What’s the deal with Proposition 61 in California?

What is Proposition 61?

It is a measure that will be submitted to the voters for their approval on the November 2016 ballot that will make a start on getting the exorbitant prices of prescription drugs under control — and, save California taxpayers billions at the same time.

Vets for Proposition 61

“Since Prop 61 would require the State of California to pay no more for prescription drugs than is paid for the same medication by the U.S. Department of Veterans Affairs, big Pharma is recruiting vets (and funding their groups) to shill for them. Fact is, the VA pays 20–24% less on average for drugs than other government agencies, and 40% less than even Medicare.” — Mike King

Will this initiative result in drug companies pulling medications from the California market, or limiting access to high-cost drugs?

This is an outrageous scare tactic by Big Pharma. California represents the biggest market for the multi-billion-dollar pharmaceutical industry — we have more people than Canada and Australia, and the eighth-largest economy in the world. We’ve heard all this before. When California began mandating the catalytic converter in automobiles, there were dire threats that the auto manufacturers would stop selling their cars in California. The profit-obsessed drug companies are no more likely to stop selling drugs here than Ford or Chevy was to stop selling cars here. The market is simply too big and too lucrative. In addition, the drug companies already sell drugs to the Dept. of Veterans Affairs at the lower prices negotiated by that agency. Have they gone broke? No, they are recording record profits.

Will this increase the price of drugs for people in the private sector, who are not in a government-sponsored health-care program? Aren’t you asking employers and California’s insured in the private market to pick up more costs for Medi-Cal?

To the contrary, this initiative makes drug pricing more transparent and accountable and builds pressure on the multi-billion-dollar pharmaceutical industry to sell their products at a fair cost. Everyone will benefit if this measures succeeds.

“I had a heart attack ten years ago. I told my doctor I can only come once a year and have stopped taking two of the pills he prescribed. I can only take from my food money to pay for these things and that would mean eating unhealthily, and I can’t afford very good food as it is.” -Jerl’s Story

Would passage of the initiative jeopardize the rebates Medi-Cal and other programs already receive from pharmaceutical companies, thereby putting poor people at risk?

Quite the opposite. This initiative will prevent Medi-Cal from paying exorbitant drug prices, saving billions of taxpayer dollars that can be spent on care for seniors, veterans, people with disabilities, and families with low incomes. Lower-income people are at risk at dying of treatable diseases because they can’t afford medicine under our current distorted system — or are not taking the prescribed doses in order to save money and make the prescription last longer.

Seven other states — Delaware, Louisiana, Maine, Maryland, Montana, New York and Vermont — have limited the amount private patients pay for prescription drugs. There is a growing call to let the federal Medicare system also negotiate drug prices. There is a national movement building. The industry knows that if California voters fight back against drug price gouging, other states will follow. This is why they are ready to spend an unlimited amount to stop this vital initiative.

Would the AIDS Healthcare Foundation itself be exempt from this initiative, since it is also a Medi-Cal managed-care provider?

No, AHF provides care to Medi-Cal patients through both fee-for-service and managed-care programs. This initiative will lower drug costs for patients in both programs. Medi-Cal pays managed care providers based on the cost of care in the fee-for-service program, so as these costs decline, Medi-Cal will pay lower costs on the managed care side.

I know from personal experience that prescribed drugs are too expensive for seniors who only have Soc.Security to live on, and it causes so much stress in trying to decide to cut back on them, for those who can and not be life threatening. But for me it is a life or death issue, and for what I need for my HIV Dx. there are NO generics !! And no help, as I got married and with 2 Soc Sec. incomes it puts the income limit over the top! -G. Wilkerson

Why use the Department of Veterans Affairs as the standard for drug pricing?

Because unlike some entities of the federal government — Medicare, for example — the Dept. of Veterans Affairs is empowered by law to use its bargaining power to negotiate the prices of drugs used in the agency’s provision of health-care services to veterans. As a result, data show that the Department pays on average 20–24% less for drugs than other government agencies.

The Dept. of Veterans Affairs even pays 40% less for drugs than Medicare Part D (the prescription-drug program for seniors). When Part D was established by the George W. Bush Administration, Medicare was specifically banned by law from using its huge bargaining power to negotiate for lower drug prices for seniors — a huge and unconscionable giveaway to the drug companies.

These prices are also publicly available according to he VA, so why shouldn’t we use the lowest domestic price for prescription rugs as our standard?

In addition, Drug Companies cannot exorbitantly raise the price of drugs the VA provides due to the Veterans Healthcare Act of 1992, which placed a series of limits on Big Pharma in regard to VA prices. This happened because in the early 90’s drug companies were doing the same thing to Veterans as they are to everyday Californians now. It works for the VA, and it will work for California.

Who will benefit from this initiative?

