UC Health pharmacy leaders told the Health Services Committee that rapidly rising pharmaceutical costs — especially for one-time curative gene and cellular therapies delivered in outpatient settings — are driving a growing share of system expenses and warrant system-level strategy, including exploring a UC-run pharmacy benefit manager.

The presentation on UC medical center pharmacy operations described national and system trends and urged continued advocacy, systemwide clinical coordination and further study of a transparent PBM approach. “There are roughly 2,000,000 unique patients that we take care of every year, about 9,000,000 outpatient visits across the system,” Chad Hatfield, chief pharmacy officer at UC Davis Health, said. “From an operating expenditure, we're sitting about $21,000,000,000 of pharmacy sits around 2.6” percent of operating expense as a stand-alone drug-expenditure line, Hatfield said.

Why it matters: Presenters said the largest drivers are (1) the rise of high-cost curative therapies (gene and cell therapies that can cost millions per course), (2) migration of treatments from inpatient to ambulatory settings (infusion centers, specialty retail), and (3) complex third‑party contracting through pharmacy benefit managers that limits price transparency and captured rebates. Dave Rubin, executive vice president, framed PBM discussions as part of a broader strategy to align UC’s negotiating leverage with payers and manufacturers.

Key facts and system response
- A UC example presented: clinicians used a curative gene therapy for a pair of pediatric patients that dramatically improved mobility; Hatfield used that case to illustrate clinical benefit alongside high cost. He said some new therapies now price in the millions compared with six‑figure single‑drug prices a decade ago.
- UC system pharmacy spend has grown year-to-year; presenters attributed part of the increase to acquisitions adding sites and part to pure price inflation. Hatfield said roughly two-thirds of drug spend is in ambulatory care.
- UC maintains formulary and clinical review structures (local pharmacy and therapeutics committees and a system-level high-impact council) and leverages the 340B program and other mitigation strategies, which have generated multi‑hundreds of millions in savings in recent years, presenters said.

PBM opportunity and next steps
Presenters described a “transparent PBM” or a UC-managed PBM as a possible route to retain rebates and manage formularies closely with academic clinicians. Mike Goode, an external advisor, reported that his institution created an internal PBM and saw an immediate rebate recovery (about 8% on $35 million in spend in his example) that previously went to opaque intermediaries. “If we can do that at a small school, the power of the UC system, a PBM driven by the UC system should really bring a pharmaceutical savings,” Goode said.

Committee members pressed staff on implementation scope and sequencing: whether a UC PBM would start with employee health plans, then expand to public or commercial lives, and what governance and vendor, plan, and clinical partnerships would be required. Cedric Terrell and other pharmacy leaders said they would return with a concrete implementation plan and resource estimate; Cedric agreed to bring back details in upcoming meetings.

Policy and state interaction
Presenters flagged the Office of Health Care Affordability (OHCA) growth targets in California and said UC is engaged with state policy makers to ensure novel therapies and venue-of-care distinctions are considered in affordability rules. They also discussed opportunities with state purchasing and wholesaler contracts and noted potential “lockouts” by some PBMs or retail chains that can prevent UC pharmacies from dispensing certain medicines for patients.

Quotes and attribution follow the meeting transcript and Q&A. The discussion was advisory; no committee motions or votes were taken on policy changes. Staff were directed to return with a detailed PBM option paper, including proposed pilot populations, resource needs, and estimated savings.

Ending: Regents signaled support for further study and asked staff to return with a specific plan and timeline. Presenters recommended continued system advocacy on drug affordability, preserving 340B and other mitigation programs, and leveraging UC clinical expertise in any PBM design.