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Bill Would Force Drugmakers to Explain Price Hikes

California legislation requiring a 60-day notice could set a trend

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Companies would have to explain why they were raising prices under the new state bill.

California legislators have passed a landmark bill that would require the pharmaceutical industry to give advance notice of big price increases for medications and to explain the reasons for price hikes. Gov. Jerry Brown has until Oct. 15 to sign it into law.

State Sen. Ed Hernandez, a Democrat who wrote the legislation, envisions that it “will set national health care policy, having impact for consumers and providers in other states.”



Senate Bill 17 would require drugmakers to notify health insurers and government health plans at least 60 days before any price increase that would amount to 16 percent over a two-year period. In addition, companies would have to explain why they were raising prices. California would publish that information on the web, which would make it available to regulators, insurers and consumers in other states as well. “Price increases don’t happen in a vacuum,” Hernandez said.

The legislation passed by large margins in both houses, despite strong opposition from drugmakers, who said it would add red tape and focused only on list prices rather than what patients actually would pay. "It's unfortunate that lawmakers chose to score political points instead of addressing patients' concerns with access and affordability to medicine,” the Pharmaceutical Research and Manufacturers of America said in an email.

Last year, Vermont became the first state to require pharmaceutical companies to submit information justifying the cost of 15 drugs whose prices have risen substantially. Maryland recently enacted a law empowering state officials to investigate generic drug cost hikes and impose fines for price-gouging.

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