AB 910 revamps how pharmacy benefit managers (PBMs) that contract with California health care service plans are regulated. The bill replaces a general good-faith standard with an explicit fiduciary duty to the plan, requires PBMs (and certain affiliates and group purchasing organizations) to remit 100% of manufacturer rebates and similar remuneration to the contracting health plan, bans spread pricing, and restricts PBM revenue to bona fide service fees that are open to audit by the Department of Managed Health Care (DMHC).
The bill also expands registration disclosures and creates a new annual reporting regime (data due October 1, 2026, first public report January 1, 2027) requiring PBMs to submit detailed drug-level pricing, rebate, payment, and contract information to the state. Raw data is exempt from public disclosure; the department will publish an aggregated public analysis intended to assess PBM market impact and effects on premiums.
The statute adds cross‑agency data-sharing and enforcement duties for the Department of Health Care Access and Information (DHCAI) and DMHC.
At a Glance
What It Does
AB 910 requires PBMs that serve California health care service plans to register with DMHC, accept a fiduciary duty to the plan, remit 100% of manufacturer rebates and related remuneration to the plan, prohibit spread pricing, and limit compensation to bona fide service fees. It mandates detailed, drug-level annual reporting and directs DHCAI to include prescription drug pricing data in its annual analysis and notify DMHC if PBMs fail to comply.
Who It Affects
The bill targets PBMs that contract with California-regulated health care service plans and their affiliated entities and group purchasing organizations, plus the plans that contract with them. It also affects pharmacies (integrated, chain, independent, specialty, mail), pharmaceutical manufacturers, DHCAI and DMHC, and ultimately plan enrollees due to intended premium and cost-sharing effects.
Why It Matters
AB 910 imposes structural changes—legal fiduciary duty, full rebate passthrough, and a ban on spread pricing—that could materially alter PBM business models, revenue flows to affiliated pharmacies or GPOs, and plan premium dynamics. The law also creates a substantial new transparency dataset for policymakers, while keeping granular commercial data confidential.
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What This Bill Actually Does
AB 910 tightens statutory control over PBMs serving California health care service plans by aligning legal duties, financial flows, and reporting obligations. Instead of the prior ‘‘good faith and fair dealing’’ language, the bill explicitly makes PBMs fiduciaries for the plans they contract with; that recharacterization is not just rhetorical—AB 910 pairs the duty with affirmative financial rules (remit all rebates to plans, prohibit spread pricing) designed to ensure plan-level financial benefits from manufacturer payments.
The fiduciary duty must be performed in accordance with state and federal law, creating a baseline legal obligation that PBMs must document and defend.
The bill creates a layered compliance and transparency structure. PBMs must include in their registration detailed ownership and affiliate disclosures (including group purchasing organizations), and they must begin annual reporting by October 1, 2026.
The required report is granular: for the 100 most costly, most frequently prescribed, and highest revenue-producing drugs the PBM must report pharmacy type, net price paid, rebate amounts received and passed to the plan, plan payments to the PBM, PBM payments to pharmacies, aggregate wholesale acquisition cost, administrative fees received from manufacturers, and payments to affiliated versus non‑affiliated pharmacies. DHCAI will compile and publish an aggregated public report by January 1, 2027, while the underlying submissions remain confidential and exempt from the California Public Records Act, with limited disclosure to enforcement entities.On compensation, the bill narrows PBM permissible revenue to bona fide service fees that represent fair market value for itemized services actually performed; those fees cannot be tied to drug acquisition costs, rebate amounts, or patient cost‑sharing.
Compensation arrangements must be open to inspection and audit by DMHC. The statute also bars PBMs, GPOs, and affiliates from deriving income from spread pricing.
To support enforcement, DHCAI is required to include drug pricing and PBM payment data in its annual analysis once related regulations are complete, and it must notify DMHC if a PBM is noncompliant; DMHC must post links on its website to DHCAI analyses.
