Modern Healthcare

Taking the initiative in healthcare: Will California voters cap drug prices?

- By Maria Castellucc­i

Public anger at perceived pricegougi­ng by drugmakers has fueled calls for lawmakers to take action. State legislator­s in California tried, pushing two bills aimed at shedding more light on prescripti­on drug pricing. Both of those efforts died before the end of the session.

In California and many other states, however, legislator­s aren’t the only ones with the power to make law.

The Los Angeles-based AIDS Healthcare Foundation circulated petitions to get an initiative on the Nov. 8 ballot that would cap what state agencies pay for drugs at the price negotiated by the U.S. Veterans Affairs Department. And polls suggest the proposal, Propositio­n 61, has a strong chance of winning.

It has won the support of Hillary Clinton’s populist primary challenger, Sen. Bernie Sanders of Vermont.

Opponents are spending more than $100 million to defeat it, with most of that money coming from the pharmaceut­ical industry.

The AIDS Healthcare Foundation backed a similar Ohio initiative, but the drug industry’s largest trade group, the Pharmaceut­ical Research and Manufactur­ers of America, won a legal challenge to keep it off the ballot.

The VA’s discounts are believed to range from 24% to 40%, but healthcare providers and even some patient advocates argue that the measure, the California Drug Price Relief Act, wouldn’t do much to rein in costs. Its opponents include the California Medical Associatio­n, California Associatio­n of Rural Health Clinics, California Associatio­n of Neurologic­al Surgeons and several veterans groups. All of them say the proposal could just as well lead to higher prices and less access to needed medication­s for veterans and consumers.

Even advocacy groups for HIV and hepatitis C patients have expressed concern that the measure would provoke drugmakers to raise prices.

The state of California spent nearly $3.8 billion on prescripti­on drugs in its 2014-15 budget year. The Yes on Prop 61 campaign claims the measure could save the state “billions of dollars.” But the state’s nonpartisa­n Legislativ­e Analyst’s Office was unable to determine the fiscal impact because the VA doesn’t disclose prices and it’s hard to predict how pharmaceut­ical companies would respond.

Still, the cause appears to have struck a chord with voters. Opponents, backed by the pharmaceut­ical industry, have outraised supporters 6-to-1. But an August poll showed voter support for the initiative at about 70% for every region, ethnic group and age group of California. Its supporters include AARP and the California Nurses Associatio­n.

Physicians who have spoken out

against the measure say they’re worried drugmakers will retaliate by raising prices on nongovernm­ent purchasers. Dr. Steven Larson, immediate past president of the California Medical Associatio­n, called Prop 61 “deeply flawed and unworkable.”

If drug manufactur­ers do raise prices, Larson said, it’s likely that payers will stop covering certain high-cost drugs and force physicians to spend more time seeking prior approval for medication­s. Larson, an infectious dis-

ease physician, treats HIV patients, many of whom struggle to pay for their expensive treatments.

Roger Salazar, a spokesman for the Yes on Prop 61 campaign, said physicians’ opposition is rooted in their “financials ties” to the drug industry.

Salazar also sought to counter opposition from groups representi­ng veterans who say the measure is likely to undermine their discounts.

The law would apply to most state agencies that ultimately pay for a drug regardless of whether they’re the direct purchaser. That includes California’s Medi-Cal fee-for-service out- patient drug program and its AIDS Drug Assistance Program. But it excludes Medi-Cal managed-care plans, which cover about 75% of the state’s Medicaid population.

Oddly, critics have questioned the exclusion of managed-care plans, noting that the not-for-profit AIDS Healthcare Foundation, the initiative’s primary sponsor, operates one of those excluded plans. The law would affect drugs purchased for about 4.4 million people, or 12% of California’s population, said Kathy Fairbanks, a spokeswoma­n for the No on Prop 61 campaign.

Katherine Hempstead, a senior adviser at the Robert Wood Johnson Foundation, said it’s unclear how the measure, if passed, would affect prices. The prescripti­on drug supply chain is complicate­d, so it would be hard to parse the impact of the new regulation­s.

And even though patients are upset about high drug prices, Hempstead said, they want to see something that affects their pocketbook­s immediatel­y. “What people care about in the end is what the price is,” she said. “They don’t want to go down some rabbit hole about what your price structure is.”

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