The Drug Industry is Desperate to Defeat Prop. 61

California Proposition 61, the Drug Price Standard Initiative, is on track to become the most expensive ballot measure in 2016 and could end up becoming the most expensive ballot measure in the nation’s history. As of November 2 supporters of the measure have raised nearly $17 million while opponents have raised a staggering $109 million, with most of the money opposing the measure coming from pharmaceutical companies.
The measure is pretty straightforward. According to Ballotpedia:
A "yes" vote supports regulating drug prices by requiring state agencies to pay no more than the U.S. Department of Veterans Affairs (VA) pays for prescription drugs.
A "no" vote opposes this measure to require state agencies to pay no more than the VA pays for prescription drugs.

$4 billion a year on drugs

The state of California spends close to $4 billion on prescription drugs a year, mostly through Medi-Cal and the Public Employees’ Retirement System. State agencies negotiate prices with various pharmaceutical companies and pay less than the retail cost of the drugs. Prop. 61 would forbid state agencies from purchasing drugs at a price that was greater than the net cost of the same drug paid by the federal Department of Veterans Affairs. The VA’s purchasing power is greater than the states, and thus the VA receives greater discounts from the pharmaceutical companies.

VA pays 42% of retail drug price

According to information from the Congressional Budget Office, the VA pays about 42 percent of the market price for drugs it purchases, while California’s Medicaid system pays about 51 percent of the market price or about 9 percent more than the VA. The drug companies would be free to either accept or reject the lower prices offered by the state, but state agencies would be prohibited from paying higher than the VA rate.

Fight price gouging

Proponents argue that it would potentially save the state billions of dollars and would fight price gouging by drug companies. It is a popular argument fueled by the widespread perception among the public that pharmaceutical companies are out of control with their pricing actions.

Could increase drug costs to vets

Opponents contend that the measure could increase drug costs to veterans by causing the pharmaceutical companies to raise prices on VA drugs and would reduce access to certain medications. Generally speaking, Democrats are for the measure and Republican groups are opposed.
The proposal has created controversy in the state, with the state’s largest papers taking different stands. The San Francisco Examiner favors the measure and says it will reduce price gouging. The Los Angeles Times opposes the measure and expresses concern about what drug companies will do, as does the San Francisco Chronicle, which also feels that Prop. 61 is not well written and could create unintended consequences.

Polls have tightened

Early polls showed the measure passing by a wide margin, but in the past month, they have tightened. The Field Poll, which had Prop. 61 passing by a margin of 50 percent to 16 percent in early September has more recently found that the measure is now tied with each side having support from 47 percent of the voters.

Drug industry has spent $109 million

On the surface, the measure makes sense and sounds appealing to the electorate. However, as opponents have pointed out, there are some potential problems with the way the measure is written. In any case, the $109 million that the drug industry has spent towards defeating the measure shows how deeply concerned the industry is about letting voters put limits on their pricing actions.
If Prop. 61 does pass on Tuesday it will increase pressure on Congress to address the public perception that drug pricing has gotten out of control. It would also likely lead to similar ballot measures appearing across the country as a way of controlling rising drug prices.

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