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California Assembly Passes Bill to Make Drug Prices Transparent

This Monday, September 11th, the California Assembly passed Senate Bill 17, which will promote prescription drug price transparency. The bill was overwhelmingly approved by a margin of 66-9. The chief sponsor, State Senator Ed Hernandez, praised the outcome and said "drug companies threw everything they had at this bill, but the Assembly stood up for consumers." The legislature's approval of drug price transparency legislation is an excellent first step toward ensuring all Americans can get affordable medicines.

SB 17 requires drug companies to notify health insurance companies and government health plans such as Medi-Cal of certain drug price increases. The notice must take place at least 60 days before the price hikes, and this applies to any increase that exceeds 16% over a two-year period. The companies would further have to provide justifications for the price increases. In May a slightly different version of the bill passed the Senate, and the two versions will have to be reconciled.

As we mentioned before, drug companies fought against this bill every step of the way, taking out newspaper ads, sending many different lobbyists to Sacramento, and claiming that the bill would be ineffective. While SB 17 will not solve the problem of high drug prices on its own, it is a good beginning. The prescription drug market is plagued by a lack of good information about prices and the reasons for their increase. Supreme Court Justice Louis Brandeis wrote that sunlight is the best disinfectant, and transparency will promote lower drug prices and set the stage for further reforms.

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