OAKLAND, Calif. — Pharmaceutical companies have amassed an eye-popping $23 million war chest to defeat a California ballot question aimed at slashing drug prices, even though Election Day 2016 is a year away.
The measure would require drug makers to give big discounts to state agencies serving HIV patients, retirees, inmates, and low-income people, which could bring welcome relief to taxpayers. Its backers submitted more than 540,000 signatures earlier this month, virtually ensuring that the proposed law will go before voters next November.
But the drug industry didn’t even wait for the referendum to be certified for the ballot — expected several weeks from now — to mobilize against the “California Drug Price Relief Act.”
Drug firms might see “strategic benefits to making public their commitments early to show the supporters of the measure the financial strength of the opposition,” said Dan Newman, president of MapLight, a Berkeley nonprofit that tracks campaign finance. It’s a kind of financial intimidation, he said.
The companies also have cause for concern that if the measure passes in California, it could inspire similar ballot proposals in other states as a response to mounting anger over high drug prices.
Kim Alexander, president of the Sacramento nonprofit California Voter Foundation, has studied California ballot measures for decades. Several have been widely imitated by other states, she said, including Proposition 13 in 1978, which substantially froze property taxes, and a 1990 legislative term limits measure.
Already, referendum proponent Michael Weinstein, president of the Los Angeles-based AIDS Healthcare Foundation, a large service provider and activist group, has begun a similar effort in Ohio. “We want to start a brushfire,” he said, “a movement to take the sentiment that’s out there and run with it as far as we possibly can.”
The California ballot measure would require state agencies to negotiate drug prices at least as low as those paid by the US Department of Veterans Affairs. The VA keeps its costs down both by statute and by using its massive purchasing power to obtain steep discounts. Weinstein said the VA pays 20 percent below the lowest pricing now available to state agencies.
If the law passes, programs that supply prisons, AIDS patients, many recipients of Medi-Cal – the state Medicaid program – and many state-government retirees could reap huge savings, reducing California’s health care costs. The programs cover at least 5 million patients, according to the proponents.
The savings, though, wouldn’t make much difference in what individuals pay for drugs, said University of Southern California health economist Jeff McCombs. Most people served by the programs already enjoy relatively low out-of-pocket costs, said McCombs, who receives grants from pharmaceutical companies.
The direct-democracy route to roll back drug prices follows more than a decade of unsuccessful efforts to get state lawmakers to pass similar legislation.
Brandon Castillo, a Sacramento consultant helping to coordinate opposition to the proposition, raised concerns that if successful, it could lead companies to charge higher prices to other consumers and that VA costs might also rise.
“We’re taking this measure seriously because the implications could be huge,” Castillo said. “For those not covered by the measure’s provisions, what are the implications on costs for them?”
McCombs agreed that if it passes, the measure might, as the industry warns, cause the VA’s negotiated prices to creep up over time as the California market pressures drug makers. The state Legislative Analyst, which prepares information on the impact of ballot measures, has not yet weighed in.
The pharmaceutical industry recently faced a spate of unwelcome attention, driven partly by Turing Pharmaceuticals’ decision to raise the price of Daraprim, a life-saving drug needed by some AIDS and cancer patients, from $13.50 to $750 per pill. Weinstein said other HIV drug costs also have risen rapidly, and called Gilead Sciences “the poster child for pharma greed,” due to its $84,000 price tag for Sovaldi, a hepatitis C drug.
California-based Gilead paid $11 billion for Pharmasset, which developed the drug. It has collected nearly $27 billion in sales for Sovaldi and a sister drug, Harvoni, since Sovaldi’s introduction in 2013. The drugs are regarded as global blockbusters that will be highly profitable for years to come.
An analysis last year by the Kaiser Family Foundation showed Sovaldi boosting Medicare drug costs alone by $2 billion to $6.5 billion annually.
Other experts said pricing for Sovaldi, which cures most patients after one course of treatment, should take into account the costs it saves. Most patients who get Sovaldi no longer need expensive downstream care, sometimes including liver transplants.
“Most of those egregious prices are temporary,” said Stuart Schweitzer, professor of health policy and management at the University of California, Los Angeles. Sovaldi’s pricing – while still high – has begun to fall, he said, because a competing supplier quickly entered the lucrative market with a similar medicine.
Pushing drug prices too low can sometimes create different problems, Schweitzer said. Antibiotics, which have been on the market for decades, are no longer profitable enough to justify high research and development costs for most companies. So doctors and patients increasingly face infections resistant to available medicines.
Gilead declined to comment. The company is not listed among contributors to the ballot measure’s opposition. Johnson & Johnson has contributed $5.9 million, AbbVie and Amgen have given more than $4 million each, and Eli Lilly and Bristol-Myers Squibb have kicked in $2.9 million each, according to the California Secretary of State.
Weinstein said the companies’ early financial support could backfire, because it “raises the issue of them buying the political process.” The ballot measure’s supporters say they won’t disclose how much they have raised until the reporting deadline in January.
But history suggests that proponents face a steep challenge. A decade ago, drug firms spent well over $100 million on a competing pair of ballot measures involving prescription discounts for low-income families. Both went down to defeat. Last year, proponents of a measure seeking to give the state insurance commissioner approval over health insurance rate increases for some Californians were outspent 20-to-1 by a quartet of insurers, which budgeted $43 million for the effort. The proposition was trounced.