Life Science Compliance Update

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October 09, 2017

What California’s New Drug Transparency Law Does – And Doesn’t – Do

Jerry Brown Signing Prescription Price Bill

We have written numerous times on the transparency bills in various states. California’s Senate Bill 17 is one of those bills that has worked its way through the statehouse and was signed today by Governor Jerry Brown’s desk.

The law aims to make drug prices more transparent for both public and private health plans by requiring pharmaceutical companies to notify health insurers and government health plans at least sixty days prior to raising prices more than sixteen percent over a two-year period of particular drugs with wholesale acquisition costs over $40. It would also require the companies to explain the reason behind the increase in price. All of the information provided to the state would be made public online for citizens to review. Additionally, the California Research Bureau would be required to report to the Legislature about the implementation of these provisions, and would subject these provisions to review by the appropriate committees of the Legislature. The effective date would be no earlier than January 1, 2019.

Additionally, the bill requires the companies to break down and report on premium and drug cost information – allegedly providing the state with data on the percentage of premiums and the increases in premiums that can be attributed to prescription drug costs.

State Senator Ed Hernandez, who wrote the bill, signed into law, SB 17 will set national health care policy, having impact for consumers and providers in other states.”

“Price increases don’t happen in a vacuum,” Hernandez said. “SB 17 is one of the most transformative pieces of health legislation in the country.”

California’s latest bill falls short of offering patients, providers or policymakers any meaningful improvements on medicine access, affordability or coverage. Rather, it calls for mounds of red tape and government reports that look only at the list price of a prescription drug rather than considering actual patient spending after negotiated discounts and rebates.

The bill received support from a broad coalition including consumer groups, business, labor, insurance, and patient organizations.

As pointed out in PhRMA’s press release about the passage of the bill, the bill does not address the most pressing issues for California’s voters – they are most concerned with the economy and immigration issues, while healthcare is a second-tier issue. Voters also care more about the access to care and quality health coverage, including making sure they have access to their needed medicines and doctor, than they do about price transparency. Additionally, even with respect to transparency, California voters want more information from insurers about out-of-pocket charges, hospital prices, and provider networks than about prescription drug prices.

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