California bill would require Big Pharma to unveil how drugs are priced

By Zachary Brennan

- Last updated on GMT

Related tags Health care Pharmacology Price

California bill would require Big Pharma to unveil how drugs are priced
A new California bill introduced earlier this week would, for the first time, require pharma companies to unveil a number of unique operational costs as a way to better understand drug pricing.

Specifically, the bill would require pharmaceutical manufacturers to provide the California Office of Statewide Health Planning and Development (OSHPD) with annual cost reporting on drugs that cost more than $10,000 per year. OSHPD would compile the data into an annual report, submit it to the state Legislature and post it online. 

Under the bill, manufacturers of the expensive drugs would be required to report production costs, including:

  • R&D (research and development) costs paid by the manufacturer or predecessor;
  • Any R&D grants associated with the drug, including those from any governmental agency or other source;
  • Clinical trials and other regulatory costs;
  • Manufacturing costs;
  • Marketing and advertising costs;
  • Acquisition costs, including patents, licensing or purchase of a corporation owning the rights to the drug during development;
  • Profit attributed to the drug; and
  • Financial assistance provided to patients through patient prescription assistance programs.

It is the intent of the Legislature to make information available to the public about the cost of ultra-high-priced pharmaceuticals, in order to make pharmaceutical pricing as transparent as the pricing in other sectors of the health care industry​,” the bill says.

The bill is also seeking information from manufacturers on the total profit attributable to the drug and the total amount of financial assistance the manufacturer has provided through patient prescription assistance programs, if available.

Assemblymember David Chiu (D- San Francisco) introduced the bill, known as AB 463​, and said, “With this bill, we will lift the veil on drug prices and offer the public greater insight so that we can identify meaningful strategies to ensure prices do not threaten access to life-saving treatments​.”

Soaring Costs

The wrangling over drug bills and high costs come as payers and patients are grappling with six-figure price tags for treatments for complex chronic diseases such as cancer, rheumatoid arthritis, multiple sclerosis and Hepatitis C.

Gilead’s $1,000-per-pill Hepatitis C drug Sovaldi, which costs $84,000 for a regular course of treatment, and Gilead’s Harvoni, which costs $94,500​, are just a couple examples of drug prices skyrocketing in recent years. Gilead previously explained to that the high price should be attributed to the fact that Harvoni offers a cure that will significantly diminish

California Governor Jerry Brown’s proposed 2015-16 state budget includes $300m for Hepatitis C treatments across state programs, but the non-partisan Legislative Analyst’s Office has questioned whether that amount is appropriate given the lack of knowledge on the number of Hepatitis C patients covered by state programs and some believe the costs to the state could be far higher.

These high drug prices are not just straining employers offering health benefits. With one-third of Californians getting public health coverage through Medi-Cal, the state’s financial exposure is significant​,” said Chiu. “It is incumbent upon lawmakers to ensure that we have a full understanding of the costs impacting these important public programs and find new avenues to achieve savings​.”

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