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California passes legislation to improve prescription drug pricing transparency

Governor Edmund G Brown Jr of California has signed legislation SB 17 aimed at improving the transparency of prescription drug prices in the Golden State. It is hoped the Drug Price Transparency Bill, authored by Senator Ed Hernandez, will curb price hikes and help patients struggling with unmanageable medication expenses.

SB 17 requires pharmaceutical companies to provide 60 days notice to purchasers, health plans, and insurers before increasing the price of medication.  This applies when the increase exceeds a 25 percent rise over two years or a ten percent increase over the same period for expensive "specialty drugs".

Pharmaceutical manufacturers will now be required to justify price increases to the Office of Statewide Health Planning and Development. Additional information, including marketing budgets, previous price increases, relative efficacy and sales volumes will also need to be submitted. 

The move is likely to be welcomed by patients across the state and has already been applauded by a number of organizations, including the California Association of Health Plans and the American Association of Retired Persons (AARP), which has more than 3.3 million members in California. Commenting on the new laws, the organization's California state director Nancy McPherson described medicine costs as a "critical issue". 

Senator Hernandez, whose work on the bill was applauded by the AARP, stated: "Requiring drug companies to provide advance notice and some explanation for large price hikes is a step toward a more stable and predictable prescription drug marketplace."

Over the last 20 years, the number of prescriptions filled by Americans has risen significantly, soaring 85 percent between 1997 and 2016. Figures from Quintiles IMS published by Consumer Reports revealed the number of prescriptions filled in the United States last year was almost 4.5 billion, up from 2.4 billion two decades ago. Alongside the growing demand for medicine, the price of drugs has also been on the rise, with the AARP's RxPrice Watch Report showing a 15.5 percent year-on-year increase in brand-name prescription drug prices in December 2016.