Governor Proposes California Produce Its Own Generics

Gavin Newsom, the Democratic Governor of California, has presented a radical proposal to lower drug prices, suggesting that the state contract with 1 or more generic-drug manufacturers to produce specific generic medications on behalf of the state.¹ The proposal, which is still largely conceptual, was part of his proposed 2020-2021 budget.¹

Rising drug prices have been a continuing concern, with 79% of Americans saying that the cost of prescription drugs is unreasonable, according to a survey by the Kaiser Family Foundation.² In the survey, about 6 in 10 respondents said they take at least 1 prescription medicine, whereas 1 in 4 said they take 4 or more prescription drugs.² As the number of prescriptions increases, respondents reported that their ability to afford them decreases. Among those taking 1 to 3 prescription drugs, 17% said it was difficult to afford their medications. Of those taking 4 or more prescription drugs, however, 35% found them difficult to afford.²

Unaffordability also affects medication adherence, according to the survey. Of those surveyed, 19% said they had not filled a prescription for a medication because of cost; 18% said they had taken an OTC drug instead; and 12% said they had cut pills in half or skipped doses. These statistics equate to 29% of patients not taking their prescription medications as directed as a result of cost.²

Finally, the survey also showed that a majority of Americans are dissatisfied with how politicians are handling rising drug costs, regardless of party affiliation. Seventy-five percent of respondents believe that Democrats in Congress are not doing enough about the problem and 77% believe that Republicans are not doing enough.²

This dissatisfaction may lead to more creative solutions, such as Newsom’s proposal. The program, called CalRx,3 would allow the state to contract with 1 or more makers of generic drugs to provide drugs to Californians for purchase, according to a statement.¹ The plan would not apply to brand-name prescription drugs.¹

Supporters argue that the program would increase generic-drug competition, lowering prices.1 But opponents say that it would be unlikely to change anything.

“If California enters the market itself, it will face the same market dynamics that have led to generic prescription-drug price deflation in the past 3 years, as well as certain cases of patent abuse that have led to longer monopolies by select brand-name drugs,” Jeff Francer, MPP, JD, general counsel and interim chief executive officer for the Association for Accessible Medicines, said in a statement.⁴

Other pharmaceutical organizations have also expressed concern, including the Pharmaceutical Research and Manufacturers of America (PhRMA). In a statement, PhRMA said that more information is needed to determine exactly how California could become its own manufacturer5 and expressed concern about Newsom’s earlier proposal to import price-control policies from other countries.⁵

“The governor’s proposals also ignore the fact that nearly half of every dollar spent on brand medicines is going to someone other than the people who make the medicines—insurance companies, pharmacy benefit managers, hospitals, and federal and state governments,” the statement said. “ …None of the governor’s proposals look at the other players in the health care system, nor do they give Californians what they really want: savings at the pharmacy counter.”⁵

Newsom’s proposal is not an entirely new idea, however. Senator Elizabeth Warren (D, Massachusetts) has argued that the federal government should be allowed to manufacture its own generic drugs in order to reduce costs.⁶ Also, in 2018, a group of more than 500 hospitals created their own drug company in order to manufacture

generic drugs at a lower cost.⁷

“A trip to the doctor’s office, pharmacy, or hospital shouldn’t cost a month’s pay,” Newsom said in an interview with the Los Angeles Times. “The cost of health care is just too damn high, and California is fighting back.”⁸

REFERENCES

• California Governor’s Budget Summary 2020-2021, Health and Human Services website. ebudget.ca.gov/2020-21/pdf/BudgetSummary/HealthandHumanServices.pdf. Published January 10, 2020. Accessed January 13, 2020.
• Public opinion on prescription drugs and their prices. Kaiser Family Foundation website. kff.org/slideshow/public-opinion-on-prescription-drugs-and-their-prices/. Published November 20, 2019. Accessed January 13, 2020.
• Governor Newsom proposes 2020-2021 state budget [news release]. Sacramento, CA; January 10, 2020: Office of Governor Gavin Newsom. gov.ca.gov/2020/01/10/governor-newsom-proposes-2020-21-state-budget/. Accessed January 13, 2020.
• RE: Pharmacy Times: Seeking statement on CA proposed generic drug program [email]. From Rachel Schwartz, Association for Accessible Medicines. Received January 13, 2020.
• FW: INQUIRY seeking comment on CA generics proposal [email]. From Nicole Evans, Pharmaceutical Research and Manufacturers of America. Received January 14, 2020.
• Warren, E. Elizabeth Warren: It’s time to let the government manufacture generic drugs [opinion]. The Washington Post. December 17, 2018. washingtonpost.com/opinions/elizabeth-warren-its-time-to-let-the-government-manufacture-generic-drugs/2018/12/17/66bc0fb0-023f-11e9-b5df-5d3874f1ac36_story.html. Accessed January 13, 2020.
• Civica overview graphic. mk0sakunexoeoby9gsa0.kinstacdn.com/wp-content/uploads/2019/12/Civica-Overview-Graphic-1.pdf. Accessed January 13, 2020.
• Karlamangla S. Q&A: What you need to know about Gov. Newsom’s drug plan for California. Los Angeles Times. January 9, 2020. latimes.com/california/story/2020-01-09/q-a-newsom-prescription-drug-plan. Accessed January 13, 2020.