Lower Drug Costs
Overview
Prescription drugs are a major driver of health costs and have complex supply chains and financing mechanisms that are often separate from the rest of the health care system. The Office of Health Care Affordability (OHCA) leads statewide efforts to improve prescription drug affordability through data‑driven research and policy. In support of this mission, CalRx, a state drug initiative, works on making essential medications more accessible and affordable for Californians. OHCA and CalRx collaborate with advisory councils, academic institutions, community partners, and patient groups to ensure affordability strategies reflect real‑world needs and support broad adoption of lower cost medications.
Pharmaceutical Market Research
OHCA researches and analyzes trends in drug pricing, the roles of various supply chain actors, and gaps in patient access to inform statewide affordability strategies, including the CalRx program. OHCA helps CalRx prioritize drugs that can significantly reduce costs, increase competition, address shortages, and improve public health. CalRx’s selection criteria include factors such as broken market where prices are high despite available generics; high prices per unit, and high consumer out-of-pocket costs.
Since its inception, CalRx has developed low-cost biosimilar insulin and naloxone nasal spray products, with the prices of CalRx insulin and naloxone more than 50 percent lower than the comparative brand list prices at the time of CalRx launch. More information about CalRx is available at https://calrx.ca.gov/.
Cost Driver Analyses
OHCA collaborates with other offices in HCAI, including the Office of Health Information (OHI), to study and publish findings on cost drivers and pharmaceutical spending in the state. This work supports a deeper understanding of how market dynamics, utilization trends, and pricing structures influence overall health care spending. By integrating data analytics and subject‑matter expertise, OHCA helps identify emerging cost pressures and informs policy strategies aimed at improving affordability and transparency.
OHCA uses both total health care expenditure data and claims and encounter data to identify potential cost drivers that include chronic condition prevalence, utilization, and pricing. CalRx supports this cost driver research by providing a market lens, as the program was specifically created to intervene in drug markets where high prices, limited competition, or supply-chain vulnerabilities contribute to escalating costs.
Policy Recommendations
OHCA recommends policies to improve pharmaceutical access and affordability in the state, such as how drugs are covered and paid for and opportunities for increased market oversight of various actors in the supply chain.