Existing law provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes the willful violation of its provisions a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law requires a health care service plan contract or health insurance policy that provides coverage for outpatient prescription drugs to cover medically necessary prescription drugs.

For a health care service plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2026, this bill would prohibit a health care service plan, health insurer, or pharmacy benefit manager from engaging in specified steering practices, including, among others, requiring an enrollee or insured to use a retail pharmacy for dispensing prescription oral medications, as specified, and imposing any requirements, conditions, or exclusions that discriminate against a an in-network physician in connection with dispensing prescription oral medications. The bill would require a health care provider, physicians office, clinic, or infusion center to obtain consent from an enrollee or insured and disclose a good faith estimate of the enrollees or insureds applicable cost-sharing amount before supplying or administering an injected or infused medication to an enrollee or insured, or sending an enrollee or insured to receive an injected or infused medication, if the setting or manner of administration is different than the setting or manner of administration for which the health care service plan, health insurer, or pharmacy benefit manager directed the enrollee or insured, as specified. Because a willful violation of these provisions by a health care service plan relative to health care service plans would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes the willful violation of its provisions a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law requires a health care service plan contract or health insurance policy that provides coverage for outpatient prescription drugs to cover medically necessary prescription drugs.

For a health care service plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2026, this bill would prohibit a health care service plan, health insurer, or pharmacy benefit manager from engaging in specified steering practices, including, among others, requiring an enrollee or insured to use a retail pharmacy for dispensing prescription oral medications, as specified, and imposing any requirements, conditions, or exclusions that discriminate against a physician in connection with dispensing prescription oral medications. Because a willful violation of these provisions by a health care service plan would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes the willful violation of its provisions a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law requires a health care service plan contract or health insurance policy that provides coverage for outpatient prescription drugs to cover medically necessary prescription drugs.

For a health care service plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2026, this bill would prohibit a health care service plan, health insurer, or pharmacy benefit manager from engaging in specified steering practices, including, among others, requiring an enrollee or insured to use a retail pharmacy for dispensing prescription oral medications, as specified, and imposing any requirements, conditions, or exclusions that discriminate against a physician in connection with dispensing prescription oral medications. Because a willful violation of these provisions by a health care service plan would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Date of Hearing: May 14, 2025

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 577

Author:(Wilson) – As Amended Ver:May 1, 2025

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill prohibits a health plan, health insurer, or pharmacy benefit manager (PBM) from engaging in specified steering practices.

Specifically, this bill:

1. For a health plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2026, prohibits a health plan or insurance policy, or PBM, from doing any of the following:
   
   1. Requiring an enrollee to self-administer or to use a specific in-network health care provider, infusion center, or home infusion pharmacy, for administration of an injected or infused medication, if their in-network health care provider determines it is medically necessary for the medication to be administered by their current in-network health care provider in a physician’s office, clinic, or infusion center.
   2. Requiring an enrollee to use a mail order pharmacy to furnish a health care provider or enrollee with an injected or infused prescription medication for subsequent administration in a physician’s office, clinic, or infusion center to receive coverage for that medication.
      
   3. Imposing upon an enrollee cost-sharing relating to covered injected or infused prescription medication furnished by a health care provider for administration in an in-network physician’s office, in-network clinic, or in-network infusion center that is greater, or more restrictive, than what would otherwise be imposed if a mail order pharmacy furnished the covered drugs to the health care provider or enrollee.
      
   4. Refusing to authorize or pay an in-network health care provider for providing contracted and covered injected or infused prescription medications and related services to enrollees, if the injected or infused prescription medication would otherwise be covered.
      
   5. Requiring an enrollee to obtain prescription oral medications from a retail pharmacy, if the in-network health care provider determines it is medically necessary for the medication to be dispensed by a different in-network pharmacy or by the prescriber.
      
   6. Reimbursing less than the contracted rate for a covered prescription oral medication dispensed by a physician.
      
   7. Imposing any requirements, conditions, or exclusions that discriminate against an in-network physician in connection with dispensing prescription oral medications, as specified.
      
2. Requires a health care provider, physician’s office, clinic, or infusion center obtain consent from an enrollee and disclose a good faith estimate of the enrollee’s applicable cost-sharing amount before supplying or administering an injected or infused medication to an enrollee, or sending an enrollee to receive an injected or infused medication, if the manner or location of administration is different than the manner or location for which the health plan or insurer or PBM has directed the enrollee.
   

