(CN) – As part of an effort to combat the rising costs of prescription drugs, California will negotiate with drug manufacturers to create the Golden State’s own label of generic drugs, officials announced Thursday.
Gov. Gavin Newsom said in a statement that the effort will bring pharmaceutical costs down for residents while offering them bargaining power with drugmakers.
“A trip to the doctor’s office, pharmacy or hospital shouldn’t cost a month’s pay,” Newsom said. “The cost of health care is just too damn high, and California is fighting back. These nation-leading reforms seek to put consumers back in the driver seat and lower health care costs for every Californian.”
He is expected to formally introduce the plan Friday at the unveiling of his proposed state budget.
Newsom has long pushed for using the state’s purchasing power to negotiate lower-drug prices for residents while furthering the goal of increasing transparency in price-setting. After his inauguration, Newsom signed an executive order facilitating a single-purchaser program that allows California cities and counties to bargain directly with drug companies.
Los Angeles County, which is one of the state’s largest public buyers of prescription drugs, was the first local government to sign up for that program. MediCal, the state’s Medicaid program which serves over 13 million Californians, budgeted $8 billion for pharmacy services in the previous fiscal year.
In a statement Thursday, Newsom’s office said California will partner with or more makers of generic drugs to manufacture select drugs for residents and other partners, making it the first state in the U.S. to launch such an effort.
With the state’s generic drug brand increasing competition in a new single market, drug prices are expected to go down, according to Newsom’s office. Participants in the market will include MediCal, the California Public Employees’ Retirement System, the marketplace Covered California, private insurers and others who will combine their purchasing power.
“Drug manufacturers would have to bid to sell their drugs – at a uniform price – in the California market,” a state memo on the plan said Thursday. “California would invoke a most-favored-nation clause in the manufacturer price bid, which would require manufacturers to offer prices at or below the price offered to any other state, nation, or global purchaser if they wish to sell their products in California.”
Newsom signed a bill this past October barring drug companies from paying competitors to keep generic drugs off the market. The first-in-the-nation bill outlaws a common industry practice known as “pay-for-delay” which the Federal Trade Commission estimates costs U.S. pharmaceutical consumers $3.5 billion annually.
Under the plan announced Thursday, California will also launch the Office of Health Care Affordability to promote equity in health services statewide while cutting administrative costs and lowering health care costs.
Part of that office’s plan includes investing in preventative health programs and boosting efforts to keep low-income residents with the most need in their communities instead of in expensive hospital and emergency room beds.
Newsom has also pushed a plan that includes allowing young adult undocumented immigrants to receive coverage up to age 26 under the state’s subsidized low-income health care program.