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Politics

3 things to know about Prop 61, California's complex prescription drug initiative





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California’s Proposition 61, which seeks to provide more affordable prescription drug coverage, has become one of the most highly debated measures this election.

According to a recent KPCC article, under the measure, specific state programs such as Medi-Cal fee-for service plans and CalPers, would not pay more than the Department of Veterans Affairs pays for prescription drugs.

The measure has been endorsed by political superstars including Bernie Sanders, Robert Reich and Dolores Huerta. And the Yes on 61 campaign accuses pharmaceutical companies opposing the proposition of “unconscionable profiteering.”

"Drug companies are raising prices exponentially now," says Garry South, chief strategist and spokesperson for the 'Yes' campaign on 61. "Think about the EpiPen. They’re doing it at-will, exponentially, and putting these drugs out of the reach of not just average people but government healthcare programs at federal and state levels. They will continue to raise prices willy-nilly if nothing happens."

But the No on Prop. 61 campaign claims the measure would increase prescription drug costs for veterans and reduce patient access to medications.

"It’s very easy right now for people in California, and everywhere, to be upset with the drug companies and concerned about drug prices," says campaign spokesperson Kathy Fairbanks. "There even may be an instinct to stick it to the drug companies, and I think that’s what the proponents are hoping for in passing Prop 61. It’s not going to stick it to the drug companies, it’s actually going to boomerang and backfire on patients and California taxpayers.

Highlights: 3 things to know

What will the overall impact on drug prices be if Prop 61 passes?

Garry South (Yes on 61): This is a measure that deals only with state purchases of drugs. In other words, drugs purchased directly by the state of California with taxpayer dollars. Our estimation is that if the state of California achieves the ability to buy drugs at the same rate that the U.S. Department of Veterans Affairs pays, the taxpayers could save up to $1 billion a year. In addition, this is a measure that the drug companies have already put $109 million into trying to beat it. This breaks all records for any ballot measure in the history of California back to 1912 when we adopted the initiative system. Opponents are going to tell you that this is something that would actually raise drug prices for veterans and others and not lower them. This measure would not do any of the things that the opponents of it tell you would do. It would be only the drug industry itself that would try to punish taxpayers and consumers in California. 

Kathy Fairbanks (No on 61): I can’t say for sure what will happen if Prop 61 passes. What I can point to is similar policy. Back in 1990, Congress passed the Omnibus Budget Act of 1990 which extended VA pricing to other federal agencies, meaning that other federal agencies could buy drugs at the same price that the VA got. At the time, the prices that the VA was paying went up because the small program that was supposed to be for the VA was extended to federal agencies. That’s what we’re looking at today. The VA pricing would be extended to California, and I don’t know that there’s any reason to think that history wouldn’t repeat itself. Nothing in Prop 61 prevents drug prices to the VA from going up and those costs being passed on, and then that will have a ripple effect across the entire state. If Prop 61 goes into effect, and the 12 percent of people covered by Prop 61 experience some lower drug prices, the 88 percent of people in California who are not covered by Prop 61 could see an offsetting price increase. 

So should voters be concerned that Prop 61 will have a similar ripple effect?

GS: The federal legislation Kathy refers to did apply the discounts that the VA was enjoying to other federal government programs. It is true that the avaricious drug companies, in their greed, did raise the prices to the VA. What she didn’t mention is what happened in 1992 as a result of that act of greed by the drug companies. Congress put in place a law that mandates the drug discounts to the VA, and the drug companies cannot overcome that of their own volition. It also put in place a law that limits price increases to the VA to no more than the consumer price index. It is utterly disingenuous to assert that if Prop 61 passes, drug companies can go to the VA, rip up their contracts, and raise prices to the VA. Federal law doesn’t allow that to happen. 

KF: Garry is right about that 1992 law and he’s right that the VA automatically gets a discount of 24 percent off the list price of drugs. What he didn’t tell you is that the VA doesn’t always pay that price. The VA actually negotiates steeper discounts for the drugs that it purchases, and estimates are that it could pay 40 percent less than Medicare and get a much steeper discount than that 24 percent.

What will the overall impact be on veterans?

GS: I really respect and honor our veterans' service to our country, but there are Prop 60 ads all over the air with vets talking about how this is going to increase prices to not just the VA, but veterans as well. That also is not possible under the law. Most veterans don’t pay anything for VA care or drugs if they have a service-related injury. Those vets get their care for free. Other vets who have non service-related maladies or illnesses or problems pay a very low co-pay per month -- $8 per drug is the highest it can go – and there’s a $960 limit annually on what a veteran can pay out of pocket. So a typical veteran isn’t affected by drug prices that the VA pays, even if they go higher.

KF: The concern of the VA, and this is where they come up with the $3.8 billion I mentioned earlier, is the difference between the prices that they’re paying now and the 24 percent is that $3.8 billion. If the VA is faced with such a big budget hole, even if it doesn’t get to that $3.8 billion figure, they will have to fill that hole somehow. There’s only two ways to address a budget deficit: either you cut costs, which could mean cutting services to veterans, or you pass the cost along. Nothing in Prop 61 says that the federal government couldn’t someday increase co-pays for veterans or charge them more for healthcare. Prop 61 can’t dictate what a federal government does. If VA is faced with massive budget hole, they’ll have to do something and from a veteran’s perspective, they don’t like what they see.

How much is being spent on the campaigns?

Guests:

Garry South, chief strategist and spokesperson for the Yes on 61 campaign

Kathy Fairbanks, spokesperson for the No on Prop 61 coalition

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