California Wants to Create Its Own Generic Drug Label

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Gov. Gavin Newsom's plan calls for the state to contract with existing generic drug manufacturers to make certain drugs. Pfizer, the world's biggest drugmaker, manufactures the cholesterol drug Lipitor. Lipitor is the world's top-selling drug.  (Scott Olson/Getty Images)

California could soon become the first state in the nation to create its own generic drug label, a bold proposal aimed at making drugs more affordable.

It's one of several health care reforms Gov. Gavin Newsom plans to announce in his new budget proposal for the upcoming fiscal year.


The administration’s plan is to contract with existing generic drug manufacturers to make certain drugs. Then the state will set the prices and sell them, making them available to “all Californians,” the administration said in a statement.

The idea is to increase competition in the generic market that will result in lower drug prices for everyone.

“A trip to the doctor’s office, pharmacy or hospital shouldn’t cost a month’s pay,” Newsom said in the statement. “The cost of health care is just too damn high, and California is fighting back.”

The governor said he will also build on another of his proposals from last year to consolidate the state's purchasing power to buy other drugs, allowing state health agencies like Medi-Cal and Covered California, along with private insurers and employers, to negotiate together and force drug companies to sell at lower prices.

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He also wants to expand on current law to allow Medi-Cal, the state’s health coverage for low-income Californians, to consider international drug prices, not just domestic prices, when negotiating rebates with drugmakers.

The governor also laid out two other proposals aimed at making health care more affordable for state residents, including:

  • Strengthening choice and affordability of health plans available for sale through Covered California, the state’s Affordable Care Act marketplace; and
  • Establishing an Office of Health Care Affordability to improve price transparency, create strategies for tackling high costs at hospitals, particularly in regions where there is little competition, and reduce administrative waste at hospitals and doctors’ offices.

The governor plans to unveil the proposals as part of his 2020-2021 budget proposal later this week.

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