California’s SB-939 Seeks To End Discriminatory PBM Practices Against 340B Covered Entities

On March 24, 2022, Senators Richard Pan and Scott Wiener of California introduced new legislation (SB-939) targeting abusive Pharmacy Benefit Manager (PBM) practices in connection with the federal 340B program. By way of background, the 340B program requires drug manufacturers to provide outpatient drugs to covered entities at significantly reduced prices so that those entities can stretch scarce federal resources to provide more comprehensive services to more patients, improving health outcomes for vulnerable populations.

Declaring that PBMs and other for-profit entities undermine the benefits of the federal 340B program, SB-939 prohibits PBMs from discriminating against covered entities with respect to:

• Payment terms and conditions that distinguish between 340B drugs and other drugs, account for 340B discounts, or are less favorable than payment terms and conditions for other non-340B drugs;
• Terms and conditions that account for covered entities’ participation in the 340B program, including restrictions on participation in pharmacy networks;
• Requiring covered entities to disclose covered drugs or covered drug costs;
• Refusing to contract with covered entities or terminating contracts with covered entities for reasons that do not apply equally to non-340B entities;
• Retaliating against covered entities for exercising rights under this legislation; and
• Interfering with an individual’s choice to receive covered drugs from a covered entity whether in person or via delivery/mail services.

SB-939 also endeavors to control drug manufacturers’ behavior towards covered entities by prohibiting those manufacturers from imposing preconditions, limits, delays, or other barriers to the purchase of covered drugs.  For instance, drug manufacturers cannot limit the number or type of locations covered entities may dispense covered drugs or condition the sale of covered drugs on enrollment with third-party vendors or on the disclosure of claims data.

Through SB-939, California joins the many other states that have introduced and/or passed new legislation since the new year designed to level the playing field between PBMs and 340B covered entities, as previously reported by Frier Levitt.

How Frier Levitt Can Help

Frier Levitt has substantial experience challenging abusive PBM practices and formulating strategies to assist pharmacies and covered entities in vindicating their rights. Frier Levitt also has extensive knowledge regarding the contractual relationships between 340B contracted pharmacies, covered entities, and PBMs, as well as related issues concerning audits, network access, and reimbursement. To learn more, contact us today to speak with an attorney.