On October 11, 2025, California Governor Gavin Newsom signed into law State Bill 41 (SB 41), which calls for the regulation of Pharmacy Benefit Managers (PBMs) by mandating rebate transparency and pass-through, outlawing spread pricing, and providing a fiduciary duty on PBMs to act in the best interest of the payers. Specifically, the law, which went into effect on January 1, 2026, states that “[a] pharmacy benefit manager has a fiduciary duty to a self-insured employer plan that includes a duty to be fair and truthful toward the client, to act in the client’s best interests, to avoid conflicts of interest, and to perform its duties with care, skill, prudence, and diligence.”
One would think PBMs, who tout themselves as pharmacy benefits experts that help lower drug costs for health plans and their patients, would want to assure their clients that they will always act fairly, truthfully, and in the client’s best interests. After all, the client (i.e. the plan) is paying them. However, it is all too common in the PBM playbook to not do right by clients but rather to profit off them at every turn.
Thus, it is no surprise that the Pharmaceutical Care Management Association (PCMA), the national association representing PBMs, is suing to overturn the section of SB 41 that requires PBMs to act in the plans’ best interests as a fiduciary.[1] PCMA’s challenge is essentially an implied admission that PBMs do not always act in their clients’ best interests, and forcing them to do so likely will cut into their financial bottom lines. A loose interpretation of the lawsuit is the PBMs saying, “Dear Judge…please allow us to not act in the plans’ best interest (and, by extension, not act in the patients’ best interest because the patients/employees pay for the plan benefits).”
PCMA’s legal argument is that the fiduciary duty provision of SB 41 is preempted by the Employee Retirement Income Security Act of 1974 (ERISA). But ERISA and SB 41 are consistent and not in conflict since both provide a legal obligation to act in the best interest of plan participants and beneficiaries. The real dispute is that PBMs try to contract away their fiduciary duty via the terms of their pharmacy benefits agreements. Case in point—PCMA argues that SB 41 “will upend existing contracts.”
Rather than argue that SB 41 is problematic because it will reduce PBM profits, PCMA argues that the law, which demands acting in the best interests of plans, will result in California plans paying more! Specifically, PCMA alleges that plans will have to pay higher premiums in exchange for less generous benefits. But a law that requires PBMs to act in the best interests of plans and patients should have the opposite effect – it should result in reduced premiums and better benefits. What the PBMs are really saying is that if they can’t conceal the ways they profit and retain revenues from plans, then they will just have to charge more up front in fees to keep their profit levels the same.
How Frier Levitt Can Help
Frier Levitt represents self-funded employers and plan sponsors in their dealings with PBMs. Our deep understanding of the legal landscape and PBM practices uniquely positions us to conduct comprehensive audits. We assess contract compliance, financial accuracy, and performance metrics to ensure that your PBM arrangements align with fiduciary standards and your company’s financial interests.
Contact Frier Levitt today to learn how our PBM audit services can fortify your defense against fiduciary breach claims and secure the financial health of your employee benefits plan.
Frier Levitt provides strategic, industry-focused legal counsel tailored to your needs. Contact our team today to learn how we can help you.
[1] See Pharmaceutical Care Management Association v. Robert Bonta, et al., 2:26-cv-0012 (C.D. Ca.) filed on January 2, 2026.
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