Sanders thinks California measure to rein in drug prices could spark national movement
The pharmaceutical industry will be closely watching a different tight election race today — a California drug price referendum that has drawn $109 million in opposition funding and could have ripple effects beyond the state if it passes.
The ballot initiative, Proposition 61, seeks to piggyback on the prescription drug discounts enjoyed by the U.S. Department of Veterans Affairs, requiring state-funded health insurance programs to pay no more for drugs than the VA. The ballot measure only affects drug coverage for a fraction of Californians, who account for about $3.8 billion in drug spending. But its merits and potential unintended consequences have been fiercely debated because of the possibility the measure could be replicated in other states or trigger more efforts to control drug prices.
Proposition 61 has been the most searched state measure in the past day, according to Google.
Pharma has bankrolled a large part of the opposition campaign, and they’ve outspent supporters mightily, raising about six times as much money. But recent polling on the measure revealed that voters are sharply divided. The rhetoric is high on both sides, and there are many uncertainties about the potential effects of the legislation — including the basic question of how much money it would actually save, if any — and how it would be implemented.
Sen. Bernie Sanders, I-Vt., has supported the measure, calling it a “chance to stand up to the pharmaceutical industry’s greed and spark a national movement” in an op-ed in the Los Angeles Times.
Meanwhile, drugmakers are fighting it “tooth and nail,” Eli Lilly chief executive John Lechleiter said in an earnings call in October.
“It’s not only bad legislation, it’s bad for your health,” Lechleiter said. “And we’re trying to impress that on the voters.”
Beyond drug companies, a large coalition of organizations opposes the legislation, as well as many newspapereditorialboards.
The VA is entitled to a rebate of at least 24 percent off the average manufacturer price and is insulated against price increases that outpace inflation. A brief analysis published in the British Medical Journal last month examined the possible cost savings, if the measure passed, for one of the state-funded health programs, Medi-Cal fee-for-service, which spent roughly $1.8 billion on drugs in 2014.
The Harvard Medical School researchers studied the top 200 drugs used in the program. A third of those drugs would be cheaper if the Veterans Affairs price was applied, and they estimated that getting the VA price applied to those drugs could save about $100 to $125 million in 2014.
But the authors also noted that the long-term effects of the legislation were unclear since pharmaceutical industry could respond by raising prices everyone.
The state’s Legislative Analyst’s Office, a nonpartisan agency that provides fiscal advice to the legislature concluded in an analysis that the measure could generate an “unknown” amount of savings that could range from “relatively little effect to significant annual savings.” The effect of the measure was deemed uncertain because of implementation challenges and the possibility drugmakers would raise other prices in response.
The initiative would apply to only a relatively small portion of California’s population — about five million people — but it’s being closely watched because of California’s position as a leader in policy reform.
“If every other state followed California’s example we’re talking about a substantially bigger potential impact and then the other issue is . . . could you extend this logic to Medicare, another public payer,” said Thomas Hwang, a researcher at Harvard Medical School. “So the fear of a precedent is one way to contextualize” it.
In recent earnings calls, drug companies have called out the legislation. Merck chief executive Kenneth Frazier said, “We’re very active in opposing it.” Joaquin Duato, executive vice president of Johnson & Johnson said it would create “access barriers” for patients. Pfizer’s chief executive, Ian Read, said it was “basically untenable.”
“It’s asking for an industry that has given non-commercial prices to the veterans for a very good reason – they are a special part of our society, and we’ve given non-commercial prices to that part of society. To take that and extend it to the rest of government is not a workable economic model,” Read said.
The campaigning in support of the initiative took a turn for the rancorous this week, with the release of a social media ad campaign featuring pharmaceutical executives faces on “Wanted” posters.
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Keywords: drug prices, pharma