Drug industry concerned about California Law allowing State to seek drug discounts

A new California law set to take effect in January 2007 "provides a glimpse of the type of government price controls the drug industry fears," the Boston Globe reports.

The measure is designed to secure price discounts of up to 60% from drug manufacturers for five million California residents, including those with low-incomes and seniors enrolled in the Medicare prescription drug benefit.

Although state officials say the measure is voluntary, the law also includes language that permits California in 2010 to remove from its Medicaid formulary treatments sold by companies that do not comply with the law.

According to the Globe, the "law is intended to help California's low-income and underinsured residents by leveraging their collective purchasing power."

It aims to lower the cash price of prescription brand-name drugs by 40% and generic drugs by 60%, according to Nicole Kasabian Evans, a spokesperson for the California Health and Human Services Agency.

Gov. Arnold Schwarzenegger (R) signed the measures in September despite objections from the pharmaceutical industry.

Jim Greenwood, chief executive of the Biotechnology Industry Organization, said, "At the end of the day, you have to have very healthy companies who have the resources to do the research and development of these drugs.

You're not going to get it on the cheap.

And you're not going to get it under a system of European-like price controls that have stifled innovation."

The Pharmaceutical Research and Manufacturers of America has called the measure "problematic" but has not filed to stop its implementation.

Jan Faiks, vice president of government affairs and law for PhRMA, said, "We support discounted drugs for Californians."

However, Faiks noted that the measure does not require pharmacists and other drug distributors to negotiate drug prices, adding, "Frankly I don't know where they are going to get those discounts."

A coalition of consumers and patient groups are now working to support the legislation, according to Earl Lui, a senior attorney for Consumers Union (Henderson, Boston Globe, 11/11).