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California Has a New Law to Expose Drug Price Hikes. Big Pharma Isn’t Happy

October 10, 2017, 9:41 AM UTC

Pharmaceutical companies have a lot of explaining to do. Or at least they will under a new California law signed Monday by Governor Jerry Brown.

Under the law, SB 17, pharmaceutical companies will have to give 60 days’ notice if a drug’s price will increase more than 16% over a two-year period—and explain why the price hike is necessary.

But drug companies won’t be the only ones under scrutiny. Insurers will also need to file annual reports explaining the relationship between drug prices and healthcare premiums.

Big pharma is a popular target for righteous anger from many quarters, but Governor Brown’s defense of the law rests on reducing income inequality rather than sticking it to the man for its own sake.

Some critics say the bill has not gone far enough, arguing that transparency on its own won’t bring down drug prices and the bill lacks a mechanism to enforce price reduction. Drug companies say the law will not only be ineffective, but will also threaten innovation and development.

The drug lobby has spent nearly $17 million in just over two and a half years to oppose new regulation in California. The pharmaceutical industry is expected to bring a legal challenge to the new regulation before it takes full effect in 2019.