Controversial activist Michael Weinstein is behind a misleading initiative proposed for California’s November 2016 ballot. The measure would prohibit the state from entering into contracts to purchase prescription drugs unless the prices are the same or lower than the special discounts provided to the U.S. Department of Veterans Affairs (VA) and our nation’s veterans.
The measure would likely invalidate existing contracts the state has negotiated with pharmaceutical manufacturers, increasing state costs for prescription drugs by tens of millions of dollars and reducing funding for Medi-Cal, the state’s largest low-income health care program.
The only thing the measure would actually guarantee is millions of dollars in taxpayer dollars wasted on more state government bureaucracy, red tape and potential lawsuits. It could also create a new bureaucratic prior approval process that could delay or prevent patients from getting the medicines and critical treatments they need.
Below are some facts about what the measure will and will not do.
The measure is unworkable and could cost taxpayers millions in bureaucracy, red tape and potential lawsuits.
The measure’s language is legally flawed, unenforceable and at odds with how the sale and purchase of prescription drugs (or any other products) work in the real world.
For starters, the measure contains absolutely no language for how it is to be implemented. It could lead to litigation from numerous parties, including the state, patient advocacy organizations, manufacturers or even federal agencies affected by the measure – wasting millions of taxpayer dollars and taking years to resolve.
Furthermore, the measure, as written, does not compel pharmaceutical manufacturers to sell their products to state agencies at certain prices. Rather, it seeks to prohibit the state from entering into “agreements” (contracts) with pharmaceutical manufacturers above the VA price.
The state currently has rebate agreements with hundreds of manufacturers for thousands of prescription drugs. One potential consequence of this measure could be that the state is forced to invalidate many existing rebate agreements it has with pharmaceutical manufacturers if the net price of those agreements is higher than the VA price.
Invalidating these rebate agreements could result in the state losing tens of millions of dollars in rebates that it currently receives each year. Cancellation of these agreements could also result in reduced access to medicine for patients.
Lastly, as recently noted by the state’s independent Legislative Analyst’s Office1, many VA prescription drug prices are not publicly available. So the state may not be able to obtain the basic information necessary to implement this unworkable measure.
Given these significant flaws, the measure will likely result in more bureaucracy, red tape and potential lawsuits.
The measure could increase health costs for veterans, active duty military, their families and retirees by undermining special price considerations provided to those who serve our country.
The VA and pharmaceutical manufacturers negotiate special discounts for the benefit of veterans, retirees, active duty military and their families in recognition and appreciation of their dedicated service to our country.
Under federal law, pharmaceutical manufacturers extend discounts to the VA and Department of Defense (DOD) for innovative drugs and may also negotiate additional discounts for drugs to be included on the VA and DOD formularies.2
These discounted prices were intended to support and assist our nation’s military. They would not be sustainable if applied to additional programs in California or other states.
In fact, the VA and the GAO have, on multiple occasions, warned that extending VA pricing to other sizable health care programs could undermine these special price considerations provided to those who serve our country.
“VA has been able to get substantial discounts from manufacturers… However, if manufacturers had to make these prices available to a larger market, they might be considerably less willing to continue to offer these prices”
-U.S. Government Accountability Office (GAO) testimony before Congress3
Increased State Prescription Drug Costs
The measure could actually result in higher prescription drug costs for the state.
California’s Medi-Cal Fee for Service program has many agreements with pharmaceutical manufacturers, where manufacturers provide “state rebates” in order to be included on the state’s preferred drug list.
These rebates totaled $233 million last year, $97.7 million of which benefits the state’s General Fund.4
One potential consequence of this measure could be the invalidation of some or many of these existing rebate agreements if the net price isn’t at or below the VA price.
However, Medi-Cal is required by federal law to cover medically necessary outpatient drugs, regardless of a manufacturer’s willingness to provide the state supplemental rebate.
As a result, the state could be required to purchase these drugs without the benefit of the state rebate – therefore paying higher prices for those drugs than the state pays today.
Reduced Access to Medicines
The measure could increase physician paperwork and reduce or delay patients’ access to prescription drugs.
This measure could limit the ability of doctors and patients to choose the best drug for each patient.
Under existing law, state agencies are required to consider both price AND access to medicines when negotiating contracts. The proposed measure would impose a new statutory requirement that the state government base drug purchases on VA prices alone – even, potentially, if it restricts patients’ access to vitally needed medications.
As discussed above, the Medi-Cal Fee for Service supplemental rebate contracts guarantee that a manufacturer’s drug will be placed on the Medi-Cal List of Contract Drugs (List). Drugs not on the List require a prior authorization, to be prescribed by doctors and dispensed for patients.
If the state were not able to maintain these current agreements with manufacturers, it would result in fewer drugs on the List, which would create a new prior authorization hurdle for doctors and their patients.
As a result, this measure could delay or even eliminate patient access to needed medicines.
Contradictory Inclusions and Exclusions Make No Sense
Even the proponent admits the measure would only apply to a limited number of state programs. And the measure would negatively impact those programs.
The misleading Rx measure only applies to a limited number of state drug purchasing programs, while excluding the vast majority of Californians. And for the few programs it does cover, it could actually increase the cost of prescription drugs, limit patient access to medicines, and increase taxpayer costs.
Harmful to Research and Cures
The measure could have a chilling effect on cutting edge medical research and cures.
If California and other states pass laws that seek to extend VA prices on innovative drugs, it would reduce revenues and thus limit future investments in the research and development of new drugs and cures.
Limiting investment could cause medical research facilities in California to lose funds for cutting edge research, resulting in lost California jobs and fewer cures.
According to the Tufts Center for the Study of Drug Development5, on average, it costs pharmaceutical companies $2.6 billion to do the years of research and tests necessary to develop a single new drug.