Regulation and Compliance > State Regulation

California Drug Price Bill Becomes Law as Legal Fight Looms

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California passed a law requiring pharmaceutical companies to explain their price increases, escalating the state-by-state battle between lawmakers trying to bring more transparency to the industry’s practices and drugmakers that oppose the efforts.

The California measure, signed Monday by Gov. Jerry Brown, is among the most aggressive state efforts to peel back the secretive process of setting drug prices in the United States. The law requires pharmaceutical companies to notify insurers and government health plans at least 60 days before a planned price increase of more than 16% during a two-year period, and to explain the rationale for the increase. The information will be available on a government website.

“Californians have a right to know why their medical costs are out of control,” Brown said at a signing ceremony in Sacramento. “This measure is a step at bringing transparency, truth, exposure, to a very important part of our lives.”

(Related: CVS Health Is Sued Over `Clawbacks’ of Prescription Drug Co-Pays)

The law — like measures in other states — is expected to be a legal target by the industry.

Last month in Nevada, the industry’s two major lobbying groups — Pharmaceutical Research and Manufacturers of America, of PhRMA, and the Biotechnology Innovation Association, or BIO — sued the state over a law requiring drug plan administrators to reveal rebates they get on diabetes drugs. In Maryland, the Association for Accessible Medicines, the trade association for generic drugmakers, challenged a state “price gouging” law, although a judge allowed it to take effect on Oct. 1.

Industry Opposition

In California, BIO and a lobby group for drug plans, the Pharmaceutical Care Management Association, opposed the legislation and spent millions of dollars on lobbyists and advertising as it worked its way through the state legislature.

They continued to criticize it Monday, though neither PhRMA or BIO would say if they planned to sue.

The law “seriously jeopardizes” the state’s future in biotech and pharmaceuticals and will not lead to lower prescription drug costs, said BIO Senior Executive Vice President for Public Affairs Gary Andres in an emailed statement.

Unlike most developed nations, the U.S. largely doesn’t regulate pricing for drugs. Consumer outrage over prices has grown in recent years because of aggressive price increases taken by companies, like Valeant Pharmaceuticals International Inc., that acquired older drugs and sharply increased the prices. In a 2015 analysis, the Kaiser Family Foundation found that 86% of Americans supported requiring drug companies release information on how they set prices.

PhRMA said the California law wouldn’t help consumers save money.

“We are ready to roll up our sleeves and do the hard work of working collaboratively with the governor, legislature and health care stakeholders to find common sense solutions that improve affordability and access for patients,” the group said in a statement.

—-Read Drug Industry Lunacy: Who’s to Blame? on ThinkAdvisor.

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