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California Could Be 1st State To Sell Own Prescription Drugs

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California could become the first state to make its own prescription drugs under a proposal announced Thursday by Gov. Gavin Newsom, who says it would “take the power out of the hands of greedy pharmaceutical companies."

Speaker 1: 00:00 It's a bold strategy to drive down prescription drug prices. Governor Gavin Newsome is proposing the California become the first state in the nation to establish its own generic drug label. The idea being to make those medications available at an affordable price to the state's nearly 40 million residents. That proposal is part of the governor's $222 billion budget for 2020 and he announced it last week, but how would such a program work and how will the state pay for it? Joining us to talk more about this is Sammy Kay Yola of Capitol public radio. Sammy, welcome. Hi. Thanks for having me. You know, I realize the governor hasn't filled in all of the details about this yet, but what can you tell us about how such a program might work?

Speaker 2: 00:44 We don't know a lot about the details. We don't know how much it would cost or the mechanics of what it would mean to become a generic drug label here in California. But theoretically what's been proposed is that California would contract with a drug manufacturer to create more generics that are California generics and they would be available to health plans and hospitals and other purchasers and those purchasers would buy drugs from the state generic medications.

Speaker 1: 01:13 Okay. And Medi-Cal already cost the state and the federal government about a hundred billion dollars a year. Are there any estimates at least of how much this generic drug program might cost?

Speaker 2: 01:24 There are no estimates at this point. There was not a dollar amount in the budget and our requests for more information to the governor's office came back, uh, without, without any dollar amount.

Speaker 1: 01:34 Hmm. Has the governor yet explained how the state would, would pay for this program? And you've talked to people on both sides of the issue. What are supporters and opponents saying?

Speaker 2: 01:43 There are several different interpretations as to how this could go. And part of why there's so much speculation is because we don't have all the details, but some people are thinking that this is a great idea. Um, the, the argument for it is that it could increase competition in the generic manufacturing space. There are some generic drugs for which there's only one generic. And so the drug maker that makes that generic can set the price wherever they want. If California were making its own generics, they could theoretically introduce some competition and possibly lower some of those prices. Then you've got other health economists and pharmaceutical experts who say that generic drugs are a really small part of what's driving the price increases in the drug market. So, I mean, most of the medications people purchase are generics, but you've got some experts that say that generics are not really rising in price very rapidly.

Speaker 2: 02:37 They're pretty cheap already. And that focusing on making generics cheaper isn't the way to go. We should really be focusing, they say on these specialty medications, um, drugs for hepatitis C drugs for which there's really only one, uh, patented drug and that drug becomes astronomically expensive. So they say, you know that focusing on generics is just kind of putting your focus in the wrong place and then it's not going to do that much for the overall drug pricing problems in the state. You know this strategy is one of several. The governor is proposing to lower the cost of healthcare for Californians. What else is on the table? Yeah, he sent out a slew of healthcare proposals related to drug pricing. Another interesting one is making California the sole drug purchaser for all plants in the state. So that would include public plans and commercial plans.

Speaker 2: 03:26 And he's arguing that if California goes to the drug negotiation table on behalf of all the plans, that there'll be this purchasing power that's increased and will help more leverage and be able to get cheaper prices sorta because we're buying in bulk instead of each health plan going to drug makers to try to get the best cost. And how much have drug costs risen in recent years. So I have some data from the California office of statewide health planning and development showing that from 2017 to 2019 a generic drug prices Rose about 37%. While brand name drugs, uh, the price increased only about 25%. So when you look at that, you could say that the price of generics has been rising actually a little faster than the price of brand name drugs. But I did talk to some health economists who said that's not necessarily accurate data or it doesn't tell the whole story because that's the wholesale acquisition cost.

Speaker 2: 04:22 So that's the price that the drug will cost for wholesalers or for drug purchasers, but it's not necessarily what the customer is going to see at the pharmacy. So I don't necessarily have the data for how those prices have increased for the customers. Uh, pocket price, you know, with drug prices though, increasing as much as they have. What's been the impact on consumers? I think many consumers are noticing or rise in their prescription drug costs when they go to purchase. Uh, and it can be worse for people who have rare conditions or who are on a specialty medication. Um, I think it's a point of frustration for a lot of consumers. I spoke to some people in the, um, in the, in the labor union space, um, who say for workers that are just making a minimum wage that you know, healthcare costs and specifically the cost of medication are biting out larger and larger chunks of their weekly paychecks.

Speaker 2: 05:20 Um, and that it's, it's really breaking the bank for some folks. So I know there's, there's a lot of interest on the customer side and getting these drug prices down. And I know a Kaiser survey found that what three in 10 Americans reported not taking their medicine as prescribed due to the cost of prescriptions being so high, you know, if this proposal is successful, are there any estimates on how much the price of generic drugs could be lowered in California? No, we haven't seen any estimates yet because the proposal is so new and we have so little information about how it might play out. Right. I know this is something that you will continue to cover and many people will keep an eye on. I've been speaking with San Micaela of Capitol public radio. Sammy, thank you so much for joining us. Thanks for having me.

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KPBS Midday Edition Segments

Maureen Cavanaugh and Jade Hindmon host KPBS Midday Edition, a daily radio news magazine keeping San Diego in the know on everything from politics to the arts.