Drug firms arming for battle at ballot box;

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$43 million in past month alone given to fight stringent prescription discounts

The San Francisco Chronicle

In the past month, drug companies from across the nation have raised more than $43 million to challenge a union-backed initiative on the Nov. 8 special election ballot that would cut prescription drug prices for a wide range of California residents.

Giant pharmaceutical companies including Pfizer, Merck and GlaxoSmithKline have pumped more than $8.5 million each into the industry’s California Initiative Fund, which also is financing Proposition 78, a rival drug cost measure on the special election ballot.

The drug industry has collected a total of more than $53 million thus far for the initiative battle, an indication of how important the fight over prescription drug costs is to the industry.

“Their fund raising is astronomical, and obviously they’re scared,” said Robin Swanson, a spokeswoman for the Alliance for a Better California, a union-funded group that put the Proposition 79 drug cost measure on the ballot. “They wouldn’t invest that kind of money if they didn’t have something to lose.”

The money shows that the pharmaceutical industry will wage an all-out effort to defeat the union initiative and pass its rival measure, said Jan Faiks, a vice president of the Pharmaceutical Research and Manufacturers of America.

“We are dead serious about passing Prop. 78 because we believe it’s a real solution for real people that can take effect immediately,” she sai. “We will do all that’s necessary to educate the voters about both initiatives.”

Both initiatives have their roots in failed legislative efforts. Gov. Arnold Scharzenegger vetoed a plan last year to provide discounted drugs to low-income Californians. Much of the language in that measure has found its way into Prop. 79, which is sponsored by the wide-ranging coalition of labor and consumer groups. The initiative also would penalize drug companies that don’t participate willingly in the program.

A version of Prop. 78, the drug industry’s measure, was defeated in a state Senate committee earlier this year, despite support from the governor. It would provide lower-cost prescriptions to a smaller group of Californians.

While many groups talk about raising $50 million for an initiative campaign, the drug industry already has its money in the bank where everyone, including its opponents, can see it.

For the moment, the industry is playing a low-key political game. While millions of dollars sit in the initiative fund, only about $600,000 has been transferred to Californians for Affordable Prescriptions, the group that will run the Prop. 78 campaign.

The implication, however, is that the money can be spent at any time on the high-priced mailers, phone banks and TV ads needed to win a statewide race.

“The drug companies are putting their cannon at the top of the hill and daring the unions to climb it,” said Jamie Court, president of Santa Monica’s Foundation for Taxpayer and Consumer Rights. “The money is a deterrent, designed to convince union and consumer groups not to further fund their initiative.”

If the drug companies spend the money, their effort could rival the estimated $66 million that California’s Indian tribes spent in 1998 to gain voter approval of casino gambling on tribal lands.

The drug industry’s war chest also could prod unions and their Democratic allies in the Legislature to work harder on a compromise drug cost measure that could join the two existing initiatives on the ballot.

“Our goal is to have an agreement with (the drug companies),” Assembly Speaker Fabian Nez told the Chronicle editorial board. “We want to be able to provide discounted drugs for seniors and poor people.”

But earlier negotiations couldn’t produce a compromise, and Faiks isn’t confident that one can be reached now.

“We tried to negotiate a legislative solution, but now both initiatives have qualified for the ballot,” the industry spokeswoman said. “But we’re always ready to sit down and talk with legislative leaders.”

While Prop. 78 and Prop. 79 would provide cheaper prescription drugs to some California residents, they have very different ways of cutting those costs.

Prop. 79 would allow eligible residents (individuals making $37,000 or less and families of four making up to $75,000) to get discounts at pharmacies for prescription drugs. Drug companies would be asked to provide discounted drugs at prices equal to those of federal programs. Drug companies that didn’t negotiate discounts with the state could be barred from selling to the state’s Medi-Cal program, a $4 billion market.

Opponents complain that Prop. 79 is an untried program, would be too expensive for drug companies, could deny Medi-Cal patients needed drugs and clears the way for anyone in California to sue companies over the price of prescription drugs.

Drug companies say that Prop. 78 would provide discounted drugs in a fairer manner. Discounted drugs would be available to uninsured individuals making $28,000 or less and families of four making up to $56,000. Participation in the plan would be voluntary for drug companies.

Opponents argue Prop. 78 would cover fewer people than the competing initiative and provide smaller benefits. They also say that, without any penalties, there would be little reason for drug companies to participate.

The early flood of drug company money into the initiative campaign will make it tougher, but not impossible, for backers of Prop. 79 to make their case to the voters, said Sarah Leonard, a spokeswoman for the unions’ drug discount measure.

“At the end of the day, voters would have to trust pharmaceutical companies to voluntarily lower their prices,” she said. “We’re confident that once voters know the choice is between a plan supported by the drug industry and one backed by health advocates and consumers, we’ll get their support.”

Competing drug measures

Proponent: A consortium of drug companies
What it does: Provides prescription drugs at discounted prices for uninsured low- and moderate-income Californians. Would allow drug companies to participate in the discount program on a voluntary basis.

Proponent: Unions and consumer groups
What it does: Provides prescription drugs at discounted prices for low- and moderate-income Californians and penalizes drug companies that don’t participate in the discount plan.

Big contributors

Records at the secretary of state’s office show $43 million has flowed since June 16 from drug companies across the nation into a California campaign committee poised to use the funds on behalf of an industry-backed measure on the Nov. 8 special election ballot.
The donors include:

Pfizer – $8.5 million – New York City

Merck – $8.5 million – Whitehouse Station, N.J.

GlaxoSmithKline – $8.5 million – Philadelphia

Novartis Pharmaceuticals – $3.9 million – East Hanover, N.J.

Eli Lilly – $3.9 million – Indianapolis

Amgen – $3.9 million – Thousand Oaks (Ventura Co.)

Bristol-Myers Squibb - $3.4 million – New York City

Schering – $750,000 – Kenilworth, N.J.

Hoffmann-La Roche – $750,000 – Nutley, N.J.

SchwarzPharma - $175,000 – Milwaukee

Organon USA – $175,000 – Roseland, N.J.

Serono - $80,000 – Rockland, Mass.
Todd Trumbull / The Chronicle
E-mail John Wildermuth at [email protected]

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