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The pharmaceutical industry may be losing a heated battle over drug prices in California.

A poll released earlier this week found that two-thirds of Californians support an initiative that would require drug makers to offers discounts to state health programs. And despite differences in age, ethicities, political party affiliation, and regions where they resided, the poll participants had similar responses. The initiative is on the ballot for a vote in November.

At issue is the California Drug Price Relief Act, which would revise state law to require the state Medicaid program, which is known as Medi-Cal, and other state programs to pay no more for medicines than the prices negotiated by the US Department of Veterans Affairs. Currently, the VA gets a 24 percent discount off average manufacturer prices.


The ballot measure, known as Proposition 61, comes at a time of growing national unrest over the cost of prescription medicines. Over the past few years, drugs for such hard-to-treat illnesses as cancer and hepatitis C have caused a firestorm, especially among public and private payers that worry about overextended budgets.

At the same time, the pharmaceutical industry has been criticized for taking continual price hikes and, in some cases, buying medicines and quickly jacking up the prices to unforeseen heights. Several states, including California, have pursued still other bills to force drug makers to disclose their costs in hopes of gaining transparency into the pricing process. So far, only Vermont has signed such a bill into law.


The measure is being closely watched as a litmus test for public discontent over prescription drug costs and the extent to which such efforts may crop up in other states, a point of great importance to drug makers. So far, the only state where a similar initiative is being organized is Ohio. But California is often seen as a bellwether state for political trends and voter attitudes.

For this reason, the pharmaceutical industry is scrambling to defeat the ballot measure, and drug makers — big and small — have so far donated nearly $70 million to the cause, which includes an aggressive publicity campaign. That effort has spurred more than 100 organizations – representing business, patients, unions, and veterans, among others – to publicly declare their opposition.

The bill is “deeply flawed and unworkable,” said California Medical Association President Dr. Steven Larson, in a statement. “We believe the measure would likely increase, not lower, state prescription drug costs. Of greatest concern to doctors is that the measure would result in a new bureaucratic prior approval process that could interfere with patient access to the medicines they need.”

For instance, it seems unclear whether Medi-Cal or the state AIDS Drug Assistance Program would receive better pricing, according to an analysis by Project Inform, an advocacy group for people with HIV and hepatitis C. The organization also complains the current rebate system is so complex that state agencies might suffer an “unintended consequence” and will be precluded from obtaining the best prices.

And in a report issued last month, the state Legislative Analyst’s Office found the overall fiscal effect is “highly uncertain” and measuring its impact is “challenging.” A key concern is whether the lowest prices paid by the VA are publicly available and how drug makers may respond. The California Public Employees’ Retirement System speculates companies may simply raise prices to the VA to compensate.

The measure will “increase prescription drug costs, reduce access to medicines, harm our nation’s veterans, and result in new bureaucracy and red tape,” said Kathy Fairbanks, a spokeswoman for the No on Prop. 61 campaign backed by the pharmaceutical industry. She also questioned the survey methodology and accused the ballot supporters of failing to release all of the data, although the supporters say they have done so.

Meanwhile, both sides are throwing darts at one another.

Opponents note the organization promoting the initiative, the AIDS Healthcare Foundation, is an activist group which operates clinics and pharmacies in various states. AHF also operates a Medi-Cal managed care plan in California, although the ballot measure would exempt these plans. To some, this suggests that such plans might not experience lower reimbursement for drugs or services later.

For their part, the measure’s supporters have issued statements that different organizations opposing the initiative have received pharmaceutical industry funding. For instance, several drug makers provided a total of $764,000 to the California Medical Association, according to its 2013 annual report. The CMA did not respond to questions for comment.

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