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Tuesday, Jan 31, 2023

Drug Firms to Battle Against Requirements for Discounts

Pharmaceutical companies are spending tens of millions of dollars to derail a ballot initiative for prescription drug discounts that would cut into profits in California and, if the idea spreads, elsewhere in the nation.

Proposition 79, placed on the November special ballot by consumer advocates, would require the companies to sell prescription drugs at a discount to low-income patients. It’s a local response to federal rules that keep drug prices higher in the United States than in other countries.

Efforts in Washington to force drug makers to lower their prices or allow consumers to buy them cheaper in Canada have failed under opposition from the pharmaceutical industry. Consumer groups in other states view Proposition 79 as a test case to see if mandatory drug discounts could be applied on a state-by-state basis.

“There is no reason why the citizens of California should have to pay more for prescription drugs than the people of other wealthy nations,” said Anthony Wright, executive director of Health Access, one of the groups sponsoring the legislation.

Rather than try to defeat Proposition 79, the drug industry has poured more than $50 million into a competing initiative, Proposition 78, which would establish a voluntary discount plan.

If both measures pass, the one with the most votes prevails. (In a statewide Field Poll taken last month, Prop. 78 had 60 percent support while Prop. 79 had 54 percent support.)

The drug companies say that the contributions are designed to educate voters on the benefits of their voluntary program and the drawbacks of the mandatory discount plan.

“Medicine manufacturers realize that there is a need to get prescription drugs into the hands of people who can’t afford them,” said Denise Davis, spokeswoman for the Yes on Proposition 78 campaign. “Proposition 78 will do this, while Proposition 79 will never get federal approval to go into effect.”

Drug money

Only once before have industries raised so much money to block a California initiative and never so early. Drug companies have spent up to $8.4 million each; Thousand Oaks-based Amgen Inc. has contributed a total of about $4.6 million.

Three pharmaceutical companies Merck & Co., Glaxosmithkline and Pfizer Inc. have made single contributions of $8,388,607. Four other drug companies have made single contributions of $3,898,500: Amgen; Bristol-Meyers Squibb Co.; Novartis Pharmaceuticals Corp.; and Eli Lilly & Co.

In 1988, insurance companies spent $70 million in an unsuccessful attempt to defeat Proposition 103, which ordered insurers to roll back auto insurance rates 20 percent. Like this time, most of the money went into two competing initiatives designed to confuse voters. (Indian tribes spent $90 million on a pair of competing gambling initiatives last year, but neither was a consumer measure.)

“The drug companies are concerned about the nationwide precedent that would be set in California passes Proposition 79,” said Bob Stern, president of the Center for Governmental Studies. “They are viewing their contributions as an investment in California that could save them many more times the amount of money later on.”

The U.S. Supreme Court has upheld the right of individuals and corporate entities to contribute as much as they want to initiative campaigns, saying such contributions are free speech protected by the First Amendment. But Kathay Feng, executive director of California Common Cause, said corporate spending on behalf of Proposition 78 is tantamount to buying off the initiative process.

“The amounts we’re seeing here have reached obscene levels that close out any real public discussion about the issues raised by the initiative,” Feng said.

Amgen spokeswoman Mary Klem said each corporate member of the Pharmaceutical Research and Manufacturers of America coalition was assessed a certain amount. She would not say how the figures were determined.

“We contributed because we are committed to working with people in need to have access to safe, effective and affordable therapies,” Klem said. “Proposition 78 does this: it provides real help right now to patients in need.”

If Proposition 79 passes, the drug companies are likely to challenge it, based on the view that the measure goes against federal policies allowing drug companies to charge market rates for their products. “If Proposition 79 passes, it’s unlikely it will ever go into effect, since it directly contradicts longstanding federal policy,” said Davis.

Going to voters

The two drug discount initiatives have their roots in Gov. Arnold Schwarzenegger’s veto last year of four bills passed by the Legislature that would have allowed the import of cheaper Canadian drugs to the state.

The same dynamic occurred on a national scale when attempts to allow Canadian drug imports and deep discounts for prescription drugs for Medicare recipients failed in Congress last year. Instead, President Bush’s Medicare plan, with lower drug discounts, squeaked through.

Now, consumer groups are stealing from Schwarzenegger’s style by going directly to voters with Proposition 79.

Its backers include Health Access and Alliance for a Better California, a Democratic- and labor-aligned coalition formed to oppose Schwarzenegger’s initiatives on the special ballot.

Proposition 79 would require the state to negotiate with pharmaceutical companies for discounts or rebates for low-income residents. If the companies refused to negotiate, they would face the cutoff of lucrative Medi-Cal contracts.

The industry’s plan establishes set discounts that are voluntary, and allows drug companies to withdraw if not enough participate. It is based on an industry-backed bill that failed to clear the Legislature last year.

Davis said the companies have pledged in public testimony to participate in the voluntary drug discount program. “If Proposition 78 passes, low-income residents will see discounts,” Davis said.

Wright said there are no problems with the mechanisms used by Proposition 79, noting that it is similar to what the state’s Medi-Cal program uses to require drug companies to negotiate discounts.

“Proposition 78 is a smokescreen designed to confuse the voters, pure and simple,” Wright said. “They don’t want our measure to pass and are willing to spend breathtaking sums of money to make sure it doesn’t.”

Wright said Health Access has yet to form a campaign committee to raise funds for Proposition 79, but that it would start soon. “We’ll raise enough to be competitive,” he said.

Howard Fine
Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.

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