FISCAL EFFECT:

1. The Department of Managed Health Care (DMHC) anticipates it will need to conduct legal research, promulgate regulations, draft legal opinion memoranda, respond to an increased number of provider complaints, and take an increased number of enforcement actions, among other activities. DMHC estimates Managed Care Fund costs as follows:
   

• $548,000 in fiscal year (FY) 2025-26.
• $455,000 in FY 2026-27.
• $437,000 in FY 2027-28 and annually thereafter.

1. Costs to the Department of Insurance (CDI) of an unknown, but likely absorbable amount. At the time this analysis was prepared, CDI had not provided a cost estimate.

COMMENTS:

1. Purpose. This bill is sponsored by the Association of Northern California Oncologists, Medical Oncology Association of Southern California, and California Rheumatology Alliance. According to the author:

[PBMs], health plans and insurers have begun to institute policies which take the in-office administration of physician administered drugs out of the hands of patients’ doctors, and into their own vertically-integrated pharmacies and infusion centers, in an effort to increase their profits at the expense of patients. These policies effectively prevent patients from receiving drugs directly from their physician—such as requiring cancer patients to go to an infusion center—as opposed to receiving chemotherapy infusions in their own physician’s office. In addition, PBMs often require patients to receive oral drugs through the PBM-owned mail-order pharmacies. These policies prevent physicians from dispensing oral drugs to their patients, such as when a physician dispenses anti-nauseant medication to their patient prior to administering an infusion.

Unfortunately, there are currently no laws to prevent [PBMs] from engaging in patient steering practices, and many of the other anti-competitive practices they deploy, since there is a lack of regulatory oversight of PBMs in California. In the words of a former policy director at the Federal Trade Commission, which is currently suing PBMs for anticompetitive practices, “This is an industry that exploited being in a regulatory blind spot for a quarter of a century, so we need as much litigation and regulation as possible.” Similarly, in the words of [Attorney General Bonta], who is also suing PBMs: “States have the responsibility to regulate these deliberate, unfair, and deceptive pricing tactics set by PBMs that allow them to line their own pockets at the expense of consumers.”

1. Opposition. The California Association of Health Plans (CAHP), Association of California Life and Health Insurance Companies (ACLHIC), and America’s Health Insurance Plans (AHIP) (collectively, “health plans”) contend this bill restricts health plans’ ability to hold down drug costs for patients and purchasers of health care. The health plans note that one way they have been lowering drug costs is by leveraging the use of lower-cost pharmacies – called specialty pharmacies – to safely distribute physician-administered drugs. The health plans argues that high drug costs are especially problematic with physician-administered drugs, where the problem of high manufacturer prices is compounded by exorbitant mark-ups by hospitals and physician’s offices. An AHIP study found the cost of ten drugs that are commonly and safely delivered through a specialty pharmacy for provider administration were on average, double the price (118% more) when provided by a hospital pharmacy, and an average of 23% more when purchased from physician offices. The health plans further argue that specialty pharmacies protect patient safety and offer greater value and affordability.

Analysis Prepared by: Allegra Kim / APPR. / (916) 319-2081

Date of Hearing: April 29, 2025

ASSEMBLY COMMITTEE ON HEALTH

Mia Bonta, Chair

ABPCA Bill Id:AB 577

Author:(Wilson) – As Amended Ver:April 21, 2025

SUBJECT: Health care coverage: antisteering.

SUMMARY: Prohibits a health care service plan (health plan), health insurer, or pharmacy benefit manager (PBM) from engaging in specified steering practices, including requiring an enrollee or insured to use specific settings for the administration of injected or infused medication. Specifically, this bill:

