Proponents Ads on Pharmaceutical Contracting Measure Attempt to Mislead Voters

Measure excludes 88% of Californians and could actually increase prescription drug costs.

Proponent of measure, who exempted own organization from initiative, has history of overcharging government

SACRAMENTO– Today, proponents of the pharmaceutical contracting initiative released new advertisements, airing on limited cable networks, that seek to mislead Californians about their measure. 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.

Below are some facts about the initiative that proponents are not including in their ads:


Proponents are misleading voters by claiming the measure would lower state prescription drug costs. The independent Legislative Analyst said the measure’s effect on state drug purchases is “highly uncertain” (page 7) and that “the measure could raise Department of Health Care Servicesspending on prescription drugs” (page 10). That’s because the measure could invalidate existing contracts between the state and pharmaceutical companies that provide significant rebates to the state.

Source: State Legislative Analyst’s Report



The measure would reduce patient access to medicines for the few programs it does cover. The California Medical Association, representing 41,000 doctors in the state, opposes the measure and says:  “We evaluated this measure and have concluded it is deeply flawed and unworkable. Of greatest concern to doctors is that the measure would result in a new bureaucratic prior approval process that could interfere with patient access to the medicines they need.”

Source: California Medical Association



The proponent excluded his own organization from the provisions of the initiative, even though AHF buys and sells prescription drugs in California. The initiative is entirely funded by one organization, the AIDS Healthcare Foundation (AHF). The initiative’s author, Michael Weinstein, is the head of the AHF, which is a global organization that made nearly $900 million in revenues in 2014 through prescription drug sales and operating HMO plans. In 2014, AHF earned $696 million – or 80% of its revenues – in pharmacy sales. AHF also operates a Medi-Cal managed care plan in California called “Positive Healthcare California” (PHC). Yet Weinstein specifically exempted Medi-Cal managed care plans.

AHF Revenues Source: AHF Financial Statements

Exemptions Source: Section 4 of the initiative, Section 14105.32 (b) of the initiative: “The requirements of this Section shall not be applicable to… any Medi-Cal managed care program.”



The proponent has a long history of overcharging state and local governments. While the proponent claims the purpose of the initiative is to lower government prescription drug costs, AHF has been accused of overcharging Los Angeles County by more than $6 million. AHF is also suing the State of California so it can charge more for prescription drugs.

  • AHF has been audited four times in Los Angeles (LA) County, which found a total of $6.1 million in questioned payments or overcharges. A July 2014 LA County audit found AHF inappropriately charged the Dept. of Human Services Program $3.5 million. In 2012, LA County found AHF overbilled the county for $1.7 million. A 2005 LA County audit found AHF overcharged $348,000. In 1996, LA County auditors found “fiscal mismanagement” at AHF and overbillings of $653,000.

Sources: Los Angeles Times, November 1, 1997, Los Angeles Times, May 17, 2005, Los Angeles Daily News, February 12, 2014, The Bay Area Reporter, August 7, 2014

  • For the past five years, AHF has challenged the State of California to prevent the implementation of a 2009 state law that would lower the drug reimbursement rate AHF received from the state under the 340B program. The law would require AHF to charge the state’s Medi-Cal program only its actual acquisition costs plus a dispensing fee for prescription drugs, resulting in less potential revenue for AHF. The suit seeks to prevent the law from being implemented. By filing this lawsuit, which is still pending before the 9th Circuit Court of Appeals, AHF is costing the state $10 million per year in higher drug costs.

Source: CIS by Deloitte, Permanent Injunction of California’s 340B Provision

Source: Lawsuit costing the state $10 million in higher drug costs (page 65)



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.

Below is the list of the groups opposed to the Misleading Rx Measure as of June 3, 2016:


  • California Medical Association
  • American Congress of Obstetricians and Gynecologists (ACOG) – District IX/CA
  • Bonnie J. Addario Lung Cancer Foundation
  • California Hepatitis C Task Force
  • California Psychiatric Association
  • California Association of Rural Health Clinics
  • Latino Diabetes Association
  • Ovarian Cancer Coalition of Greater California
  • Medical Oncology Association of Southern California
  • American Liver Foundation – Pacific Coast Division
  • Lupus Foundation of Southern California
  • International Foundation for Autoimmune Arthritis
  • Community Health Action Network
  • The G.R.E.E.N. Foundation
  • Minority Health Institute
  • Los Angeles Wellness Station
  • Mental Health Systems
  • Plaza Community Services (clinic)


  • Veterans of Foreign Wars, Department of California
  • Military Officers Association of America, California Council of Chapters
  • American GI Forum of California
  • AMVETS, Department of California
  • Military Order of the Purple Heart, Department of California
  • Vietnam Veterans of America, California State Council
  • American Legion, Department of California
  • Paralyzed Veterans of America, Bay Area & Western Chapter
  • Association of the United States Army, Northern California
  • Reserve Officers Association, Department of the Golden West
  • Fleet Reserve Association, West Coast Region
  • Minority Veterans Coalition of California
  • Jewish War Veterans of America, Department of California
  • Scottish American Military Society

Civil and Human Rights

  • California NAACP
  • Black American Political Association of California (BAPAC)
  • Black Women Organized for Political Action – PAC
  • Embracing Latina Leadership Alliances (ELLAS)
  • Beverly Hills Hollywood NAACP


  • California Taxpayer Protection Committee
  • San Diego County Taxpayers Association


  • LA/OC Building & Construction Trades Council
  • International Brotherhood of Boilermakers
  • Southern California Pipe Trades District Council No.16
  • International Brotherhood of Electrical Workers (IBEW), Local 11


  • California Senior Advocates League
  • ONEgeneration


  • California Chamber of Commerce
  • California Business Roundtable
  • California Manufacturers & Technology Association
  • Valley Industry & Commerce Association
  • California Black Chamber of Commerce
  • Orange County Business Council
  • Silicon Valley Leadership Group
  • Los Angeles County Business Federation
  • San Francisco Chamber of Commerce
  • Sacramento Black Chamber of Commerce
  • Fresno Chamber of Commerce
  • Chamber of Commerce Alliance of Ventura and Santa Barbara Counties
  • San Gabriel Valley Economic Partnership
  • Hollywood Chamber of Commerce
  • San Diego East County Chamber of Commerce
  • Kern County Hispanic Chamber of Commerce
  • San Mateo Chamber of Commerce
  • Santa Clara Chamber of Commerce
  • Oxnard Chamber of Commerce
  • Santa Clarita Valley Chamber of Commerce
  • Port Hueneme Chamber of Commerce