New Bill to Lower Drug Prices Targets Practice of “Pay-for-Delay” |

Consumer advocates cheered the introduction of a bill to address the outrageous pharmaceutical company practice of “pay for delay,” where drug manufacturers offer patent settlements to pay generic companies to delay the introduction of lower-price medication to the market. According to an FTC study, “these anti-competitive deals cost consumers and taxpayers $3.5 billion in higher drug costs every year.” The new bill, AB 824, was announced today by Assemblymember Jim Wood and Attorney General Xavier Becerra at a joint press conference.

When drug companies pay to prevent a lower-price medication from entering the market, we all pay more, at the pharmacy and in our premiums. With this bill, California can take the lead in preventing this problematic, price-gouging practice of pay-for-delay by the prescription drug companies.

It’s bad enough that the drug companies abuse the patents they get by charging sky-high prices, it’s worse when they pay to keep cheaper options off the market and engage in other problematic pricing policies to make patients pay more for longer. While a solution to prevent this prescription drug company practice has been discussed for in DC for years, if the federal government won’t act, then California must to protect consumers and our health system overall.

California has been a national leader is confronting the issue of prescription drug prices. In 2017, SB 17 (Hernandez) was signed into law to require all drug price hikes over 16% over a two-year span to be subject to transparency requirements, which discourages double-digit price increases and encourages better negotiations between drug companies and purchasers. This advance notice is given to public purchasers like Medi-Cal and CalPERS and private purchasers including health plans and insurers. It also enhances public disclosure of information about drug pricing by requiring drug manufacturers to file information about the rationale for pricing increase, marketing costs, and other specifics with the Office of Statewide Health Planning and Development. The law also requires health plans and insurers to disclose information about drug pricing through existing rate review processes at the Department of Managed Health Care and Department of Insurance. SB 17 was strongly backed by a broad coalition of consumer, labor, business, insurer, and other health organizations, but opposed by the pharmaceutical industry who hired dozens of lobbyists, ran radio and newspaper ads, and otherwise spent significantly in their campaign against the transparency protections of the legislation.

Other recent legislation around prescription drug have included AB 315 (Wood) to regulate pharmacy benefit managers and SB 1021 (Wiener) to maintain co-pay caps to keep life-saving drugs affordable.

Last month, Governor Newsom proposed a statewide prescription drug purchasing pool, to consolidate the purchasing power of various state agencies, and ultimately other payers, to negotiate the best possible deal on pharmaceutical prices for Californians.


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