Big pharma spending big dollars to defeat California measure

LOS ANGELES (AP) — The national furor over rising drug prices is moving to the ballot box in California, where voters will decide how the state negotiates for prescription medications.

The stakes are high: How trendsetting California votes could spill over to other states.

That possibility is not lost on the pharmaceutical industry, which has faced withering criticism for its huge profits and examples of massive price hikes, such as Turing Pharmaceuticals raising by 5,000 percent the cost of a drug for a life-threatening parasitic infection and Mylan's popular EpiPens costing $608 for a two-pack, an increase of more than 500 percent since 2007.

The industry has poured more than $86 million into an opposition campaign for Proposition 61, the "California Drug Price Relief Act," saying passage will lead to higher drug prices — especially for military veterans — and less access to medications.

Proposition 61 would bar certain state agencies from paying more for a drug than the lowest price paid by the U.S. Department of Veterans Affairs, which typically receives huge discounts.

However, the initiative doesn't require the drug industry to offer the VA price to California. And if it doesn't, the state would be limited in what it can buy or be on the hook to make up the difference. Supporters say approval will even the playing field and lead to lower costs for prescriptions the state reimburses or buys outright for low-income residents, government retirees and inmates. And while those who would benefit represent only about 10 to 15 percent of the state's 39 million residents, backers think establishing a foothold could help lead to broader price reductions.

Despite what each sides says, Stanford University law professor Michelle Mello said the fiscal effects are unclear. That's mainly because of the secrecy surrounding drug pricing negotiations, putting voters in a tough spot.

"It's going to come down to a battle of the sound bites," said Mello, who studies health policy.

Like sticker prices on cars, prescription drugs have list prices. But governments and other large buyers usually end up paying less through discounts and negotiations that are often bound by confidentiality agreements.

The VA's massive bargaining power allows it to pay some of the lowest rates. Under federal law, the VA gets an automatic discount of 24 percent and can negotiate even steeper reductions for specific drugs.

There are heavy-hitters on both sides of Proposition 61. Supporters include former Democratic presidential candidate Bernie Sanders, the California Nurses Association and AARP, formerly the American Association of Retired Persons.

Opponents include the California Medical Association, which is the state's largest doctors' organization, and the state chapters of Veterans of Foreign Wars, Vietnam Veterans of America and the American Legion. Veterans expressing concern about Proposition 61 are featured prominently in opposition ads.

Patient advocacy groups have lined up on both sides.

The initiative is the brainchild of longtime activist Michael Weinstein, president of the Los Angeles-based AIDS Healthcare Foundation, which runs pharmacies and clinics around the world. Weinstein is also the driving force behind another ballot measure, Proposition 60, which would require adult film stars to wear condoms during the filming of sex scenes.

California has tried different tactics to get the best deal, including state agencies banding together to haggle with drug companies. Still, during the 2014-2015 fiscal year, California spent about $4 billion on prescription drugs for the groups covered under the initiative.

The California Public Employees Retirement System, which administers the state's health program, has seen its costs for specialty drugs to treat arthritis and Hepatitis C soar in recent years. The group hasn't taken a position on the measure.

"We cannot sustain this runaway pricing," said Ged Kenslea, spokesman for the AIDS Healthcare Foundation, which raised the bulk of the $14 million in support of the measure.

Kathy Fairbanks, spokeswoman for the "no" campaign, said the initiative is "poorly thought out."

"This is not a forward step. This is a backward step that could lead to unintended consequences that will harm patients. That's not progress," she said.

Analysts say it's unclear how drug companies would react if the measure is passed. Manufacturers could refuse to offer the VA rate to California or raise VA prices in response, potentially limiting any state savings.

"I don't see Prop. 61 as being a constructive answer to drug pricing issues," said Richard Evans, a health care analyst for SSR, an investment research firm. Evans has consulted for the pharmaceutical industry.

Jay Jimenez, director of California State Retirees, which endorsed the initiative, said it's a question of fairness.

"Why should we pay more than the veterans? Many of our members are, in fact, veterans themselves," said Jimenez.