California deals pharma a double whammy with signing of copay coupon bill

California Gov. Jerry Brown signed a new bill that limits pharma's copay couponing in the state.

Even as many drug industry headlines out of California on Monday focused on the state's groundbreaking new pricing transparency regulations, another bill targeting pharma's copay coupons is set to become law.

On Monday, Gov. Jerry Brown signed California's AB-265, which will limit the use of copay coupons and other discounting strategies for branded prescription drugs when a cheaper generic is available. Brown authorized that bill on the same day he signed SB-17, a separate piece of legislation which will force drugmakers to give warning of and explain price hikes. 

Exceptions to the copay coupon law include cases in which patients complete step therapy or receive prior authorization for the branded drug, according to an online summary

Together, the bills represent two significant regulatory steps on drug pricing in a critical state. Taken alone, they are a setback for the drug industry in California. But other states could follow the model as many around the country look to take pharmaceutical prices into their own hands. 

PhRMA, the drug industry trade group, opposed both proposals. The group has voiced concern over AB-265 because it argues the bill doesn't ensure patients who need a branded med over a generic will be able to get that drug. 

In a June letter, the trade group wrote to AB-265 author Assemblymember Jim Wood to push for an amendment that would allow the use of coupons for up to 12 months after the FDA approves a generic option. PhRMA also called for continued couponing if a patient receives prior approval, if a prescriber believes the brand is medically necessary, if there's a shortage of the generic or if the brand is less expensive than the generic. 

Wood introduced the bill back in February, noting that the coupons “appear to help the consumer,” but in fact drive overall costs up by sending patients to expensive brands instead of cheaper options. 

The strategy has come under plenty of scrutiny before. Massachusetts, for instance, banned the promo method in 2012. New Jersey lawmakers are considering a similar proposal. 

For their part, payers are certainly no fans of copay couponing. CVS Health and UnitedHealthcare each have introduced programs to target drugs that get a significant boost from the programs. Express Scripts officials noted in a blog post last year that coupons "inject waste" into the healthcare system. 

Lawmakers on Capitol Hill have their eye on the strategy, as well. During the Mylan EpiPen pricing scandal, 20 senators questioned the coupons in a letter to CEO Heather Bresch. 

“When patients receive short-term co-pay assistance for expensive drugs, they may be insulated from price hikes, but insurance companies, the government and employers still bear the burden of these excessive prices,” the senators wrote in a letter last year. “In turn, these costs are eventually passed on to consumers in the form of higher premiums.” 

RELATED: Thanks, Mylan. Your EpiPen pricing saga puts pharma’s winning copay coupons under interrogation

Both of the drug industry's Monday losses in California come nearly one year after a notable win for pharma in the state, as voters rejected a drug-pricing ballot initiative last November. Industry watchers felt the result could discourage state-level action on pricing, but so far Nevada, Maryland and now California have all passed their own separate regulations.