Today, California Governor Jerry Brown signed Senate Bill 17 into law, a groundbreaking measure to increase transparency and accountability for the prescription drug industry. We celebrate the new law—passed with support and hard work from CALPIRG—as a landmark victory for consumers, not just in California, but nationwide.
SB 17 will provide the general public with invaluable information about drug prices and drug price hikes. Since the prescription drug market is national, this information will effectively be available nationwide, making the new law a potential game changer in the fight to contain rising prescription drug costs.
The high cost of prescription drugs has been a perennial concern for American consumers. A new crop of life-changing but extraordinarily expensive specialty drugs that have come on the market in recent years and headline-grabbing price hikes for older medications that had previously been available at reasonable prices have combined to bring new urgency to the issue. Rising prescription drug costs are a burden on all Americans—not just the patients who depend upon expensive specialty drugs—through rising health insurance premiums, rising costs for businesses and a growing burden on local, state and federal budgets.
Experts agree that prices often have little to no correlation to what the manufacturer spends to research and develop drugs, and that R&D costs are often overstated by the drug industry. One of the conditions that enables escalating drug prices is a lack of transparency and accountability regarding prescription drug manufacturers’ pricing practices.
SB 17 by itself will not entirely solve the problem of skyrocketing prices for prescription drugs, but it is a critical first step toward holding the pharmaceutical industry accountable.
The new law requires prescription drug corporations to give 60-day advance notice before they increase prices, and require an explanation and justification for the increase. With this bill, California is pulling back the curtain to expose surprise price hikes before they happen, and shining some much-needed sunlight on what goes into the price of a drug.
This matters for consumers nationwide because the information about manufacturers’ price justifications and upcoming price hikes is of national significance and will be accessible to everyone in the United States. The required price justifications will be posted to a public website accessible to all Americans. The price hike notifications will be available to all public and private health care purchasers, including California state government and commercial health insurance plans, who will be free to share the information with the general public. Since manufacturers’ prices and price hikes are determined on a national basis, this information will be relevant to all Americans.
Making this information available is unlikely to be enough on its own to contain prescription drug prices for consumers. But by informing purchasing decisions by consumers, employers, health insurers and government programs—and by putting greater public pressure on drug companies to keep prices justifiable—its impact could be substantial.
The fight for reasonable prescription drug prices is far from over. Drug manufacturers are likely to challenge the implementation of the law at every step, and to fight it in court. But California’s new law represents one of the most important victories for consumers against the power of pharmaceutical corporate interests in American history, and deserves to be celebrated.