California signs into law transparency over drug pricing

In a move that is guaranteed to result in further lawsuits and acrimony, California has signed into law a requirement for pharmaceutical companies to notify and explain any drug pricing increases above a certain threshold.

Pharmaceutical companies, beginning in January 2019, will have to give the state of California at least 60 days’ notice prior to raising drug prices by more than 16% in a two-year period. This is more stringent than the self-imposed single digit increases that several big pharma companies have pre-emptively instigated in the hopes of avoiding such a move by states.

Allergan and Takeda, in the US, are two prominent names who have pledged to ensure that prices do not exceed 10% annually, among several others who have taken different steps, such as releasing average price increases all brands. However, it was clearly not enough to stymie the state-wide push to take greater control of pricing away from the drug companies.

Another part of the law also requires health plans and insurers to provide a report every year regarding how drug pricing is impacting on healthcare premiums in California.

"Californians have a right to know why their medication costs are out of control, especially when pharmaceutical profits are soaring," said Governor Brown during the signing of the law.

PhRMA is unlikely to allow such a measure to go unopposed, as drug pricing continues to be a topic of heated debate in the US, it cannot afford for such laws to spread to other states.

California, itself, had previously attempted to pass a bill tying prescription drug prices to those paid by the US Department of Veteran Affairs. This bill was rejected in what was seen as a symbolic victory for pharma against drug pricing being taken into state hands, but this victory was short-lived with the current measure arriving only a year after.

"It is disappointing that Gov. Brown has decided to sign a bill that is based on misleading rhetoric instead of what’s in the best interest of patients," Priscilla VanderVeer, a spokeswoman for the PhRMA, said in a statement. Continuing, that the step "ignores the reality that spending on prescription medicines remains a much smaller portion of overall healthcare spending."

The battle is undoubtedly set to rattle on in the short-term but the pharma industry in the US will be increasingly concerned that such proposals are gaining public support. The trend within the industry to move towards single digit price increases is now looking unlikely to stop this movement, particularly as those companies would still fall foul of California’s new law.