Tuesday, December 16, 2025
DMHC issues annual drug pricing report as California continues work to make medications more affordable
SACRAMENTO - The Department of Managed Health Care (DMHC) released the Prescription Drug Cost Transparency Report for Measurement Year 2024. The report looks at the impact prescription drug costs have on health plan premiums and compares the data submitted from 2017 through 2024.
Results show that health plan spending on prescription drugs has increased by $6.2 billion since 2017, including an increase of almost $1.3 billion in 2024. These increases underscore the importance of the Newsom Administration’s efforts to address affordability and health care spending, including new requirements on pharmacy benefit managers (PBMs) recently enacted in partnership with the state Legislature, work by the Office of Health Care Affordability (OHCA) to slow per capita health care spending, and initiatives like the CalRx program to make medications more affordable for all Californians.
“Prescription drug costs continue to impact the affordability of health care overall, and this report provides greater insight into health plan prescription drug costs and the impact on health plan premiums,” said DMHC Director Mary Watanabe. “In partnership with the Governor, the California Health and Human Services Agency and other departments, the DMHC continues to work to make health care more affordable and take on the rising costs of prescriptions drugs in multiple ways, including through recently passed laws to regulate PBMs and prevent inflated prescription drug prices.”
The Department of Health Care Access and Information (HCAI) also publishes prescription drug information, including specified price increases and information about new drugs introduced to market. These data and reports are available for public use.
KEY FINDINGS:
- Health plans paid about $14.9 billion for prescription drugs in 2024, an increase of almost $1.3 billion, or 9.5%, from 2023. Since 2017, prescription drug costs paid by health plans increased by $6.2 billion, or 72%.
- Prescription drugs accounted for 15.4% of total health plan premiums in 2024, an increase from 15.2% in 2023.
- Total prescription drug costs increased by 9.5% in 2024, while total medical expenses increased by 6.9%. Overall, total health plan premiums increased by 8% from 2023 to 2024.
- While total annual health plan spending for generic, brand name and specialty drugs all increased in 2024, spending on specialty and brand name drugs has continued to rise at a faster pace. Several of these drugs, such as Ozempic, Jardiance, and Paxlovid, had the highest year-over-year increase in total annual spending.
- While specialty drugs accounted for only 1.8% of all prescription drugs dispensed, they accounted for 63% of total annual spending on prescription drugs.
- Generic drugs accounted for 88.8% of all prescribed drugs but only 11.8% of the total annual spending on prescription drugs.
- Brand name drugs accounted for 9.4% of prescriptions and constituted 25.2% of the total annual spending on prescription drugs.
ABOUT THE REPORT: This report provides greater transparency into prescription drug costs and the impact of prescription drug costs on health plan premiums. In developing the report, the DMHC considered the total volume of prescription drugs covered by health plans and the total cost paid by health plans for those drugs. The Department also analyzed how the 25 most frequently prescribed drugs, the 25 most costly drugs and the 25 drugs with the highest year-over-year increase in total annual spending impacted health plan premiums.
Health plans in the commercial market must annually report their prescription drug costs to the DMHC. The Department then prepares an annual report summarizing the findings and the impact of prescription drug costs on health care premiums.
LEADING THE WAY TO MORE AFFORDABLE HEALTH CARE: This report is part of a larger effort by the Newsom Administration to rein in health care costs. Another initiative designed to combat high costs is the creation of OHCA within HCAI. Established in 2022, OHCA collect, analyze, and publicly report data on total health care expenditures, and enforces spending targets set by the California Health Care Affordability Board.
Building on the DMHC’s analysis, OHCA examines trends in prescription drug spending across coverage sources, consumer out-of-pocket payments and regions, and aims to identify underlying drivers of cost growth, including utilization, price and the introduction of new drugs to the market. As part of a balanced approach to slowing spending growth, OHCA also promote high value system performance by measuring quality, equity, adoption of alternative payment models, investment in primary care and behavioral health, and workforce stability.
HCAI also administers the CalRx program, which aims to bring down the cost of prescription drugs through strategic partnerships in development and distribution. Beginning January 1, 2026, low-cost insulin glargine pens will be available to consumers through CalRx, marking a significant step in the state’s ongoing effort to lower prescription drug prices and improve medication access statewide. For more information on CalRx insulin, visit CalRx’s Biosimilar Insulin Initiative website.
In addition, the Medi-Cal Rx program, which is administered by the California Department of Health Care Services, continues to strengthen California’s prescription drug purchasing power by centralizing pharmacy benefits for Medi-Cal members. This approach enhances transparency and access, improves oversight, and supports the state’s broader goals of affordability and equitable access to medications.
Governor Newsom recently signed significant legislation advancing health care affordability by lowering the cost of prescription drugs, including:
- AB 116 (Committee on Budget, 2025) which requires PBMs that contract with a DMHC-licensed health plan or California Department of Insurance (CDI) licensed insurer to obtain a license from the DMHC and file various organizational and financial information to the DMHC. In addition, PBMs will be required to report detailed information regarding pricing and payment for prescription drugs to HCAI.
- SB 40 (Wiener, 2025) which creates a new cap on cost-sharing for insulin at $35 for a month-long supply.
- SB 41 (Wiener, 2025) which regulates the practices of PBMs under the DMHC. The bill reforms the revenue generating abilities of PBMs, including prohibiting the practice of spread pricing, requiring manufacturer rebates to be passed through to health plans, and allowing only administrative fee charges to be assessed to health plan and health insurer clients. PBMs negotiate prices between drug manufacturers, health care insurance providers, and pharmacies.
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About DMHC
The mission of the DMHC is to ensure health plan members have access to equitable, high-quality, timely, and affordable health care within a stable health care delivery system. The DMHC accomplishes this important mission by regulating health plans, enforcing California’s strong consumer protection laws and assisting health plan members. For more information visit www.DMHC.ca.gov.