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Prescription Drug Pricing in the Spotlight

Stethescope and pillsThe cost of prescription drugs continues to be a topic generating action in the California Legislature as some policymakers consider drug costs a material component of high healthcare costs.

Billed as an attempt to bring greater transparency to prescription drug pricing practices, state Senator Ed Hernandez (D-West Covina), introduced SB 17 in January. Described as a “common-sense approach,” the Hernandez bill would require drug makers to give prior notice to purchasers before raising prices and also would require health plans to report the percentage of consumers’ healthcare insurance premiums that is spent on drugs. SB 17 also would require detailed descriptions of insurance premium changes related to drug spending.

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This is Hernandez’s second attempt in this area, having introduced a similar bill in 2016 only to see it stall last August. The drug-cost spotlight continued last year, however, as Proposition 61 made its way to the November General Election. That voter initiative sought to lower prescription drug prices by requiring state agencies to pay for medicines at the same rates paid by the federal Department of Veterans Affairs. While both sides of the initiative conducted heavily funded campaigns, the initiative was defeated on a 54-46 margin.

Among other things, SB 17 would require a drug manufacturer to notify specified state purchasers, health plans, and insurers, at least 90 days prior to a planned effective date, if it is increasing the wholesale acquisition cost (WAC) of a prescription drug. The bill also would require health plans to release data on drug purchasing trends, including the 25 most prescribed and 25 most expensive medications. This data would be provided to the Department of Managed Health Care or the California Department of Insurance, which would be required to produce a public report addressing the impact of drug costs on healthcare insurance premiums.

Legislatively, SB 17 remains in active status, having made its way out of the Senate Health Committee, Senate Appropriations Committee, and the Senate floor. SB 17 also was heard and passed in the Assembly Health Committee and is currently awaiting action in the Assembly Appropriations Committee once members return from their August recess. The bill is not without strong and vocal opposition from biotech and pharmaceutical manufacturers, who contend that transparency bills do not lower the price of drugs and instead create barriers for investments into new medicines, making it more difficult to deliver breakthrough therapies to patients.