A new bill would make drug pricing more fair for Californians | Opinion

It’s time to stop kickbacks on prescription drugs

As the president and CEO of Ascendiun, the nonprofit parent company of Blue Shield of California — one of California’s largest health insurers — I believe that all health care decision-making should be based on what is best for the patient. Yet, in the murky world of pharmacy benefit managers and drug pricing, kickbacks (such as fees, rebates and incentives for prescribing one drug over another) distort the market.

That’s why we need Senate Bill 41, authored by Sen. Scott Wiener, D-San Francisco, which will require a more fair and transparent pricing model for pharmacy benefit managers, the third-party companies that manage prescription drug benefits on behalf of health insurers, employers, unions and government programs. Pharmacy benefit managers often accept a kickback from drug manufacturers in exchange for placement of a particular (and usually more expensive) drug on the list of covered medications, also known as a formulary.

SB 41 makes three important changes: First, pharmacy benefit managers must ensure that all rebates go to the payer and consumers; it de-links the fees they charge from the cost of the drug, eliminating the incentive to place higher cost drugs on formularies; and third, it eliminates their ability to mark-up generics. These reforms will put consumers’ interests first and go a long way toward fulfilling Blue Shield of California’s non-profit mission of creating a health care system that is affordable for all.

SB 41 is common sense and bipartisan. Democrats and Republicans across the country and in the halls of Congress all agree that pharmacy benefit managers need to be reigned in. So does President Donald Trump, who declared: “We’re going to cut out the middleman and facilitate the direct sale of drugs at the most favored national price directly to the American citizen.”

Naturally, there is opposition to this bill largely from those who financially benefit from the current way of doing business. Granted, they would never say their advocacy is a result of financial self-interest, but we all know better.

Here’s why these kickbacks are so problematic: Consider the case of Humira, a drug used to treat a variety of inflammatory conditions such as rheumatoid arthritis. With the patent expiration, numerous other companies began to offer the same kind of drug in a generic form, referred to as “biosimilars.” One of those companies, Fresenius Kabi, agreed to sell a Humira biosimilar to Blue Shield of California for $545 per monthly dose as compared to the nearly $7,000 monthly “list price” and the approximately $2,100 net price with “rebates and fees” for Humira.

With competition like that, why would anyone buy Humira? But people did. In January of 2024, one year after biosimilars became available, Humira had a 96% market share, and the drug maintained more than 70% market share for all of 2024. With such highly credible alternatives available for a fraction of the price for such a long time, how is this possible? It has to do with the kickbacks.

The “business model” for pharmacy benefit managers is to negotiate rebates from drug manufacturers that are tied to the list price of the drug and formulary placement fees based upon the list price of the drug. In the case of Humira, last year there were nearly $5,000 of rebates and fees kicked back to pharmacy benefit managers each month for each patient. While a lot of that money was then passed back to others, including health plans and employers, much of that money was skimmed off the top by pharmacy benefit managers and their affiliates.

All of this is legal, but it shouldn’t be. By enacting SB 41, we can foster a more fair, equitable health care system.

Paul Markovich is president and CEO of Ascendiun (formerly president and CEO of Blue Shield of California).

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