California has passed several high-profile healthcare laws in 2025 aimed at increasing PBM transparency, reducing prior authorization burdens, and limiting corporate influence in patient care.
Three bills to know:
Pharmacy benefit managers
Senate Bill 41, signed on Oct. 11, aims to curb inflated prescription drug costs by reforming how pharmacy benefit managers operate in the state. The law prohibits PBMs from engaging in “spread pricing,” where they charge an insurer more for a drug than what they pay the pharmacy, and instead mandates a passthrough pricing model in which all rebates and payments from drug manufacturers are passed directly to payers.
Under the new law, effective Jan. 1, 2026, PBMs must derive their income solely from a transparent pharmacy benefit management fee and can no longer receive hidden payments tied to drug prices or rebates. The bill also bars PBMs from excluding or discriminating against nonaffiliated pharmacies, ensuring they can participate equally in dispensing prescriptions.
Prior authorization
Senate Bill 306, signed on Oct. 6, allows the Department of Managed Health Care and the Department of Insurance to waive prior authorization requirements for healthcare services or prescriptions that insurers approve at least 90% of the time.
The law requires all insurers to report detailed data on prior authorization approvals, modifications and denials by Dec. 31, 2026, which will help identify services frequently approved. By July 1, 2027, the departments must publish a list of those services, and by no later than January 1, 2028, plans and insurers must stop requiring prior authorization for them.
Private equity
Senate Bill 351, signed Oct. 6, gives the state attorney general new authority to take legal action against private equity firms and hedge funds that interfere with medical or dental decision-making within the practices they invest in.
The law prohibits investors from influencing or controlling healthcare functions, such as diagnostic decisions, patient referrals, clinical staffing, billing or treatment choices. It also bars them from entering into or enforcing contracts that grant them such authority. Any provisions that violate these rules are declared void and unenforceable.
The new law also voids noncompete clauses that prevent physicians or dentists from practicing after leaving a practice controlled by a private equity or hedge fund, and protects their right to speak publicly about care quality, ethical concerns or business practices of those firms.
