Prices for prescription drugs keep climbing, driving up overall health care costs. The price of prescription drugs has become one of the primary cost drivers in our health care system, accounting for almost 20% of premiums for those under age 65, and even more if you count drugs administered in a doctor’s office, such as chemotherapy, or drugs administered in hospitals and other health facilities. Escalating drug prices affect not only consumers’ health but also their pocketbooks through higher premiums, co-pays, deductibles, and other out-of-pocket costs. When people face higher drug costs, they’re more likely to skip doctor appointments, tests and procedures, and not fill their prescriptions.
Since taking office, Governor Gavin Newsom has proposed a number of efforts to help address the skyrocketing cost of prescription drugs, including creating a state purchasing pool for prescription drugs (Medi-Cal Rx), the possibility the California having it’s own generic drug label to ensure a lower-cost in manufacturing, and more.
California has already taken a number of steps to address the rising price of prescription drugs:
In 2019, Governor Newsom’s signed AB 824 (Wood), the strongest law in the nation to deter the anti-competitive “pay-for-delay” practice by prescription drug companies. These harmful “pay-for-delay” deals occur when brand name pharmaceutical companies pay generic drug makers to slow down or stop lower-cost alternative medications from entering the marketplace. While this drives up profits for drug companies, consumers were being left to pay artificially high prescription drug costs. In 2010, the Federal Trade Commission estimated Americans pay $3.5 billion a year more for medications because of these “pay-for-delay” practices, and that figure has likely gone up significantly since that finding.
Read more: San Francisco Chronicle Open Forum: Californians need prescription drug price relief
Other California laws that have helped lower the cost of prescription drugs for California consumers:
- AB 265 (Wood) from 2017 which prohibits prescription drug manufacturers from offering discounts for name-brand drugs, if a less-expensive equivalent brand is available, preventing the use of higher priced drugs when unnecessary.
- SB 1021 (Wiener) of 2018 extended a law that ensured that all Californians, including those living with chronic conditions, are able to afford lifesaving prescription drugs by keeping co-pays affordable for consumers and maintaining standards for formulary
tiers, helping consumers have access to the prescriptions they need.
In 2017, Governor Brown signed SB 17 (Hernandez), setting national policy with first-in-the-nation transparency requirements for prescription drug price spikes. The law requires prescription drug companies to provide advance notice and explanation for any price hike of more than 16% over two years. It also enhances public disclosure of data about prescription drug pricing by requiring drug manufacturers to file information about the rationale for price spikes with the Office of Statewide Health Planning and Development including other increases over the last five years, any improvements made to the drug, and other specifics.
Other California laws improving transparency of prescription drug costs:
- AB 315 (Wood) of 2018 required pharmacy benefit managers (PBMs) to register with the state and require them to disclose information about drug acquisition costs and negotiated rates to purchasers. Regulating PBMs and requiring disclosure of information on rebates and discounts to purchasers ensures that consumers and purchasers benefit from savings that are reaped by PBMs.