The analysis was prepared for the Pension and Health Benefits Committee which will be discussing the initiative next week. More extensive findings can be found below. Some excerpts from the analysis are as follows:
- “…passage and implementation of the Act would drastically change the current drug purchasing landscape and could result in unintended consequences.” (page 1)
- “ … if the Act is approved by voters and becomes law, it may cause:
- “Increased drug prices for the VA, instead of decreased prices for CalPERS and other state entities as intended;
- “Disruption of CalPERS PBM and health plan contract administration efforts;
- “Decreased access to certain drugs for CalPERS members; and,
- “Compliance challenges.” (page 3)
The analysis also noted that “The Act specifically excludes ‘drugs purchased or procured, or rates developed, pursuant to or under any Medi-Cal managed care program’ from its provisions; however, it does not exclude CalPERS managed care plans.”
More than 60 patient advocacy, health, veterans, taxpayer, business, labor, and civil rights groups oppose this flawed measure, which could increase state prescription drug costs and reduce patients’ access to medicines.
The flawed ballot 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 US Department of Veterans Affairs (VA) and our nation’s veterans. However, 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 measure could also result in more physician paperwork and more bureaucratic hassle for patients, limiting or delaying access to prescription drugs.
Excerpts taken directly from CalPERS staff analysis of drug contracting ballot initiative.
Full report can be found at: https://www.calpers.ca.gov/page/about/board/board-meetings/pension-201606
- (page 1) “… passage and implementation of the Act would drastically change the current drug purchasing landscape and could result in unintended consequences.”
- (page 2) “The Act specifically excludes ‘drugs purchased or procured, or rates developed, pursuant to or under any Medi-Cal managed care program’ from its provisions; however, it does not exclude CalPERS managed care plans.”
- (page 3)“The Act’s intent to lower drug prices for Californians is very attractive; however, if the Act is approved by voters and becomes law, it may cause:
- “Increased drug prices for the VA, instead of decreased prices for CalPERS and other state entities as intended;
- “Disruption of CalPERS PBM and health plan contract administration efforts;
- “Decreased access to certain drugs for CalPERS members; and,
- “Compliance challenges.”
- (page 3) “Potential Increase in Drug Prices. The Act could cause pharmaceutical manufacturers to increase their VA prices instead of lowering the prices paid by California state purchasers such as Medi-Cal and CalPERS.”
- (pages 3 and 4) “Potential Effects on CalPERS PBM and Health Plan Contracting. Contracting separately with drug manufacturers would likely conflict with PBM contract terms. If contracts could not be amended, leaving CalPERS without a tenable PBM arrangement, CalPERS might be forced to collaborate with other state agencies to procure, warehouse, and distribute drugs. This new arrangement would create supply chain hurdles, and it is doubtful such a massive build-out could be accomplished by the Act’s compliance date of July 1, 2017.”
- (page 4) “Potential Decreased Access to Drugs. As noted by the LAO, affected state entities could modify their formularies in response to the Act. For example, state entities might include only those drugs that the VA does not purchase and drugs that manufacturers will offer at the lowest VA price. The Act could cause difficult formulary choices if a manufacturer does not offer the VA price to the CalPERS PBM or health plans for certain drugs.”
- (page 4) “Potential Compliance Challenges.
- “Even with regulations, it may be impossible for CalPERS or DHCS to discover the lowest price paid for the same drug by the VA in a way that complies with the Act; and
- “Ultimately, it is questionable whether the Act and subsequent implementing regulations developed at the state level will be effective.”
- (page 5) “Risks. If the Act becomes law, it may cause:
- “Increased drug prices for the VA, instead of decreased prices for CalPERS and other California state entities as intended;
- “Disruption of CalPERS PBM and health plan contract administration efforts;
- “Decreased access to certain drugs for CalPERS members;
- “Potential challenges for CalPERS to comply with the law’s requirements in a complete and timely manner; and,
- “Increased administrative costs.”