A California initiative to require drug makers to provide large discounts to state agencies has received revived news attention. The presidential campaign is breathing new life into the debate over drug pricing and state agency discounts.
In preparation for the California Presidential Primaries, Democrat Presidential Candidate U.S. Senator Bernie Sanders called for other presidential nominees Hillary Clinton and Donald Trump, to join him in backing the California initiative. According to a Bernie Sanders campaign press release, the proposition has the power to “save state taxpayers from being ripped off by pharmaceutical companies.”
During a campaign stop, Sanders discussed the issue, saying,
The pharmaceutical industry charges the American people, by far, the highest prices in the world for prescription drugs and millions of people are unable to afford the medicine they need. Meanwhile, the top five major drug companies last year made almost $50 billion in profits.
Concerns with the Initiative
As we mentioned previously, many experts in the field are concerned that the ballot proposition is misguided and actually will not help as many patients as proponents think.
Jeff McCombs, a health economist at the University of Southern California, believes that the savings created by the proposition would not make that much of a difference in what individuals pay for drugs, since most people who receive benefits through the affected programs already have low out-of-pocket costs.
Other concerns about the proposal included the idea that if the measure is successful, it could lead companies to charging higher prices to other consumers and that in turn, VA costs might also rise. Brandon Castillo, a Sacramento consultant, for example, stated, “We’re taking this measure seriously because the implications could be huge. For those not covered by the measure’s provisions, what are the implications on costs for them?”
A preliminary report done by the Legislative Analyst’s Office found that it is “highly” uncertain how much money California would safe (if it saved any money at all) if the ballot measure passes. The uncertainty is driven by two ideas: (1) the lowest prices paid by the VA are not known and there is no guarantee that they will be revealed to the public – or to state officials and (2) it is unclear how companies would react if the measure became law, i.e., raising prices on the VA.
Those who have watched the pharmaceutical industry ebb and flow over the years realize that pushing drug prices too low can also create problems. For example, antibiotics have been on the market for decades and are no longer profitable enough for the companies that own them to justify high research and development costs.
Drug Pricing in Politics
Without wading into the merits of each candidate’s argument, since it is an election year, everyone is concerned about where the candidates stand on issues that matter to them. With regard to drug pricing, both Senator Bernie Sanders and Secretary of State Hillary Clinton support allowing Medicare to negotiate drug prices. Presumptive Republican nominee Donald Trump has also been on record criticizing the industry’s pricing, though he has since walked back his comments on supporting price negotiations by Medicare. Since then, he has suggested allowing Americans to buy drugs from countries like Canada and the United Kingdom, where they are cheaper.
While two of the remaining candidates believe that giving the power to Medicare to negotiate with drugmakers would do much to lower the cost of drugs, a report released in February by the National Coalition on Health Care, said that price negotiations alone would do little to lower the prices Americans pay for drugs. Such a change would require myriad policy changes.