California Drug Price Transparency Bill Clears Key Committee

A measure that would compel pharmaceutical companies to disclose and justify drug price increases overcame a show of skepticism by Democratic lawmakers on Tuesday afternoon, passing the Assembly Health Committee 12-4 on a party-line vote.

The bill — softened from earlier versions — would require drug manufacturers to notify state agencies and health insurers within days of federal approval for a new drug that cost $10,000 or more per year or for one course of treatment.

Drugmakers would be required to provide 30 days’ notice before increasing the price of a drug. The pharmaceutical industry also would have to justify the price increases as well as the introduction of high-cost drugs.

“This bill renders prescription drugs in line with other sectors of health care,” said the bill’s author, state Sen. Ed Hernandez (D-West Covina), who is chairman of the Senate Committee on Health. Hernandez said other industries, such as health insurance, already face pricing and transparency rules.

California is among about a dozen states that have considered proposals this year to impose greater price transparency on pharmaceutical companies, as dramatic drug price hikes make headlines and stoke public ire.

The bill’s supporters say advance notice of a price increase can help drug purchasers negotiate the best deal for consumers. Pharmaceutical companies had criticized that provision, saying it could prompt “hoarding” by large pharmacies.

A few lawmakers commented on the complexity of the measure, seeming overwhelmed by the topic of pharmaceutical pricing and uncertain how the bill would affect it.

“I’m very afraid that this is only going to disrupt the marketplace and further increase the prices,” said Assemblyman Adrin Nazarian (D-Sherman Oaks). He ended up supporting the bill.

Assemblyman Freddie Rodriguez (D-Pomona) asked if the bill would cause health care premiums to go down.

“I’ve got a lot of different answers, so it’s hard for me to grasp it,” said Rodriguez. “I’ve been trying to look at this for the last probably two weeks,” he said. He, too, voted for the measure.

Before the hearing, Hernandez said lawmakers on the committee had been asking for amendments to the bill in favor of “what pharma is asking for.” He said he wasn’t sure whether the measure would have enough support to win committee approval.

Over the past week, the bill was altered to ease the proposed rules for the pharmaceutical industry. The advance notice drugmakers would have to give before a price increase was shortened from 60 to 30 days. A requirement to hold a yearly public hearing on drug price increases was deleted.  And pharmaceutical companies would only have to notify buyers of the affected drugs.

The California Life Sciences Association said it had been seeking amendments on the measure over the past week. The CLSA spent $492,936 on lobbying the California legislature from January 2015 through March of this year — more than any other pharmaceutical company or trade association.

At the hearing, Mike Carpenter, a lobbyist speaking on behalf of CLSA, said the bill “will provide a distorted picture of the role that medicines play in overall health care costs.” He said the legislation seeks selective information that won’t “meaningfully inform” the dialogue about controlling health care spending.

Fred Noteware, a lobbyist speaking on behalf of the Pharmaceutical Research and Manufacturers Association (PhRMA) said the measure creates “unnecessary and onerous” requirements and doesn’t provide insight into the role health plans and pharmaceutical benefits managers (PBMs) play in pharmaceutical spending.

However, the bill was amended to require disclosures about and reporting from PBMs, which are companies that contract with health insurers and state agencies to negotiate lower drug prices with manufacturers.

Insurers backed the bill, even though it requires health plans to disclose how much they spend on prescription drugs.

The bill moves next to the Assembly Appropriations Committee, and if it passes, it would then go to the assembly floor for a vote.

If the legislation becomes law, “we will be continuing this discussion on a national level,” Hernandez said.

But Assemblyman David Chiu (D-San Francisco), who introduced a different drug price transparency measure last year that never made it to a vote, said getting the political support to pass the bill may be tricky.

“These fights are very unpredictable,” he said.