California Governor Jerry Brown Signs SB 17

October 2017

California Gov. Jerry Brown has signed SB 17 into law. Senate Bill 17 requires drug makers to explain price hikes. One of the highest operating costs in hospitals is the purchase of pharmaceuticals. In time, greater transparency in the pharmaceutical industry will help lower costs and therefore saving valuable dollars in our hospitals to be invested into patient care.

UNAC/UHCP strongly supported the landmark drug pricing transparency bill as it made its way through the California legislative process. The bill's sponsor, California Senator Ed Hernandez, Chair of the Senate Health Committee, said, “With Governor Brown’s signature, this law will bring much-needed transparency to skyrocketing drug prices. This is a groundbreaking law that will not only benefit millions of Californians, but will hopefully become a model for the entire nation. Despite Pharma’s best efforts to kill this bill, we’ve shown they are beatable when you can rally a broad coalition of support. I encourage other states, and the U.S. Congress, to pass similar legislation. Let’s work together to advance transparency and lower health care costs.”

More information from Senator Hernandez's office is below.

Prior notice of rate increases for prescription drugs

  • Requires drug manufacturers to notify purchasers, at least 60 days prior to the planned effective date, if it will be increasing the wholesale acquisition cost of a prescription drug that costs more than $40 by 16% in a 2-year period.
  • Requires manufacturers to provide specified information related to price increase to OSHPD, such as a description of factors that led to the decision to increase drug’s price, including documentation of increased clinical efficacy of the drug, if any.
  • Requires manufacturers to report, within 3 days of release to the market, to OSHPD if it is introducing a prescription drug to market priced above Medicare’s specialty drug threshold.
  • Requires manufacturers to provide specified information related to the new drug’s price to OSHPD within 30 days of that notification, such as the marketing and pricing plans used in the launch of the new drug and the estimated volume of patients that may be prescribed the drug.

Greater understanding of the costs of prescription drugs for health plans/insurers

  • Requires health plans and insurers to annually report specified information to regulators related to the proportion of the premium dollar spent on prescription drugs, the year over year increase in net costs and member costs, the 25 most frequently prescribed medications, most costly drugs by total plan spending, and drugs with the highest year over year increase in net cost.
  • Requires regulators to compile this information into a consumer-friendly report that demonstrates the overall impact of drug costs on health care premiums.