Cart is empty
Dueling initiatives offer very different programs
By Bill AinsworthUNION-TRIBUNE STAFF WRITER
August 22, 2005
SEATTLE - California's high-stakes initiative battle over dueling prescription drug discount programs is part of a nationwide movement to give the uninsured relief from the skyrocketing price of drugs.
States across the country are taking steps that include encouraging the purchase of low-cost Canadian drugs and launching discount programs, according to the National Conference of State Legislatures. Thirteen states have started programs offering cut-rate drugs.
In California, two sides are highlighting the very different approaches of Ohio and Maine in the nationwide effort.
California voters face a choice in the Nov. 8 special election.
They can follow Ohio and approve Proposition 78, which relies on voluntary discounts from drug makers. Or they can vote for Proposition 79, based on a program in Maine that holds a "hammer" over the heads of drug companies to make them comply.
Under Proposition 79, companies that don't participate could have their drugs taken off the preferred list for the state's Medi-Cal program for the poor. Once a drug is off that list, physicians have to obtain special permission to prescribe it, which could dramatically lower sales.
Medi-Cal, funded by the federal and state governments, spends about $4 billion on drugs each year for the 6.8 million people it covers.
Drug companies are working hard to promote the voluntary approach. Proposition 78 combines existing programs, which haven't been very effective, with new voluntary agreements from drug companies to sell some drugs at lower prices.
So far, the pharmaceutical industry's campaign has raised $72 million to pass Proposition 78 and defeat Proposition 79. A coalition of consumer groups and organized labor has raised $10 million for Proposition 79 and Proposition 80, which would re-regulate the electricity industry.
Late last week, pharmaceutical companies sent representatives to Seattle for the National Conference of State Legislatures and contributed thousands of dollars as sponsors. Astra Zeneca Pharmaceutical LP, for example, chipped in $25,000, while Pfizer donated $10,000.
At the convention, a reminder of the pharmaceutical industry's promotional efforts dangled from the necks of thousands of delegates. Each lanyard that held identification badges advertised TogetherRxAccess, a new drug industry discount program.
The industry trade group Pharmaceutical Research and Manufacturers of America, or PhRMA, has spent thousands of dollars in court trying to block the Maine program.
In Ohio, PhRMA succeeded in knocking a measure off the ballot that would have pressured drug companies to join a discount program.
Two years ago, however, the industry found that while it was winning many legal and political battles, it was losing in the court of public opinion. Drug makers became increasingly unpopular as consumers began seeing them as profit-hungry companies that made drugs less affordable.
"The pharmaceutical industry has made a real effort in the last two years to regain the credibility and the bond with patients. We lost it. We want to get that covenant back," said Jan Faiks, vice president for government affairs for PhRMA.
She said the effort began two years ago in Ohio, where PhRMA worked with lawmakers to create a discount program for the uninsured that was enacted this year. The push has continued in California, where the industry is promoting Proposition 78, the voluntary plan.
The Ohio program seeks to save money by using discounts from pharmacies and negotiated rebates from drug makers. So far, 90 percent of the $1 million in discounts saved by Ohio participants has come from pharmacies and only 10 percent from drug makers, said Jennifer Lopez, administrator of the Ohio Best Rx program.
"That's surprising to me," Lopez said. "Pharmacies are carrying the bulk of the savings. It's tough for them."
In Ohio, without any leverage to use against companies, Lopez said, she relies on each pharmaceutical company to decide how much it wants to reduce prices for the uninsured.
"Some have been very generous. Some are up to 40 percent. Others are giving less than 5 percent," she said.
Still, she wants to pressure companies by publishing a "value drug list" of inexpensive drugs. She hopes that all companies will have an incentive to offer discounts so they can get their products on that list and help increase sales.
"People are getting good discounts. We expect them to get better as the program grows," Lopez said.
Proposition 78, which is based on a plan formulated by Gov. Arnold Schwarzenegger, also relies on voluntary discounts negotiated with pharmacies and drug makers.
About 5 million Californians would be eligible to pay $15 a year to join the program, which covers uninsured people who earn at or below 300 percent of the federal poverty level. For a family of four, that would be $58,000 a year.
Proposition 79 would cover about 10 million people, including those who earn at or below 400 percent of the federal poverty level, an income of $77,000 a year for a family of four.
Proposition 79, which would cost $10 a year to join, would also cover a person whose medical expenses exceed 5 percent of family income. The measure also allows lawsuits against drug manufacturers charging "unconscionable prices" and making "unjust" profits,
Anthony Wright, executive director of Health Access, which is sponsoring Proposition 79, said the legal provision protects consumers. But pharmaceutical company officials say it could ruin the state's business climate by unleashing a flood of lawsuits.
In Maine, a judge threw out a similar lawsuit provision, ruling that it improperly regulated companies outside the state.
Sponsors of the union-backed Proposition 79 say a voluntary approach won't work with drug makers because they are so aggressive at protecting profits. Iowa and California both tried and failed to enact discount programs that relied on a voluntary approach because companies didn't participate.
California created a program that aimed to get discounts for seniors, but the Department of Health Services couldn't implement it, said Stan Rosenstein, director of Medi-Cal Care Services.
"The number of manufacturers and the level of potential discounts was low," Rosenstein wrote in a letter to state Sen. Jackie Speier, D-Burlingame, the program sponsor.
Wright said drug companies respond only to pressure. "Even if the voluntary programs work at the beginning, as the public pressure goes down, so will the discounts," he said.
The leveraging approach in Proposition 79 comes from a plan first enacted in Maine.
Despite years of legal challenges from the pharmaceutical industry, the Maine program has operated for two years and it has not sought or needed federal approval, said Jude Walsh, who administers the Maine Rx plus program.
"It's a wonderful program for people who don't have a pharmacy network. We get very significant discounts," Walsh said.
About 98,000 people are enrolled, she said.
She said Maine officials have modified the program since it was first passed and have never had to follow through on the threat to pull a company off the preferred list for Medicaid. Maine doesn't need the hammer now, she said, because companies are participating.
Sharon Treat, a former Maine legislator who helped enact the Maine Rx Plus program, said that even if it's not used, the threat of yanking a drug off the list helps the state improve its bargaining position.
Treat, executive director of the National Legislative Association on Prescription Drug Prices, said research by her organization shows that Maine program members pay 10 percent less for drugs than those enrolled in Ohio.
She believes the lower prices are a result of the leverage. "They have more authority to negotiate prices in Maine," she said.
Treat said the pharmaceutical industry is going all-out to defeat Proposition 79. "It's trying to stop something that's a movement across the country that could really disrupt market share," she said. "If this passes in California, other states could follow."
While California advocates use the experience of other states to help make their case, lawmakers from across the nation say they are following the initiative battle closely.
"Whatever happens in California affects everybody. We'll be watching," said Jon Tester, president of the Montana Senate and author of a voluntary discount drug program.
