Calif. Drug Price Initiative Opponents Raise Millions

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By Joyce E. Cutler

Aug. 25 — A California effort to limit prescription drug prices paid by some public benefits plans is spurring a multimillion-dollar flow of contributions from opponents including major drugmakers.

California Proposition 61 would limit how much the state can pay for prescriptions to what the U.S. Department of Veterans Affairs pays. Opponents of the measure contributed $85.8 million through Aug. 19 , or seven times as much as proponents.

Pfizer Inc.’s $8.5 million contribution to Californians Against the Deceptive Rx Proposition nearly equals the $9.4 million that Prop 61's supporters have raised, the California Secretary of State reports.

Merck & Co. Inc. and Johnson & Johnson each contributed $7.2 million.

“I think that there will be more and wealthier and more concerted opposition to this moving from California to the rest of the nation than there have been for really all other things,” R. Adams Dudley, of the University of California, San Francisco, told Bloomberg BNA. Dudley is a medicine and health policy professor and director of the UCSF Center for Healthcare Value. “We’re talking about the most profitable industry, even more than Wall Street.”

And unlike the car industry, which has a small number of manufacturers that opposed the state’s mandate of catalytic converters years ago, there are more drugmakers to oppose this initiative, Dudley said Aug. 25.

“And we’re post- Citizens United, so the limits are gone. So the people who are opposed to this becoming a national thing from California are extremely well financed” to fight limits on their pricing, he said. The Supreme Court's 2010 decision in Citizens United v. FEC allowed outside groups to raise and spend unlimited amounts for “independent expenditures” to influence campaigns.

“We’re picking the biggest dog there is, not about territory but about that bowl of food there, and that almost always leads to a dog fight,” Dudley said.

Rx for State Employees, Retirees, Inmates

California spent almost $3.8 billion on prescription drugs in 2014-2015 under a variety of state programs. State funds pay for roughly half of overall state prescription drug spending, and the remainder is paid with federal and other nonstate revenues, the state Legislative Analyst’s Office said in a July analysis.

California has 39.4 million people, about 4 million of whom would be covered by Prop 61, including University of California and California State University employees and retirees and jail inmates.

“It’s a big enough market that if this was real, it might give the drug companies pause about what prices they give the VA. It really is unclear how the drug companies respond” if one market limits prices, Dudley said.

“It’s a huge a problem for the whole country. But it’s not clear that California can solve it alone.”

Amgen, AbbVie, Gilead, Others

The opposition campaign is sponsored by the Pharmaceutical Research and Manufacturers of America.

The top contributors to defeat Prop 61, the California Drug Price Relief Act, after Pfizer, Merck & J&J, are:

  •  Amgen Inc., contributing $5.6 million;
  •  AbbVie Inc. and Sanofi-Aventis U.S. LLC, each adding $5.2 million;
  •  AstraZeneca Pharmaceuticals LP, $4.9 million;
  •  Gilead Sciences Inc., $4 million;
  •  Allergan USA Inc., $3.8 million; and
  •  GlaxoSmithKline, $3.5 million.

The largest contributor to the campaign in favor is the AIDS Healthcare Foundation, which wrote the initiative and gave $9.4 million. The California Nurses Association political action committee donated $50,000, Secretary of State records said.

`Existential Threat.'

“If you view this measure as an existential threat to their profit, which the drug companies do, you’re going to engage in overkill,” Garry South, a longtime political consultant working on the campaign for the AIDS Healthcare Foundation, told Bloomberg BNA. “Their real concern is that this will have snowball effect and if California achieves the ability to buy the drugs at VA prices, every other state is going to demand the same thing,” South said Aug. 25.

The initiative “is a concern for a whole bunch of reasons,” Kathy Fairbanks, the No on Prop 61 spokeswoman, said Aug. 25. “No. 1 is it upends and could cancel existing agreements pharmaceutical companies have with the state of California.”

The measure would result in administrative headaches for the California Public Employees’ Retirement System, the University of California and other systems that would be affected, Fairbanks told Bloomberg BNA. It also could jeopardize the relationships drug companies have with the VA.

Using Analysis to Bolster Arguments

The LAO analysis that goes to each California voter is giving both sides something in their fight.

“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. As a result, the measure could extend the VA’s favorable drug prices to health programs serving tens of millions of additional people nationwide, placing added pressure on drug manufacturers to take actions to protect their profits under the measure,” the July 18 analysis said.

Conversely, opponents point to the LAO analysis that the measure “places no requirements on drug manufacturers to offer prescription drugs to the state at the lowest VA prices. Rather, the measure restricts actions that the state can take,” which is prohibiting paying more than the lowest VA prices.

To comply with federal law, “Medi-Cal [Medicaid] might have to disregard the measure’s price limits and pay for prescription drugs regardless of whether manufacturers offer their drugs at or below VA prices,” the analysis said.

Thus, the LAO said, the fiscal impact to the state is unknown.

Medi-Cal spent $1.8 billion on prescription drugs in 2014-2015. The initiative applies to fee-for-service Medicaid and exempts the managed care system from drug pricing requirements.

To contact the reporter on this story: Joyce Cutler in San Francisco at

To contact the editor responsible for this story: Brian Broderick at

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