California’s Pharmaceutical Spending Has Risen to Nearly 26 Percent in 3 Years
Thu, April 22, 2021

California’s Pharmaceutical Spending Has Risen to Nearly 26 Percent in 3 Years

California remains focused on its analysis of the trends of drug pricing for approximately a thousand products. / Photo by Mr.rapisan Swangphon via 123rf


California’s Office of Statewide Health Planning and Development, which helps improve people’s access to quality healthcare in the country, recently revealed in a report that the pharmaceutical spending in the country increased to nearly 26 percent in three years.


Prescription drug pricing increase

The state agency said that drug companies have increased their whole acquisition cost, which is the all-in cost or list price or the wholesaler’s price without rebates or discounts, by 25.8 percent median from 2017 to the first quarter this year. The initial report also detailed that California remains focused on its analysis of the trends of drug pricing for approximately a thousand products.

Statewide healthcare consumer advocacy coalition Health Access California’s executive director Anthony Wright said in an interview with full-service pharmacy media resource the Pharmacy Times that even with public anger and the spotlight on prescription drug prices, the report from the OSHPD only showed that the pharmaceutical firms continue to increase their prices usually without any or good justifications for doing so.


Drug pricing transparency

Policymakers and consumers have long been focusing on drug pricing transparency, with various studies that highlight how there is inequality in drug spending across different disease states and the increase of out-of-pocket costs. The Food and Drug Administration itself has already implemented the policy steps necessary to enhance drug pricing transparency, particularly for the generic applicants. These applicants must specifically demonstrate that their product performs in the same way as the innovator drug.


The largest median increase of prescription drugs was 23.3 percent median increase. / Photo by 振亚 范 via 123rf


Specialty and generic drugs 

The report revealed that the largest median increase of generic drugs was 37.6 percent and prescription drugs at a 23.3 percent median increase. These prescription drugs are those with whole acquisition cost of less than $10,000. There was also a slight increase in the price of specialty drugs because of their large whole acquisition cost. One example of this would be the Samarium SM 153 Lexidronam. It is an intravenous injection used for patients with lung, breast, and prostate cancers that have already spread to their bones. The specialty drug is injected into the vein so that it gets distributed throughout the body. The cost of such specialty drugs increased by about 10 percent and the new listed price in the country is now $15,217.

The prices for generic drugs also increased dramatically. For instance, a generic liquid of Prozac increased from $9 to $69 in the first quarter this year. This equates to a 667 percent increase in the price of the generic drug. Guanfacine, a generic medication used to treat attention deficit hyperactivity disorder and high blood pressure, has been on the market since 2010 and its price has now increased to over 200 percent in the first quarter of 2019 alone.



The spokeswoman of the trade association representing the country's pharmaceutical researchers and biotechnology companies Pharmaceutical Research and Manufacturers of America, Priscilla VanderVeer, said that patients are required to pay the high amount of drugs but the private health plans and the government are not sharing in the cost. Pharmacy Times pointed out that more of the pharmaceutical cost should fall on health plans and the government instead of on the consumers only. VanderVeer said that if the country’s drug transparency law only considers one part of the pharmacy supply chain and not does involve PBM and insurers, it will mean that patients will not afford or have access to the medicines they need.

The law in California, as of now, requires drugmakers to indicate why they have to raise the prices but they are not taking into account the pharmacy benefit management intervention or account insurer. Health Access California’s Wright also commented that drug pricing transparency should be a federal priority. Yet, more reforms are still needed and Congress has to make bolder and bigger steps to help lower the prices of medicines. This way, patients can get the medications that were prescribed to them.

In 2017, California’s former governor Jerry Brown signed the transparency law called SB-17, requiring manufacturers to report their price increases on drugs every quarter. Firms that we're able to meet such standards were asked to provide price information within the last five years too.

In the United States, interventions to reduce wasteful spending in healthcare would save the country as much as $282 billion annual, a separate study found. 



Pharmaceutical spending: OECD data

The Organization for Economic Co-operation and Development, which is tasked to stimulate economic progress and world trade, has published data about pharmaceutical spending. It covers the expenditures on prescription drugs and self-medication as well or the over-the-counter products. The data provided below indicates the net spending, which is adjusted for possible rebates that will be payable by pharmacies, wholesalers, and manufacturers, and measured in total health spending per capita.

Russia: 29.0 percent
Hungary 27.9 percent
Latvia: 27.4 percent
Greece: 27.3 percent
Slovak Republic: 26.4 percent 
Lithuania: 25.8 percent
Mexico: 22.7 percent
Korea: 20.7 percent
Poland: 20.4 percent
Japan: 18.6 percent
Spain: 18.6 percent
Slovenia: 18.4 percent
Estonia: 18.2 percent
Italy: 17.5 percent