A recent report released by California health officials revealed that drug prices are still on the rise – even despite California’s drug-price transparency laws aimed at curbing drug cost.
In 2017, California passed a drug-price transparency law that requires manufacturers to notify its customers at least 60 days in advance if they plan to increase a drug price by more than 16% in a two-year period. The law also requires manufacturers to provide a report describing reasons for drug price increases. Because of the law, several manufacturers announced plans to postpone or rescind previously planned price hikes.
However, the report showed that since the passage of the law, pharmaceutical companies raised the wholesale acquisition cost (WAC) of their drugs by a median of 25.8%.
Generic drugs saw the largest price increase of about 40%. By comparison, the annual inflation rate during the period was 2%.
Some drugs saw the sharpest increase. For example, Prozac’s price was increased from $9 to $69 (just in the first quarter of 2019, an increase of 667%). Guanfacine rose more than 200% in the first quarter of 2019 (its manufacturer cited costs and “market conditions” as reasons for the price hike).
Other states with similar drug-price transparency laws experience the same increases despite the efforts and oversight of the manufacturers. As a result, many states consider alternative measures to contain drug price hikes. For example, California has passed a law allowing it to manage and negotiate drug prices for Medi-Cal managed-care plans. Drug benefit will be carved out of the Medi-Cal managed care plans and be directly administered under the fee-for-service model.
Another example, Nevada fined several manufacturers for failing to comply with the state’s transparency law requiring detailed disclosure of financial and pricing information.
On the federal level, the Senate is currently considering several proposals to contain drug cost. One approach is to negotiate Medicare drug prices for approximately 250 brand drugs directly with the manufacturers. Another approach in to set a maximum out-of-pocket cost for Medicare patients and penalize drug companies if prices rise faster than inflation.