This summer, as a Land Park pharmacy readied to shut down — under pressure, its owner said, by low reimbursements for its medications — independent pharmacy owners across the state advocated for new legislation on the industry’s payment practices.

Two miles away in the Capitol, state lawmakers were debating a slate of new regulations on the companies that serve as middlemen between pharmacies, insurers and drugmakers. In October, the Gov. Gavin Newsom signed a bill placing new restrictions on pharmacy benefits managers — or PBMs — which manage health insurers’ prescription drug benefits, create formularies and negotiate fees and rebates.

Now independent pharmacy owners are taking measure of the final legislation, and assessing what it may mean for their businesses. The bill prohibits PBMs from steering patients toward their affiliated pharmacies, or reimbursing nonaffiliated pharmacies less. It also bans spread pricing, the practice of charging insurers more than the PBM pays the pharmacy.

“Overall, what we got is a major win for Californians and for pharmacies,” said Clint Hopkins, CEO and pharmacist at Pucci’s Pharmacy on Folsom Boulevard in East Sacramento. The prohibition of spread pricing, he added, is “huge for all of us.”

“We are extremely happy,” said Susan Bonilla, CEO of the California Pharmacists Association, who described the legislation as a “landmark bill.”

Some independent pharmacy owners were more reserved, noting that it will take time to gauge how the state enforces the new regulations, and to what extent the changes impact their bottom lines. Bonilla acknowledged that some pharmacy owners were disappointed that a provision was amended out that would have set minimum “dispensing fees,” for medications covered by private insurance. Hopkins said he expected to see legislation next year that would seek to bring back provisions that were amended out of Senate Bill 41.

“Definitely, there’s going to be more legislation next year,” Hopkins said.

Advocates for PBMs maintained that the bill was misguided, and that it will give drug companies more leverage to raise costs. The PBM industry has generally argued, faced with criticism in the past over low pharmacy reimbursements, that drug prices are set by drugmakers.

“As written, patients, employers, and unions will pay higher drug prices,” Greg Lopes, vice president of public affairs and communications for the Pharmaceutical Care Management Association, said in an email. “Pharmaceutical companies are ripping off patients, and this bill gives them more power to charge even higher prices.”

Higher scrutiny

Though PBMs came into existence around 60 years ago, lawmakers and regulators have leveled greater scrutiny in recent years as PBMs consolidated and merged with other health care companies — and as pharmacy owners complained that PBMs reimbursed them too little to survive.

Pharmacy owners have reported receiving reimbursements lower than their costs for certain medications. The payments are structured in such a way, they say, that taking on more patients sometimes means taking on more losses. Revenues from other sources, like providing vaccinations and selling retail items in their stores, help fill in the gaps.

“It used to be a volume game,” said Jasmine Basrai, chief operating officer of Haller’s Pharmacy and Medical Supply, based in Fremont. “If I never had to fill a prescription again, I’d probably be much better off.”

The PBM industry has maintained that drug prices are set by pharmaceutical companies, and argued that they negotiate to lower costs. The health care industry has debated those points, nationally, over the past decade, and in that time dozens of states have passed regulations, like requiring PBMs to register with state agencies, banning spread pricing, and requiring PBMs to disclose more information.

Paul Markovich, the former CEO of Blue Shield of California, who has advocated for changes to the industry, said the legislation won’t fix drug pricing issues overnight, but that he considered it a “major breakthrough” all the same.

Markovich said he viewed the bill’s passage as a reinforcement of changes Blue Shield of California made earlier this year, when it stopped using its traditional PBM, CVS Caremark, for all but specialty drugs. The company divided its pharmacy management responsibilities across several different entities, including Amazon Pharmacy and Mark Cuban Cost Plus Drug Company, and began contracting directly with pharmaceutical companies for certain drugs.

“We’ve been trying to push this rock up a hill for the better part of a decade,” said Markovich, who now serves as president and CEO of the insurer’s parent company, Ascendiun.

‘Not everything we want’ Sonya Frausto, the Land Park pharmacist who shuttered her storefront in August, said she sold her pharmacy’s inventory to Safeway, and gave the grocery chain her prescriptions at no cost. She said she filed for bankruptcy to manage the business’ remaining debts.

It won’t be possible, Frausto said, to measure the effect of the new law until pharmacies can compare their 2026 pricing to 2025.

“I do think, at least for 2026 — although it is good legislation — I think there is still some cautiousness,” she said. “It’s not everything that we want or deserve as pharmacy owners.”

Regardless, independent pharmacists said they believed there has been an increase in public awareness about the complex system of payments, reimbursements and rebates in which they operate. “When I started working here, nobody knew what a PBM is,” Basrai said. “When I go to D.C., you don’t even have to explain it anymore.”

Read more at The Sacramento Bee.