California state lawmaker to try again on drug price transparency

Photo by Chris Potter via Flickr Creative Commons

A California lawmaker has reintroduced legislation intended to make drug price increases more transparent, vowing to again take on the pharmaceutical industry over runaway costs.

Senator Ed Hernandez (D-West Covina), who chairs the Senate Committee on Health, this week announced a measure that would require pharmaceutical companies to notify state health programs and private insurers before they increased prices of certain drugs. Hernandez dropped a similar bill last session because he was dissatisfied with some amendments.

"I’m sending a message to the pharmaceutical industry that I’m serious, that I’m coming back," Hernandez said in an interview. He said he’s willing to "poke the bear" – meaning he will take on the pharmaceutical industry and its lobbyists in the Capitol once again.

The health chairman has not yet fleshed out the specifics of his new legislation, but it's expected to be similar to the bill he introduced last year, SB 1010. In its original form, SB 1010 would have required drugmakers to notify state programs and insurers in writing when they raised the price of a drug by 10 percent or more; it also would have required notification if a drug was going to cost $10,000 or more a year or for one course of treatment. 

Amendments by the Assembly Appropriations Committee last summer raised the reporting threshold for drug price increases from 10 percent to more than 25 percent. The amendments also removed the requirement for drug companies to provide justification for the price increases and delayed by a year when these notifications would have to go into effect.

Hernandez felt the amendments had weakened the bill to such an extent that he pulled it from consideration in August. 

The new bill, SB 17, says that prior notification of a price increase by manufacturers would help payers of prescription drugs manage costs. Its passage would also state the legislature's intent to require that "the public be given information about the justification, if any, for the prices of newly emerging medications and price increases for existing prescription drugs," according to the measure's language.

Priscilla VanderVeer, spokeswoman for the Pharmaceutical Research and Manufacturers of America, said her group cannot comment on the bill until Hernandez fills in the details.

Todd Gillenwater, a spokesman for the California Life Sciences Association, which represents pharmaceutical companies, said the group is aware of the senator's new bill.

Protecting patients’ access to drugs and advancing innovation in the state’s biomedical sector are both a "top priority," he said in an emailed statement.

"We look forward to working with the Chairman, his colleagues in the legislature, and the Administration in pursuit of these important goals throughout the coming legislative session."

The Life Sciences Association spent $723,529 lobbying in Sacramento from the beginning of 2015 to the end of September of this year, according to the California Secretary of State. Only some of that money was spent lobbying against Hernandez’s legislation, although the senator said he had encountered strong opposition to the measure.

Hernandez said it is even more important to pursue drug price transparency in the aftermath of the November 8th election. California "take[s] the lead" on many policy issues, he said, naming the environment, health care and immigration. The heavily Democratic state’s role in health policy has become "even more important," with the election of Donald Trump and a Republican-dominated Congress, he said.

About 16 states considered some sort of drug price transparency measures last year, according to the National Conference of State Legislatures. Some of them, unlike the first Hernandez bill, proposed that drugmakers disclose research and development costs. Most of them failed, except for Vermont’s proposal, which was signed into law this past June.

Vermont’s law requires, among other things, that the state identify 15 drugs on which it spends the most and which have also been subject to price increases of 50 percent or more over the past five years. Virginia will consider its transparency legislation again this coming year, according to the Conference of State Legislatures.

"Transparency… [puts] pressure on the markets to control prices," Hernandez said, adding that he doesn’t believe in regulating the actual prices of the drug or eliminating companies’ ability to make a profit. But their profits, he said, should not "gouge" patients or taxpayers.

Patient advocates support the new measure, saying revelations about Epipen price increases helped their cause.

"The public anger over skyrocketing prescription drug prices is not going away," Anthony Wright, executive director of Health Access, a co-sponsor of the legislation, said in a written statement. "We are confident we will be able to make progress in the new year."

Kaiser Health News is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.