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California Governor Signs A Bill To Allow State To Develop Generic Drugs

ARI SHAPIRO, HOST:

If you live in San Diego or Sacramento or Silicon Valley, one day you might be able to buy California-branded drugs at your local pharmacy. Yesterday, California Gov. Gavin Newsom signed legislation that will allow the state to develop its own line of generic drugs, like prescription insulin or epinephrine. This is the first law of its kind in the country. And here to talk with us about how it might work is reporter April Dembosky of member station KQED in San Francisco.

Hi, April.

APRIL DEMBOSKY, BYLINE: Hi, Ari.

SHAPIRO: What does - exactly does it mean that California's getting into the generic drug business? Like, what happens now?

DEMBOSKY: So the initial plan is to hire a drug manufacturer to make the drugs, but California will be in charge of distributing them and selling them. And it's going to take a few years at least. But first, California will study which drugs make the most sense to produce, which ones would be the most cost-effective. But then the law also requires the state to study what it would take to eventually become the manufacturer as well.

SHAPIRO: Explain what the motivation here is. I mean, we've all heard stories of drug companies or hedge fund managers jacking up prices of generic drugs. Is California basically trying to just control the prices?

DEMBOSKY: So there are two goals here, and preventing price gouging is absolutely the main goal. And it's written into the law that California will focus on drugs where it could see substantial cost savings. So insulin is one that was discussed a lot. Insulin is available in a generic form that has been around for decades. And yet, we recently saw the price of insulin double over a four-year period. Then there's epinephrine. Most people call it an EpiPen. So people who are deathly allergic to beestings or peanuts carry this around with them. And even the generic version now costs hundreds of dollars.

So the second goal is around supply. The pandemic has really laid bare how vulnerable our health care system can be to shortages of protective equipment like masks and medications. And there were shortages of drugs used to treat COVID patients early in the pandemic. Even before that, there have been shortages of various drugs, like one for childhood leukemia. So the idea is that this plan will give California more control over the supply of critical drugs as well.

SHAPIRO: Who's likely to benefit most from this?

DEMBOSKY: Well, California is a huge state with a lot of market power. It already spends billions of dollars on drugs for its prisons, retired state workers and its health care programs. The state's Medicaid program alone cares for 14 million people. So the state is primarily looking for savings in its own budget. But the idea is to also make these generics available to private insurance companies so one day consumers could go to their pharmacy and pick up Cal-Rx insulin. And finally, you know, California being California, there is hope that the state system will become a model for other states to copy and benefit from as well.

SHAPIRO: And what's the reaction from the drug companies? What do they think of this new law?

DEMBOSKY: So this doesn't really affect what people think of as Big Pharma, the brand-name drugs. This is about generic drug companies. And they took a neutral position on the bill. Some saw California as a potential competitor, while others were intrigued by the potential business opportunity. Maybe the state would hire them to be a partner. I got in touch with the trade group for generic manufacturers, the Association for Accessible Medicines, and they said they welcome the competition.

SHAPIRO: It's really interesting.

Health correspondent April Dembosky of member station KQED, thanks for explaining this to us.

DEMBOSKY: Thanks for having me, Ari. Transcript provided by NPR, Copyright NPR.