New drug plan would curb exorbitant pharmaceutical costs

California Governor, Gavin Newsom has proposed a pharmaceutical plan to cut costs of pharmaceutical prescriptions. It was suggested that using low prices obtained by the state, could help other buyers. Read this blog to learn about how California Governor is purposing an attempt to lower costs for California residents.

California’s governor unveiled plans to establish a state-run generic-drug wholesaler, as part of a series of measures that together would constitute one of the furthest-reaching attempts to curb pharmaceutical costs in the U.S.

Gov. Gavin Newsom on Thursday also proposed creating a single market that would allow drug buyers to pool their bargaining power to drive down costs. And Newsom suggested using low prices obtained by the state’s Medicaid program to aid other buyers, among other steps.

The most populous U.S. state, California has a history of using its economic muscle to try to influence national policy on everything from auto emissions to health care. The drug-pricing proposals, which in some cases appear to require new law, are likely to be opposed by a pharmaceutical industry that has formidable economic and legal wherewithal of its own.

“These nation-leading reforms seek to put consumers back in the driver seat and lower health care costs for every Californian,” Newsom, a Democrat, said in a statement.

The plans, released as part of the state’s proposed 2020-2021 budget, are almost certain to face substantial practical, political and legal hurdles. For example, the proposal to create a state-run drug label would rely on drug companies to supply inventory on a contract basis.

Companies could balk at that notion if it stands to further compress their margins. Major generic manufacturers, including Mylan NV and Teva Pharmaceutical Industries, have struggled to turn a profit on some widely used medications. For higher-cost generic drugs, there can be few competing manufacturers with the licenses to produce the pills for the U.S. market.

Creating a single buying pool could run into difficulties, as well. Newsom’s proposal says state programs, health insurers and private employers would band together as a sole buyer, and that drugmakers would have to offer their products at one price to the entire market.

But that could limit patient access to medications if pricing disputes lead drug companies to withhold their products. In Europe, negotiations between drugmakers and government health programs have resulted in some expensive drugs not being available, one of the trade-offs for the continent’s typically lower costs. It’s unclear if California could successfully hold together a large pool of independent buyers in the face of pressure from patients unable to access treatments.

SOURCE: Bloomberg News (09 January 2020) "New drug plan would curb exorbitant pharmaceutical costs" (Web Blog Post). Retrieved from

Companies Look to Pharmacy Benefits for Savings

Employers increasingly are putting prescription drugs -- specifically their plan designs and providers -- under the microscope in hopes of spotting more health care savings.

Following a trend among health care plans, more prescription drug plans are shifting to a "value-based" model, according to Lauren Flynn Kelly, a blogger with AIS Health. In a recent post, Kelly highlighted one particular eight-tier formula that assigned clinical and financial values to drugs on each tier and included only a few lower-cost generics on its first tier.

Ritu Malhotra of The Segal Co. noted that this type of plan design promotes the use of generics -- particularly the lower-cost generic options.

"I think the value part of the value-based plan design is that those drugs are effective and much more cost-effective and could potentially result in a savings on the medical side if patients are more adherent," Malhotra notes in the AIS Health post.

Patient adherence is a primary goal of value-based plans, Kelly wrote. Unfortunately for employers, it's an area where the statistics remain grim. A recent poll by Express Scripts Inc. found that non-adherence cost the nation about $317.4 billion in 2011 in treatment -- that's not counting lost productivity and other costs that can occur when patients don't follow their prescribed drug regimen, according to a report in Employee Benefit News.

While adherence remains a constant obstacle, recent moves in the pharmacy benefit marketplace may create alternative opportunities for lower costs and stronger benefits, an online Workforce report suggests.

Express Scripts' $29 billion purchase of Medco Health Solutions could shake up the pharmacy benefit management (PBM) landscape, potentially creating a polarization between big PBMs that offer the best costs and smaller PBMs that can offer more services, F. Randy Vogenberg of the Institute for Integrated Healthcare told Workforce.

Linda Cahn, founder of Pharmacy Benefits Consultants, suggests that the merger may prompt some employers to start shopping for better deals.

"I think people are aware that changing PBMs can save them large amounts of money, and they are also aware that marketplace developments create further incentives to conduct [request for proposals]," Cahn told Workforce.

Most employers, however, likely won't make any sudden moves with their PBMs at renewal time later this year.

"Change creates controversy, and employers are not looking for controversy," Vogenberg said.