The Wall Street Journal: California Governor Signs Bill Requiring Greater Drug Price Transparency

October 9, 2017
Maria Armental

California’s governor has signed a bill into law that requires pharmaceutical companies to give notice and reason for price increases of certain drugs, placing the state at the center of the national debate over costs over prescription drugs’ costs.

The law, which drew bipartisan legislative support and Democrat Gov. Jerry Brown signed Monday, requires that, starting Jan. 1, 2019, companies give a 60-day notice if list prices of drugs are raised more than 16% in a two-year period. The law applies to drugs with a wholesale price of more than $40 for a 30-day supply. Health plans and insurers would also have to file annual reports outlining how drug costs affect health-care premiums in the state.

“We need answers for the child who needs an EpiPen, the hepatitis C patient who needs Sovaldi, and the AIDS patient who needs Daraprim,” said Democratic State Assemblyman David Chiu in a statement.

Trade group Biotechnology Innovation Association, one of the groups that is suing Nevada over a similar measure in that state regarding insulin prices, said in a statement the new law “seriously jeopardizes the future of California’s leadership” in biopharmaceutical innovation and “will neither provide meaningful information to patients nor lower prescription drug costs.”

Sen. Ed Hernandez, the lead sponsor, retorted: “I just can’t see how that’s the case.”

The law, Mr. Hernandez said, doesn’t set prices, and companies could still raise prices and invest in innovation, albeit they would have to disclose and justify those price increases.

“We are going to set the standard,” said Mr. Hernandez, adding that it was now up to their federal counterparts to take up the issue so that “everybody in this state and this country has access to health care.”

Mr. Hernandez introduced the bill last year after California voters rejected a ballot proposal that required state agencies to pay no more for prescription drugs than what the U.S. Department of Veterans Affairs pays, with certain exceptions. The VA negotiates discounts off list prices directly with manufacturers.

Uninsured patients or those with high-deductible health-insurance plans pay the full list price or a relatively high percentage of the cost.

The drug industry spent more than $100 million on advertising attacking the initiative.

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