As a drug pricing transparency bill stumbles in Sacramento, the battle turns to November’s ballot

Reporting from Sacramento —  An effort to shed more light on prescription drug prices sputtered in the Legislature on Wednesday, dealing a setback to a burgeoning national movement to rein in healthcare expenses by curbing the cost of medication.

The decision by state Sen. Ed Hernandez (D-West Covina) to yank his bill from consideration after it was watered down in an Assembly panel marks an abrupt end to what promised to be the marquee lobbying battle of the legislative session, pitting Capitol heavyweights such as labor groups and health insurers against drug manufacturers.

The measure’s demise is a significant victory for pharmaceutical companies, but not a full reprieve. A separate ballot initiative to clamp down on drug costs will go before voters this fall, and the measure’s advocates hope to capitalize on the Legislature’s inaction.

With all parties vowing to press ahead — either via initiative or legislation next year — the issue of prescription drug costs is certain to remain at the forefront of California’s healthcare debate.

“This is an issue that will not go away, and the public demands answers,” Hernandez said in a statement Wednesday. “We will get it right.”

Hernandez’s measure, SB 1010, took a two-pronged approach. First, it would have required health plans to report detailed information on pharmaceutical drug costs — such as the most prescribed and most costly medicines — to state regulators.

It also would have forced drug makers to give notice of future price increases to insurance companies, pharmacy managers and the state agencies that buy prescription drugs.

It was the second piece of major drug pricing legislation to come before lawmakers this session: An earlier bill by Assemblyman David Chiu (D-San Francisco) to require pharmaceutical companies to report costs and profits associated with high-priced specialty drugs faltered earlier this year.

Updates from Sacramento »

The string of high-profile legislation reflects escalating scrutiny nationwide on surging drug prices and their effect on overall healthcare costs. From the presidential campaign to statehouses across the country, pharmaceutical companies have found themselves playing defense, hammered by headlines about six-figure specialty drugs or former Turing Pharmaceuticals executive Martin Shkreli, who drew intense criticism after increasing the price of a medication to combat rare infections by 5,000%.

Nearly three-quarters of Americans believe prescription drugs are too expensive, according to a poll last year by the nonprofit Kaiser Family Foundation, which is not affiliated with healthcare provider Kaiser Permanente.

The drug industry counters that much of the debate centers on wholesale prices, which can climb into five- and six-figure amounts. Most insured consumers typically pay a fraction of those costs under their co-payment plans.

Hernandez’s legislation was one of the most lobbied bills of the session, with at least 70 groups spending money to advocate for or against it, according to lobbying activity filings.

The measure was sponsored by the California Labor Federation, an umbrella group of 1,200 unions. Many of the individual statewide unions — along with local affiliates — pushed hard for the bill, arguing that advance notice on price increases was crucial to plan for their members’ healthcare.

On the opposing side, the industry’s main trade group, the Pharmaceutical Research and Manufacturers of America, or Phrma, and other associations were joined by at least 28 pharmaceutical companies that paid lobbyists to work to defeat the legislation.

“I’d be surprised if there was any major lobbying firm that did not have a contract … with one side or another in this fight,” said Anthony Wright, who leads the consumer advocacy group Health Access, a supporter of the bill.

The bill was substantially overhauled last week in a key Assembly fiscal committee. The changes increased the threshold under which drug makers would have to alert purchasers of price increases, and would have delayed the notice requirement for one year. The provision would have expired in 2022.

Proponents worried the new notice requirements would not have captured the vast majority of drug price increases, and argued that the delayed implementation would have given pharmaceutical companies time to manipulate their prices without scrutiny. Hernandez decided to pull the bill.

From labor groups to healthcare insurers, the reaction struck a common tone: We’ll be back.

“In the coming months, the California labor movement and our coalition partners, ranging from businesses and insurers to healthcare advocates and consumer groups, will redouble our efforts to enact real reform to control rising prescription drug prices that are hurting us all,” said Labor Federation leader Art Pulaski in a statement.

Even Phrma signaled an intention to tackle the issue.

“No patient should have to worry about whether they can afford their medicines,” said Priscilla VanderVeer, a spokeswoman for the group. “We believe that there is an opportunity to for us to work with Sen. Hernandez and his colleagues, as well as the broader stakeholder community, to find solutions that will give patients and families what they need: predictable and accessible information about the out-of-pocket costs they will face and enforceable, common-sense rules that prevent discrimination and remove barriers to receiving care.”

Meanwhile, the fight now shifts to the ballot box, with an initiative, Proposition 61, that would prevent state agencies from paying more for a drug than the price paid by the U.S. Department of Veterans Affairs.

The initiative is sponsored by the Los Angeles-based AIDS Healthcare Foundation and has been endorsed by former Democratic presidential contender Sen. Bernie Sanders of Vermont.

But its support does not match that of the drug pricing bill. Some of the legislation’s backers, including the California Medical Assn. and the statewide union of construction workers, oppose the initiative. Others, such as the California Democratic Party and the California Labor Federation, did not take a position on Proposition 61.

“People are looking at each policy differently,” said Kathy Fairbanks, a spokeswoman for the No on Proposition 61 campaign. “Prop. 61 still is bad policy. It was bad policy before today and it will be bad policy tomorrow.”

Drug companies have invested heavily to defeat the measure. The opposition campaign had nearly $66 million on hand as of June 30, according to campaign finance filings. Supporters reported just over $7 million in the bank.

The measure’s proponents said they see voters’ frustration with climbing drug prices — and Sacramento’s inability to address it — as working in their favor.

“Californians desperately want their leaders to do something about outrageous drug price gouging,” said Roger Salazar, spokesman for the initiative. “This bill was strictly about transparency, but the drug lobby spent massively to kill it. Well, I believe the voters of California aren’t afraid of Big Pharma, and if the Legislature won’t do it, they’ll handle this problem themselves by voting yes on Prop. 61.”

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