California governor, rebuffing pharma pleas, signs breakthrough drug pricing bill

California Gov. Jerry Brown is ready to sign a pricing bill hated by PhRMA and has already inked a bill that will crimp use of copay coupons. (Neon Tommy/Flickr)

California's governor has decided to sign a drug pricing bill that deals a blow to drugmakers—and to their lobbyists who've been fighting strenuously against the measure.

In a Sunday advisory, Gov. Jerry Brown's office said the governor would sign SB 17, which requires drugmakers to provide notice before increasing their prices.

The governor's move comes even after industry lobby group PhRMA previously pledged to reach out to Brown on its concerns about the transparency bill. That fighting hasn't stopped, though: As advocates celebrated on Monday, the association continued to criticize the legislation. 

Meanwhile, a separate bill that would crimp a favorite marketing technique among branded drugmakers—the copay coupon—is awaiting Brown's signature. The measure would ban such coupons, which drastically cut patients' share of branded drug costs, if cheaper meds are available.

Passed by state lawmakers last month, California's Senate Bill 17 seeks to require health insurers to disclose costs of certain drugs and force pharmaceutical manufacturers to give warning of price hikes. Certain pricing information will be published on a government agency's website under the bill.

"Californians have a right to know why their medication costs are out of control, especially when pharmaceutical profits are soaring,” Gov. Brown said in a statement.

PhRMA spokeswoman Priscilla VanderVeer said in a statement on Monday that it's "disappointing that Gov. Brown has decided to sign a bill that is based on misleading rhetoric instead of what’s in the best interest of patients." She said there's "no evidence" the bill will lower costs "because it does not shed light on the large rebates and discounts insurance companies and pharmacy benefit managers are receiving that are not being passed on to patients." 

Pharma and drug middlemen called pharmacy benefit managers have had somewhat of a contentious year as attention to pricing has escalated in Washington, D.C., and elsewhere. Drugmakers say growing rebates and discounts are driving up overall prices, while PBMs counter that drug companies always set prices and that negotiating saves the healthcare system billions. 

PhRMA further argues that SB17 ignores the value drugs bring to the healthcare system and the fact that they are a minority of overall healthcare spending. 

"It’s time to move beyond creating new, costly bureaucratic programs that don’t make a dent in patients’ costs for medicines," VanderVeer continued. "We stand ready to work with policymakers on new innovation strategies that emphasize value while bringing down costs and expanding access to needed medicines."  

Advocates, on the other hand, praised the governor's decision. The bill is important not only because California is such a big state, but also because it could serve as a model for other states looking to take action on prices.

RELATED: With Prop 61's defeat, drug-pricing foes can forget state-level action 

While pricing legislation hasn't made any headway in Congress, the development in California comes after Maryland and Nevada implemented their own pharma regulations. Maryland's measures, which recently became law, target high price hikes in the generic sector. Nevada took aim at the diabetes market and PBMs. 

Gov. Brown's decision also follows last year's failed ballot proposal in California that would have tied prices the state pays for drugs to the amount paid by the U.S. Department of Veterans Affairs. Industry watchers saw it as a victory for pharma and a big setback for pricing activists, but now a separate pricing regulation is in play not even one year later. 

Brown's office hasn't said whether he plans to sign the copay coupon bill. If he does, the new law would bar branded drugmakers from attempting to preserve market share by lowering out-of-pocket costs to patients. Payers, including PBMs, say the coupons thwart their own attempts to steer patients to cheap generics and cut overall drug spending costs.