Caitlin Owens
January 10, 2020
California Gov. Gavin Newsom wants the state to become
the first to create its own generic drug label, an attempt to create more
competition and bring down prices.
The big picture: California
already has enacted insurance reforms that could be a model for the federal
government, and is now doing the same on drug prices.
Between the lines: Having the
government contract directly with manufacturers isn't a new idea; Sen.
Elizabeth Warren has proposed doing so at a federal level.
- The private market has
also created a similar arrangement through Civica Rx, a nonprofit funded
by hundreds of hospitals that contracts with private manufacturers to
produce generic drugs.
- “To the extent that
Civica Rx has been able to do this for its hospital systems, the state of
California could engage in similar kinds of arrangements, at least at some
level," said Rachel Sachs, a law professor at Washington University.
How it would work: The state would
contract with private manufacturers to make certain generic drugs.
- It would also create a
single market for drug pricing within the state, meaning that all
participating payers — private or public — would receive the same
price for the same drug.
What they're saying: Northwestern
University professor Craig Garthwaite said California's approach probably
wouldn't drive down prices in large, competitive markets, but it likely could
in smaller markets without much competition — where prices tend to be higher.
The other side: "This
is not a new ‘entrant,’ it is just a labelling change," said Rena Conti, a
professor at Boston University.
- Conti added that
establishing a single drug market could backfire by raising prices for
some purchasers, or creating a situation where access to drugs is
restricted because some companies refuse to bid.
The bottom line: We've told you this before,
but the most interesting action on health policy is in the states.
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