California lawmaker pulls plug on drug price transparency bill

California Capitol Building-Sacramento, CA

After being approved by a key committee last week, a bill that would have required drug companies to justify treatment costs and price hikes was pulled by its author on Wednesday.

California state Sen. Ed Hernandez (D-West Covina) said that he introduced the bill "with the intention of shedding light on the reasons precipitating skyrocketing drug prices." But amendments by an Assembly committee last week make it difficult to accomplish this goal, he said in a statement.

"The goal was transparency, making sure drug companies played by the same rules as everyone else in the health care industry," he said.

[Also: Hospitals overhaul information collection as part of pilot project for California Cancer Registry]

The original bill required that drug manufacturers notify state agencies and health insurers within 60 days of federal approval of a new drug with a price tag of $10,000 or more per year or for one course of treatment and provide information justifying those prices. It also required these companies to provide notice before they increased the price of a drug by more than 10 percent. It was approved by the Senate in June.

But amendments by the Assembly Appropriations committee raised the reporting threshold for drug price increases 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 said he will continue to work closely with health advocates and community organizations until they "get it right."

"This is an issue that will not go away and the public demands answers," he added.

[Also: Multiple factors weighed when gauging impact of Covered California rate hikes]

The bill had gathered support from patient, labor, education and business groups and was opposed primarily by the pharmaceutical industry. The opponents have said the bill places the responsibility solely on drug companies, ignoring that other organizations also affect drug prices, including wholesalers, distributors, health plans and other purchasers.

Some groups representing seniors and patients with chronic diseases had also expressed concerns about the legislation.

"The voters are with us and will be even more so in the future," said Anthony Wright, executive director of Health Access California, a Sacramento-based health care advocacy group. "Every new high-priced drug or unjustified price spike increases public attention and anger, not to mention contributes to rising health premiums."

Supporters referred to the bill as a solution to battling rising health care costs. Allowing insurers and state purchasers to know the cost of drugs at least 30 days in advance would enable them to better negotiate prices, supporters had said.

Key state drug purchasers include the California Public Employees' Retirement System and Medi-Cal, the state's version of the Medicaid program for low-income people.

Like Healthcare Finance on Facebook

Researchers have said that while drug price transparency measures alone, such as Hernandez's bill, would not bring health care costs down, they could help prevent drug companies from raising prices without explanation.

Similar proposals in other states have included requiring drug companies to report closely held research and development costs to government agencies. California joins other states where efforts have been stalled this year.

Hernandez's bill is separate from a ballot initiative on drug prices also garnering publicity this summer. That initiative, Proposition 61, would prohibit the state from paying more for prescription drugs than the lowest prices negotiated by the U.S. Department of Veterans Affairs.

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

Twitter: @HC_Finance