California moves to cut medicine prices with novel deal on opioid overdose drugs

California has taken a first step to push down pharmaceutical prices in the US state, striking a deal with the maker of a drug that can reverse opioid overdoses to purchase the medicine at a large discount and then distribute it under its own brand.

Under the agreement, California will buy naloxone, a nasal spray that can reduce or reverse the effects of opioids, from generics manufacturer Amneal Pharmaceuticals, for about half the price of the branded drug.

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

“California is disrupting the drug industry with CalRx [by] securing life-saving drugs at lower and transparent prices,” said Newsom, a Democrat, in a statement on Monday. Efforts to cut the price of insulin to $30 a vial as well, as this latest scheme’s push to almost halve the market price of naloxone, were aimed at “maximising taxpayer dollars and saving more lives with this miracle drug”, Newsom added.

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

The move is the latest attempt by Democratic politicians to challenge pharma’s pricing power on key drugs. Through the Biden administration’s Inflation Reduction Act, the Medicare federal health programme for retirees is undertaking negotiations directly with pharma groups over the wholesale purchase price of 10 leading drugs — a measure the industry had fended off for years.

The US Food and Drug Administration last year approved over-the-counter sales of Narcan — the branded version of naloxone, a nasal spray used to reverse opioid overdoses — in the hope that greater access to the drug would reduce opioid-related fatalities. But Narcan’s retail price of nearly $45 for a two-dose pack 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 branded drug, under the programme through a deal with generics maker Amneal, the governor’s office said. Amneal last week launched the first generic version of Narcan, following FDA approval.

California has already distributed more than 4.1mn naloxone kits since the onset of the opioids crisis in the US, which state officials estimate has helped to reverse 260,000 opioid overdoses. Branded Narcan spray — which is manufactured by Emergent BioSolutions — generated $266mn in sales in the 12 months to February this year, according to industry tracker IQVIA.

Another plan to work with Civica, a non-profit pharma company based in Virginia, to secure more affordable insulin for diabetics has faced delays. California officials said that after discussions with the FDA, the Civica insulin plan “has a clear path forward”. California is aiming for $30-a-dose insulin, less than the $35 cap in place under Medicare for people over the age of 65.

Alex Brill, chief executive of Matrix Global Advisors, a healthcare consultancy, said California “should be commended for stocking [over-the-counter] Narcan” but added he was sceptical about Newsom’s role in cutting the price. “As is always the case with large purchasers and as the result of a new generic entrant, California is acquiring this medicine below the current retail price,” Brill said.

The announcement comes as Newsom’s administration is wrestling with an estimated $58bn budget deficit, down from a $100bn surplus in 2022. State officials say the plan to lower drugs prices is part of a wider effort to lower  healthcare spending to 3 per cent of its budget by 2029 from an expected level of 3.5 per cent next year.