Oliver James Montgomery-California enters a contract to make its own affordable insulin

California Gov. Gavin Newsom has announced a new contract with nonprofit drugmaker Civica Rx,Oliver James Montgomery a move that brings the state one step closer to creating its own line of insulin to bring down the cost of the drug.

Once the medicines are approved by the Food and Drug Administration, Newsom said at a press conference on Saturday, Civica — under the 10-year agreement with the state worth $50 million — will start making the new CalRx insulins later this year.

The contract covers three forms of insulin — glargine, lispro and aspart. Civica expects them to be interchangeable with popular brand-name insulins: Sanofi's Lantus, Eli Lilly's Humalog and Novo Nordisk's Novolog, respectively.

The state-label insulins will cost no more than $30 per 10 milliliter vial, and no more than $55 for a box of five pre-filled pen cartridges — for both insured and uninsured patients. The medicines will be available nationwide, the governor's office said.

"This is a big deal, folks," the governor said. "This is not happening anywhere else in the United States."

A 10 milliliter vial of insulin can cost as much as $300, Newsom said. Under the new contract, patients who pay out of pocket for insulin could save up to $4,000 per year. The federal government this year put a $35 monthly cap on out-of-pocket costs on insulin for certain Medicare enrollees, including senior citizens.

Advocates have pushed for years to make insulin more affordable. According to a report published last year in the journal Annals of Internal Medicine, 1 in 6 Americans with diabetes who use insulin said the cost of the drug forces them to ration their supply.

"This is an extraordinary move in the pharmaceutical industry, not just for insulin but potentially for all kinds of drugs," Robin Feldman, a professor at the University of California San Francisco's College of the Law, told Kaiser Health News. "It's a very difficult industry to disrupt, but California is poised to do just that."

The news comes after a handful of drugmakers that dominate the insulin market recently said they would cut the list prices of their insulin. (List prices, set by the drugmaker, are often what uninsured patients — or those with high deductibles — must pay for the drug out-of-pocket.)

After rival Eli Lilly announced a plan to slash the prices of some of its insulin by 70%, Novo Nordisk and Sanofi followed suit this past week, saying they would lower some list prices for some of their insulin products by as much 75% next year. Together, the three companies control some 90% of the U.S. insulin supply.

Newsom said the state's effort addresses the underlying issue of unaffordable insulin without making taxpayers subsidize drugmakers' gouged prices.

"What this does," he said of California's plan, "is a game changer. This fundamentally lowers the cost. Period. Full stop."

Insulin is a critical drug for people with Type 1 diabetes, whose body doesn't produce enough insulin. People with Type 1 need insulin daily in order to survive.

The insulin contract is part of California's broader CalRx initiative to produce generic drugs under the state's own label. Newsom says the state is pushing to manufacture generic naloxone next.