One law will let phone companies compete to sell pay television services. The other aims to cut medication costs for the uninsured.
The Los Angeles Times
SACRAMENTO, CA — Gov. Arnold Schwarzenegger signed two sweeping consumer bills Friday that seek to cut the cost of prescription drugs and cable television service for millions of Californians, embracing key issues championed by Democratic lawmakers.
The new laws will create a medicine discount program for about 6 million uninsured people and unleash AT&T and Verizon to begin competing next year with cable companies to sell pay television service.
Assembly Speaker Fabian Nunez (D-Los Angeles) wrote both bills, saying they would make life easier for ordinary Californians.
Schwarzenegger agreed. Before he signed the prescription drug bill in the Capitol, he said, “It is another example of when Democrats and Republicans work together, the private sector and the public sector work together, anything is possible in this building and we make decisions that are really best for all Californians.”
The drug and telecommunications industries spent enormous sums trying to influence policymakers during the debate over the two bills.
AT&T spent $18 million through June lobbying and running television and full-page newspaper ads urging consumers to support the Nunez bill — and then to thank Nunez after it passed the Legislature.
Drug makers, who are loath to see other states replicate California’s new law, spent $80 million last year to defeat a ballot measure much like the bill Schwarzenegger signed Friday. Drug makers have made at least $360,000 in donations this year to the governor.
Consumer advocates say they expect the legislation, AB 2911, to bring average savings of 40% on brand-name medications and 60% on generic drugs. People will be eligible to enroll for the savings if they earn no more than three times the federal poverty level, or roughly $60,000 for a family of four. Those facing catastrophic medical costs will also qualify.
Under the new law, drug companies must offer the discounts within three years or risk punishment by the state, which could make it harder for them to sell their products to California’s massive Medi-Cal program. Medi-Cal spends about $4 billion a year buying drugs for 6.7 million poor, elderly and disabled people. The new law covers people who are not enrolled in Medi-Cal.
“We’ve got leverage,” said Gary Passmore of the Congress of California Seniors. “Our Medi-Cal program is huge, and the drug companies will not want to walk away from it.”
There’s no telling when Californians struggling to afford medicine will see savings. Several of the people involved in crafting the bill said they expect drug makers to sue when the law takes effect in January, just as the Pharmaceutical Research and Manufacturers of America sued Maine over a similar law.
The U.S. Supreme Court upheld the Maine law last year but did not address using the state’s buying power as leverage. Maine regulators have yet to attempt to punish drug companies.
Officials with the drug manufacturers group refused to say Friday whether they would sue. In a statement, organization Senior Vice President Ken Johnson called the new law “fundamentally flawed.”
Many consumer groups, including AARP California and Health Access California, support the law. But some advocates for the poor, as well as drug makers, warned that if the state carries out its threat, it could prevent Medi-Cal recipients from getting necessary drugs.
“It is not good public policy to use poor people with disabilities in need of many medications every month as leverage pawns in order to coerce pharmaceutical companies into offering discount prices,” said Rusty Selix, executive director of the Mental Health Assn. of California.
But Anthony Wright of Health Access California said, “There are protections for Medi-Cal patients so that somebody on a drug continues to get that drug no matter what the drug company does.”
The governor’s signature on the bill comes a year after he allied himself with drug companies and battled Democratic lawmakers and consumer advocates over two initiatives on the special election ballot. The Schwarzenegger-backed initiative, Proposition 78, would have created a voluntary discount program, while Proposition 79, backed by consumer groups, used the Medi-Cal program to force discounts. Voters rejected both, despite $80 million spent by drug firms on the campaign.
“So we went back to work and started negotiating, feeling that if 78 was rejected and 79 was rejected, maybe we should come up with 78 1/2 ,” Schwarzenegger said.
Like medication prices, monthly cable bills have been rising in many places faster than the inflation rate. Nunez said his ultimate aim in writing the telecommunications bill, AB 2987, was to save Californians money.
“Consumers have had enough of limited competition, minimal technological advances, mediocre customer service and ever-increasing bills,” he said in a statement Friday.
The new law will shift regulation of the pay TV industry from cities and counties, which now hold about 500 individual franchise agreements with cable companies such as Time Warner, Cox and Comcast, to the California Public Utilities Commission.
The new law will free AT&T and Verizon to get a single statewide permit from the PUC as soon as April to start competing against cable companies. Cable firms swung their support behind the bill after winning the right to get statewide permits themselves from the PUC whenever they are faced with imminent competition from the phone companies.
The bill attempts to protect cities and counties by requiring that cable companies continue to offer the free access channels and other perks agreed to under their franchises until the expiration of those agreements, some of which last as long as 20 years. The legislation also protects the 5% gross revenue that cities and counties currently collect from cable companies.
Local government opposed the bill, but the Legislature passed it overwhelmingly. On Friday the cities struck a cooperative tone.
“We believe Californians need and deserve the best 21st century telecommunications services available,” said Megan Taylor, spokeswoman for the League of California Cities. “We’re going to work with everybody to make sure that’s what they get.”
Jamie Court, president of the Foundation for Taxpayer and Consumer Rights in Santa Monica, predicted that the law would lead to higher pay TV bills and poor service, because it gives the PUC little leverage over the phone or cable companies.
But Jeffrey I. Cole, executive director of the Center for the Digital Future at USC, said phone companies will have to offer pay TV services for less than the cable companies.
“The only way they’re going to attract attention,” he said, ” is by lowering prices.”
He said he welcomed competition in the industry.
“When I was a kid,” said Cole, “everybody hated the phone company. Today people don’t even know who the phone company is, and everybody hates the cable company.”
With one day left to act on bills sent to him by the Legislature, Schwarzenegger by Friday evening had signed 805 and vetoed 194, with about 175 still awaiting his decision.
* Enacted a bill aimed at shutting down the market in phone records by making it illegal to sell such records without the consumer’s consent. SB 202 by Sen. Joe Simitian (D-Palo Alto) also makes it illegal to obtain phone records by pretending to be someone you’re not, a practice known as “pretexting.”
Simitian said he found scores of websites where people could purchase the last 100 phone calls someone had made on a cellphone or home phone.
“Your phone records are really a roadmap to your life,” said Simitian, who called such trafficking a “widespread invasion of privacy.”
* Rejected a bill to allow schools the use of textbooks that give English learners additional reading and writing support, SB 1769 by Sen. Martha Escutia (D-Whittier).
“I cannot endorse any effort which may lead to the creation of separate curricula and textbooks that will isolate these students within our public schools,” wrote Schwarzenegger in his veto message.
* Vetoed legislation to allow nonprofit groups to distribute condoms in prisons — AB 1677 by Assemblyman Paul Koretz (D-West Hollywood) — because he said it conflicts with the state ban on sodomy in prison.
* Signed a bill he had previously rejected that will establish a “biomonitoring” program to test the blood, urine, breast milk and tissue of volunteers. Sen. Deborah Ortiz (D-Sacramento) said SB 1379 would help track ethnic, economic and geographic exposure to chemicals.
* Vetoed a bill that would have directed the state to write regulations for pet stores on the treatment of animals — AB 2862 by Assemblyman Mark Ridley-Thomas (D-Los Angeles).
* Vetoed a measure to require children up to 8 years old to ride in rear child safety seats.
AB 2108 by Assemblywoman Noreen Evans (D-Santa Rosa) would “do little to actually better protect our children,” wrote Schwarzenegger, and current laws save lives and injuries when parents comply.
Times staff writer Dan Morain contributed to this report. Contact the author at [email protected]