California Voters Will Decide on Drug Price Standards Initiative

Among the measures on the ballot for Californians this Election Day is Proposition 61, the Drug Price Standards Initiative. The measure, which would restrict the amount state agencies pay for drugs, has a multitude of supporters and opponents who have amassed a combined $125.84 million in contributions as of Monday. California Proposition 61 would require that state agencies purchase all prescription drugs at or below the price paid for that drug by the Department of Veterans Affairs (VA), which pays the lowest of any federal agency for prescription medications.

Supporters of the measure say that Proposition 61 would save taxpayers billions and fight price gouging by drug companies. However, according to the legislative analysis in the California Voter Information Guide, the measure’s potential to reduce state spending on drugs is complicated by uncertainties regarding the measure’s implementation and the reaction from drug companies.

The VA’s public database on prescription drug prices does not always reflect the actual cost paid, because in some cases “the VA has negotiated a lower price than that shown in the public database and is keeping that pricing information confidential,” the guide explained. This confidentiality could make California agencies “unable to assess in all cases whether state agencies are paying less than or equal to the lowest price paid by the VA for the same drug.” However, it noted that because the publicly available VA prices are still generally lower than those paid by California state agencies for some drugs, the measure could help the state spend less on prescription medications.

The voter guide also named drug manufacturer responses as a major unpredictable factor that will determine the measure’s financial impact. The manufacturers could raise VA drug prices, or they could simply refuse to offer California agencies the reduced price, since the measure does not force them to lower prices. In that case, the state would have to either negotiate down to the VA price or only purchase drugs the VA does not purchase, which could be more expensive than the drugs bought before the measure.

Veterans groups including the California chapters of Veterans of Foreign Wars, Vietnam Veterans of America, the American Legion, and AMVETS have opposed the measure out of concern that it could lead to drug companies raising prices for the VA. However, supporters of the measure say that this scenario could not occur.

“As the former chairman of the Senate Veterans' Affairs Committee, I would never support a measure that harms our veterans,” wrote Senator Bernie Sanders in an op-ed for the Los Angeles Times. “Pharmaceutical companies cannot unilaterally raise the prices of drugs it sells to the VA. The most the VA pays for a drug is either the best commercial price minus discounts and rebates, or the average price paid by pharmacies minus a large discount, whichever is lower. Those price caps are set in law. The VA also receives additional discounts if drug prices rise faster than general inflation.”

Proposition 61’s supporters have claimed that the opposition is hardly motivated by concern for veterans, citing the $105 million that the “No on Prop 61” committee, largely funded by pharmaceutical companies, has spent so far campaigning against the measure.

“Drug companies are planning to spend $100 million to fight this measure because they know it would cause downward pressure on ALL drug prices—and cut into their excessive profits,” according to the official argument in favor of Proposition 61 in the California voter guide.

Supporters and opponents of the measure have raised more than $125 million in total contributions as of Monday, making it the costliest measure on any ballot nationwide this Election Day. Californians heading to the polls will have to wade through the barrage of conflicting television commercials, billboards, and newspaper ads about Proposition 61 to decide how to cast their vote on November 8, 2016.