California has long been an innovator in prescription drug cost control efforts. In 2017, the state passed SB 17, a piece of drug pricing legislation with multiple reporting requirements aimed at cost transparency and accountability. SB 17 also included a number of drug pricing policies, as well as a generic drug production implementation timeline.
This past September, Governor Gavin Newsom expanded upon the efforts already underway as a result of SB 17 by signing SB 852 into law. SB 852 created Cal RX, the state-sponsored prescription drug label that aims to manufacture generic drugs for Californians. In doing so, the legislation aims to increase competition and lower drug prices for all residents (without income eligibility requirements) by making lower-cost, state label drugs available to all residents.
Key milestones outlined in the bills include:
- By October 1st of each year, the California Department of Managed Health Care must report on the state’s 25 most prescribed drugs, the 25 most costly drugs, the 25 drugs with the highest year-over-year increase in annual spending, and the impact of drugs on health insurance rates.
- By July 1, 2022, the California Health and Human Services Department (CHHSA) must submit a report to the legislature outlining recommendations and findings related to generic drug production. In particular, the report will update the legislature on the status of drugs specifically targeted by the legislation (at least one form of insulin, drugs for chronic and high-cost conditions, and mail-delivered drugs).
- By July 1, 2023, CHHSA must report on the feasibility of the state manufacturing generic drugs itself (though the state’s preferred course of action is to partner with an existing manufacturer).
The National Academy of State Health Policy (NASHP) released their analysis of California’s publicly-available drug utilization reporting as compared to that of the few other states that have also begun requiring annual issuer drug cost and utilization reports. These other states—Maine, Nevada, Oregon, and Vermont—all have some level of publicly-available drug cost and utilization requirements for health issuers.
The key findings of the California reports include that:
- For the 25 most prescribed drugs (which NASHP reported made up 42.8% of the state’s total retail spending), enrollees paid 3% of the cost, ranging from 2.9% of the cost of specialty drugs to 56.6% of the cost of generics.
- For the 25 most costly drugs, enrollees paid 8.8% of the cost of the drug.
- Drug manufacturer rebates accounted for a large chunk of health plan retail prescription costs, totaling 10.5% of total RX costs.
This data is important for California and other states as they seek to make targeted investments and changes to control drug pricing and ensure consumer access. With enrollees currently paying 56.6% of the cost of generic drugs in the state, Cal RX shows promise in ensuring affordable access to generic drugs for all Californians.
Stay tuned as Health Policy News continues to monitor state RX cost control efforts! Next month, we will provide an update on similar initiatives underway in Vermont, as well as a quick look at those in Wisconsin. Future installments in this series will also cover the potential impact of COVID-19 on efforts to implement prescription drug cost control measures.