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Pulling Back the Curtain on Prescription Drug Prices

By Emily Rusch
Executive Director

One of the big outstanding issues for the California state Legislature to tackle this year is the soaring cost of prescription drugs. And while the legislature has proposed several bills with solutions, the bill that's gotten the most attention is SB 17 for prescription drug price transparency. 

In recent years CALPIRG’s Health Insurance Rate Watch Project reviewed dozens of health insurance companies’ rate filings at the California Department of Insurance, and found prescription drug price increases to be a significant driver of premium price hikes overall. We're not alone. A recent Congressional investigation found that four major drug companies were all engaged in deliberate, monopolistic behavior that allowed them to impose and protect astronomical price increases.[1] Another Congressional investigation into the pricing of the Hepatitis C drug Sovaldi demonstrated that the $84,000 price tag was based on an assessment of what the market could bear and what policymakers and the public would put up with, not on the cost of developing and producing the drug and making a reasonable profit.[2]

Many other prices have skyrocketed for medications that have been on the market for years or decades.

  • The list price for a pair of Epipen devices went from $100 in 20017 to $600 in late 2016.[3]
  • The average price of insulin rose by 200% between 2008 and 2016.[4]
  • The antidepressant Amitriptyline went from $.04 per 100 milligram pill in 2013 to $1.03 per pill in 2015.
  • The antibiotic Tetracycline went from $.06 per 250 milligram pill in 2013 to $4.60 per pill in 2015.[5]

The California state Legislature has very limited authority over drug prices. But a lot can be learned if we simply require more transparency of the industry.

SB 17 would require drug manufacturers to notify purchasers of significant price increases at least 60 days in advance. This advance notification would allow payers to either negotiate lower prices or search for cheaper alternatives. The bill also gathers more information from insurers about prescription drug costs, so that regulators and policymakers have a better understanding of the industry going forward. Read the full bill here.

The prescription drug industry is staunching opposed to the bill, and successfully squashed a similar bill in the last legislative session.

But the legislative author, State Senator Ed Hernandez, has made this a high priority. Health Access California, the California Labor Federation, and Unite Here! are sponsoring the bill, and CALPIRG is among a long list of supporters, which includes everyone from other consumer groups, to business organizations and labor unions, to the health plans. Many of the editorial boards of the state’s biggest newspapers have weighed in favorably as well: 

  • The Los Angeles Times: "The fact that pricing is complicated is all the more reason to develop a clearer picture of the factors involved. It’s not as if this issue is going away — as drug prices continue to rise along with healthcare spending in general, so will the pressure on lawmakers to ease the pain."
  • The San Jose Mercury News: "The bill deserves to breeze through the Legislature and get a quick signature from Gov. Jerry Brown."
  • The Sacramento Bee: "It seems perfectly reasonable, so much so that Sen. John McCain, R-Ariz., working with congressional Democrats, has introduced similar legislation."

Legislators are likely hearing from the opposing drug companies over the summer legislative break, leaning on them to vote no. So CALPIRG is calling upon our members to weigh in with the own Assembly members, by going to a local meeting, picking up the phone or sending an email. 

And we're supporting other efforts, too, including Senator Mike McGuire's bill SB 790 to limit drug company gifts to doctors, Assemblymember David Chiu's bill AB 587 to help state government negotiate better prices for state-purchased drugs, and AB 315 to increase transparency in in the pharmacy benefits marketplace.  

Here's a list of SB 17 supporters here: 

   
 
 

    

[1] https://www.aging.senate.gov/imo/media/doc/Drug%20Pricing%20Report.pdf

[2] https://www.finance.senate.gov/ranking-members-news/wyden-grassley-soval...

[3] http://www.reuters.com/article/us-mylan- nl-epipen-congress-idUSKCN11R2OG

[4] http://www.nbcnews.com/business/consumer/insulin-new-epipen-families-fac...

[5] https://www.bostonglobe.com/business/2015/11/06/generic-drug-price-incre...

[6] http://www.consumerreports.org/drugs/cure-for-high-drug-prices/

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