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Drug Makers to Justify Costs, Disclose Price Hikes under Proposed California Law

June 28, 2016

A recently proposed California law that would require drug makers to justify the costs of their treatments and disclose any major price hikes has invoked strong opposition from the pharmaceutical industry. 

The bill would require pharmaceutical companies to notify state agencies and health insurers, within days of federal approval, of any new drug that costs $10,000 or more per year or for one course of treatment. In addition, a drug maker would be required to provide notice before increasing a drug’s price above a certain threshold as well as justify the price increase. Finally, both pharmaceutical companies and health insurers would have to disclose how much they spend on prescription drugs each year.

The new bill, written by Senator Ed Hernandez (D-West Covina), has support from business and labor groups, health care providers, insurers, and patients. However, the pharmaceutical industry has begun lobbying against the bill as well as releasing messaging to warn the public that, if passed, the bill will lead to shortages of crucial drugs in some parts of the California.

Members of the California Life Sciences Association (CLSA), a trade group for biotechnology and pharmaceutical companies, are most concerned about the bill’s requirement that drug makers must give 60-days’ notice of drug price hikes. The CLSA has said that large pharmacies or other drug purchasers may stock large quantities of drugs to avoid the price increase, leaving smaller, independent pharmacies unable to acquire the drug.

On the other hand, proponents of the bill say that the new law does not go far enough and only provides some insight into drug industry pricing practices. Notably, the law only requires manufacturers to report price increases, not decreases.

A state Assembly committee hearing is scheduled for next Tuesday to discuss the bill.



California Legislative Information. SB-1010 Health care: prescription drug costs. Published June 2016. Accessed June 28, 2016.

Bartolone P. California drug price measure fiercely opposed by pharmaceutical industry. Kaiser Health News. Published June 28, 2016. Accessed June 28, 2016.

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