Pharma may have defeated Prop 61, but state battles over pricing will continue

This weekly column offers opinions on the latest pharmaceutical industry news.

The controversial California ballot measure to lower drug prices may have been defeated, but you can be certain that angst over rising medicine costs will prompt still more state efforts.

Known as Prop 61, the measure vilified drug makers as greedy and criminal, but lost by a notable margin — nearly 54 percent of Californians voted it down. This is not surprising, though, and it’s not just because the pharmaceutical industry amassed a $109 million war chest to run a slew of ads that warned about unforeseen consequences.

Prop 61 was simply the wrong initiative, even it if appeared at the right time.

The measure would have required state agencies to pay no more for drugs than the Department of Veterans Affairs, which receives a federally mandated 24 percent discount from manufacturers.

But there were outstanding questions about what would happen if drug makers balked at offering the same discounts, which could have put the state Medicaid program in a bind. And the VA doesn’t always disclose what it pays. This explains why even the state’s legislative analyst’s office couldn’t ballpark whether Prop 61 would have saved money or not.

“I think it was a poorly conceived proposal that negatively impacted more people than it helped,” said Ira Loss, of Washington Analysis, who tracks pharmaceutical matters for investors.

Going forward, the key question is the extent to which the defeat in California will deter state legislators from pursuing other measures.

For now, the outcome of the California voting casts doubt on the ability of an identical measure to succeed in Ohio, which will be on that state ballot next year. Like Prop 61, the Ohio initiative was spearheaded by the AIDS Healthcare Foundation.

Of course, there are other approaches that can be pursued. Nearly a dozen state legislatures around the country have introduced bills that would either require drug makers to justify their pricing or provide detailed information on their costs in hopes that such transparency would slow rising prices.

But the pharmaceutical industry has largely swatted these aside as well. Only Vermont has enacted such a law.

“I think legislators will keep trying, though, because it’s a politically appealing issue,” said Erik Gordon, a business and law professor at the University of Michigan. “Which legislator wants to be attacked for not sticking up for low drug prices? It’s a political stumping point.”

Indeed, the pharmaceutical industry will continue to encounter a legislative version of whack-a-mole.

Take Joann Ginal.

The Colorado state representative earlier this year introduced a bill that would have required each drug maker to provide a one-time report to the state about any medicine priced at or above $50,000 for a treatment course or per year. It never went anywhere, but she’s searching for a way forward.

“You bet I’m going to try something again in January,” she told STAT. “I understand about the pushback, so I need to look at how I can approach this problem in a different fashion. But I still think this is one of the biggest concerns and something has to be proposed.”

Of course, a solution at the national level would make more sense. But given that Republicans will control the White House and Congress next year, it appears less likely that any legislation designed to rein in rising drug prices will succeed.

Nonetheless, the pharmaceutical industry would be remiss to ignore legislators such as Ginal. Too many Americans are complaining about unsustainable drug prices.

“The message here is that all the actors — drug companies and insurers — need to get together and find solutions,” said Dana Goldman, who heads the Schaeffer Center for Health Policy and Economics at the University of Southern California.

“They’re beating each other up, but not offering real reform. Yes, for the states, passing these bills is definitely like pushing a rock uphill. But the issue is not going to go away. And if government does step in, no one has a clue what that may look like. … And the reality is that no one likes risk.”

For the pharmaceutical industry, the risk is further alienation of the American public. When the tipping point may be reached is unclear, but until then, bills and ballot measures will be coming.