Could California Become the First U.S. State to Sell its Own Prescription Drugs?

Governor Gavin Newsom is proposing that California become the first state to make and sell its own prescription  drugs.

Under his proposal, the state government would contract with generic drug companies to make medications to be sold to nearly 40 million California residents. This plan would also create a single market for drug pricing in California, in which companies would bid to sell their drugs at a uniform price.

“Other countries control or negotiate the price of drugs, and if there is one state that could do it, it’s California, which is the size of a country,” said Larry Levitt, executive vice president of health policy for the Kaiser Family Foundation. “A drug company could walk away from Rhode Island. It’s much harder to walk away from California.”

Drug companies are required by law to report any price increases to the state of California. The Office of Statewide Health Planning and Development reported that generic drugs saw a three-year median list price increase of 37.6 %. This figure does not include any rebates or discounts, and generic drugs that decreased in price were not reported.

Republican lawmakers say the state should not compete with the private sector. “When the state runs it, it costs more money,” Republican Assemblyman Devon Mathis said. “The money is coming out of families’ pockets paying all those crazy taxes.”

In addition, Jon Roth, MS, CAE, CEO of the California Pharmacists Association, said that manufacturers may be forced to charge higher-than-anticipated prices for its own generic drugs because of external factors like disruptions in the supply chain and raw material shortages. “There are other factors in the actual manufacturing that the state may not be able to escape,” he added.

Lawmakers would have to approve the plan, which is part of Governor Newsom’s budget proposal, before it could become law.

Source: AP News, January 9, 2020.