Release: Senator Hernandez’ SB 17 Signed into Law

October 9, 2017

SB 17 sets national health care policy, bringing transparency to Big Pharma

SACRAMENTO – Today, Senate Bill 17, authored by Senator Dr. Ed Hernandez, O.D., was signed into law by Governor Jerry Brown. SB 17 will bring transparency to Big Pharma and require drug companies to explain the reasons behind rising drug prices.

“With Governor Brown’s signature, this law will bring much-needed transparency to skyrocketing drug prices. This is a groundbreaking law that will not only benefit millions of Californians, but will hopefully become a model for the entire nation,” said Senator Hernandez, Chair of the Senate Health Committee. “Despite Pharma’s best efforts to kill this bill, we’ve shown they are beatable when you can rally a broad coalition of support. I encourage other states, and the U.S. Congress, to pass similar legislation. Let’s work together to advance transparency and lower health care costs.”

Public anger at rising drug prices has been growing for some time, and Californians expected their government to do something about it. SB 17 promotes transparency in the health care system by requiring drug makers to give prior notice to purchasers before raising prices and requiring health plans to report the proportion of the health insurance that is spent on prescription drugs. [SB 17 Fact Sheet]

Co-sponsored by California Labor FederationHealth Access California and Unite HERE!, SB 17 amassed a strong support coalition of consumer, labor, business, insurer, and other health organizations.

“We commend Governor Brown for signing into law the strongest bill in the country to bring much-needed transparency to prescription drug pricing. Labor unions led the fight for SB 17 because skyrocketing prescription drug costs hurt working people, patients, the chronically ill and cost taxpayers billions of dollars,” said Art Pulaski, Secretary-Treasurer of the California Labor Federation. “Many Californians are forced to choose between the lifesaving drugs they need and putting food on the table for their families. This is not a choice anyone should have to face in this state. Despite Big Pharma’s well-funded campaign to distort the truth on SB 17, the Legislature approved SB 17 and the Governor signed it into law, taking a huge step forward on reducing the cost of prescription drugs. SB 17 isn’t just important for California, it’s a model for the rest of the country.”

“This new California law sets national policy, breaking new ground to benefit patients and purchasers against unfair and unjustified prescription drug price hikes. No longer will drug companies get to spike prices without advance notice or justification,” said Anthony Wright, Executive Director, Health Access California. "While the law provides tangible tools to help address prescription drug prices, its passage also signals that Big Pharma is beatable. The drug companies’ behavior has been so outrageous that there’s an opportunity for further reforms at the state and federal level, building on this important step today.”

“Prescription drug companies continue to make obscene profits while thousands of hotel, restaurant and casino workers like me -- and millions of other Californians -- work hard every day just to make ends meet. Drug companies should play by the same rules as health insurance and hospital corporations,” said Shawn Prasad, Server at The Esquire Grill (HMS Host), Sacramento Airport, member of UNITE HERE Local 49. “We need transparency in drug prices, and that's why we worked so hard to pass this law, spending our weekends canvassing in the summer heat, dropping thousands of door hangers urging our legislators to pass the bill. SB 17 is the fruit of our labor.”

What other supporters are saying:

Paul Markovich, President and CEO of Blue Shield California:

“Blue Shield of California applauds the Governor and Legislature for enacting a new state law that provides much-needed transparency to prescription drug pricing in California. Drug pricing remains a significant threat to affordability. Blue Shield believes Senate Bill 17 takes an important step toward informing consumers why drug prices go up and determining if these price increases are reasonable.”

Charles Bacchi, President and CEO of the California Association of Health Plans:

“SB 17 speaks to the needs of all Californians who have felt the strain of nonstop prescription drug price increases. Pharmaceutical prices have long played an outsized role in driving up the cost of health coverage across the board. SB 17 gives us the tools to address the issue by helping us prepare for price hikes and discouraging needless cost increases.” 

Bernard J. Tyson, Chairman and CEO of Kaiser Permanente:

“This is a crisis in need of immediate attention because we view high-priced drugs as a threat to affordability. I applaud Governor Brown for signing SB 17. For millions of people to access coverage and care, we need pharmaceutical manufacturers to publicly explain the price of their products and to share responsibility for making health care more affordable. SB 17 is not the panacea for out-of-control drug prices, but it is the most significant and far-reaching drug pricing transparency legislation in the country. It is an important step forward to achieving our shared goal of better health for all.”

Tom Steyer, President of NextGen America:

“In the face of powerful corporate interests, Californians stood up for people over profits and made their voices heard in support of SB 17. Drug pricing transparency is a significant victory for Californians over Big Pharma, but this is just the start. We must make sure that everyone has access to high-quality health care, and we need to bring costs under control for the sake of consumers, workers, and businesses.”

Senator Hernandez will hold a media availability today between 11 a.m. – 12 p.m. Email or call Diana Crofts-Pelayo to RSVP.

Dropbox Clips:

About SB 17

Prior notice of rate increases for prescription drugs

  • Requires drug manufacturers to notify purchasers, at least 60 days prior to the planned effective date, if it will be increasing the wholesale acquisition cost of a prescription drug that costs more than $40 by 16% in a 2-year period.
  • Requires manufacturers to provide specified information related to price increase to OSHPD, such as a description of factors that led to the decision to increase drug’s price, including documentation of increased clinical efficacy of the drug, if any.
  • Requires manufacturers to report, within 3 days of release to the market, to OSHPD if it is introducing a prescription drug to market priced above Medicare’s specialty drug threshold.
  • Requires manufacturers to provide specified information related to the new drug’s price to OSHPD within 30 days of that notification, such as the marketing and pricing plans used in the launch of the new drug and the estimated volume of patients that may be prescribed the drug.

Greater understanding of the costs of prescription drugs for health plans/insurers

  • Requires health plans and insurers to annually report specified information to regulators related to the proportion of the premium dollar spent on prescription drugs, the year over year increase in net costs and member costs, the 25 most frequently prescribed medications, most costly drugs by total plan spending, and drugs with the highest year over year increase in net cost.
  • Requires regulators to compile this information into a consumer-friendly report that demonstrates the overall impact of drug costs on health care premiums.