California adopted a law to allow the state to develop its own line of generic drugs, a notion designed to address the rising cost of prescription medicines that is straining many government budgets across the U.S.

Earlier this year, Governor Newsom announced a first-in-the-nation plan to lower the cost of prescription drugs by creating Cal Rx – a state-sponsored generic drug label.

Newsom has now signed SB 852, a new law that advances his proposal in January to leverage California’s purchasing power to increase generic drug manufacturing as one solution to the prescription drug affordability crisis.

The new law requires the California Health and Human Services Agency (CHHSA) to enter into partnerships, in consultation with other state departments as necessary to, among other things, increase patient access to affordable drugs.

The new law requires CHHSA to enter into partnerships to produce or distribute generic prescription drugs and at least one form of insulin, provided that a viable pathway for manufacturing a more affordable form of insulin exists at a price that results in savings.

SB 852 requires CHHSA to submit a report to the Legislature on or before July 1, 2023, that, among other things, assesses the feasibility and advantages of directly manufacturing generic prescription drugs and selling generic prescription drugs at a fair price.

The law requires CHHSA to report to the Legislature on or before July 1, 2022, a description of the status of the drugs targeted for manufacture and an analysis of how CHHSA’s activities have impacted competition, access, and costs for those drugs.

The law exempts all nonpublic information and documents relating to this program from disclosure under the California Public Records Act in order to protect proprietary, confidential information regarding manufacturer or distribution costs and drug pricing, utilization, and rebates.

The state has already begun to identify potential target medications and develop a strategic plan to promote state-led generic drug purchasing and manufacturing.

California is also transitioning all Medi-Cal pharmacy services from managed care to direct state payment in 2021, strengthening California’s ability to negotiate better prices with drug manufacturers.