New York Times: California Drug Price Plan Is Criticized by Patient Advocates

By Andrew Pollack, New York Times   ·  Link to Article

A state ballot initiative meant to lower prescription drug prices for California faces an expected opponent: the pharmaceutical industry, which has spent almost $70 million to defeat it.

But concerns are also coming from a more curious source: some patient advocacy groups.

Called the Drug Price Relief Act, or Proposition 61, the proposal would prohibit state programs, such as California’s Medicaid, from paying more for a drug than the lowest price paid by the federal Department of Veterans Affairs, which typically receives big discounts.

It promises to be the most prominent measure in November’s election to deal directly with pharmaceutical prices. And because the effort is happening in California, the most populous state and a trendsetter, the approach could quickly spread to other states if it is approved.

Yet how much, if any, money would be saved is a matter of hot debate, highlighting the complicated world of drug pricing. In recent weeks, there has even been a nasty spat between some AIDSactivists — who say the proposal might inadvertently lead to price increases — and Senator Bernie Sanders, the Democratic presidential hopeful, who supports the measure.

“We agree with the proponents that we need to do something, but we just don’t think this is it,” said Anne Donnelly, director of health care policy at Project Inform, an advocacy group based in California for people with H.I.V. and hepatitis C. “It doesn’t appear to save the State of California perhaps any money, and it could have some negative effects.”

Drug prices have become a big public concern and an issue in the presidential campaign, in part because of huge price increases on decades-old drugs by Valeant Pharmaceuticals and Turing Pharmaceuticals, the company founded by Martin Shkreli. A furor also arose over the $1,000 a pill that Gilead Sciences charged for its hepatitis C drug Sovaldi, which strained health care budgets. And list prices for a huge number of drugs to treat various conditions increase 10 percent or more each year.

Still, federal legislation to address drug prices is considered unlikely in an election year. So some proponents of greater action have turned to states.

In June, Vermont enacted the nation’s first so-called pharmaceutical cost transparency bill, which will require drug companies to justify certain big price increases.

Last Tuesday, the California Assembly’s health committee approved a bill, already passed by the State Senate, that would require drug makers to give advance notice of big price increases and to justify them. Several other states have cost transparency bills, though most have not gotten very far.

In Ohio, a voter initiative similar to the one in California has been caught up in litigation filed by the pharmaceutical industry and other business groups and might not make it to the ballot in November.

Supporters of the California proposal, including the California Nurses Association and the California branch of AARP, say it could save the state several hundred million dollars a year on the more than $4 billion it now spends on medicines for about five million to seven million people.

Proponents also say it might spur private insurers to seek bigger discounts as well.

“We believe it will have an overall effect of lowering prices across the board for all payers,” said Michael Weinstein, president of the AIDS Healthcare Foundation, which sponsored the initiatives in California and Ohio.

Pharmaceutical companies, worried about a precedent being set, have contributed $68.5 million to the opposition campaign, which calls itself Californians Against the Misleading Rx Measure. That swamps the $4.4 million contributed in support of the measure, virtually all from the AIDS Healthcare Foundation.

“It’s a fairly straightforward expansion of price controls,” said Stephen J. Ubl, president of the Pharmaceutical Research and Manufacturers of America, the industry’s main lobbying group.

Concerns about the measure center on how it would actually work and whether it could even be put into practice.

The California Public Employees’ Retirement System, which spends nearly $2 billion a year on drugs and would be affected by the measure, said the proposal “might possibly provide cost savings” but could disrupt the contracts the group already had with pharmacy benefit managers and would be hard to administer.

The California Medical Association, which represents doctors, called it “deeply flawed and unworkable.”

One concern is that if drug companies are forced to lower prices for state programs, they might try to raise the prices they charge Veterans Affairs and commercial health plans.

“Veterans are special,” Mr. Ubl, of the pharmaceutical trade organization, said. “To the degree the veterans population becomes a larger population, I think it undermines the economics of the situation.”

Another issue is that the rebates and discounts offered by drug companies are typically confidential, making it difficult to determine whether a state agency is paying less than Veterans Affairs. The state Legislative Analyst’s Office said the impact of the proposal was “highly uncertain,” in part because of the opacity of drug prices.

“You’re taking one set of numbers where there’s no transparency and another set of numbers where there’s no transparency and trying to compare them,” said Tim Horn, H.I.V. project director for the Treatment Action Group, an advocacy organization.

Veterans Affairs tends to pay the lowest prices for drugs, in part because it gets mandatory discounts under federal law. A report by the Congressional Budget Office in 2005 said the department was paying on average 42 percent of list price for name-brand drugs while Medicaid was paying 51 percent. The gap between Veterans Affairs and Medicare or private insurers is even bigger.

Proponents of the measure have filed Freedom of Information requests to bolster their case that price information can be obtained. They also say that it would be difficult for pharmaceutical companies to raise the prices they charge Veterans Affairs, and vindictive if they were to do so.

Sniping over the California measure intensified after Senator Sanders met with 19 AIDS activists in San Bernardino in late May and then issued a news release praising the initiative. The activists saidMr. Sanders had falsely implied that they endorsed the measure when they had reservations about it. The campaign in favor of the ballot initiative then accused the AIDS activists of “shilling for Big Pharma.”

Mr. Weinstein and the AIDS Healthcare Foundation have long been at odds with other AIDS advocacy groups. For instance, he has run almost a one-man campaign against use of a Gilead drugto prevent H.I.V. infection, something some other activists support.

The nonprofit AIDS Healthcare Foundation runs treatment centers in many states and countries. It had about $1 billion in revenue last year, $800 million of which came from pharmacies it operates, which can mark up prices on the drugs they provide to patients.

Mr. Weinstein is a vocal critic of Gilead, the leading supplier of drugs for H.I.V. and hepatitis C. He recently had a caravan of vehicles, including a hearse, pass by an investor conference where Gilead was making a presentation. A plane flew overhead towing a banner that read “Gilead Greed Kills.”

Calling attention to pharmaceutical industry “greed” is a crucial strategy of the campaign in favor of the proposition, as illustrated by its website,

It also points out that many opponents of the measure — including some politicians and doctors, and the AIDS advocacy groups that raised questions — receive money from the industry.

Ms. Donnelly of Project Inform, the AIDS advocacy organization, said the accusation was “an unfair attack designed to obfuscate poor policy.” She says that while her organization receives some money from drug companies, it often takes positions unfavorable to the industry.

Public opinion polls by third parties have not yet been taken on the initiative. Early polls often mean little in any case. Generally, industries have succeeded when they have spent huge amounts to defeat ballot initiatives in California.

In 2005, drug companies beat back a measure that would have essentially required discounts on medicines for some Californians.