This bill introduces comprehensive regulations for pharmacy benefit managers (PBMs) in California, requiring them to obtain a license from the Department of Insurance by January 1, 2027, and establishing strict guidelines for their operations. The bill mandates that PBMs must use a passthrough pricing model, direct 100% of prescription drug manufacturer rebates to health plans to offset patient costs, and prohibit discriminatory practices against non-affiliated pharmacies. Starting January 1, 2026, PBMs will be banned from using spread pricing (where they charge health plans more for drugs than they pay pharmacies) and will be required to report detailed information about drug pricing, rebates, and pharmacy payments to the Department of Insurance. The legislation aims to increase transparency in pharmacy benefit management, protect consumer interests by potentially lowering prescription drug costs, and provide state regulators with more oversight of PBM practices. PBMs found in violation of these regulations could face civil penalties up to $7,500 per violation, and the bill preserves the Attorney General’s authority to investigate and prosecute any related unfair business practices. The bill also creates two new accounts in the state’s funds: the Pharmacy Benefit Manager Account and the Pharmacy Benefit Manager Fines and Penalties Account to support the implementation and enforcement of these new regulations.