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# California Could Partner in Drug Manufacturing: Report
- URL: https://www.fdaweb.com/california-could-partner-in-drug-manufacturing-report/
- Published: 2020-09-16T12:00:00.000Z
- Updated: 2026-09-14T16:28:57.000Z
- Author: David McFarland
- Tags: Drugs, #legacy-id-D5147662

The California legislature has passed SB 852 that would require the state to partner with industry “to produce or distribute generic prescription drugs and at least one form of insulin, provided that a viable pathway for manufacturing a more affordable form of insulin exists at a price that results in savings” to “increase patient access to affordable drugs.” Attorney **Sara Koblitz** (Hyman, Phelps & McNamara) [writes](http://www.fdalawblog.net/2020/09/californovation-california-is-set-to-become-a-drug-manufacturer/?ref=fdaweb.com) in her firm’s *FDA Law Blog* that the bill, if approved by the governor, “essentially allows California to become a drug manufacturer.”

Specifically, she writes, California would engage in drug production only “to produce a generic prescription drug at a price that results in savings, targets failures in the market for generic drugs, and improves patient access to affordable medications.”

The law requires the California Health and Human Services Agency to identify and prioritize the production of generic drugs that would have the greatest impact on lowering drug costs to patients or purchasers, increasing competition and addressing shortages, improving public health. The agency must prioritize drugs for chronic or high-cost conditions, including an insulin.

For each drug identified, the agency must determine whether a viable pathway exists for a partnership based on the relevant legal, market, policy, and regulatory factors. Once the drugs have been identified, it sets a price based on user fees, ANDA acquisition costs amortized over five years, mandatory rebates, contracting and production costs, research and development costs, and other initial start-up costs amortized over five years.

Koblitz says that any drugs produced under the program would be made available to all purchasers at a transparent price and without rebates, unless federally required,

She sees the plan as “an interesting approach to the drug affordability problem” but also finds that the mandated drug production and/or distribution partnership “raises many questions, particularly if the partnership is excluded from production.” She notes that often the high priority, expensive drugs are still subject to patents and exclusivity periods. As a result, she writes, development costs could include potential Paragraph 4 challenges or, in the case of insulin and other biologics, the Biologics Price Competition and Innovation Act patent dance. She asks whether those could be included in the pricing calculations.

“Novel approaches often result in a myriad of legal challenges,” Koblitz concludes. “So while California continues to innovate and think outside the box in an effort to address drug pricing, surely someone in the industry is thinking of ways to challenge SB852\. **Governor Newsom** has until 9/30 to sign the bill. He proposed a similar plan in 1/2020, so it’s unlikely that this will be a tough sell for him.”