Stanislaus County, CA, USA; California Governor Gavin Newsom (C), and former Los Angeles Mayor Antonio Villaraigosa (L) meet with NorCal Carpenters Union workers along the construction of the Battery Energy Storage Systems (BESS) for the future site of Proxima Solar Farm in Stanislaus County, California, USA, 19 May 2023. The Governor unveiled legislation to speed up construction for a streamlined process and to expedite court review on legal challenges that often tie up projects. The project is expected to create 300 construction jobs and generate $35 million in local revenue. The project is expected to be operational by December, could power 60,000 homes in the surrounding region and can generate up to 210 megawatts of clean, renewable energy and 177 megawatts of better energy storage. Mandatory Credit: John G. Mabanglo/Pool via USA TODAY NETWORK
Sacramento, California – Governor Gavin Newsom announced Tuesday’s sweeping proposal to regulate prescription drug middlemen and expand California’s ability to stockpile critical medications, including those used in reproductive health care, as part of his revised state budget set to be unveiled Wednesday.
The governor’s plan targets pharmacy benefit managers (PBMs)—powerful, often opaque intermediaries between drug manufacturers and insurance providers that negotiate drug prices and determine what medications are covered. Newsom’s proposal would require PBMs to be licensed through the state’s Department of Managed Health Care, disclose detailed financial and operational data, submit to contract reviews and audits, and report drug pricing information to the Department of Health Care Access and Information.
“Prescription drug prices are out of control, and we’re shining a light on hidden costs,” Newsom said in a statement. “We’re also giving CalRx more tools to respond to supply chain disruptions, market manipulation, or politically motivated abortion restrictions.”
The announcement marks a significant shift for the governor, who vetoed similar legislation requiring PBM licensing and transparency just eight months ago, citing concerns that the bill’s “expansive licensing scheme” wouldn’t reduce costs. His office has not explained what prompted the change in approach.
Critics of PBMs argue that the companies inflate drug costs by withholding manufacturer discounts and imposing fees, while the industry insists that regulation could lead to higher health insurance premiums. A new bill, Senate Bill 41, reviving many of the provisions Newsom previously rejected, is currently moving through the Legislature.
Newsom also unveiled an expansion of CalRx, the state’s $100-million initiative to manufacture and procure affordable drugs. The revised plan would broaden CalRx’s authority to include brand-name medications, not just generics, enabling the state to better respond to shortages or federal policy shifts.
The proposal aims explicitly to protect access to abortion medications like mifepristone, which has faced increasing legal challenges from conservative states. In 2023, Newsom ordered California to stockpile 250,000 doses of the abortion pill amid federal court rulings threatening its availability. That stockpile was depleted in 2024.
Now, the governor is calling for more flexibility in acquiring and storing both mifepristone and misoprostol—another abortion drug less targeted by anti-abortion activists.
Newsom’s broader budget plan is expected to address a projected $10 billion deficit, attributed to federal cuts, Medi-Cal funding shortfalls, and trade policies under President Donald Trump’s administration. Despite legal and political uncertainty surrounding drug pricing and reproductive care, Newsom emphasized California’s role as a safeguard.
“We’re protecting reproductive freedom,” he said Tuesday, “and taking on the hidden players driving up health care costs.”
