Governor Newsom Proposes a State-Run Generic Prescription Drug Label

On Thursday, Governor Gavin Newsom released a new budget proposal that would have the state of California manufacture generic prescription drugs.

A plan for California labeled generic drugs

“Prescription drug prices are too high,” stated Governor Newsom in a tweet. “I’m proposing that California become the first state in the nation to establish its own generic drug label. It’s time to take the power out of the hands of greedy pharmaceutical companies.”

“A trip to the doctor’s office, pharmacy or hospital shouldn’t cost a month’s pay,” said Governor Newsom in a later statement. “These nation leading reforms seek to put consumers back in the driver seat and lower health-care costs for every Californian.”

Combating higher costs

Governor Newsom has proposed the plan to combat increasingly high pharmaceutical costs. California would produce several medications and pharmaceuticals, including insulin and other life saving drugs, to increase competition in the generic market and gradually lower prices to more affordable levels.

Drug companies such as Merck and Pfizer would license drugs for California to produce, thus ultimately not losing money or having to slash research and development costs.

Governor Newsom has gone after pharmaceutical companies in California ever since he took office. Last year Governor Newsom had California take over Medicaid’s prescription drug benefits program. And in 2020, in addition to starting a state drug label, Newsom has planned for  for a single market on drug pricing, effectively making it a ‘lowest bidder’ market to set a single drug price point for each drug.

The downsides of state-made prescription drugs

While the Governor’s proposal has garnered support from many lawmakers and health reform advocates, critics have pointed out flaws and gaps in the plan.

“They aren’t even giving a ballpark figure for the cost of this program,” said George Dragusha, a former hospital administrator. “A program of this size, for California, would easily be in the billions. My former hospital alone, with all the prescriptions we filled, that’s already a small chunk of that.”

“You also have to think about drug companies and drug makers complying. If California is trying to corral them to a price that’s below profitability, they’ll either stand firm on a price or walk. And that’s a scary thought.”

“There’s a lot of side effects to this too. Unforeseen costs, like if a California drug is improperly made and causes death. That’s a lot of lawsuits we are looking at. There’s the socialist aspect of it. There’s the insurance carriers who may be alienated by this. Consumers who may refuse to buy the California made drug. There’s a lot of aspects here that need discussion.”

“That said, we do need to make drugs more available for people, and that means making them more affordable. People die because they can’t afford medicine, and we need to stop that. But there are other ways to do this. California may lower costs, or they may see this as another source of making money and keep them higher.”

“There’s too many unknowns here right now to make any kind of decision, either for or against. Knowing how much all of this will cost is the first step we’ll all want to know. And where it’s coming from”

Budget proposals will be debated at length later this year. This was Governor Newsom’s second budget proposal this year following a $1 billion homeless initiative announced earlier this week.