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Assembly panel hears joint HCAI/DMHC plan to license PBMs and require drug‑supply reporting
Summary
The Department of Managed Health Care and HCAI presented a joint May Revision proposal to require licensure of pharmacy benefit managers contracting with California insurers and to mandate PBM data reporting to HCAI; the DMHC would gain audit and enforcement authority and both agencies would seek positions to implement the new requirements.
The Department of Managed Health Care (DMHC) and the Department of Health Care Access and Information (HCAI) told the Assembly Budget Subcommittee No. 1 on Health that the May Revision proposes replacing current pharmacy benefit manager (PBM) registration with a licensure requirement and expanding data reporting to HCAI's Health Care Payments Data (HPD) program.
DMHC Director Mary Watanabe summarized the proposal: PBMs that contract with a DMHC‑licensed health plan or a California Department of Insurance‑regulated insurer would need to obtain a DMHC license, submit quarterly financial statements and other information, be subject to DMHC audits for compliance, and pay annual assessments to fund regulatory work. HCAI would use PBM submissions to augment its all‑payer data holdings with PBM‑level price, rebate and payment information to support policy analysis on prescription‑drug pricing.
HCAI Director Elizabeth Landsberg and DMHC staff said the PBM data would include national drug codes, therapeutic categories, wholesale acquisition cost, average wholesale price, member counts, fees and rebates, and would be grouped by whether pharmacies are owned by the PBM. HCAI said it already collects many payer and manufacturer data but lacks direct PBM information needed to evaluate the impacts of vertical integration and rebate and spread‑pricing practices.
Implementation resources: DMHC requested six positions and funding authority (amounts shown in the May Revision) to implement licensure and enforcement functions; HCAI requested its own positions for data intake and analysis. DMHC noted the proposal is not funded from the general fund; the department would finance work through assessments on licensed PBMs.
Policy process and oversight: The LAO recommended deferring major policy initiatives with limited bucketed budget impact to the policy process so the Legislature can fully examine statutory trade‑offs and regulatory design. Legislators asked whether licensing and data reporting must occur together; DMHC and HCAI said the enforcement authority associated with licensure is critical to ensuring PBMs submit the legally required data.
Why it matters: PBMs are central to prescription‑drug distribution and finance. The proposed licensure and data reporting would create new regulatory scrutiny and allow the state to analyze rebates, manufacturer fees and pricing across the supply chain. The LAO urged lawmakers to weigh policy choices about the scope of reporting and consequences for market participants.
Next steps: Committee members requested more detailed cost and implementation information and suggested the Legislature consider trailer‑bill language and reporting requirements to enable legislative oversight. The subcommittee did not vote on the proposal at the hearing.
