California senator withdraws ‘gutted’ drug price transparency bill

A closely watched effort in California to pass a bill that would require drug makers to explain their price hikes has been scuttled. The decision came after amendments were made during an assembly committee hearing last Friday that sources told us “effectively gutted” the legislation.

The bill would have required drug makers to report any move to increase the list price of a medicine by more than 10 percent during any 12-month period. And drug makers would also have had to justify price hikes for medicines with a list price of more than $10,000 within 30 days of making such a move.

“Unfortunately, recent amendments have made it more difficult for us to accomplish our fundamental goal,” said California state Senator Ed Hernandez, who pulled the bill after introducing the legislation and succeeding in getting the state Senate to approve the measure two months ago.

The legislation was one of more than a dozen such efforts by state legislatures around the country in response to rising medicine costs. Beyond sensational examples of drug prices rising by sky-high amounts, average prices for prescription drugs increased 10 percent last year, according to Truveris, a health care data company. And prices for brand-name medicines, specifically, jumped nearly 15 percent.

Congress, however, has not taken any action, which explains why 14 states have introduced bills that require drug makers to either disclose their costs or explain price hikes, according to the National Conference of State Legislatures. So far, only Vermont has passed such a law, while several others have stalled or failed.

For its part, the pharmaceutical industry has been battling these bills. The Pharmaceutical Research and Manufacturers of America, the industry trade group, argues that disclosing many of the required costs is difficult, if not impossible, and that some pricing data is proprietary information. Drug makers also argue the bills often fail to note that payers do not pay list prices for medicines.

Although Hernandez said he hopes to reintroduce the legislation at some point, the withdrawal is a significant victory for the pharmaceutical industry. The effort in California was being closely tracked because the state is often seen as litmus test for what happens elsewhere around the US. Moreover, the bill appeared to have more distinct reporting requirements for price hikes than other state bills.

But during a California assembly appropriations committee hearing last Friday, the committee chair introduced amendments that loosened some of the reporting requirements for companies. For instance, the threshold for reporting price hikes was increased from 10 percent to 25 percent, and the bill would not go into effect until 2018, according to a legislative source.

We asked Lorena Gonzalez, the committee chair, why she introduced these amendments and will update you accordingly. The assemblywoman, by the way, is a Democrat whose largest financial contributors are unions, although the pharmaceutical and health industries ranked 10th among her supporters, according to FollowTheMoney.

“The pharmaceutical industry has been completely tone deaf and unresponsive to the public outcry over skyrocketing prices and the end result will be public policy action in one form or another,” said Charles Bacchi, who heads the California Association of Health Plans, in a statement.