Proposal Requires Transparency on Drug Costs for First Time
Assemblymember David Chiu (D- San Francisco) introduced AB 463, which, for the first time, requires drug companies to reveal operational costs in order to better understand pricing for ultra-high-priced drugs.
“In recent years we have seen drug costs climb to new heights with little transparency for these astronomical prices,” said Chiu. “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.”
The bill would require pharmaceutical manufacturers to provide the Office of Statewide Health Planning and Development (OSHPD) with annual cost reporting on the most expensive drugs. OSHPD would compile the data into an annual report submitted to the Legislature and publicly posted online.
Specifically, the manufacturer of any drug or course of treatment that costs more than $10,000 per year, must report production costs for the drug, including:
- Research and development costs paid by the manufacturer or predecessor;
- Any research and development 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;
- Financial assistance provided to patients through patient prescription assistance programs.
“As drug costs continue to rise, the need for transparency is critical. People now have to choose between basic necessities and filling their prescriptions for drugs they need to live healthy lives. At the same time, these companies are making record profits,” said Michael Weinstein, president of the AIDS Healthcare Foundation.
Payers and patients are grappling with six-figure price tags for medications that treat complex chronic diseases such as rheumatoid arthritis, multiple sclerosis, cancer, and Hepatitis C. The $1,000-per-pill Hepatitis C drug Sovaldi, which costs $84,000 for a regular course of treatment, and Harvoni, which costs $94,500, represent important breakthroughs in biologic treatments for patients with these conditions. But the prices for these drugs are a significant burden on the health care system and ultimately unsustainable in the long-term.
Governor Jerry Brown’s proposed 2015-16 state budget includes $300 million 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 the cost per treatment for those patients. 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.”
Assemblymember David Chiu (D – San Francisco) is the Assistant Speaker Pro Tempore of the California State Assembly and represents the 17th Assembly District, which encompasses the eastern portion of San Francisco.