$123M and Counting for Calif. Drug Price Ballot Fight

BNA’s Health Care Daily Report™ sets the standard for reliable, high-intensity coverage of breaking health care news, covering all major legal, policy, industry, and consumer developments in a...

By Joyce E. Cutler

Oct. 20 — The pharmaceutical industry pumped in another $22 million in late contributions against California’s initiative to limit what the state pays for prescription drugs with total industry donations reaching nearly $109 million, filings with the California Secretary of State’s Office reveal.

Proposition 61 would prohibit state agencies from paying more than what the U.S. Department of Veterans Affairs pays for prescription drugs. Opponents, led by the Pharmaceutical Research and Manufacturers of America, added nearly $22 million in late contributions, the California Secretary of State’s Office reported Oct. 19.

Merck & Co. and Pfizer Inc. each contributed a total $9.4 million, while Johnson & Johnson contributed $9.3 million, filings said.

Proponents of Prop. 61, the California Drug Price Relief Act, contributed nearly $14.5 million. The California Nurses Association donated $54,930, and sponsor AIDS Healthcare Foundation paid the rest, according to reporting though Oct. 14.

Opponents as of Sept. 24 spent $48.7 million, compared with the $7.8 million the Prop. 61 backers spent, the filings said.

“The passage of this initiative would have a tremendous financial impact, so the amount of money they’re spending to defeat Proposition 61 is a fairly small amount compared to the broader financial stakes involved,” Dan Schnur, director of the University of Southern California’s Unruh Institute of Politics, told Bloomberg BNA.

Impact on Medicaid, Other States

“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 state Legislative Analyst’s Office said in a July analysis. “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.”

Prop. 61 covers drug spending for 4 million of California’s 39 million residents. The University of California, the California Public Employees’ Retirement System, public health, jails and prisons, and California State University would be affected by Prop. 61. Exempted are drug purchases in the managed care program funded through the state Medicaid program, Medi-Cal.

Big State, Big Ballot

“This is the future of ballot initiatives in California, make no mistake. The initiative process was originally intended to be a voice of the people, an opportunity to give voters a chance to weigh in on matters that their elected representatives were not resolving,” Schnur said Oct. 19. “But in the state of 39 million people, communicating a message on behalf of or against an initiative is extremely expensive. So it’s not surprising that the initiative process has become the province of special interests as well.”

California is an expensive state, Kathy Fairbanks, spokeswoman for the No on Prop 61-Californians Against the Deceptive Rx Proposition, said Oct. 19.

“Even if there were only one or two initiatives, we unfortunately have to spend a lot of money to reach voters in California. And now add to it 16 additional initiatives and everything else to it and it becomes more expensive,” Fairbanks told Bloomberg BNA.

Major markets including Los Angeles, San Francisco, San Diego and Sacramento mean major spending to get out the message amid advertising for state and local initiatives and office seekers.

“It just takes more firepower to cut through the clutter,” said Fairbanks.

Add to the volume of initiatives and candidates the advent of permanent absentee voting, which changes the time line to inform the 65 percent of voters who cast ballots by mail, said Garry South, a longtime political consultant working on Yes on 61 campaign, told Bloomberg BNA.

“I think that the pharma side will break all records of money spent either on behalf of or in opposition” to a measure, South said Oct. 19.

Big Bucks, Middling Impact?

Prop. 61’s impact on pharmaceutical companies’ financial performance may not be as lethal as feared, RBC Dominion Securities analyst Michael Yee said in a note to clients. His remarks were included in analysis published last month by Bloomberg Markets.

“We think a possible 2-3 percent earnings per share impact to large-caps if this initiative were passed across all 50 states, but this is more headline risk than anything,” Yee wrote.

To contact the reporter on this story: Joyce E. Cutler in San Francisco at JCutler@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

For More Information

The campaign contribution data from the California Secretary of State’s Office are at http://src.bna.com/jwR.

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.