Disgusted with Big Pharma?
If you aren’t, you must be boycotting the news. The latest outrage involves Mylan, which ratcheted up the price of life-saving EpiPen injectors more than 500 percent since acquiring the patent in 2007 and presented some creative accounting during a congressional hearing last week. There are too many other examples of price gouging to list them here. Meanwhile, lobbying by pharmaceutical companies has thwarted efforts to control costs and even introduce a degree of transparency to pricing of prescription medication.
So it’s easy to understand why voters might be tempted to punish drug companies.
At first glance, Proposition 61 on the Nov. 8 ballot looks like an opportunity to send a message to an avaricious industry. Unfortunately, it might backfire.
Proposition 61 would prohibit state agencies from paying more for prescription drugs than the U.S. Department of Veterans Affairs. Federal law guarantees the VA a 24 percent discount below average prices, and, using its muscle as a bulk purchaser, the agency negotiates even lower prices on some commonly used medications.
Drug companies hate Proposition 61, and they’re on track to spend $100 million to defeat it.
But respected consumer groups including Consumers Union and Health Access are neutral, despite their support for cost containment. And independent budget analysts can’t say if it would save money for taxpayers. It could drive public and private costs higher.
This much is certain: If Proposition 61 passes, pharmaceutical companies will fight it.
There’s nothing to prevent drug makers from raising their prices, thereby increasing what they charge the Department of Veterans Affairs and, in turn, what state agencies could legally pay under the initiative. Under that scenario, veterans may not be the only ones facing higher costs. Price hikes could hit California residents with private insurance, too — all without producing savings for state agencies.
To avoid offering discounts, drug makers could simply refuse to sell certain medications to state agencies, reducing options for state employees and retirees among others.
Medi-Cal, one of the largest public purchasers of prescription medication, would be obligated by federal law to continue providing some drugs even if manufacturers refuse to discount their prices.
In short, there aren’t any obvious incentives for pharmaceutical companies to comply with Proposition 61, which would cover only about 12 percent of California residents. But there’s one big disincentive: other states would demand the same discounts.
The rising cost of prescription medicine is a drain on public agencies, private employers and millions of families. Pharmaceutical companies seemingly raise prices at will, and they gain leverage through confidentiality agreements with bulk buyers as well as a consumer-unfriendly federal law that prohibits Medicare from negotiating bulk discounts of the sort enjoyed by the Department of Veterans Affairs. These issues need to be addressed, but that will take more than one initiative in one state.
Casting a protest vote against Big Pharma might feel good, but it won’t get at the source of high costs, and it’s unlikely to deliver any real savings, but it may drive up costs. The Press Democrat recommends a no vote on Proposition 61.