Prop 61 targets drug prices
by Seth Hemmelgarn
A ballot measure set to go before California voters in November is designed to reduce the price the state pays for drugs.
However, some say that the proposal – Proposition 61, the California Drug Price Relief Act – may not help and may actually lead to some higher prices if it becomes law.
The law would generally prevent state agencies from paying more for prescription drugs than the lowest price that the U.S. Department of Veterans Affairs pays.
The state Legislative Analyst's Office found that Prop 61 is "highly uncertain," since drug manufacturers may react by charging the VA more for drugs, and implementation challenges that include some VA prices not being publicly available.
The LAO said, however, that "the state spent almost $3.8 billion on prescription drugs in 2014-15," and "if the measure lowered total state prescription drug spending by even a few percent, it would result in state savings in the high tens of millions of dollars annually."
One of the main factors is how drug companies may react if the measure passes.
The LAO notes that the federal government entitles state Medicaid programs, such as California's Medi-Cal, to the lowest prices available to most payers.
"If certain California state agencies receive VA prices, as the measure intends, this would set new prescription drug price limits at VA prices for all state Medicaid programs," the LAO says in its report on Prop 61. "As a result, the measure could extend the VA's favorable drug prices to health programs serving tens of millions of additional people nationwide."
Drug makers would face "added pressure" to do something "to protect their profits."
Reactions could include drug companies increasing what they charge the VA for drugs, since the measure would make "VA prices the upper limit for what the state can pay, drug manufacturers might choose to raise VA drug prices," the LAO said.
They could also choose not to offer the state some of the drugs the VA purchases.
"This manufacturer response could reduce potential state savings under the measure since it might limit the drugs the state can pay for to those that, while meeting the measure's price requirements, are actually more expensive than those currently paid for by the state," the LAO said.
Additionally, in some cases, "the VA has negotiated a lower price" than what appears in its public database. Those costs could remain confidential under an exemption of the federal Freedom of Information Act that's related to trade secrets and financial information.
According to data from the secretary of state's office, drug companies have contributed almost $70 million through June 30 to oppose Prop 61.
The list includes Gilead Sciences Inc., the manufacturer of Truvada, which is used for PrEP. The company contributed $4 million, state data show.
Asked about the contribution, Gilead spokeswoman Michele Rest sent an email saying that the company "has always been an advocate for patient access to therapies in the areas in which we work. We believe this ballot initiative will do the opposite of what it is intended to do and reduce or delay patient access to much needed medications, putting people’s health at risk."
Kathy Fairbanks, a spokeswoman for the No on Prop 61 campaign, acknowledged the campaign has received funding from drug companies, but she also noted supporters include a variety of groups. The http://www.NoProp61.com website lists the California Medical Association and the Veterans of Foreign Wars, Department of California.
Fairbanks also pointed to an analysis posted on the San Francisco nonprofit Project Inform's website that says it's "unclear" whether Prop 61 "would result in cost savings to the state."
Among other concerns, the analysis says, "Even if the initiative were to result in cost savings to the state, it is unclear whether or not lower prices would be realized for consumers. The initiative does not include any provisions that would lower the cost of prescription drugs for consumers who are increasingly having difficulty accessing treatment, both because employers and insurers are passing on more of the cost to employees and consumers, and because more restrictions to access are being placed on higher-cost drugs."
Along with Project Inform, which does HIV advocacy and other work, the analysis also says the San Francisco AIDS Foundation and other groups "have raised concerns" about Prop 61, although they are "officially neutral" on it.
The No on Prop 61 campaign also criticized the measure's main proponent, Michael Weinstein, president of the Los Angeles-based AIDS Healthcare Foundation. The nonprofit has contributed more than $9 million through June 30 to support Prop 61, according to the secretary of state's office.
Citing an AHF financial statement, the anti-Prop 61 campaign says Weinstein's group "brought in more than $1 billion last year selling prescription drugs and operating HMOs. Suspiciously, he exempted his organization's HMO from having to comply with his own measure."
Ged Kenslea, an AHF spokesman, didn't respond to an email seeking comment.