Attorney General Bonta Defends State Authority to Regulate Rising Cost of Prescription Drugs

Joins bipartisan coalition of attorneys general in support of Oklahoma's regulation of pharmaceutical go-betweens

OAKLAND – California Attorney General Rob Bonta today announced joining a coalition of 35 attorneys general in filing an amicus brief in the U.S. Court of Appeals for the Tenth Circuit in support of Oklahoma’s authority to regulate Pharmacy Benefit Managers (PBMs). PBMs act as a middleman between pharmacies, drug manufacturers, health insurance plans, and consumers. This position allows them to have a significant impact on consumers’ access to affordable prescription drugs.

“Ensuring access to affordable and regulated prescription medication is essential to the health and well-being of Californians,” said Attorney General Bonta. “The expanded power of PBMs in the pharmaceutical industry has had an outsized, negative impact on drug pricing and the availability of pharmacies in vulnerable communities. States have a responsibility to regulate PBMs to curb the rising cost of lifesaving prescription drugs.”

Over the years, PBMs have expanded into a multi-billion dollar industry, while doing nothing to lower the prescription drug prices paid by health plans to drug manufacturers. In response, states like California have increased their regulation of PBMs to protect residents from the rising cost of prescription medications. This regulation is essential because the price consumers pay for pharmaceuticals has continually risen under the oversight of PBMs. 

The regulation of PBMs is also critical to ensuring residents have access to their prescribed medication. As PBMs consolidate with big-name retail pharmacies like CVS and health plans such as Aetna, independent pharmacies are reimbursed at below-market rates and, as a result, are often forced to close. In California, the closure of neighborhood pharmacies disproportionately occurs in communities that are majority Black and Latino. According to Health Affairs, in major metropolitan areas in the U.S. between 2007 and 2015, pharmacies were less likely to open and more likely to close in neighborhoods with majority Black or Hispanic/Latino residents. 

In today’s brief, the coalition of attorneys general argue that:

• Regulation of PBMs protects consumers and curbs abuses by the multi-billion-dollar pharmaceutical industry. Prescription drug spending in the United States has increased year after year. In 2021, the U.S.’s total drug spending grew by 7.7% to $576.9 billion, and it is projected to continue increasing and comprising more of the country’s gross domestic product. Running parallel to this massive increase, the role of PBMs in the industry has expanded over the past 50 years, and PBMs now control nearly every aspect of a health plan’s pharmacy benefits. PBMs make money from large fees and rebates while spending as little as possible to reimburse pharmacies, including neighborhood pharmacies, for medications. Without state regulation, PBMs will be able to operate in the shadows – driving down reimbursement rates and increasing drug prices.

• Federal law does not preempt state laws that govern transactions between PBMs and pharmacies. In 2020, the U.S. Supreme Court reaffirmed in Rutledge v. PCMA that the Employee Retirement Income Security Act of 1974 does not prevent states from regulating PBMs. The Court’s decision includes laws like those at issue now in Oklahoma.

• Medicare only preempts state laws that conflict with a Medicare standard or rule. Medicare Part D does not preempt Oklahoma’s Preferred-Participation Requirement.

Attorney General Bonta continues to advocate for state regulation of PBMs and other aspects of the healthcare industry. Last year, Attorney General Bonta joined a coalition of 34 attorneys general in filing an amicus brief in support of the state of North Dakota’s position that federal law does not prevent states from regulating PBMs.

In filing today’s brief, Attorney General Bonta joins the attorneys general of Minnesota, Arizona, Arkansas, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Carolina, South Dakota, Texas, Utah, Virginia, and Washington. 

A copy of the brief is available here.