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California Prescription Price Bill Demands Transparency from Drugmakers  

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Lately it feels like there’s no such thing as a sure thing when it comes to healthcare. After all, the seemingly never-ending Republican attempt to repeal the Affordable Care Act (ACA) has recently gained steam (again!). Reportedly, the three GOP Senators that quashed the previous version in July are now considering the Graham-Cassidy Bill (that would still result in tens of millions of Americans without coverage). This at the same time that a Medicare-for-all bill authored by Senator Bernie Sanders (I-Vt.) picks up more than a dozen co-sponsors. (And yet, the former is clearly the one most likely to succeed.)

With all this uncertainty, it’s no wonder some states are trying to do what they can to bring some measure of certainty to an aspect of healthcare that impacts the consumer wallet: prescription prices. New York, for example, has passed legislation that adds a price ceiling for meds covered under Medicaid; if that ceiling is broken, pharmaceutical companies would owe rebates to make up the difference. Maryland has a new law that permits the state’s attorney general to go after manufacturers suspected of “price gouging” generics, which could result in consumer refunds and drugmaker penalties.

California senator wants to hold manufacturers and insurers accountable for price hikes

Here at home, Senator Ed Hernandez (D-Covina) has authored a bill that seeks to help consumers by ultimately making prescriptions more affordable and more predictably priced, but it has a markedly different approach from the aforementioned examples. “I still believe in the basic tenet of free enterprise,” Hernandez, who chairs the state Senate’s health committee, told California Healthline. The market should play itself out.”

Rather than relying on price controls, SB-17 is all about transparency. The bill would require health insurers and pharmaceutical companies to follow reporting guidelines under certain scenarios. For example, in the case of a drug valued $40 or more (on the wholesale end), if a drugmaker intended to hike the price over a two-year window at a rate exceeding 16%, they’d have some explaining to do — to both state agencies and health insurers. And they’d have to provide a 60-day notice before the increase went into effect, as well as the reasons behind the spike in pricing.

Additionally, the bill proposes holding drugmakers accountable for the high price of new meds just introduced to the market. In those cases, pharmaceutical companies would be required to explain how the expensive drug differs from (and improves upon) comparable products already in consumers’ hands.

The reporting doesn’t end with drug manufacturers. The measure would require health insurers to inform the state about how prescription spending impacted premiums, as well as report on drugs that saw the steepest price jumps over the previous year.

Senate bill would shine a light on pricing practices

The rationale informing the required transparency of the bill is a straightforward one: drugmakers can’t hide behind transparency. If price hikes are brought out into the open, lawmakers can object to them more readily and effectively than if they are quietly buried. And perhaps, the thinking goes, manufacturers will be less likely to ratchet prices up if they know everyone will be watching.

However, shining a light on an aspect of healthcare that needs changing begs for a future move rather than a quick fix. So the bill might be well-intended but frustrating for those looking to tamp down rising costs with immediacy.

Will the governor sign the measure?

The bill won’t land on Governor Jerry Brown’s desk ’til next month, but whether he’ll sign it can only be answered with a guess at this point. However, Brian Ferguson, a spokesperson for the governor, told California Healthline that Brown’s staff did contribute to the legislator brainpower huddle over the measure.

Unsurprisingly, the pharmaceutical industry is not a fan of SB-17 and plans to throw its lobbying weight against it. In an email to California Healthline, deputy vice president of public affairs for the Pharmaceutical Research and Manufacturers of America (PhRMA) Priscilla VanderVeer said that the bill “will not improve the accessibility or affordability of medicines for patients.”

Can the bill serve as a model for other states?

Last year Vermont passed a bill that requires transparency in drug pricing, although it is not as broad a measure as what California is proposing, which would include generic, brand-name and specialty meds, and would impact both private and public insurers. Narrower still is Nevada’s new legislation that forces insulin manufacturers to adhere to transparency in pricing.

“I encourage the federal government, especially California’s representatives in the U.S. House and Senate, to consider similar legislation as we continue this discussion at a national level,” Hernandez told California Healthline.

This blog post is provided for educational purposes only and is not offered as, and should not be relied on as, legal advice. Any individual or entity reading this information should consult an attorney for their particular situation. For more information/questions regarding any legal matters, please email info@nelsonhardiman.com or call 310.203.2800.