Prop. 61 Seeks To Lower Drug Prices, Boost Transparency

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Counting on the growing public outrage over the soaring costs of prescription drugs – and bolstered by the recent fury generated by huge price hikes for lifesaving EpiPens – Proposition 61 proponents are gearing up for one of the most highly anticipated ballot measure showdowns this election season.

The California Drug Price Relief Act would require the state to pay no more for prescription drugs than is paid for the same medication by the Department of Veterans Affairs. The federal agency negotiates drug prices with pharmaceutical companies, paying on average one-quarter less for drugs than other government agencies.

Political observers are curious to see if widespread disgust with high drug prices will be enough to counter Big Pharma's deep pockets and what Proposition 61 supporters are calling the opponents' "scare tactics."

Already, the pharmaceutical companies' arguments have convinced several veterans groups that expanding the drug discount could raise prescription prices for their members. Similar concerns have led some patients' rights groups to remain neutral on the measure.

Proposition 61 is being championed by the Los Angeles-based AIDS Healthcare Foundation, the largest provider of HIV/AIDS medical care in the U.S., which believes the measure is the best chance Californians will have to hold down drug prices.

"The Legislature is unwilling or unable to do anything about skyrocketing drug prices,'' said Ged Kenslea, a spokesman for the AIDS group. He pointed to attempts this year by state Assemblyman David Chiu, D-San Francisco, and Sen. Ed Hernandez, D-West Covina, whose bills sought to shed light on the reasons behind escalating prescription drug prices. Chiu's bill was shelved for lack of support. Hernandez pulled his measure after it was watered down with amendments."We have presented a ballot measure that is at least a first step toward reducing drug pricing, and the opposition is quibbling in the weeds on this," Kenslea said. "Their answer is to do nothing."

Proposition 61 would apply to 4.4 million Californians whose health care is paid by the state, including 3 million Medi-Cal patients in fee-for-service health plans; 838,000 state employees and retirees; and 294,000 teachers and other employees of the University of California and Cal State University systems. It wouldn't affect drug purchases made by individuals.

Panicked that Proposition 61's triumph here could start a domino effect nationally – allowing other states to petition drug manufacturers for the same discounts as California – pharmaceutical companies as of Sept. 1 had already poured $86 million into the "no" campaign. By contrast, the measure's proponents had raised $9 million.

Proponents are riding the wave of outrage over alleged price gouging by drug companies. The most recent howls of protest came when pharmaceutical giant Mylan increased the wholesale price of a two-pack of EpiPens, which reverse life-threatening allergic reactions, to more than $600 – up from less than $100 in 2007.
"This seems like an issue that, on the face of it, the public would probably like to support," said Field Poll Director Mark DiCamillo, whose organization will be polling on Proposition 61 and other statewide measures this month.

"I'm not predicting its passage," DiCamillo emphasized. "I'm assuming it will start out with a lead. We'll see what the campaign does."

The campaigns no doubt will be scrutinizing tactics and strategies used in 2005, when two drug price control measures lost by wide margins in California.

But Jack Pitney,a professor of politics at Claremont McKenna College, noted that 11 years ago voters had turned against Gov. Arnold Schwarzenegger's efforts at ballot-box lawmaking. And that "no" sentiment, he said, took down other measures as well.

"This time, there does not seem to be any such negative tide," Pitney said. "And the electorate is likely to be much bigger and more Democratic than it was 11 years ago."

Among Proposition 61's supporters are former presidential candidate Bernie Sanders, the American Association of Retired Persons, the California Nurses Association and Consumer Watchdog.

Proponents say the measure would save California taxpayers about $5.7 billion over 10 years. But the nonpartisan state Legislative Analyst's Office says it can't determine the exact savings.

Here's why: The VA has a public database that lists the prices it pays for most of the prescription drugs it buys. But because the agency has confidentiality agreements with some drugmakers, the database may not reveal additional negotiated discounts that could in some cases bring the total savings to as high as 42 percent. To maintain their profits, the analyst's office says, drug manufacturers might decide to raise some VA drug prices, or might decline to offer the lowest VA prices to the state for some drugs.

That uncertainty has rattled some veterans' groups, who point to what happened in 1990 when the federal government factored VA pricing into state Medicaid rebate calculations. The Government Accountability Office later found that VA and Department of Defense prescription drug costs increased by tens of millions of dollars in one year.

But Michael Weinstein, president of the AIDS Healthcare Foundation, said that two years later a new federal law capped the price the VA can pay at 24 percent below the average manufacturers' price. And, he said, price increases at the VA are now limited to the annual inflation rate.

Carmen Balber, executive director of Santa Monica-based Consumer Watchdog, agreed with Weinstein, saying "there is no way drug companies are going to raise prices for vets in retaliation when Prop. 61 passes."
But Fred Romero, state commander of the American GI Forum of California, a Latino veterans and civil rights group with about 1,000 members, isn't convinced.

"Why should we gamble?" he asked. "We already have the benefit, and there is no guarantee if this passes that they are not going to raise the prices to the VA. We don't feel the vets should be the guinea pigs of this thing."

Kathy Fairbanks, spokeswoman for the "no" campaign, said it's the steeper discounts that the VA negotiates with the drug companies that the measure could jeopardize. "That is why the VA estimated that if Prop. 61 passes, it could cost the VA $3.8 billion annually" nationwide, Fairbanks said.

San Francisco-based Project Inform, a nonprofit that advocates for HIV and hepatitis C patients, is also concerned. It said without a better analysis from the Legislative Analyst's Office, it cannot take a position on the measure.

"We agree that the cost of drugs and cost to consumers needs to be addressed," said Anne Donnelly, the group's director of health care policy. "But this proposition could have unintended consequences.''

Dan Schnur, director of the University of Southern California's Unruh Institute of Politics, knows one thing for sure: Voters should prepare for an onslaught of contradictory TV and radio ads on Proposition 61.
The proponents, he said, have the tougher road ahead.

"They have to overcome the spending disparity, and they have to deliver a message that strikes at the voters' hearts," Schnur said. "It's an uphill fight, but certainly not impossible."


Contact Tracy Seipel at 408-920-5343. Follow her at



WHAT WOULD IT DO: The measure would require the state of California to negotiate with pharmaceutical companies and pay no more than the price paid for the same drugs by the U.S. Department of Veterans Affairs. The proposition would affect 4.4 million Californians who receive their health care from the state. It wouldn't apply to drug purchases made by individuals.
WHAT SUPPORTERS SAY: The measure would increase transparency in the pharmaceutical industry and save taxpayers money.
WHAT OPPONENTS SAY: The measure would raise prices overall, reduce the availability of some drugs and cost taxpayers millions of dollars in lawsuits.
HOW MUCH MONEY IS BEING RAISED?: Proponents collected $9 million as of Sept. 1. The opponents, mostly pharmaceutical companies, have raised $86 million.
Source: California Secretary of State's Office

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