Calif. Bill Would Force Drugmakers to Pay State Rebate for Marketing Costs

Aiming to rein in public spending on pharmaceuticals, California lawmakers plan to consider a bill that would require drugmakers to pay the state a rebate for costs of marketing life-saving drugs used in state assistance programs -- a proposal that critics contend treads on commercial speech rights.

Assembly Bill (AB) 95 would affect manufacturers of drugs for life-threatening, chronic conditions that are listed on the state's Medi-Cal or the AIDS Drugs Assistance Program. The bill would require drugmakers to pay a rebate equal to the costs of marketing those drugs, as well as disclose all costs incurred in the marketing of the products to consumers and physicians.

"Budgets for Medi-Cal and targeted drug programs like the AIDS Drug Assistance Program are escalating, in large part, because the drug prices are escalating," according to AB 95, which is set to go before the state assembly's health committee April 12. The state spends roughly $3 billion on drugs annually for the Medi-Cal program for low-income residents.

Under AB 95, if a firm complies with the disclosure requirement, the state health department will agree to a marketing rebate that allows the manufacturer to retain up to 10 percent of its marketing costs. "If the manufacturer does not comply with the disclosure requirement, the department shall agree to a marketing rebate that is equal to at least 25 percent of the ... price of the drug," the bill says.