Gov. Newsom Targets Prescription Drug Middlemen in New Reform Proposal

A pharmacist handing a customer prescription medication.
Photo by Getty Images on Unsplash. Unsplash+ License obtained by editor.
Author: Tori Stevens
Published: 14 May, 2025
Updated: 16 May, 2025
2 min read

SACRAMENTO, CALIF. — California Gov. Gavin Newsom is reviving efforts to regulate the powerful and often opaque intermediaries at the center of the prescription drug supply chain. In a proposal unveiled as part of his revised May budget, Newsom calls for stringent oversight of pharmacy benefit managers (PBMs), companies he says are driving up patient costs.

“Prescription drug prices are out of control,” Newsom said in a May 13 statement. “We’re shining a light on hidden costs.”

Running for President as an Independent: How it Really Works

PBMs like CVS Caremark, OptumRx, and Express Scripts act as middlemen between drug manufacturers, pharmacies, and insurers. 

As IVN recently reported, PBMs are among American healthcare's least transparent but most powerful actors. While they claim to negotiate discounts and control costs for health plans, critics argue PBMs inflate prices by pocketing manufacturer rebates and restrict patient access to medications.

As IVN has reported for almost a decade, including in its January 2025 report, “The Hidden Power of PBMs: A System Under Scrutiny,” their influence over U.S. drug pricing is vast and largely unchecked.

Newsom’s new proposal would:

  • Require PBMs to be licensed and regulated by the Department of Managed Health Care (DMHC).
  • Impose a fiduciary duty to act in the best interest of clients.
  • Mandate operational and financial reporting, including audited statements.
  • Require drug pricing transparency, with PBMs reporting detailed price data to the Department of Health Care Access and Information (HCAI).
  • Give DMHC authority to review contracts, perform audits, and penalize violations.

The proposal marks a pivot for Newsom, who vetoed PBM legislation last year, saying he was unconvinced it would lower drug prices.

“I believe that PBMs must be held accountable to ensure that prescription drugs remain accessible throughout pharmacies across California and available at the lowest price possible. However, I am not convinced that SB 966's expansive licensing scheme will achieve such results,” the Governor wrote in his veto message.

Newsom’s office has not said why his position changed, but the new proposal arrived as national scrutiny of PBMs intensified.

IVP Donate

The governor’s announcement came less than one month after President Donald Trump signed an executive order targeting PBMs’ “opaque” practices. Trump’s executive order directs the Department of Labor to require employer-sponsored health plans to disclose all PBM compensation and calls on HHS, the FTC, the DOJ, and the Department of Commerce to investigate anti-competitive behavior in the drug supply chain.

In California, the pressure to act is urgent. State data shows prescription drug spending rose 56% from 2017 to 2023, increasing by nearly $4.9 billion. In 2023, the state’s health plans paid about $13.6 billion for prescription drugs, according to the California Department of Managed Health Care (DMHC) Prescription Drug Cost Transparency Report for Measurement Year 2023

Newsom is asking the legislature to pass the PBM reforms as part of the budget process this summer. If enacted, California could become one of the first states to impose comprehensive oversight of PBMs, potentially setting a national precedent.

Related articles

Image of a dark figure taking cash from a patient needing prescription drugs.
Pharmacy Benefit Managers and Trump’s Executive Order Attack on Drug Pricing Middlemen
WASHINGTON, D.C. — In less than a month, President Donald Trump has signed two major executive order...
12 May, 2025
-
5 min read
Prescription medication spilling out of bottle.
Pressure Mounts for PBM Reform Amid Rising Drug Costs
The Hidden Power of PBMs: A System Under ScrutinyPharmacy Benefit Managers (PBMs) have long operated...
29 Jan, 2025
-
5 min read

Latest articles

US map divided in blue and red with a white ballot box on top.
Could Maine Be the First State to Exit the National Popular Vote Compact?
On May 20, the Maine House of Representatives voted 76–71 to withdraw the state from the National Popular Vote Interstate Compact (NPVIC), reversing course just over a year after Maine became the 17th jurisdiction to join the agreement....
04 Jun, 2025
-
3 min read
New York City
Nine Democrats Face Off in NYC Mayoral Debate as Ranked Choice Voting, Cuomo Probe, and Independent Bid from Adams Reshape the Race
A crowded field of nine Democratic candidates will take the stage tonight, June 4, in the first official debate of the 2025 New York City mayoral primary. Held at NBC’s 30 Rock studios and co-sponsored by the city’s Campaign Finance Board, NBC 4 New York, Telemundo 47, and POLITICO New York, the debate comes at a pivotal moment in a race already shaped by political upheaval, criminal investigations, and the unique dynamics of ranked choice voting....
04 Jun, 2025
-
6 min read
Elderly woman sitting in wheelchair staring out window.
Three Reps Put Party Labels Aside to Strengthen U.S. Role in Global Fight Against Alzheimer’s
Two California members of Congress, Ami Bera, M.D. (D-CA-06) and Young Kim (R-CA-40), introduced a bill Wednesday with Republican Pennsylvania Rep. Brian Fitzpatrick aimed at bolstering the US's global role in the battle against Alzheimer’s disease. ...
04 Jun, 2025
-
3 min read