1. Prohibits a health plan contract or health insurance policy issued, amended, or renewed on or after January 1 2026, or a PBM from doing any of the following:
   1. Requiring an enrollee or insured to self-administer an injected or infused prescription medication if a health care provider determines it is clinically appropriate for the medication to be administered by a health care provider in a physician’s office, clinic, or infusion center;
   2. Requiring an enrollee or insured to use a specific health care provider, external infusion center, or home infusion pharmacy for administration of an injected or infused medication, if their current health care provider determines it is clinically appropriate for the medication to be administered by their current health care provider in a physician’s office, clinic, or infusion center;
   3. Requiring an enrollee or insured, in order to receive coverage under the plan or insurer, to use a mail order pharmacy to furnish a health care provider, enrollee, or insured with an injected or infused prescription medication for subsequent administration in a physician’s office, clinic, or infusion center;
   4. Imposing upon an enrollee any cost-sharing requirement relating to injected or infused prescription medication furnished by a health care provider for administration in a physician’s office, clinic, or infusion center that is greater, or more restrictive, than what would otherwise be imposed if a mail order pharmacy furnished the injected or infused prescription drugs to the health care provider, enrollee, or insured;
   5. Refusing to authorize, approve, or pay a participating health care provider for providing covered injected or infused prescription medications and related services to enrollees or insured, if the injected or infused prescription medication would otherwise be covered;
   6. Requiring an enrollee or insured to use a retail pharmacy for dispensing prescription oral medications, if the health care provider determines it is clinically appropriate for the medication to be dispensed by a different pharmacy or by the prescriber;
   7. Reimbursing at a lesser amount a prescription oral medication dispensed by a physician than the amount that would otherwise be reimbursed if the same medication was dispensed by the plan, insurer, or PBMs chosen pharmacy; and,
   8. Imposing any requirements, conditions, or exclusions that discriminate against a physician in connection with dispensing prescription oral medications. Specifies that discrimination prohibited by this bill includes, but is not limited to, any of the following:
      1. Including terms and conditions in a contract with a physician based on the physician dispensing prescription oral medications, including, but not limited to, either of the following:
         1. Terms and conditions to preemptively dissuade or discourage the physician from dispensing prescription oral medications; or,
         2. Terms and conditions included because of, or in response to, a physician dispensing prescription oral medications;
      2. Refusing to contract with or terminating a contract with a physician on the basis of the physician dispensing prescription oral medications; or,
      3. Retaliation against a physician based on the physician’s exercise of any right or remedy under this bill.
2. Specifies that the provisions of this bill do not prohibit or interfere with compliance with federal and state law, including registration with the United States Drug Enforcement Administration as required to dispense controlled substances.
3. Defines “PBM” as a person, business, or other entity that, pursuant to a contract with a health care service plan, manages the prescription drug coverage provided by the health care service plan, including, but not limited to, the processing and payment of claims for prescription drugs, the performance of drug utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to prescription drug coverage, contracting with network pharmacies, and controlling the cost of covered prescription drugs.

EXISTING LAW:

1. Establishes the Department of Managed Health Care (DMHC) to regulate health plans under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act) and the California Department of Insurance (CDI) to regulate health insurers. [Health and Safety Code (HSC) § 1340, et seq., and Insurance Code (INS) § 106, et seq.]
2. Establishes the Board of Pharmacy within the Department of Consumer Affairs to administer and enforce the Pharmacy Law. [Business and Professions Code (BPC) §§ 4000 - 4427.8]
3. Prohibits a health plan contract from requiring or allowing a health care service provider (but not other providers such as health facilities, hospices, or surgical centers) to assume or be at any financial risk for any specified covered injectable medications and adult vaccines that are administered in the office of a physician and surgeon or prescribed by a physician and surgeon for self-administration by the patient. Requires these items to be reimbursed on a fee-for-service basis at the negotiated contract rate or through an alternate funding mechanism mutually agreed to by the health plan and the health care service provider, subject to any applicable copayment or deductible, by the health plan. [HSC § 1375.8]
4. Permits a health care service provider to assume financial risk for the items described in 3) above after making the request in writing at the time of negotiating an initial contract or renewing a contract with a health plan. Prohibits a health plan from requesting or requiring as a condition of the contract agreement a health care service provider to assume the financial risk for any of those items. [HSC § 1375.8]
5. Defines a “PBM” in the Knox-Keene Act to mean a person, business, or other entity that, pursuant to a contract with a health plan, manages the prescription drug coverage provided by the health plan, including, but not limited to, the processing and payment of claims for prescription drugs, the performance of drug utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to prescription drug coverage, contracting with network pharmacies, and controlling the cost of covered prescription drugs. Excludes from this definition a health plan licensed under the Knox-Keene Act or any individual employee of a health plan its contracted provider performing the above-described services. [HSC § 1385.001]

FISCAL EFFECT: Unknown. This bill has not been analyzed by a fiscal committee.

