California's Anti-PBM Legislation Draws Fire from FTC Staffers

Ken Rankin
Published Online: Monday, November 1, 2004

Ignoring concerns raised by pharmacists and consumer leaders in California, officials at the Federal Trade Commission (FTC) called on Governor Arnold Schwarzenegger to veto legislation intended to prevent prescription drug profiteering by pharmacy benefit managers (PBMs).

The bill, which passed the state Senate and Assembly earlier this year, requires PBMs to disclose arrangements under which they are paid by pharmaceutical manufacturers to give preferences to certain drug products.

The goal of the legislation is to increase cost transparency in transactions between PBMs and their health plan clients, and ensure that any realized cost savings are passed on to consumers. The FTC, however, concluded that the bill "is actually more likely to increase the cost of pharmaceuticals, increase health insurance premiums, and reduce the availability of insurance coverage" for pharmaceuticals.

"This bill looks good on paper but may well harm consumers," said Maureen Ohlhausen, acting director of the FTC's Office of Policy Planning. "Many drug substitutions are good for consumers' health and their pocketbooks," but the California bill "makes all substitutions more difficult, time-consuming, and expensive."

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