Price fight for California drug makers as biotech convention rolls in

California drug makers want to put a face other than Martin Shkreli's on the issue of drug pricing.

Saying a price transparency bill in the state Legislature will shift money from research to paperwork, the California Life Sciences Association trade group is unleashing a digital campaign emphasizing patients and caregivers.

The initiative is the latest in the rhetorical back-and-forth featuring legislators, patient advocacy groups, consumer organizations, labor unions, insurers and the biopharmaceutical industry — a debate that often features Shkreli's well-documented plan as CEO of Turing Pharmaceuticals to increase the price of a generic drug treating HIV patients by 5,000 percent.

What's more, drug pricing is a dominant issue as 15,000 or more biotech executives and others land on San Francisco this week for the Biotechnology Innovation Organization's annual convention.

It is the first time the Bay Area has hosted BIO's big convention since 2004, when some protestors pelted convention-goers with tomatoes to highlight their opposition to genetically modified food. Now the industry's battle with consumers and legislators centers on Gilead Sciences Inc.'s $1,000-a-pill hepatitis C drugs, Shkreli and other price increases.

A petition effort will put a pricing initiative on November's ballot, but the state legislation would require biopharmaceutical companies to report to state government purchasers when a drug price increases more than 10 percent or when a new drug will cost more than $10,000 a year. It also would require insurance companies to report information about drug price increases.

"It's for the overall good of transparency," said state Sen. Ed Hernandez, a Los Angeles-area Democrat. "It's of more benefit to the public."

Not so, said Sara Radcliffe, CEO of the California Life Sciences Association, the biotech industry trade group based in South San Francisco.

"It requires a lot of paperwork for lawyers and accountants instead of researchers," Radcliffe said.

What's more, she said, in the 60 days between drug makers reporting a price and the actual increase, secondary distributors could corner the market on a drug at the lower price and sell months later at the higher price. That could lead to drug shortages in the interim, she said.

"It's a bad idea for patient access and safety," Radcliffe said.

CLSA is leading a digital campaign, called "Protect Access & Innovation," that features patients and nurses and other caregivers, specifically aimed at Hernandez' Senate Bill 1010.

The California Senate last week approved the bill — supported by the California Labor Federation and Health Access California, a consumer advocacy group — on a 25-10 vote. It now goes to the state Assembly and could land on Gov. Jerry Brown's desk in late August.

While the drug industry argues that the bill would bring more paperwork than transparency, Hernandez said it would bring clarity around the role drug prices play in the overall cost of healthcare. Several industry groups have said drugs account for only 10 percent or so of health care costs, other estimates have put it at about 20 percent.

"What really is the cost of prescription medications? We should find that out," Hernandez said. "They say 10 percent; I hear differently."

The state Legislature has had to augment budgets for state programs, including MediCal, Covered California and state prisons, by $224 million, Hernandez said, because they were blindsided by the cost of one drug: Gilead's Sovaldi.

The drug is as good as a cure for hepatitis C, a viral infection that often leads to liver cancer and liver transplants. What's more, Sovaldi and Gilead's other hep C tablet, Harvoni, can treat patients in a matter of months, instead of patients receiving debilitating, year-long injections.

Overall, Foster City-based Gilead (NASDAQ: GILD) and other drug industry executives have argued, the drugs offer long-term savings. But payers claimed the costs came out of nowhere and stressed their budgets in the short term.

Senate Bill 1010 would give California state payers more time to respond, Hernandez said.

"We're not setting prices for them. There's absolutely no price fixing, no regulating of drug prices," Hernandez said. "But we're putting sunshine in the true cost of drugs and the percentage of premium dollars" for which drug prices are responsible.

The bill, CLSA's Radcliffe said, is well intentioned but in the end won't help patients. What's more, she said, it also would take away drug companies' flexibility to negotiate discounts with insurance companies and other "partners."

Publishing drug prices publicly means a system of crisscrossing rebates and discounts — a confusing mishmash of health care prices negotiated privately, even among public health plans — would no longer be effective for drug makers/sellers.

In some cases, those discounts mean drug makers are providing drugs at less than their costs.

"The whole market migrates to the same price and it defeats competition to lower those prices," Radcliffe said. "A list could be exploited by competitors in the market."

The bill, she said, also doesn't address the underlying problem of "discriminatory insurance design," where patients rather than hospitals or insurers are hit with bigger out-of-pocket expenses.

"We do understand Sen. Hernandez has a good intent here: trying to do something for patients," Radcliffe said. "But this is a classic case of the devil being in the details."