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, PBMs, health plans and insurers have begun to institute policies which take the in-office administration of physician administered drugs out of the hands of patients’ doctors, and into their own vertically-integrated pharmacies and infusion centers, in an effort to increase their profits at the expense of patients. The author states that these policies effectively prevent patients from receiving drugs directly from their physician—such as requiring cancer patients to go to an infusion center—as opposed to receiving chemotherapy infusions in their own physician’s office. The author continues that PBMs often require patients to receive oral drugs through the PBM-owned mail-order pharmacies. The author argues that these policies prevent physicians from dispensing oral drugs to their patients, such as when a physician dispenses anti-nauseant medication to their patient prior to administering an infusion. The author continues that unfortunately, there are currently no laws to prevent PBMs from engaging in patient steering practices, and many of the other anti-competitive practices they deploy, since there is a lack of regulatory oversight of PBMs.
2. BACKGROUND.
   1. Patient steering. Patient steering is the practice of directing patients to certain preferred pharmacies or providers in a network. Steering has become a particular point of focus in the delivery of pharmacy benefits. A January 2025 interim Federal Trade Commission (FTC) report entitled “Specialty Generic Drugs: A Growing Profit Center for Vertically Integrated PBMs” identified specialty prescription steering as a key mechanism through which PBMs, and the health plans they are integrated with, direct patients to their owned or affiliated pharmacies and entities. The FTC reported that members of commercial health plans managed by the Big 3 PBMs filled a significantly larger proportion of their high markup specialty generic drug prescriptions at PBM-affiliated pharmacies, which suggests that the Big 3 PBMs may be steering these prescriptions to their own affiliated pharmacies (and away from unaffiliated pharmacies). The FTC further noted that documents produced by PBMs showed various discussions on “optimization levers” that may be used to steer patients to their affiliated pharmacies, as well as strategies to “push to retail” prescriptions on “low/no margin drugs” and “effectively block” the dispensing of these drugs at their affiliated pharmacies.
   2. White & brown bagging. The National Association of Pharmacy Boards (NAPB) describes “white bagging” as the distribution of patient-specific medications from a pharmacy, typically a specialty pharmacy, to the physician’s office, hospital, or clinic for administration. It is often used in oncology practices to obtain costly injectable medications that are distributed by specialty pharmacies and may not be available in all non-specialty pharmacies. “Brown bagging” is the dispensing of medication from a pharmacy (typically a specialty pharmacy) directly to a patient, who then transports the medications to the physician’s office for administration. In a 2018 report on these topics, the NABP indicates that as the specialty pharmacy model becomes more prevalent more patient care will be subject to white and brown bagging under mandates by third party payers. The NAPB concluded that there is a legitimate patient protection issue when a specialty drug is distributed to an entity other than the patient.

As part of their 2025 Sunset Oversight Review Report, the California Board of Pharmacy (BoP) discussed payer activities that negatively impact patient access. In 2021, the BoP convened an informational meeting to discuss the practice of white bagging. The BoP reported that during that meeting they learned about many of the patient safety concerns stemming from this practice, including challenges in coordinating care and delays in therapy. Many of the patients requiring infusion have serious medical conditions such as cancer where delays in therapy to result in disease progression. The BoP noted that they do not have the current authority to prevent this payer driven practice, although they have suggested statutory changes to rein in the practice.

• 1. Consumer co-pay caps. AB 948 (Berman), Chapter 820, Statutes of 2023, made permanent a $250 co-pay cap for a 30-day supply of a prescription. Before the $250 cap, Californians with serious and chronic conditions like cancer, HIV/AIDS, multiple sclerosis and lupus were particularly vulnerable to high out-of-pocket costs because more expensive specialty drugs were often put on the highest tier of the formulary, costing thousands of dollars.

While this $250 co-pay cap has been made permanent in state law, it is important to note that the cap only applies to pharmacy benefits, which in the context of this bill typically covers self-injected or self-administered medications. Medical benefits, which cover drugs administered by a health care provider, are not subject to the $250 co-pay cap.

