The bill would require drug companies to give 60 days’ notice to state agencies and health insurers anytime they plan to raise the price of a drug by 16 percent or more over two years.
This article first appeared October 06, 2017 on Kaiser Health News.
Insurers, hospitals and health advocates are waiting for Gov. Jerry Brown to deal the drug lobby a rare defeat, by signing legislation that would force pharmaceutical companies to justify big price hikes on drugs in California.
"If it gets signed by this governor, it's going to send shock waves throughout the country," said state Sen. Ed Hernandez, a Democrat from West Covina, the bill's author and an optometrist. "A lot of other states have the same concerns we have, and you're going to see other states try to emulate what we did."
The bill would require drug companies to give California 60 days' notice to state agencies and health insurers anytime they plan to raise the price of a drug by 16 percent or more over two years. They would also have to explain why the increases are necessary. In addition, health insurers would have to report what percentage of premium increases are caused by drug spending.
Drugmakers spent $16.8 million on lobbying from January 2015 through the first half of this year to kill an array of drug legislation in California, according to data from the secretary of state's office. For the pricing bill alone, the industry has hired 45 lobbyists or firms to fight it. Against the backdrop of this opposition campaign, Brown must decide by Oct. 15 whether to sign or veto the bill.
"When they have to justify in California, de facto, they have to justify it to the other 49 states," said Gerard Anderson, a health policy professor at Johns Hopkins Bloomberg School of Public Health in Baltimore. "Other states essentially get to piggyback on the good efforts of California, and hopefully, because they might have difficulty justifying the price increases, everybody's prices around the country will be lower."
Other states, including Maryland, Vermont, Nevada and New York, have passed similar laws aimed at bringing more transparency to prices and curbing price gouging. But the pharmaceutical industry has fought the hardest in California. If drug companies don't like the disclosure laws in smaller states, they could decide not to sell their drugs there, Anderson said, but the market in California is just too big to ignore.
"States like Maryland are just not as powerful," he said. "It just doesn't have the clout that a state like California has."
Kaiser Health News is a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation.