On October 7, 2023, California Governor Gavin Newsom signed Senate Bill 786 (SB 786) into law, prohibiting pharmacy benefit managers (PBMs) from discriminating against covered entities participating in the 340B Program.

Effective January 1, 2024, PBMs cannot impose requirements, conditions or exclusions that discriminate or prevent a 340B covered entity from obtaining and retaining the benefit of the discounted drugs available through the 340B Program. Under the new law, the prohibited discriminatory practices against 340B covered entities, pharmacies owned by 340B covered entities and pharmacies that contract with 340B covered entities to dispense 340B drugs include:

• Establishing payment terms, reimbursement methodologies, or other contract terms and conditions that are designed to distinguish between 340B drugs and other drugs and make reimbursement less favorable for 340B drugs
• Imposing terms or conditions based on the furnishing or dispensing of 340B drugs or their status as a 340B covered entity, 340B owned pharmacy or 340B contract pharmacy, including restrictions or requirements for participation in specialty, standard or preferred pharmacy networks, or requirements related to the frequency or scope of audits
• Refusing to contract with, terminating a contract with, or retaliating against a 340B covered entity solely because of its status
• Retaliation based on a 340B covered entity’s exercise of any right or remedy under this law
• Interfering with an individual’s choice to receive a 340B drug
• Restricting or prohibiting a 340B covered entity from raising a grievance, speaking publicly or filing a legal action against any PBM for violating this law

The law applies to any entity that meets the California definition of a PBM, including wholly and partially owned and controlled entities of a PBM and PBMs that contract with Medicare or Medi-Cal managed care organizations.