Senator Hernandez Back with Legislation on Drug Price Reporting

March 18, 2017

Last August, State Senator Ed Hernandez (D-Asuza) pulled his drug price reporting legislation — Senate Bill (SB) 1010 — after the bill was amended in the Assembly Appropriations Committee. On March 15, he introduced SB 17, which is a somewhat modified version of last year’s bill.

At the press conference introducing SB 17, Hernandez, the chairman of the Senate Health Committee, was joined by Assemblyman David Chiu (D-San Francisco), billionaire activist Tom Steyer, and others, including representatives of Kaiser Permanente and the Pacific Business Group on Health. Comments at the press conference blamed the pharmaceutical industry for increases in health insurance costs and asserted more reporting from manufacturers would lead to lower drug prices.

The bill would require, among many other things, manufacturers of prescription drugs to submit a 90-day advance notice of a price increase to all California public agency purchasers, health insurers, and pharmacy benefit managers (PBMs) where that increase would mean the wholesale acquisition cost (WAC) has exceeded 25 percent over the previous three calendar years. For specialty drugs, the price increase threshold is only 10 percent.

This notice must also “include a statement of any changes or improvements to the clinical efficacy of the drug that explain the increase in [WAC].”

On the effective date of the increase, a host of information must be submitted to the state, including an explanation of “specific financial and nonfinancial factors used to the make the decision to increase [WAC],” the previous year’s marketing budget, any acquisition costs, the previous year’s sales volume, and any “documentation of increased clinical efficacy.”

For new specialty drugs, as defined under Medicare Part D, a manufacturer must notify the state three days before commercial availability regardless of FDA approval status. Within 30 days of this notice, the manufacturer must also submit a “description of the marketing and pricing plans” for the drug, the estimated number of patients to be prescribed the drug, the expected marketing budget, any acquisition costs related to the drug, and any documentation “showing increased efficacy of the drug compared to existing treatments.”

Finally, all the aforementioned information, for both new drugs and existing drugs with price increases, must be posted publicly on the internet by the state in a manner that allows identification of the information on an individual drug basis.

Unlike last year, Sen. Hernandez has not held any stakeholder workgroups or reached out to CLSA and others for input prior to introduction of the bill. We anticipate the bill being heard in the Senate Health Committee in mid-to-late April. Questions? Please contact Brett Johnson, CLSA’s Sr. Director, Policy & Regulatory Affairs (