In his state budget set to be released Friday, Gov. Gavin Newsom is expected to unveil a plan to make California the first state to sell its own brand of generic prescription drugs in an effort to drive down rising healthcare costs.
Newsom provided few details about the mostly conceptual plan. Here are answers to some questions based on what is known.
How would it work?
The state could contract with one or more generic drugmakers to manufacture certain prescriptions under the state’s own label, according to Newsom’s office. Those drugs would be available to all Californians for purchase, presumably at a lower cost.
The plan would target generic prescription drugs, which make up 90% of the prescriptions filled in the United States, said USC health economist Geoffrey Joyce. It would not apply to brand-name prescription drugs, which are typically more expensive.
The proposal would increase competition in the generic drug market, which would probably lower prices, Joyce said.
“A trip to the doctor’s office, pharmacy or hospital shouldn’t cost a month’s pay. The cost of healthcare is just too damn high, and California is fighting back,” Newsom said in a statement.
Has this been done before?
Experts say that no state has attempted something like this before.
However, in 2018, more than 500 hospitals banded together to launch their own drug company, called Civica Rx, to manufacture generic drugs to sell at a lower cost.
Leaders of the consortium, which includes systems such as the Mayo Clinic and Providence St. Joseph Health, said they were fed up with spiking drug costs and wanted to make medicines available at more reasonable prices.
“That was a novel idea when it came out,” said Jack Hoadley, Georgetown health policy research professor emeritus. “It could be that the governor’s office heard about that.”
Late last year, a patient was treated with a Civica Rx medication for the first time, according to the company.
What effect would this have on rising drug costs?
When a pharmaceutical company invents a new drug, it patents the formula and gets the exclusive right to make it for several years. Those are called branded prescription drugs.
When the period of exclusivity ends, other companies can manufacture the same medicine and sell it. Those are called generics.
But most of the nation’s drug spending goes for pricey branded prescription drugs, such as those for complicated diseases like cancer and multiple sclerosis, experts say.
It is harder to regulate these drugs because of the exclusivity patents, experts say. Some also fear that setting price caps on these drugs will stifle innovation that could lead to breakthroughs.
Newsom’s plan would target only generics, which account for less than a quarter of the nation’s drug costs.
“It has the potential to correct some of the problems in that market, but it’s not a panacea,” said Joyce, who heads the USC Schaeffer Center for Health Policy and Economics. “If generic drugs are at most 25% of drug spending, then you’re going to making a modest dent in overall drug spending.”
