Earlier this month, the California legislature passed a bill that would make the Golden State the first in the nation to establish its own line of generic drugs. Gov. Gavin Newsom is expected to sign the bill into law by the end of the month.
The measure’s architects argue that a state-run generics firm would provide additional competition in the drug market and lead to lower prices. But that promise is empty. Generic drugs can’t get much cheaper. Setting up a new state generics manufacturer would cost millions and deliver miniscule savings.
Injecting more transparency into the prescription drug supply chain is a far more effective way to reduce costs for patients.
The bill in question, Senate Bill 852, would direct the California Health and Human Services Agency to partner with existing drug manufacturers to begin developing and distributing a wide range of pharmaceuticals — including generic drugs, biosimilars, and at least one form of insulin.
But by and large, people are not struggling to gain access to affordable generics. Ninety percent of prescriptions filled in the United States are generics; 95 percent of such prescriptions cost $20 or less.
The average generic copay is under $6. There’s not much more room for prices to go down.
If government-sponsored manufacturers entered the market, they’d likely have minimal impact. They could even lose money. California taxpayers are surely unenthused about seeding a new state-run drug company with $1 million to $2 million start-up capital and hundreds of thousands of dollars in operating funds, only to