California enacts law aimed at corralling high drug prices

Leslie Hanson
October 12, 2017

Gov. Jerry Brown approved a measure Monday to increase disclosure on prescription drug prices, the focal point of growing efforts to clamp down on climbing pharmaceutical costs. Jerry Brown signed Monday, requires companies, starting in January 1, 2019, to give the state's health planning and development office a 60-day notice if prices of drugs are raised more than 16% in a two-year period.

Insurance companies will be required to explain the relationship between drug prices and health care premiums. But critics say the law doesn't go far enough to bring down drug prices, and the legislation lacks the proper framework to enforce a price reduction. And then there was the public outrage over Martin Shkreli's 4,000 percent increase in the price of the 62-year-old anti-fungal Daraprim and Mylan's 400 percent increase in the price of a two-pack of EpiPens.

The pharmaceutical industry is expected to legally challenge the law, which takes effect in 2019.

The United States is one of the only developed nations that doesn't regulate drug prices. Taking the costs of the regulatory process into account raises the average cost for a new drug to $2.9 billion.

Drug companies argue that the law will threaten development and innovation.

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