California Assembly Health Chair Pressing the Life Sciences Sector on Cost and Coupons

Feb. 21, 2017

California Assembly Health Committee Chair, Jim Wood (D-Healdsburg), has opened this year’s legislative session with drug costs in his crosshairs, introducing two bills and holding hearings related to the subject.

The first bill, Assembly Bill (AB) 315, would put pharmacy benefit managers (PBMs) operating in California under the authority of the California State Board of Pharmacy. PBMs would be required to be licensed by the board and to report several cost-related items of information, including the aggregate price concessions received from manufacturers and the aggregate amount of that passed on to insurers.

The second bill, Assembly Bill (AB) 265, would prohibit a drug manufacturer from offering in California “any discount, rebate, product voucher, or other reduction in an individual’s out-of-pocket expenses, including, but not limited to, a copayment or deductible” if a lower cost and therapeutically equivalent brand or generic drug is “available.”

CLSA has significant concerns with AB 265 beyond just the negative impact on patients for whom a prescriber has determined a certain brand medicine is necessary. For instance, questions remain as to how therapeutic equivalence will be determined and monitored continuously and how will it be determined whether a discount was offered in California.

CLSA will take a formal position on AB 265 later this month and hopes to continue discussing our concerns with the author.

To draw further scrutiny on the subject of drug costs, Asm. Wood called a Feb. 14 hearing, entitled “Impact of Rising Drug Costs on Public and Private Payers.” It consisted of four panels: public programs, private payers, the biopharmaceutical industry response and emerging issues.

The comments from both public and private payers in the first two panels focused on rising drug costs, citing Hepatitis C treatments numerous times and often targeting price increases on older medicines, primarily single-source generics.

Several panelists attempted to clarify that prices, not utilization, were the primary factor in increasing costs, and insurers, in particular, stressed that their ability to manage utilization must be preserved.

Panelists were also asked to address strategies employed to contain costs. They discussed utilization management, generics and formularies. Many panelists talked about the opportunity of and interest in value-based pricing.

A representative for the PBM trade association spoke on the private payers panel and defended PBM practices, emphasizing that they were a critical line of defense against increasing drug prices. In response to criticism on a lack of transparency, he asserted that PBMs are frequently audited by clients.

The biopharmaceutical industry response was provided by Kristin Manzolillo, Director of Global Policy and International Public Affairs for Pfizer, presenting an alternative perspective on private payers’ spending on prescription drugs.

Asm. Wood, however, was critical of the data presented and pointedly questioned its validity, ending his remarks with a request that all stakeholders meet to discuss how he can get an accurate picture of drug costs. Asm. Wood has stated he intends to have one final hearing on the subject of drug costs in the month of March.

Questions? Please contact Brett Johnson, CLSA’s Senior Director of Policy and Regulatory Affairs (