California families and employers would face higher prescription drug costs under SB 524

SB 524 would impose double-digit cost increases for some California patients and employers

A bill currently under consideration in Sacramento, Senate Bill 524 (SB 524), would ban health plans from offering more affordable options to patients who are able to access savings when receiving their prescriptions through the mail or at specific pharmacies.

This proposal would affect both commercial health plan coverage and public programs like Covered California. SB 524 would have negative consequences for California’s most vulnerable populations: mail-order pharmacies and exclusive pharmacy networks disproportionately serve individuals managing chronic illnesses and individuals with complex conditions requiring high-cost, high-touch medications, including cancer, infertility, hemophilia and inflammatory conditions.

The proposal would provide favorable treatment to the $76 billion independent pharmacy industry at the expense of affordable prescriptions for California families and employers. Currently, PBM tools save Californians $962 per person, per year, on average, but SB 524 jeopardizes these savings.

Many California patients and employers would face double-digit percentage increases in prescription drug costs if SB 524 is enacted, according to a new CVS Health analysis released today. The analysis examined a representative sample of the company’s PBM clients in California.

“CVS Health is committed to ensuring that medications are safe, effective, and affordable for California families and businesses. SB 524 would impose higher costs on all Californians and particularly target vulnerable individuals managing chronic illnesses and complex conditions,” said Leanne Gassaway, CVS Health Vice President, State Government Affairs. “Why should we increase prescription drug costs for our most vulnerable residents in order to enrich California’s independent pharmacies? Lawmakers in Sacramento should abandon these harmful proposals and focus instead on ways to tackle the root cause of prescription drug spending: the high prices set by big drug companies.”

The CVS Health analysis examined a representative sample of PBM clients, finding that had SB 524 been in place, actual 2020 gross prescription drug costs would have increased for this select group of clients by approximately the following amounts:

In addition, according to California’s most recent Prescription Drug Cost Transparency Report, specialty drugs accounted for more than half (56.1 percent) of total annual spending on prescription drugs by consumers and health plans in the state. With the report finding $10.7 billion in total spending, that percentage represents more than $6 billion in annual spending on specialty drugs in California that may be impacted by cost increases due to SB 524.

SB 524 would prohibit small businesses from offering lower-cost pharmacy options to their employees by effectively banning preferred pharmacy networks. Just as health insurance plans use preferred networks of doctors, hospitals, and other providers, they rely on preferred pharmacy networks to keep prescription drug costs down. If enacted, SB 524 would benefit independent pharmacies while raising costs for patients and small businesses paying for benefits – including copayments, deductibles, and premiums.

Californians across the board would face higher medical costs if SB 524 is enacted, with major negative impacts to the health insurance offered by small businesses and labor unions in the state. SB 524 is the wrong solution to address rising health care costs.

Contacts

Phil Blando
Senior Director, PBM Communications
Phillip.Blando@CVSHealth.com

Brittney Manchester
Director, PBM Communications
Brittney.Manchester@CVSHealth.com