California, calling drug price rises unbearable, leaps into making generics

cagovlogo-300x106Although President Trump has made California a favored object of scorn, the Golden State has put itself on a path to help patients better rein in Big Pharma price gouging on prescription drugs in a way that Washington hasn’t. California lawmakers have given the green light for the state to leap into making generic drugs, notably  affordable insulin to assist diabetics.

The state legislative season ended with a bill, advancing to Gov. Gavin Newsom for his signature by Sept. 30. The bill orders California’s top health agencies by January to partner with existing makers to develop and produce generics and biosimilars. As the Los Angeles Times reported of the California pharmaceuticals plan detailed in SB-852:

“Under the measure, state-developed generics would be ‘widely’ available to public and private purchasers within California. Taxpayers would pick up the costs — roughly $1 million to $2 million in startup funding, plus ongoing staff costs estimated in the low hundreds of thousands of dollars annually, according to a state fiscal analysis. It’s unclear which drugs the state would make or procure, though it would target drugs that could produce the biggest cost savings for the state and consumers.

“But the bill specifically calls for the production of ‘at least one form of insulin, provided that a viable pathway for manufacturing a more affordable form of insulin exists at a price that results in savings.’ Insulin is a biologic drug, made with living cells. Once a biologic hits the market, rival copycat products that follow are called biosimilars. Three major drug companies — Eli Lilly and Co., Sanofi and Novo Nordisk — have long controlled the lucrative insulin market in the U.S. California would be the first entity to produce a biosimilar version of one of the newer, fast- and long-acting insulins on a not-for-profit basis, said Jane Horvath, a health policy consultant in Washington, D.C.”

The newspaper explained why lawmakers focused on insulin and its costs:

“Patients who need insulin have faced huge cost spikes. A 2019 report by the Health Care Cost Institute concluded that average prices for insulin doubled from 2012 to 2016. And California health insurance regulators found last year that diabetes medications accounted for nine of the 25 costliest brand-name drugs sold in the state. ‘It’s a big deal — diabetes affects a lot of people who rely on insulin for their very lives,’ said Larry Levitt, executive vice president for health policy at the Kaiser Family Foundation. ‘And insulin has probably been the poster child for unreasonable drug pricing.’”

The specialty trade of generics

Big Pharma has declared it will stay neutral on California’s foray into its business. Generic manufacturing is a specialized part of the trade, with entrepreneurs seeking to capitalize on products that have been on the market for so long that they have lost intellectual property protections and other advantages typically enjoyed by costly, and profitable branded drugs. Generics also should be cheaper for consumers because they don’t come with big costs for advertising and marketing.

Generic makers have employed an array of legal maneuvers to get a leg up in pricing, including by asserting that they will manufacture drugs that they then don’t (but block out competitors) or by claiming that old products have new uses with rare diseases that give them special market protections.

The federal government and state attorneys general have investigated and accused generic drug makers of price fixing, including in a recent indictment of Teva Pharmaceuticals. Teva had sought to fight off the charges by telling the Trump Administration the accusations would be ill-timed because the company was playing a crucial role in the battle against the coronavirus. The New York Times reported earlier about the price fixing case, thusly:

“The investigation centers on allegations that Teva and a number of rivals illegally worked together to increase prices for widely used generic drugs like pravastatin, which is used to treat high cholesterol. Congressional investigators have found that Teva dominated the market for some of the drugs whose prices inexplicably rose and remained high. And nearly every state attorney general and the Justice Department’s antitrust division have identified Teva as a leading player in the alleged price-fixing conspiracy. Teva executives and board members view the federal case as overly reliant on a single former Teva employee who has struck an immunity deal with the government, according to people familiar with their thinking.

“But they also feared an indictment, which would be likely to crush the company’s stock price. A criminal conviction would bar Teva from selling drugs to federal health care programs for at least five years. Avoiding such an outcome was a top priority for Teva, and a settlement seemed close at hand this spring, according to the people on both sides of the negotiations. The Justice Department was inking settlements with other players in the alleged price-fixing conspiracy. In March, the government announced a deal with the Novartis subsidiary Sandoz, another major generic drug maker. Sandoz admitted to criminal charges and agreed to pay a $195 million fine, the largest ever in a U.S. antitrust case … another company, Apotex, agreed to a $24 million settlement.”

Allies in the battle against soaring drug costs

Big Pharma critics — who had hoped that generics would help push down the ever-increasing prices of drugs — have grown restive in recent times. The Los Angeles Times noted that California may join in its pharmaceutical approach with Utah- and hospital-based crusaders against high drug prices:

“Although it would be costly and could take years, the Utah-based nonprofit drug company Civica Rx, is discussing partnering with California to produce generic or biosimilar drugs. The company … has already hammered out deals with major health systems running short on critical drugs, including the Department of Veterans Affairs, and is producing lower-cost generics for Blue Shield of California and other insurers. ‘There’s no doubt insulin would be a more complex and expensive drug to develop, but it’s certainly possible,’ said Allan Coukell, the company’s senior vice president of public policy.”

At the federal level, despite much heated talk, efforts to deal with sky-high prescription drug prices have foundered. President Trump — when not locked in 100 lawsuits with California over an array of environmental, immigration, and other policy battles or in assailing Newsom over wildfires savaging the state  — has boasted in counter factual fashion about his drug pricing proposals. These have either gone nowhere or led to his issuing, or mostly planning to, executive orders of dubious effect. Congressional efforts to deal with drug prices, to be fair, also have not been meaningful to patients, especially as House Democrats and Senate Republicans remain stalemated.

For those skeptical about Big Pharma’s relentless pushing of prices, the news site Politico reported this information at mid-year:

“Drug makers raised the price of hundreds of medicines during the coronavirus pandemic, even in the face of Trump administration vows to crack down on surging drug costs and efforts to tack price controls on Covid-19 relief packages. Pharmaceutical companies logged more than 800 price increases this year and adjusted the cost of 42 medicines upward by an average of 3.3% so far in July, according to GoodRx, which tracks the prices consumers pay at pharmacies.”

Need a longer perspective? How about this reporting from the corporate-attuned Advisory Board:

“The net prices of hundreds of prescription drugs increased by 60% from 2007 to 2018, according to a study published Tuesday in JAMA that’s one of the first to account for discounts and rebates provided by drug makers.”

In my practice, I see not only the harms that patients suffer while seeking medical services, but also the damage that can be inflicted on them and their loved ones by dangerous and harmful drugs. Patients and their families also all but turn themselves inside out to access and afford safe, efficient, and excellent medical care. This was an ordeal before the pandemic, driven by the skyrocketing cost, complexity, and uncertainty of treatments and prescription medications.

The coronavirus has only underscored “glaring gaps” in how the public and private sectors can keep up with desperately needed medications, equipment, and medical devices, State Sen. Richard Pan (D-Sacramento) told the Los Angeles Times. The newspaper quoted him as saying:

“People need these drugs, but prices are through the roof, so we’re saying there’s a role for the state to bring prices down.”

Indeed. We all have lots of work to do, including researching carefully, analyzing information wisely, and getting ourselves, our friends, neighbors, and everyone we know to exercise their fundamental constitutional rights in getting out to vote.

Patrick Malone & Associates, P.C. listed in Best Lawyers Rated by Super Lawyers Patrick A. Malone
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