiliar with the industry-specific vocabulary, PBMs are third-party administrators of prescription drug programs for commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans. Essentially, they serve as a middleman between drug manufacturers and pharmacies, which allows them to negotiate drug prices and determine the extent of coverage for certain medications. The anti-discrimination law forbids these PBMs from playing favorites or discriminating in any part of their operations towards covered entities under the 340B Program.
The 340B Program, run by the US Health Resources and Services Administration, ensures that certain outpatient drugs to eligible health care organizations are available at significantly reduced prices. The program’s goal is to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services. Entities covered under this program include federally-qualified health centers, certain types of hospitals, and specialized clinics like STD clinics or black lung clinics.
With the introduction of SB 786, PBMs operating in California can no longer discriminate against these entities. This implies they cannot deny 340B pharmacies or withhold discounts or reduce payments simply because these entities acquire drugs through the 340B program. Also, the fines imposed by the law for violations can significantly deter potential discriminative practices by PBMs.
As the new law takes effect, it symbolizes a major step towards achieving equitable health care in the Golden State by preventing any form of discrimination against the covered entities. Yet, it is crucial for legal professionals working with these organizations to understand the nuances of this law and its potential implications on their operations.
Governor Newsom’s signature on SB 786 marks a crucial moment in California’s health care sector. This legislation represents a much-needed attempt to bring equality and fairness to the golden state’s pharmacy benefits management system and protect the critical role of the 340B Program in serving the health care needs of those most in need.