The Five Things You Need to Know
Reporting deadlines: PBMs must submit annual drug- and payment-level data to the department by October 1 each year beginning October 1, 2026; the department must publish an aggregated report by January 1, 2027.
100% rebate passthrough: PBMs, group purchasing organizations, and affiliates must pass 100% of prescription-drug manufacturer rebates and similar remuneration to the health care service plan for the sole purpose of offsetting enrollee cost sharing and reducing premiums.
No spread pricing and restricted fees: The bill prohibits spread pricing and limits PBM income to bona fide service fees that reflect fair market value and are itemized in the PBM‑plan agreement; those arrangements must be auditable by the department.
Granular required disclosures: Registration must list affiliated entities and GPOs with ownership, control, financial interest, or contractual ties; reporting must list top 100 costly/frequent/revenue drugs and include pricing, rebate, payment, and pharmacy‑type breakdowns.
Confidential but aggregated publication: Raw PBM submissions are exempt from public disclosure under the California Public Records Act, but the department will release an aggregated public analysis to assess PBM market impact, rebates' effects, and value to consumers.
Section-by-Section Breakdown
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Confidentiality carveouts and cross‑posting of DHCAI reports
This amendment clarifies that PBM filings to the department remain exempt from public disclosure under the California Public Records Act, listing corporate financial records and applications as protected. It also requires the department to post links on its website to DHCAI analyses about PBMs. Practically, this keeps granular commercial data private while directing regulators to make DHCAI’s synthesized work easily discoverable for stakeholders.
DHCAI to include drug pricing and PBM payment data in annual analysis
DHCAI must incorporate, once relevant regulations are complete, pricing and payment data related to prescription drugs—specifically drug pricing, PBM service fees, and payments or rebates involving PBMs—into its annual Health Care Payments Data Program analysis. That gives legislators and regulators a centralized, multi‑payer view of drug costs and PBM payment flows for policy evaluation, but the provision ties publication to the completion of implementing regulations.
Interagency notification for PBM noncompliance
This change requires DHCAI to notify DMHC if a PBM fails to comply with the chapter; DMHC is then obliged to take appropriate action. The provision formalizes cross‑agency enforcement: DHCAI performs data collection and analysis, while DMHC retains regulatory authority to investigate and compel compliance.
Definitions that shape coverage and enforcement
The bill tightens definitions—’affiliated entity,’ ‘group purchasing organization,’ ‘pharmacy benefit manager,’ ‘rebates,’ and ‘spread pricing’—to capture a broad set of commercial relationships and forms of remuneration. Notably, ‘rebates’ explicitly include many manufacturer payments and administrative fees, while excluding pharmacy purchase discounts tied to stocking or dispensing by affiliated pharmacies; 'spread pricing' is defined by the difference between the PBM's charge to a plan and payments to the pharmacy. Those definitional choices determine what revenue must be passed through and what conduct is prohibited.
Plan contract requirements and fiduciary duty
Health care plans must require contracting PBMs to register, comply with the new reporting and conduct rules, and hold a fiduciary duty in their contractual performance. The section also requires PBMs to remit all rebates and to notify plans before entering contracts with affiliates unless full passthrough occurs, and to inform pharmacists about complaint rights. For plans, this creates a compliance obligation to flow these terms into PBM contracts and to monitor PBM adherence.
Enhanced registration disclosures
The PBM registration form must include detailed entity information: names, addresses, agents for service, persons with beneficial interest, parties with management or control, and, newly, any affiliated entities and GPOs where the PBM has ownership, control, financial interest, or contractual relationships. Registrations must be updated within 30 days of information changes. These disclosures support scrutiny of vertical integration and related-party arrangements.
Detailed annual reporting on drugs, prices, rebates, payments, and financials
PBMs must report, for outpatient covered drugs dispensed through plan/network/mail-order pharmacies, a set of drug lists (100 most costly, most prescribed, highest revenue) and for each drug disclose pharmacy type, net price, rebate receipts and passthroughs, plan payments to PBM, PBM payments to pharmacies, wholesale acquisition costs, administrative fees from manufacturers, and payments to affiliated vs. non‑affiliated pharmacies. PBMs must also report contract scope, enrollee counts, revenue sources, and expense categories. The department compiles an aggregated public report; however, the raw filings are confidential.
