Experts attribute the recent rise in drug spending to the proliferation of new specialty drugs, many of them used to treat cancer, and fewer patent expirations that allow for generic competition.
Sovaldi, which can cure Hepatitis C without the excruciating side effects of earlier treatments, debuted in 2014, at a shocking cost of more than $80,000 per course of treatment. The price has since come down.
California’s SB1010 would require pharmaceutical companies to provide advance notice to drug purchasers before increasing the price of a drug by 10 percent or $10,000 a year. For generics, the threshold is $100 a month or 25 percent. Insurance companies would be required to report data on drug prices to state regulators, including the portion of premiums attributable to pharmaceuticals.
Proponents hope the advance notice will give governments, insurers and pharmacy benefit managers a chance to negotiate.
But drugmakers warn it could create regional shortages of some drugs if large pharmacy chains or distributors horde medications to beat the price increase. That would create an environment for speculators to drive prices up, not down.
Drug manufacturing is a highly regulated industry with complex supply chains that relies on predictable demand, said Brett Johnson, director of state and local policy for the California Life Sciences Association, an industry group.
“This isn’t an industry where they can really react quickly to surges in demand,” Johnson said. “So that creates complications when we’re talking about things like price signaling.”
Drugmakers also say the transparency requirements would create a distorted view of drug pricing, failing to account for negotiated discounts or price decreases.
The bill’s supporters dispute the risk of shortage, noting many of the specialty drugs that would trigger the notification have a short shelf life and require careful handling, making it difficult to stockpile them.
The measure has cleared the Senate and is moving through the Assembly, which tends to take a much more skeptical view of business regulations.
The measure barely survived a hearing in the Assembly Health Committee last month and faces an even tougher test in the Appropriations Committee when lawmakers return to the Capitol following a July break.
“These medications are not like other products,” said Anthony Wright, executive director of Health Access, one of the advocacy groups sponsoring the measure. “People and patients and insurers are often cases not in a position to say ‘no.'”
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