Pharmaceutical giants spend big to defeat Prop 61, ‘ground zero’ for drug price control

Roger Salazar has his work cut out for him.

Salazar, a spokesperson for Yes on Proposition 61, The California Drug Price Relief Act, has been organizing activists and volunteers, running online ad campaigns and TV commercials and setting up street billboards—all in support of a proposition that pharmaceutical giants including Merck and Johnson & Johnson are working hard to defeat.

If passed, Proposition 61 would prohibit state agencies, such as Medi-Cal, the California Public Employees’ Retirement System (CalPERS) and the Department of Corrections and Rehabilitation, from paying more for any prescription drug than the lowest price paid by the Department of Veterans Affairs for the same drug.

So far, more than $123 million has been spent in the battle over the campaign, making it the most expensive measure on the California ballot this year. Prop 61’s opponents—led by Merck, Pfizer and Johnson & Johnson—have spent $109 million to defeat the measure, more than seven times the amount spent in support of the ballot.

Salazar said that pharmaceutical firms are concerned that Prop 61 would have a “cascading effect.”

“Once the state of California starts receiving discounts that the Department of Veterans Affairs has, private companies will also want this discount, other states will want this discount, and it is going to put a lot of downward pressure on prices,” Salazar said. “The pharmaceutical industry recognizes it. They call California ‘ground zero’ for price control.”

But a spokesperson for the “No Prop 61” campaign, Kathy Fairbanks, said that if the measure passed, pharmaceutical companies might increase prices the Department of Veterans Affairs pays for prescription drugs.

“The losers would be California veterans, patients and taxpayers,” Fairbanks said.

Merck, Pfizer and Johnson & Johnson representatives did not respond to requests for comment.

California state agencies spend approximately $3.8 billion on prescription drugs annually, according to the Legislative Analyst’s Office (LAO), which provides nonpartisan fiscal and policy advice to the state legislature.

But “different state agencies often pay different prices for the same prescription drug, which reflect the results of negotiations between the drugs’ buyers and sellers,” said LAO analyst Ben Johnson.

As a result, prescription drug purchase agreements between drug manufacturers and specific agencies often contain confidentiality clauses intended to prohibit public disclosure of the agreed-upon prices.

A public database of prices maintained by the Department of Veterans Affairs, for example, indicates that the agency pays $183 for an EpiPen; agencies such as CalPERS don’t disclose how much they pay for that drug or any individual drug.

“There is a tremendous lack of transparency right now,” Salazar said. “If the agencies don’t know how much other agencies pay, they can’t compare and figure out if one pays a higher price than the other.”

Charles Idelson, a spokesperson for Prop 61 supporter National Nurses United, said that pharmaceutical prices have climbed tremendously in recent years.

“The average price for the nation’s top 10 drugs saw a 91 percent price increase in the last five years,” he said.

“The only opportunity for voters to rein in Big Pharma is to vote Yes on Proposition 61,” Salazar said.

Top supporters of the campaign to pass Prop 61 include the AIDS Healthcare Foundation, the California Nurses Association and the American Association of Retired Persons (AARP).

More than a hundred organizations—including the Veterans of Foreign Wars, Vietnam Veterans of America, California Medical Association, California Taxpayers Association and the California chapter of the National Association for the Advancement of Colored People—have supported the campaign to defeat the measure.

According to a statewide poll conducted by The Field Poll and the Institute of Governmental Studies at UC Berkeley last month, 50 percent of Californians planned to vote yes on Prop 16 in November and 16 percent planned to vote no. Thirty-four percent of voters, according to the poll, were still undecided.

An analysis by the LAO predicted that “if the measure lowered total state prescription drug spending by even a few percent, it would result in state savings in the high tens of millions of dollars annually.”