California Code, Health and Safety Code - HSC § 130505

(a) The amount a participating, eligible Californian pays for a drug through the program shall be equal to the lower of the participating pharmacy's usual and customary charge or the pharmacy contract rate pursuant to subdivision (c), less a program discount for the specific drug or an average discount for a group of drugs or all drugs covered by the program.

(b) In determining program discounts on individual drugs, the department shall take into account the rebates provided by the drug's manufacturer.

(c) The department may contract with participating pharmacies for a rate other than the pharmacies' usual and customary rate for prescription drugs, including multiple-source drugs.

(d) This division shall apply only to prescription drugs dispensed to eligible Californians on an outpatient basis.