Bitter Pill Fight

Two drug-pricing initiatives are duking it out in California.
by | October 2005

Yet another high-stakes battle over prescription drug pricing is playing itself out this fall. In November, California voters will choose between two competing drug discount initiatives, and drug companies are on track to spend upwards of $100 million to make sure that their version wins.

Both initiatives are based on programs that are already being tried in other states. Proposition 79, backed by unions and consumer groups, would require drug manufacturers to provide breaks to Californians whose prescriptions aren't covered by insurance. If they failed to comply, their products would be dropped from Medicaid formularies. Proposition 78, the initiative sponsored by the Pharmaceutical Research and Manufacturers of America (PhRMA), the drug industry's lobbying and political arm, also calls for lower prices but on a voluntary basis.

PhRMA claims its initiative will offer low-income Californians the better deal, noting that Proposition 79 will be subject to legal challenges if it passes.

But Proposition 79 might well stand up to legal scrutiny. It mirrors a mandated discount program in Maine that has survived industry challenges all the way up to the U.S. Supreme Court. Some 93,000 residents have signed up--a good-sized chunk of the small state's population and half of all Mainers who don't have prescription drug coverage. They've been getting discounts from pharmacists and this fall started enjoying discounts that the state negotiated on 200 different drugs.

"Our initiative," says Anthony Wright of Health Access, the coalition sponsoring Proposition 79, "is based very explicitly on the Maine program, which has yielded discounts and has been tested in the courts as a working and viable model."

PhRMA counters that the Maine program has morphed into a voluntary program, because the state has not yet dropped any drugs from its Medicaid list. But officials in Maine say that doesn't mean they might not still use that stick against recalcitrant manufacturers.

As to purely voluntary drug discount programs, the Legislative Analyst's Office in Sacramento concluded in February that it did not seem likely that California would be able to obtain rebates comparable to Maine. The LAO cited a mostly unsuccessful program in Iowa, as well as a discount program for seniors in California that never got off the ground.

But PhRMA has a success story to tout, a voluntary program in Ohio that got underway in January and has been offering discounts averaging 30 percent (half from drug makers, half from pharmacists). "In the first four months of our operation," says Jennifer Lopez, director of the program, "our participants saved $722,000."

Whichever California drug initiative gets more votes in November will, given the size of the state, likely become the model for future discount programs elsewhere.