Ultimately, millions of Californians would benefit if this proposal passes. The millions of income-taxpayers would see the state save billions of dollars on drug purchases — freeing up funds to redirect to other critical health-care needs. Taxpayers would also save directly because their tax dollars pay the drug costs for the 112,000 inmates in California state prisons. The nearly five million Californians who are non-HMO participants in Medi-Cal, and who are members of CalPERS, and the 31,000 participants in the AIDS Drug Assistance program (ADAP), could also benefit from lower co-pays and deductibles for drug purchases. In addition, this proposal could ultimately force the drug companies to moderate price increases across the board, based on public pressure and the lowered prices of state-purchased drugs.

Why are Medi-Cal managed care plans exempted from the initiative?

Medi-Cal managed-care organizations already negotiate with drug companies on prices, and pay for the drugs themselves out of premiums. Medi-Cal has both a managed-care component and a fee-for-service component. As well as directly affecting the fee-for-service prices, this initiative will ultimately lower drug costs in the Medi-Cal managed-care programs, too.

Medi-Cal pays managed-care providers based on the cost of care in the fee-for-service program, so as drug prices decline for fee-for-service patients, Medi-Cal will pay lower costs on the managed-care side as well. The taxpayers will save money in both parts of Medi-Cal. Why should United Healthcare, Kaiser, and other companies be allowed to negotiate lower drug prices, but not the State of California?

How much money will the state save by negotiating drug prices?

In 2013, the Center for Economic and Policy Research estimated that California could save “between $3.3 and $7.8 billion over 10 years,” or $330 million to $780 million per year, if the federal government were allowed to negotiate lower prices for prescription drugs in the Medicare program. When Medicare Part D, the prescription drug program, was established by the George W. Bush Administration in 2003, Medicare was specifically banned by law from using its huge bargaining power to negotiate for lower drug prices for seniors — a huge and unconscionable giveaway to the drug companies.

The estimate of savings by CEPR is based on California paying the same drug prices as Canada, while the higher savings estimate is based on Danish price levels. Canadians pay about 23% less for prescription drugs than Americans, though on some popular prescriptions the discount is much steeper. Danes pay about 54% less. Countries in which governments negotiate drug prices typically pay half of what U.S. consumers do, though there is a large range.

Unlike some entities of the federal government — like Medicare — the Dept. of Veterans Affairs is empowered by law to use its bargaining power to negotiate the prices of drugs used in the agency’s provision of health-care services to veterans. As a result, data show that the Department pays on average 20–24% less for drugs than other government agencies. The Department even pays about 40% less for drugs than Medicare Part D.

By extrapolating from the figures dealing with Medicare, certain projections can be made about the potential savings to the state by purchasing drugs at the prices paid by the U.S. Department of Veterans Affairs. For example, CalPERS spent $1.86 billion on drugs in 2014. Assuming that figure held steady over 10 years (which it won’t; specialty drug costs alone went up 62% for the agency between 2012 and 2014) CalPERS would spend $18.6 billion on prescription drugs over the next 10 years. Estimating a 20–24% savings in the purchase of these drugs under this initiative would save CalPERS alone nearly $4 billion over 10 years.

Projecting a 40% savings, the state’s drug costs just through CalPERS would amount to $7.5 billion over 10 years — and that doesn’t take into account state-funded drug purchases for Medi-Cal, the AIDS Drug Assistance Program, the state prison system, and other entities for which the state directly or indirectly buys prescription drugs.

Although Big Pharma has attacked the Drug Price Relief Act from every angle, including making all sorts of threats, one thing it has not and cannot allege is that the state would not save money if the initiative were passed. In fact, this is the apocalyptic language the industry itself has used about the measure in a trade publication for Pharma executives, which called the California ballot fight “ground zero” in the fight for lower drug prices:

“If the voters of California approve this proposition it would establish an incredibly deep, mandatory discount — in essence a ‘price control’ — for the public purchase of prescription drugs in America’s largest state. Such an action would no doubt cause an immediate demand for the same VA discount rate to be made available to other states, the federal government, and likely private entities, as well. In short adoption of VA pricing by the State of California would be a pricing disaster for the entire U.S. drug industry.” [Emphasis ours]

Can this initiative be tied up in court by the drug companies?

Any initiative can be subject to legal challenge. And the possibility of baseless lawsuits being filed by the pharmaceutical companies cannot be dismissed. But like so many of the other phony arguments the industry makes, legal action to overturn a measure such as this passed by the voters would just further expose patients and State taxpayers to the reality of Big Pharma’s greed.

We now pay, by far, the highest prices in the world for prescription drugs and 1 in 5 Americans — including patients suffering with cancer — cannot afford to fill the prescriptions their doctors write.” — Bernie Sanders