Opinion: Prop 61 – California’s Drug Price Relief Act

By Susan Hayes

Proposition 61:  California’s Drug Price Relief Act

This November, Californians will decide to pass or not to pass Proposition 61.  For those of us outside the State of California, the bill would mandate that the State of California (for prisoners, state teachers, state employees and Medi-Cal’s Fee for Service program) would not pay more for a drug than what the Veteran’s Administration pays.[1]  The bill is expected to affect over 4.4 million Californians. The cost savings to the State of California is not clear.  California spends about $4.4 billion on prescription drugs, not counting 75% of the Medi-Cal members that are covered under managed Medicare programs.

The Veteran’s Administration gets a 24% discounts off the bat and then may also negotiate deeper discounts beyond the 24% discount.  Because of these deeper discounts, it has not been possible to precisely estimate what the savings impact is when and if Proposition 61 is passed.

Opponents of the proposition indicate that drug companies will just raise prices to compensate for the loss in California.   While I am not an opponent of the proposition, I agree with this notion.  Pharmaceutical manufacturers have a long tradition of passing on price increases to those willing to pay for those increases, which is why the United States pays its unfair share of the world’s drug costs.  A major criticism of Medicare Part D was that it was passed without the requirement of a standardized formulary which would require manufacturers to petition to be on that formulary, as is done in many of the Provincial Canadian programs.  The United States, for whatever reason (strong drug lobby?) has not been willing to negotiate prices with pharmaceutical manufacturers and as a result we have born the burden of staggering cost increases.

The Los Angeles Times is predicting victory for this proposition and I can only applaud the voters of California if they take this bold move.  A USC Dornsife/Los Angeles Times poll conducted earlier this month by SurveyMonkey found two-thirds of voters in favor of Prop. 61.   The war chests of opponents to the proposition (pharmaceutical companies and the Pharmaceutical Research and Manufacturers of America) raised $86 million to oppose the legislation, and proponents of the proposition have only raised $9.4 million (the measure is sponsored by the Los Angeles-based AIDS Healthcare Foundation and has been endorsed by the California Nurses Assn., American Assn. of Retired Persons of California and Robert Reich, a former secretary of Labor).  It is reassuring in this negative campaign season to see that money cannot always buy votes and that the right of the people will prevail.

Let’s hope that if this proposition is passed, the State of California will not be immediately sued by the PCMA, a powerful lobbying group funded by drug manufacturers and the PBM industry.  Such was the fate of the State of Arkansas’ Act 900 which tried to limit PBMs from reimbursing pharmacies less than what the pharmacy paid for a given drug.  One small step for man, one giant leap backwards.

And solving California’s problem does not solve the problem for the rest of the country, nor for employers who pay the majority of the cost of prescription drugs in the country, including California employers.  It is time that employers and unions take up similar legislation and follow the example of the Veteran’s Administration which negotiates prices with pharmaceutical manufacturers. Where are the lobbyist from Human Resource trade groups, unions and health providers to fight the epidemic of soaring prescription drug costs?

California does have the right idea because legislation is the only way we will be able to reign in the greed of drug manufacturers, who have clearly not be able to self- regulate.  In fact, Proposition 61 does not go far enough in California to protect private pay employers.  Further, the bill does not regulate Pharmacy Benefit Managers (PBMs) spread pricing or provide adequate transparency in how prescription drugs are priced.  PBMs will still continue to be able to set their own prices for generics through MAC lists and add spread pricing on non-State of California patients, even in the State of California.

The November election will be watched by many as a pivotal move to the right or left, conservative or liberal, corporate interests versus citizens’ interests.  Rather than the doomsday predicted by the opponents of Proposition 61, an Armageddon of prescription drug costs, let’s hope for change nationwide to reign in drug prices so that we can all enjoy a healthier future.

[1] http://www.latimes.com/politics/la-pol-ca-proposition-61-prescription-drug-prices-20160915-snap-htmlstory.html