What you need to know about Prop. 61, the spendy prescription drug measure on November’s ballot

One of the most closely watched — and big-spending — ballot initiatives this fall is Proposition 61, a measure that seeks to limit the price state agencies pay for prescription drugs. 

The proposal on the Nov. 8 ballot is the latest battleground in a national debate about rising drug prices, and advocates say they can parlay what they see as growing anger over the greed of pharmaceutical companies into voter action.

Amid stories about the 500% increase in EpiPen prices and a 5,000% price hike on a drug by Turing Pharmaceuticals that helps fight an AIDS-related disease, the issue of drug price transparency came up in two separate bills during this year’s legislative session.

After both measures failed, Prop. 61 advocates hope to capitalize on the Legislature’s inaction, urging voters to take some control of drug prices in California. 

Here are some basics about the initiative:

What is Proposition 61?

Officially called the “California Drug Price Relief Act,” it aims to clamp down on the prices paid by state agencies for prescription drugs.

What would it do?

The measure would essentially prohibit the state from paying more for a drug than the U.S. Department of Veteran Affairs does. The VA typically pays the lowest price for prescription drugs of any public or private entity, because federal law ensures the agency gets a 24% discount off a drug’s list price right off the bat. And officials there often negotiate even steeper discounts on a drug-by-drug basis.

It would apply when the state directly purchases drugs (as it does for prison inmates) and also when the state is the “ultimate payer” for those drugs, such as when it reimburses pharmacies for medicine provided to Californians who are covered under certain state programs. If passed, all state agencies would need to comply by July 1, 2017.

How many Californians would this affect?

It’s not entirely clear. Opponents of the measure say about 12% of Californians, or an estimated 4.4 million people, would be covered. That includes low-income patients covered by Medi-Cal’s Fee for Service program, inmates in state prisons, state employees and retirees, and employees and teachers at UC and CSU campuses. Proponents of the measure have said they believe the figure is higher, around 5 million to 7 million Californians.

Not covered by the measure would be anyone who has private insurance, public school and school district employees or retirees, or the 10.4 million covered by the California’s largest healthcare program — Medi-Cal managed care. But many high-cost drugs for these patients, such as those used to treat hepatitis C, could be covered under the fee for service program because of the way those more expensive drugs are handled.

Who’s for it?

The measure is sponsored by the Los Angeles-based AIDS Healthcare Foundation and has been endorsed by the California Nurses Assn., American Assn. of Retired Persons of California and Robert Reich, a former secretary of Labor in the Clinton administration. Prop. 61 also has the backing of Vermont Sen. Bernie Sanders, a fact featured prominently in one of the campaign’s ads.

The Yes campaign, known as Californians for Lower Drug Prices, had raised more than $17 million as of Nov. 4, nearly all of it from the AIDS Healthcare Foundation.

The efforts could be working — a USC Dornsife/Los Angeles Times poll conducted in September by SurveyMonkey found two-thirds of voters in favor of Prop. 61. 

Who’s against it?

The “No” campaign, which calls itself Californians Against the Deceptive Rx Proposition, is bankrolled almost exclusively by pharmaceutical companies and the Pharmaceutical Research and Manufacturers of America.

Some of the largest contributors include GlaxoSmithKline, Pfizer and Gilead, which has recently been criticized for sky-high prices for pills that treat hepatitis C.

The committee had amassed a campaign war chest of more than $109 million as of Nov. 4.

Other Prop. 61 opponents include multiple veterans groups, California Medical Assn., the California State Council of Laborers and the Los Angeles LGBT Center, which had previously been neutral on the measure.

Some prominent groups, including the California Democratic Party, the California Labor Federation, and the San Francisco AIDS Foundation, have not taken a position. One raised questions about whether it would result in cost savings.

The ballot box guide to California's propositions »

How much money could Prop. 61 save California?

The truth is no one really knows.

Advocates say it could save CalPERS, the state’s public employee retirement system that accounts for only a fraction of the state’s prescription spending, an estimated $4 billion over 10 years. Opponents say any savings would be washed out if drug companies increase their prices or revoke specially negotiated rebates with state agencies.

One thing we do know: The state spends billions of dollars on prescription drugs. According to the state’s nonpartisan Legislative Analyst’s Office, California spent roughly $4.2 billion in the 2014-15 fiscal year. That doesn’t even include the 75% of Medi-Cal recipients who are on the managed care program, which wouldn’t be covered by this proposed law. The state itself is on the hook for roughly half of that — federal and other funds paid for the rest. That means any potential savings as a result of Prop. 61 could be split with other entities. 

Why is the fiscal impact so unclear?

The VA’s federally mandated price ceiling, known as the federal supply schedule, is publicly available. But the actual price the agency pays for a particular drug often is significantly lower because it negotiates additional discounts.

In general, pricing on any drug can vary widely depending on who’s buying, and deals are often bound by confidentiality agreements.

That said, the Legislative Analyst’s Office found that even if the lowest possible drug price can't be disclosed, state agencies will likely see some cost savings simply by paying the VA’s published drug prices, but they can’t say with confidence how much.

Couldn’t pharmaceutical industries just raise prices on veterans?

That’s what Prop. 61’s opponents are arguing would happen.

And while federal law does tie drug price increases for the VA to the consumer price index, that only applies to the publicly available price ceilings, not the steeper discounts the agency is able to obtain.

The measure’s opponents also say Prop. 61 could endanger agreements drug companies make with programs such as Medi-Cal. 

Haven’t I seen some ads about this on television already?

Both campaigns have been running ads on cable and online since before the measure even received a number from California’s secretary of state. 

One of the “Yes on 61” ads features Sanders declaring that Americans are being “ripped off by the greed of the pharmaceutical industry.”

Another, styled as a parody of a prescription drug advertisement, asks voters to take a fictional drug called “NoAxion,” warning that doing so could “lead to sky-high prescription drug prices, obscene drug company profits, and sick people dying because they can’t afford their meds.”

The No on 61 ads have called the initiative campaign “misleading” and claim it could lead to a reduction in patient access to necessary medicines. Plus, opponents say it would do nothing to help most Californians deal with increased drug prices.

For more on California politics, follow @cmaiduc.

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UPDATES:

Nov. 4, 5:52 p.m.: This article was updated with new fundraising numbers for proponents and opponents of the measure, and with the Los Angeles LGBT Center’s updated position.

This article was originally published on Sept. 15.