Jan 10, 2020

California's bold new drug pricing plan

Illustration: Sarah Grillo/Axios

California Gov. Gavin Newsom wants the state to become the first to create its own generic drug label, an attempt to create more competition and bring down prices.

The big picture: California already has enacted insurance reforms that could be a model for the federal government, and is now doing the same on drug prices.

Between the lines: Having the government contract directly with manufacturers isn't a new idea; Sen. Elizabeth Warren has proposed doing so at a federal level.

  • The private market has also created a similar arrangement through Civica Rx, a nonprofit funded by hundreds of hospitals that contracts with private manufacturers to produce generic drugs.
  • “To the extent that Civica Rx has been able to do this for its hospital systems, the state of California could engage in similar kinds of arrangements, at least at some level," said Rachel Sachs, a law professor at Washington University.

How it would work: The state would contract with private manufacturers to make certain generic drugs.

  • It would also create a single market for drug pricing within the state, meaning that all participating payers — private or public — would receive the same price for the same drug.

What they're saying: Northwestern University professor Craig Garthwaite said California's approach probably wouldn't drive down prices in large, competitive markets, but it likely could in smaller markets without much competition — where prices tend to be higher.

The other side:. "This is not a new ‘entrant,’ it is just a labelling change," said Rena Conti, a professor at Boston University.

  • Conti added that establishing a single drug market could backfire by raising prices for some purchasers, or creating a situation where access to drugs is restricted because some companies refuse to bid.

The bottom line: We've told you this before, but the most interesting action on health policy is in the states.

Go deeper

Blues plans invest in new generic drug company

A new company will sell generic medicines at cost. Photo: George Frey/Getty Images

Eighteen Blue Cross Blue Shield insurers are investing a combined $55 million to build a new generic drug company as a subsidiary of the nonprofit Civica Rx. The firm will focus on manufacturing generics people get at the pharmacy.

Between the lines: Civica and the Blues aren't disclosing which drugs they want to make, so it's unclear how much effect this company will have. But the investment highlights the broad desire to counter generic companies that are accused of price-gouging.

Go deeperArrowJan 23, 2020

When a generic drug doesn't do much to lower costs for patients

Photo: Shana Novak/Getty Images

A generic version of Copaxone, one of the most popular drugs to treat multiple sclerosis, didn't do much to lower costs for patients, NPR reports.

The big picture: MS drugs cost $70,000 a year, on average, and some prices have increased to five times what they were when the drugs were first approved by the FDA.

Go deeperArrowJan 21, 2020

A venture capitalist wants to mimic blockbuster drugs at a lower price

A venture capitalist is launching a company today to create new drugs that mimic the effects of blockbuster drugs, and then sell them to insurers and hospital systems at a lower price, STAT reports.

Between the lines: The key question is whether insurers and hospitals will buy these new drugs over their competitors.

Go deeperArrowJan 13, 2020