Conditions of registration: rebate passthrough, fee limits, auditability, and spread pricing ban
As a condition of registration, PBMs, their GPOs, and affiliates must pass 100% of manufacturer rebates to plans for the stated consumer protections, may not profit from spread pricing, and may only derive income via bona fide service fees that are itemized, reflect fair market value, and are auditable. The statute prevents PBM fees from being tied to drug prices, rebate volumes, or enrollee cost sharing, though it allows flat, non‑price‑linked performance bonuses.
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Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Health care service plans — They receive 100% of manufacturer rebates and related remuneration, which plans can use to lower enrollee cost sharing and premiums, and they gain statutory tools (contract requirements and audit access) to oversee PBM compensation.
- Plan enrollees/patients — The bill is designed to route manufacturer savings to offset copayments, deductibles, coinsurance and premiums, potentially lowering out‑of‑pocket costs for the most expensive and commonly used drugs.
- State regulators and legislators — DHCAI and DMHC gain a richer data set and clearer jurisdictional pathways to analyze PBM market impact, detect noncompliance, and craft further policy using aggregated drug‑level and payment data.
- Independent and non‑affiliated pharmacies — Banning spread pricing and requiring transparent reporting of payments to affiliated versus non‑affiliated pharmacies could reduce opaque dispensing margin capture by intermediaries and improve comparability of pharmacy reimbursements.
Who Bears the Cost
- Pharmacy benefit managers and affiliated GPOs — PBMs will lose retained rebate revenue and spread margins, must restructure contracts to itemize and justify service fees, and face increased audit exposure and compliance costs.
- Affiliated or vertically integrated pharmacies — Income previously routed through PBM or affiliate arrangements may decline if payments to affiliated pharmacies must be disclosed and rebates routed to plans rather than used to subsidize affiliated operations.
- Health care service plans — Plans must enforce contract provisions, monitor PBM compliance, and potentially restructure plan designs; willful noncompliance by a plan carries statutory penalties, so plans face legal and operational risk if they fail to police PBMs.
- State agencies (DMHC, DHCAI) — The departments will incur implementation, regulatory, and audit workload to process registrations, analyze large datasets, conduct audits, and enforce compliance—functions that may require expanded resources.
Key Issues
The Core Tension
The central tension in AB 910 is between forcing immediate financial transparency and consumer-facing benefit (rebates remitted to plans to lower premiums/cost sharing) and the risk that PBMs will replace hidden rebate margins with higher, auditable service fees or shift costs elsewhere; the law must balance protecting consumers from opaque intermediation without prompting offsetting price or service‑design changes that negate the intended savings.
AB 910 creates tightly coupled obligations—fiduciary duty, 100% rebate passthrough, a ban on spread pricing, and an auditable limit on compensation—that push PBM revenues away from rebate retention and opaque price spreads. That shift will likely trigger business-model responses: PBMs may increase explicit service fees, renegotiate plan contracts to index fees to other nonprohibited metrics, or alter formularies and utilization-management tools to preserve margins.
Those responses could blunt the consumer benefits the bill seeks to produce if service fees replace rebate-derived savings passed to plans.
Operationalizing the bill raises several practical challenges. ‘Bona fide service fee’ and ‘fair market value’ are conceptually straightforward but administratively difficult to measure; auditors and courts will need guidance to evaluate itemization and valuation. The confidentiality regime—raw filings exempt from the California Public Records Act while an aggregated report is public—protects commercial data but may limit independent research or plan-by-plan accountability.
Finally, enforcement depends on interagency coordination and DMHC’s audit capacity; absent sufficient funding or clear audit protocols, auditability and passthrough requirements risk being formal requirements with limited real‑world verification.
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