California could be first state to launch its own prescription drug label

FILE ART (Photo by John Moore/Getty Images)

California could become the first state with its own prescription drug label under a proposal Gov. Gavin Newsom unveiled Thursday.

Newsom wants California, home to nearly 40 million people, to contract with generic drug companies to make prescription medications on its behalf so it could then sell them to the public. The goal, according to the governor's office, is to lower prices by increasing competition in the generic market.

An example could be insulin for diabetes patients. The drug has been on the market for decades and has steadily increased in price. Three drug companies control most of the market for insulin.

“The cost of health care is just too damn high, and California is fighting back,” Newsom said in a news release.

State lawmakers must approve the plan before it can take effect. The idea is part of Newsom's forthcoming budget proposal, which he must present to the state Legislature by Friday. The governor's office did not say how much the proposal would cost. The non-partisan Legislative Analyst's Office says the state could have as much as a $7 billion surplus this year.

Newsom, now in his second year in office, has sought to overhaul the state's prescription drug market. Last year, in one of his first acts in office, Newsom ordered the state to take over the Medicaid program's prescription drug benefits, a program that affects 13 million people.

That order also directed state agencies to begin buying drugs in bulk and using their leverage to negotiate lower prices. This year, Newsom's budget proposal would expand on that by creating a single market for drug pricing within the state. The governor's office says drug makers would have to bid to sell their drugs in the state at a uniform price.

This is the second budget proposal Newsom has announced this year. On Wednesday, he announced another $1 billion in spending to combat the state's growing homelessness problem.