Two Major Bills Affecting Life Sciences Sector are Signed into Law

Oct. 24, 2017

Despite the best efforts of CLSA and its partner trade associations, both Senate Bill 17 (Hernandez) and Assembly Bill 265 (Wood) reached the Governor’s desk and were signed into law. At the signing ceremony for SB 17, Governor Brown said, “Californians have a right to know why their medical costs are out of control, especially when the pharmaceutical profits are soaring,” adding that there is “real evil when so many people are suffering so much from rising drug profits.”

SB 17
First, SB 17 will require, among many other things, manufacturers to provide a 60-day advance notice of any price increase on a drug to all California public agency purchasers, health insurers, and pharmacy benefit managers (PBM) if that drug’s price has increased 16 percent or more cumulatively over the previous two calendar years, including the current year’s increase.

Beginning on January 1, 2019, on the effective date of any price increase triggering the advance notice, the drug’s manufacturer must submit a host of information to the state, though the law allows any information not “otherwise in the public domain or publicly available” to be withheld. The information is then posted publicly by the state in a manner that allows for identification of the individual drugs.

California’s Office of Statewide Health Planning and Development (OSHPD) is tasked with implementing and overseeing the law’s requirements on manufacturers, and industry hopes to begin receiving guidance on how the law will be implemented soon. Guidance is needed on significant, pressing implementation questions, such as how manufacturers should interpret a requirement to provide 60 days advance notice on a law that is not legally on the books until January 1, 2018, and for which the official list of registered recipients for the notices may not yet be available.

AB 265
Second, AB 265 will 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.” The law excludes biologics from this restriction and allows for exceptions when the patient has received a prior authorization or step therapy exception to receive the drug. Implementation questions remain, however, as to how and to what extent will pharmacies verify whether these exceptions apply when presented with a coupon or co-pay card.

CLSA is continuing to analyze the potential impacts of implementation of these laws on our industry, and any members who would like further information on these or any other new California laws are encouraged to reach out to Oliver Rocroi, CLSA’s Senior Director, State Government Relations ( or Brett Johnson, CLSA’s Senior Director, Policy & Regulatory Affairs (