California moves to lower drug prices with new opioid overdose drug deal

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California has taken a first step toward lowering drug prices in the U.S. state, reaching a deal with the maker of a drug that can reverse opioid overdoses to buy the drug at a deep discount and then distribute it under your own brand.

Under the deal, California will buy naloxone, a nasal spray that can reduce or reverse the effects of opioids, from generic maker Amneal Pharmaceuticals for about half the price of the brand-name drug.

Gov. Gavin Newsom said California was using its market power as the world’s fifth-largest economy to lower drug prices through a program it calls CalRx. It is also working with another drug company to lower the price of insulin through the plan, and officials said they were looking at ways to lower the price of other drugs in the state.

California is disrupting the pharmaceutical industry with CalRx [by] ensuring life-saving drugs at lower, more transparent prices, Newsom, a Democrat, said in a statement Monday. Efforts to lower the price of insulin to $30 a vial also, as these latest schemes drive the market price of naloxone nearly in half, were aimed at maximizing taxpayer dollars and saving more lives with the drug miracle, Newsom added.

State officials described the scheme as the first time a US state has worked directly with a drug maker to create its own branded, over-the-counter drug at low cost.

The move is the latest attempt by Democratic politicians to challenge drugmakers’ price-setting power on key drugs. Through the Biden Administration’s Inflation Reduction Act, the federal Medicare retiree health program is negotiating directly with pharmaceutical groups on the wholesale purchase price of 10 major drugs, a measure which the industry had rejected for years.

The U.S. Food and Drug Administration last year approved over-the-counter sales of Narcan, the brand-name version of naloxone, a nasal spray used to reverse opioid overdoses in hopes that greater access to the drug reduces opioid-related fatalities. But Narcans’ retail price of nearly $45 for a two-dose package has put the treatment out of reach for many opioid users.

California, where nearly 7,000 state residents died of opioid-related overdoses in 2022, will now be able to buy two doses of naloxone nasal spray for $24, or about half the price of the brand-name drug, under the program through an agreement with the generic manufacturer. Amneal, the governor’s office said. Amneal launched the first generic version of Narcan last week, following FDA approval.

California has already distributed more than 4.1 million naloxone kits since the start of the opioid crisis in the US, which state officials estimate has helped reverse 260,000 opioid overdoses. Brand-name Narcan spray, made by Emergent BioSolutions, generated $266 million in sales in the 12 months to February of this year, according to industry tracker IQVIA.

Another plan to work with Civica, a nonprofit pharmaceutical company based in Virginia, to secure more affordable insulin for diabetics has been hit with delays. California officials said that after discussions with the FDA, the Civica insulin plan has a clear path forward. California is aiming for a $30 insulin dose, less than the $35 limit set in Medicare for people 65 and older.

Alex Brill, chief executive of Matrix Global Advisors, a healthcare consultancy, said California should be commended for stockpiling [over-the-counter] Narcan, but added that he was skeptical of the Newsoms’ role in lowering the price. As is always the case with large buyers and as a result of a new generic entrant, California is acquiring this drug below the current retail price, Brill said.

The announcement comes as the Newsoms administration grapples with an estimated $58 billion budget deficit, down from a $100 billion surplus by 2022. State officials say the plan to lower drug prices forms part of a broader effort to reduce health spending to 3% of its budget. budget for 2029 from an expected level of 3.5% next year.