As many of our readers know, drug prices have been in the news for several months now, with many public figures voicing their concerns. It is slowly starting to move beyond the rhetoric into action, with several states, including California and Ohio, preparing for ballot initiatives that would attempt to provide some relief from increasing drug prices.
California
The California ballot measure that would require drug makers to provide large discounts to state agencies that serve HIV patients, retirees, inmates, and low-income people received more than 540,000 signatures, essentially ensuring its presence on California’s November 2016 ballot.
The measure would require state agencies to negotiate drug prices at least as low as prices paid by the U.S. Department of Veterans Affairs, who is able to keep its costs down by statute and by using its purchasing power to obtain steep discounts. Currently, the VA pays approximately 20% below the lowest pricing now available to state agencies.
According to Jeff McCombs, a health economist at the University of Southern California, the savings wouldn’t make that much of a difference in what individuals pay for drugs as most people who are served by the affected programs already enjoy fairly low out-of-pocket drug costs.
Brandon Castillo, a Sacramento consultant, raised concerns that if this measure is successful, it could lead companies to charge higher prices to other consumers and that in turn, VA costs might also rise. Mr. Castillo 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?”
Stuart Schweitzer, a professor of health policy and management at the University of California, Los Angeles, stated that most of the egregious drug prices that are prompting this proposal are only temporary. He offered the example of Sovaldi: while the price remains high, it has started its descent because a competing supplier entered the market with a similar medicine.
The proposal is so complex that budget analysts cannot gauge its fiscal effects. Kathy Fairbanks, a spokeswoman for PhRMA, alerted voters, stating, “While this ballot measure may look simple, the changes being proposed will have adverse consequences for Californians. If it goes forward we will be preparing a campaign to educate voters in California about its negative consequences.”
The pharmaceutical industry is well aware of this recent development and is throwing a lot of their might behind a new effort to stop this law, and others similar to it, from going into effect. There is a cause for concern that if the law passes in California, other states might be inspired to present a similar ballot proposal.
Some pharmaceutical companies that have teamed up to protect their interests are: Johnson & Johnson, AbbVie, Amgen, Eli Lilly, and Bristol-Myers Squibb.
It is not uncommon for companies to spend tens of millions of dollars in opposition to California ballot initiatives. PhRMA and other similar organizations are working to build up their war chest for educating California voters of ramifications of this ballot measure.
Ohio
Ohio is facing a similar drug pricing issue. Supporters of the Ohio Drug Price Relief Act, the AIDS Healthcare Foundation and their attorneys, have started to collect the necessary 91,677 signatures to force the state legislature into taking action on the proposal. If the state legislature does nothing within four months of receiving the proposed law, petitioners may collect an additional 91,677 signatures to place the issue on the ballot.
The proposed Ohio statute would prevent state officials from entering into contracts for prescription drugs unless the prices from manufacturers are the same or lower than the prices paid by the United States Department of Veterans Affairs.
The federal General Accounting Office has previously concluded that extending Department of Veterans Affairs pricing to Medicare would shift costs to private insurance plans and other programs not able to purchase at that rate.
Edward Hamilton, a Columbus, Ohio HIV and AIDS activist, told the Ohio ballot board that while he believes the law is “well-intentioned,” it is “poorly executed” since the VA’s deals with pharmaceutical companies are trade secrets. As such, the law couldn’t actually be enforced. Hamilton believes that if the law is enacted, either by the legislature or popular vote, drug companies would cancel rebate programs that make HIV and AIDS drugs more affordable.
It is still unknown whether the AIDS Healthcare Foundation will be able to collect enough voter signatures in Ohio to place the initiative before the state legislature. If the AIDS Healthcare Foundation is able to collect the required signatures and the state legislature passes it without any amendments, the Ohio Drug Price Relief Act will become law.
As mentioned previously, if the legislature does not pass the measure unamended, the petitioners must collect an additional 91,677 signatures within 90 days to place the measure on the Ohio ballot. The additional signatures must be presented to the Secretary of State within 90 days after any actions taken by the Ohio General Assembly or at the conclusion of the four-month period and no later than 125 days before the General Election at which the petitioners wish for the initiative to be placed on the ballot. If placed on the ballot, the measure would need a simple majority vote to become law.
Conclusion
What some don’t realize is that pushing drug prices too low can also create problems. Antibiotics, for example, 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 for most companies.
We will be sure to keep an eye on any developments in California, Ohio, or any other state where petitioners make an attempt to stifle the free market of pharmaceuticals.