California Governor Edmund G. Brown Jr. has signed legislation, Senate Bill (SB) 17, Healthcare: Prescription Drug Costs, to increase transparency in prescription drug pricing by requiring pharmaceutical companies to give notice before raising prices.

SB 17 requires drug manufacturers to provide a 60-day notice if prices are raised more than 16% in a two-year period. The bill applies to drugs that have a wholesale price of more than $40 for a 30-day supply. SB 17 also requires health plans and insurers to file annual reports outlining how drug costs impact health care premiums in California.

California State Senator Ed Hernandez (D-West Covina), who authored the legislation, outlined the rationale for the legislation. “Drug companies abuse their market power by jacking up prices, and the public is looking to their government for help,” said Senator Hernandez in a statement. “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. Sometimes even a modest change brings about big results. Transparency will make drug companies pause and consider whether drastic price increases are appropriate. I want to thank Governor Brown for signing this bill.”

California State Assembly member David Chiu (D-San Francisco), a principal co-author of SB 17, explained the value of the legislation. “Today we are one step closer to helping patients, governments, and businesses understand why drug prices are so high – and to using that information to bring those costs down,” said Chiu in a statement. “I applaud the leadership and courage of Governor Brown, Senator Hernandez, my fellow co-author Assembly member Jim Wood, and the broad coalition of patients, consumers, employers, businesses, labor, and health advocates who worked tirelessly in recent years to get this legislation across the finish line. We need answers for the child who needs an Epi-pen, the hepatitis C patient who needs Sovaldi, and the AIDS patient who needs Daraprim.”

Source: Governor’s Office for California