Biotech and Pharma

California's very expensive drug price battle: Prop 61 fight gets even nastier

Cali's drug price brawl
Cali's drug price brawl

If dollars were votes, big pharma would be beating California's controversial drug-price control ballot measure Proposition 61 by a margin of about 7-1.

Instead, it's a dead heat. And the bruising fight over the measure that could directly affect 5 million Californians, and possibly millions more, turned even nastier this week with a scathing series of social media ads targeting pharmaceutical company CEOs.

Major pharmaceutical companies have been pouring massive amounts of money — $109 million and counting — into California to urge voters to say "No" to Prop 61, which if passed Tuesday would largely bar state agencies that cover about 5 million people for paying any more for prescription drugs than what the federal Veterans Affairs Department pays.

Prop 61 advertisement for lower drug prices.
Source: Yes on Prop 61

The VA often pays the lowest prices for drugs in the nation, being able to negotiate what it pays for medications, often at a steep discount compared to other government agencies and Medicare.

The big funding support pharma has given the "No" campaign reflects both the huge amount that California state agencies spend on medications annually — around $4 billion — and concerns drug companies have that other states might follow suit with drug-price control initiatives of their own in the event that Prop 61 passes.

"They're running scared," said Michael Weinstein, president of the AIDS Healthcare Foundation, the main backer of Prop 61, also known as "the California Drug Price Relief Act."

"Their own internal polls got them nervous," said Weinstein, whose "Yes" campaign's message refers to "greedy drug companies" that are "overcharging California's taxpayers and consumers by billions of dollars each year for life-saving medicines, putting profits over people."

But the "No on 61" campaign, which in addition to pharma companies includes patient advocates, doctors, veterans' groups, labor unions and other AIDS activists, warns that the measure could have negative unintended consequences that would include higher drug costs for many people, and decreased access to some medications.

Several drug companies, Merck, Pfizer and Amgen, released identically worded statements to CNBC on Monday they have "serious concerns about this poorly-written measure because of the negative impact it will have on Californians," adding that, "We are part of a broad and growing coalition of organizations."

Pharma's contributions — which include more than $9 million apiece from Merck, Pfizer and Johnson & Johnson — combined with the $16 million or so spent by "Yes" advocates led by the AIDS Healthcare Foundation have made Prop 61 the most expensive ballot measure ever in California, and possibly the most expensive in U.S. history, according to the politics site Ballotpedia.

Despite the huge spending edge by the "No" side, which fueled an onslaught of television ads, a recent Field Poll found voters split evenly — 47 percent to 47 percent — on the measure.

The expensive and contentious campaigning over Prop 61, which has drawn enthusiastic support from Vermont Sen. Bernie Sanders, got personal on Sunday.

The "Yes" campaign released a series of 15-second YouTube ads showing CEOs of pharma companies on "Wanted" posters, saying they were being sought "for gouging the American public & taxpayers with killer drug prices."

One such ad, featuring J&J CEO Alex Gorsky, noted that his salary last year was $23.8 million, and said the company in 2013 paid $2.2 billion "to settle criminal charges of illegally promoting the improper use of its anti-psychotic drug Risperdal for use by elderly patients despite studies that showed the drug increases risk of stroke and diabetes." The ad ends with the message "Vote Yes on Prop 61."

J&J spokesman Ernie Knewitz told CNBC, "As we have learned through the 2016 election campaign, personal attacks do not serve the interests of the American public or foster a balanced discussion on the substantive issues facing the nation."

Kathy Fairbanks, spokeswoman for the "No on 61" campaign, said of the ads, "All the antics from 'Yes on 61' are an attempt by them to take attention away from their flawed measure."

"When voters look into the facts, we believe they'll see this measure is bad for California," Fairbanks said.

The "Yes on 61" campaign argues that Prop 61 would exploit the state's "bulk-purchasing power to secure lower prices for prescription drugs, saving taxpayers billions of dollars."

"And it will be an important blow against the monopoly pricing power of profit-driven arrogance of the pharmaceutical industry," according to the campaign's website.

But the "No on 61" campaign spokeswoman said the "Yes" campaign is "talking in a lot of generalities," and is misleading voters about the impact of the proposition if passed.

Fairbanks said the ballot measure would only cover "12 percent of Californians, who are in certain health-care programs." Prop 61 would not change how Medicare, job-based health plans, or Obamacare plans pay for their drugs.

The "No" campaign argues that Prop 61 could actually lead to higher drug costs for many people, including veterans. If the drug companies' prices for a large chunk of Californians was pegged to the Veterans Affairs prices, that argument goes, then the companies would have less incentive to give the VA a sharply discounted price.

The campaign also said that Prop 61 "would invalidate many drug discount agreements the state has negotiated with pharmaceutical companies," which would increase state prescription costs by tens of millions of dollars each year.

The California Medical Association, which represents doctors in California, opposes the measure because of that claim, and also because the group said the cancellation of drug purchasing contracts the state already has with pharma companies "would remove many drugs from the Medi-Cal list of pre-approved medicines — creating a new prior authorization hurdle for patients and their physicians." Medi-Cal, which is exempt from Prop 61, is the state's Medicaid program.

Fairbanks said another problem with Prop 61 is its linkage of prices paid by state agencies to the VA's price, which is not public information, and it is not clear if the state could compel disclosure.

An analysis released in June by the state's huge pension and health benefits agency for retirees, CalPers, voiced many of the same concerns raised by the "No" campaign.

The AIDS Healthcare Foundation's chief, Weinstein, said the "No" campaign has "been so fulsome in their lying that it confused people" about the issue.

Weinstein said "there's nothing in Prop 61 that would raise prices for anybody."

"What they're saying is their obscene profits are inviolate," Weinstein said, arguing that there is nothing in the ballot measure that compels drug companies to demand higher prices for consumers to offset the lower profit margin obtained from selling to customers covered by Prop 61.