When the Price Is Not Right: State Options on Prescription Drug Pricing

Marge Ginsburg of the Center for Healthcare Decisions, and Shauna Durbin, Jeffrey Hoch, Susan Perez, and Dominique Ritley of the Center for Healthcare Policy and Research at UC Davis

Rapidly rising drug prices have caught the attention of health care leaders, who are calling for drug pricing policy reform. What can California do to address this problem?
June 2016

In 2013, more than 3 million patients with hepatitis C in the US heard the good news about Gilead Sciences' effective new drug Sovaldi. The bad news: It cost $84,000 for one three-month course of treatment. Such exorbitant prescription drug price tags have caught the attention of health policy leaders who are currently working toward drug pricing reform. But they struggle to balance concerns about preserving affordability while assuring support for innovative prescription drug research.

In response to California's interest in pursuing reasonable and effective strategies for high-value medical care, this issue brief presents information about the cost of prescription drugs, details the landscape of rebates and barriers (primarily around outpatient prescription drugs), describes the various strategies being pursued at the national and state levels, notes California's own efforts, and speculates on possible outcomes.

The paper highlights several key strategies:

  • National-level approaches. The most effective strategies require changes in federal laws or regulations. These changes are being pursued by those in both the public and private sectors.
  • Cost transparency. Many transparency bills share a common theme: They seek to require pharmaceutical companies to disclose how much they spend on research, manufacturing, and marketing.
  • Value-based design. Some private purchasers are experimenting with innovative value-based formularies, which encourage patients to choose cost-effective medications.

The full issue brief is available as a Document Download.