California Governor Signs Executive Order Increasing State Powers to Negotiate Drug Prices

In one of his first actions since assuming office on Monday, California Gov. Gavin Newsom signed an executive order requiring state officials to negotiate drug prices for the state’s Medicaid program.

Currently, private insurers who run managed care plans for the state program, Medi-Cal, handle prescription drug purchasing for all but two million Californians. Newsom’s order directs all state agencies to purchase drugs together and places all negotiations under the authority of the state Department of Health Care Services.

In the executive order, Newsom noted state spending on prescription drugs has increased by about 20 percent per year since 2012 — a rate he called unsustainable — adding that about half of those expenditures are for 25 particularly expensive drugs.