1. SUPPORT. The Association of Northern California Oncologists (ANCO), the Medical Oncology Association of Southern California (MOASC), and the California Rheumatology Alliance (CRA) are sponsoring this bill, stating that California’s patients and their doctors have been experiencing a growing trend utilized by health plans/insurers and PBMs which prevent patients from receiving drugs directly from their physician, such as requiring cancer patients to go to an infusion center, as opposed to receiving chemotherapy infusions in their own physician’s office. The sponsors continue that these entities prevent physicians from obtaining and dispensing drugs to their patients, such as when an oncologist dispenses anti-nausea medication to their patient prior to administering chemotherapy or rheumatology patients with chronic diseases are forced to have their drugs administered at an infusion center by the health plan or PBM. The sponsors argue that policies which prevent physicians from administering and dispensing drugs from their own inventory directly risk patient outcomes and safety by interfering with the ability to make same-day treatment adjustments. Furthermore, the sponsors note that forcing patients to travel to infusion centers to receive treatments risks patient safety and health outcomes since their physician is unable to monitor their reaction to the treatment. The sponsors continue that health plans that own PBMs and pharmacies are implementing these types of reimbursement policies to ensure that their own vertically integrated pharmacies and infusion centers receive their reimbursement dollars, keeping all payments within a tight loop for the parent company. The sponsors contend that these policies do not benefit the patient or the community physicians who provide care in underserved areas, such as rural communities.
2. OPPOSITION. The California Association of Health Plans (CAHP), Association of California Life and Health Insurance Companies (ACLHIC), and America’s Health Insurance Plans (AHIP) oppose this bill, contending that it restricts health plans’ ability to hold down drug costs for patients and purchasers of health care. The opposition states that pharmacy costs now represent over 24 cents out of every dollar of premium spent on health care. The opponents continue that health plans are constantly fighting for patients by developing innovative solutions to make prescription drugs more affordable. The opposition notes that one of these solutions is leveraging the use of lower-cost pharmacies – called specialty pharmacies – to safely distribute physician-administered drugs (sometimes referred to by providers as “white bagging” or “brown bagging”). The opposition argues that high drug costs are especially problematic with physician-administered drugs, where the problem of high manufacturer prices is compounded by exorbitant mark-ups by hospitals and physician’ offices. An AHIP study analyzed the cost of ten drugs that are commonly and safely delivered through a specialty pharmacy for provider administration. For these ten drugs, the study found that on average, hospitals charged double the price (118% more) for the same drugs compared to specialty pharmacies while physician offices charged an average of 23% more than specialty pharmacies. The opponents further argue that specialty pharmacies protect patient safety and offer greater value and affordability. CAHP, ACLHIC, and AHIP conclude that this bill will increase the financial burden on purchasers of health care and ultimately, will raise health care costs for all residents.
3. PREVIOUS LEGISLATION. SB 958 (Limon) would have restricted the ability of health plans/insurers, or their designated medical groups or PBMs, from requiring or incentivizing patients to have infused or injected medications supplied by a vendor to the patient, or to the patient’s physician office, clinic, infusion center, or hospital outpatient department, rather than maintained at the location where the infused or injected medication will be administered. SB 958 was not set for a hearing in the Assembly Health Committee.
4. PROPOSED AMENDMENTS. The committee and author have agreed on amendments to do the following:
   1. Clarify that the provisions of this bill apply only to in-network providers, contracted services, and covered prescriptions;
   2. Require a health care provider to determine that it is medically necessary, as defined in existing law, in order to directly administer the injected or infused medication or send a patient to a specified pharmacy or facility, if such administration, facility or pharmacy is different than where the health plan, insurer, or PBM has directed the patient;
   3. Require a health care provider, physician’s office, clinic, or infusion center to obtain consent from the patient and disclose a good faith estimate of the enrollee’s applicable cost-sharing amount in order to directly administer the injected or infused medication or send a patient to a specified facility or pharmacy, if such administration, facility, or pharmacy is different than where the health plan, insurer, or PBM has directed the patient;
   4. Clarify that all dispensing must be complaint with existing Business and Professions Code requirements;
   5. Clarify that the provisions of this bill do not apply to hospital outpatient facilities; and,
   6. Align the definition of PBM with the existing definition in current law.

REGISTERED SUPPORT / OPPOSITION:

Support

Association of Northern California Oncologists (co-sponsor)

California Rheumatology Alliance (co-sponsor)

Medical Oncology Association of Southern California (co-sponsor)

American College of Obstetricians & Gynecologists - District IX
American Diabetes Association
Association for Clinical Oncology
California Chronic Care Coalition
California Medical Association (CMA)
California Podiatric Medical Association
California Retired Teachers Association
Center for Cancer and Blood Disorders
Central Coast Oncology & Hematology
Hemophilia Council of California
Infusion Access Foundation
National Infusion Center Association (NICA)

One individual

Opposition

America's Health Insurance Plans
Association of California Life & Health Insurance Companies
California Association of Health Plans
California Association of Joint Powers Authorities
California Chamber of Commerce

Analysis Prepared by: Riana King / HEALTH / (916) 319-2097