Gov. Gavin Newsom to Propose That California Manufacture Its Own Generic Drugs

Grant Boone
January 10, 2020

In a bold strategy to drive down prescription drug prices, Gov. Gavin Newsom is proposing that California become the first state in the nation to establish its own generic drug label, making those medications available at an affordable price to the state's 40 million residents.

Lawmakers must approve the plan before it can take effect.

The private market has also created a similar arrangement through Civica Rx, a nonprofit funded by hundreds of hospitals that contracts with private manufacturers to produce generic drugs.

"The state of California is treating homelessness as a real emergency - because it is one", Newsom, a Democrat, said in a statement announcing his budget proposals, which he is expected to formally deliver to the state legislature on Friday.

Democratic state Sen. Maria Elena Durazo said Newsom promised her he would include the health care proposal for seniors in this year's budget. Generic drugs saw a three-year median increase of 37.6%, according to a report from the Office of Statewide Health Planning and Development.

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Much of the governor's proposal focuses on efforts to reduce and respond to wildfires, including funding 677 new CalFire positions over five years and allocating $90 million for new technology and a forecast center to better predict, track and battle blazes. On Wednesday, he announced he wanted to spend another $1 billion to combat the state's growing homelessness problem. And in 2017, state attorneys general in New Mexico and Washington opened investigations into whether Eli Lilly conspired with other companies to drive up the price of insulin, a drug that is almost a century old.

While most Americans get generic prescriptions, they only account for a small part of the total drug spending in the U.S. That's because unlike the name-brand drug market, generics are very competitive, said Jeff Joyce, chairman of the Department of Pharmaceutical and Health Economics at USC's School of Pharmacy. The governor's office says drugmakers would have to bid to sell their drugs in California at a uniform price.

"Californians are demanding that all levels of government - federal, state and local - do more to get people off the streets and into services", wrote Newsom.

Jon Roth, CEO of the California Pharmacists Association, said the state might be surprised, however, at how much it ends up charging for its own generic drugs because of factors beyond its control, including raw material shortages and disruptions in the supply chain.

Undeterred, the Newsom administration is pushing ahead and awarded a contract last month to a firm to manage the new pharmacy benefits.

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