As Prescribed


Effective April 1, 2024, California will expand its existing prescription drug price transparency requirements by enacting legislation to amend and clarify requirements on wholesale acquisition cost increase reporting and notice submissions as well implement further processes for manufacturer penalty hearings.

Background and Existing Reporting Requirements

California first established reporting requirements for prescription drug manufacturers and purchasers in October 2017 under the authority of the Department of Health Care Access and Information (HCAI) regarding reporting of increases to the wholesale acquisition cost (WAC) and other quarterly cost reporting. Specifically, manufacturers of a prescription drug sold in California must notify the state 60 days before increasing the drug’s federally defined WAC, if certain criterion are met, and provide a statement describing the change or improvement in the drug necessitating the price increase.

Shortly thereafter, HCAI published a registry of public and private purchasers for purposes of the reporting requirements.

The legislation also created an online system, overseen by California’s Cost Transparency: Prescription Drugs (CTRx) program, for manufacturers to submit reporting to the HCAI. CTRx works directly with the prescription drug manufacturers to ensure submissions are accurate and comply with applicable reporting requirements. Each month, CTRx releases report data on the Open Data Portal maintained by California Health and Human Services, the parent agency of HCAI.

In December 2017, industry trade group Pharmaceutical Research and Manufacturers of America (PhRMA) challenged the law in federal court. PhRMA alleged the law violated the Commerce Clause by regulating out-of-state commerce and the First Amendment by compelling speech. The court rejected both constitutional challenges, finding that California’s law does not regulate out-of-state drug prices by requiring reporting on a drug’s WAC and the state has sufficient interest to require manufacturers to provide notice of and justification for drug price increases.

Follow-on regulations were adopted in 2018 requiring drug manufacturers to notify HCAI within three days of introducing a new drug with a WAC that exceeds the specified threshold set for a specialty drug under the Medicare Part D program. Cal. Health & Saf. Code § 127681; Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173.

Within 30 days of this notification, manufacturers are required to submit additional information to HCAI that is published on the website quarterly, including (1) a description of the marketing and pricing plans used in the launch of the new drug in the United States and internationally, (2) the estimated volume of patients that may be prescribed the drug, (3) information regarding whether the drug was granted breakthrough therapy designation or priority review by the federal Food and Drug Administration prior to final approval, and (4) the date and price of acquisition if the drug was not developed by the manufacturer.

As of January 2019, drug manufacturers are also required to submit information on the rationale for cost increases for existing drugs that fall under the reporting requirement to HCAI to be published on its website within 60 days of receipt from each manufacturer on a quarterly basis.

Revisions to CTRx Regulations

On December 21, 2023, further proposed revisions to the CTRx regulations were approved by the Office of Administrative Law and filed with the Secretary of State. These revisions will be effective April 1, 2024.

Notably, the amendments do not substantively revise the registration and reporting requirements under the existing regulations. Rather, the amendments seek to provide more clarity on the existing requirements.

The CTRx regulations now require

  • advance notice to each registered purchaser when a manufacturer proposes a WAC increase that will result in a total WAC increase of more than 16% above the WAC of the drug product on December 31 of the calendar year three years prior to the current calendar year;
  • inclusion of the total volume of gross sales in US dollars of the drug product sold in the United States during the one-year period prior to the effective date of the cost increase on the WAC Increase Report; and
  • inclusion in a manufacturer’s New Drug Report of the estimated annual number of patients in the United States with a condition for which the new prescription drug may be prescribed; this number must account for the total number of patients with a condition for which the new prescription drug may be prescribed and is not limited to or based on the quantity of the particular new prescription drug introduced to market, anticipated to be introduced to market, or anticipated to be prescribed.

The most extensive amendments are related to the appeals process and the addition of a good cause exception:

  • Applicable manufacturers are now required to provide a copy of any hearing requests related to appeals of accrued penalties to HCAI no later than five days after filing the request for hearing
  • HCAI’s hearing officer now has discretion to waive accrued penalties if the hearing officer finds that good cause exists for late filing of the report
  • HCAI is now permitted to assign hearings to either an employee of the department or an administrative law judge
  • While hearing requests will still be addressed to HCAI’s hearing officer, other requests will now be addressed according to whether the appeal is before an employee of the department or an administrative law judge


With these updates, California continues to strengthen its regulatory enforcement and oversight over prescription drug pricing. For information on additional states with drug price regulation coming into effect in 2024, please see our previous legislative update on New York’s latest prescription drug transparency bill.

How We Can Help

Morgan Lewis guides and provides strategic counseling to pharmaceutical manufacturers navigating complex government pricing and state price transparency reporting matters. Morgan Lewis lawyers can assist manufacturers in understanding and remaining compliant with each state’s respective reporting requirements.