California Takes Aim At Big Pharma's Price Hikes

By Zachary Siegel 07/14/16

California is promoting legislation that would force drug manufacturers to announce drug price hikes before implementation.

California Takes Aim At Big Pharma's Price Hikes

The rising cost of pharmaceutical drugs in America has taken center stage in 2016’s presidential election. Hillary Clinton and Bernie Sanders have both slammed drug pricing as predatory. Even Donald Trump, the presumptive Republican nominee, has called out pharmaceutical companies for ripping people off. 

The best case study of pharmaceutical price gouging came from wonder boy Martin Shkreli, the former CEO of Turing Pharmaceuticals who raised the price of a drug used to treat HIV from $13.50 to $750 per pill overnight. Similarly, a drug called Sovaldi, which can cure hepatitis C without the nasty side effects, debuted in 2014 at a startling cost of more than $80,000 per course of treatment. 

Such behavior has prompted California health advocates to promote legislation that would require drug manufacturers to provide ample notice before making big price hikes. Unsurprisingly, pharmaceutical companies have come out against the measure, arguing that it would lead to drug shortages. 

Advocates in support of the bill dispute the risk of shortages, countering that many of the specialty drugs—that are usually priced the highest—have a short shelf life, making it difficult to stockpile them in the first place. 

At least five states, including California, have introduced drug price transparency legislation this year. 

“Yes, [pharmaceutical companies] should make a profit, but not so much they gouge the public at the expense of the consumer and the taxpayer," state Sen. Ed Hernandez, a Democrat from Azusa who wrote the legislation, told NBC News. "There needs to be a balance."

The measure has cleared the state Senate and will move on to be considered in the California Assembly.

In November, California voters also will decide on a ballot measure that would block the state—which covers millions of underserved people including the poor, inmates, and government retirees—from paying more than the U.S. Veterans Administration for drugs. The VA has strong negotiating power that allows it to secure some of the lowest rates for veterans. 

Close to 10% of total healthcare costs goes to paying for drugs. But in 2014, pharmaceutical spending spiked by nearly 11.5%. So far, estimates for 2015 show prices have risen another 6.8%. 

Why are drugs so expensive now? New specialty drugs, many of which are used to treat cancer, are driving up overall costs, experts suggest. But still, many take aim at pharmaceutical companies who reap unfathomable profit while pricing out many patients. 

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Zachary Siegel is a freelance journalist specializing in science, health and drug policy. His reporting has also appeared in Slate, The Daily Beast, Salon, Huffington Post, among others. He writes often about addiction, sometimes drawing from his own experience. You can find out more about Zachary on Linkedin or follow him on Twitter.