Tired of Escalating Drug Prices? Watch California’s Proposition 61

It would be tiresome to say how tiresome this election has been- but I am writing this Tuesday morning and unlike you- a reader on the other side- I do not know what is going to happen tonight.

But beyond the tension at the level of the Presidency, there are numerous other issues at stake- including one we all care about [or at least the majority of Americans at 77%]: the need to control prescription drug prices.

Today California is attempting to do what has been impossible at the Federal level. That state’s Proposition 61 is an attempt to begin to rein in the pharmaceutical industry, a ballot measure that Bernie Sanders publically hopes would “spark a national movement.”

The Rollicking World of Drug Price Gouges

It may go without saying that the pharmaceutical industry has its way with us consumers in an unregulated industry (unlike most other industrialized countries, there are no drug price controls in America).

Many families feel the impact of increases when even one prescription drug is necessary-prescription drugs rose more than 12% in 2015 alone. But the abuses in the industry are most obvious when reviewing some of the recent escalations that have come under media scrutiny.

Most of you probably remember the sweet young face (age 32) of Martin Shkreli, the “new poster boy for corporate greed”. He was all over our TVs after he acquired the American marketing rights for a drug critical for treating toxoplasmosis (of particular danger to children and people with AIDS), then immediately raised the price of the 65-year-old old medication from $13.50 to $750.00. But that is by no means the only example of pricing abuse.

The cost of the necessary 5-day treatment for lead poisoning rose from $950 to $27,000 (a 2,700% increase) when Valeant Pharmaceutical purchased the company manufacturing the drug in 2013. Schizophrenics are another population injured by a pharmaceutical company when the price of one drug used to battle some forms of that disease was increased 1,650% during the second fiscal quarter of 2016.

Price gouging at this magnitude is not lost on Congress, with bipartisan push-back. The escalation of a drug used to treat chronic myeloid leukemia four times in 2016 led to a letter to the company from Senator Bernie Sanders (I, Vt.) and Representative Elijah Cummings (D, Md.) just last month. Senator Chuck Grassley (R, Iowa) recently wrote the manufacturer of the (now notorious) EpiPen asking why the cost for this life-saving emergency medication was $500 when it sold for only $57 in 2007.

Even Donald Trump and Hillary Clinton agreed throughout the election season that controlling drug prices is essential to our economy and our health care system.

With this much media attention, public backlash and bipartisan focus on legislative correction it would appear that the drug companies will finally be reined it- right?

Well- unfortunately not. Let’s look at California as an example why.

California Proposition 61

Given the Federal government has not been able to get price controls for drug companies (let’s not forget that Medicare Part D, passed in 2003, specifically prohibits the US government from negotiating drug prices with the industry), California decided to bring accountability to the market in that state.

Today (remember it is Election Day in my world) Californians are voting on a law that would direct California state agencies not to pay more for prescription drugs than the VA [U.S. Department of Veterans Affairs] pays for the same drugs. That is important- because although there is little transparency in this part of the market, “it is believed the federal program for military personnel gets some of the deepest discounts in the country.”

This Summer the Proposition was going strong, with polls showing two-thirds of Californians supporting the measure.

But that was before PhARMA– the trade advocacy group for the pharmaceutical industry, poured $109 million dollars into the state to defeat the bill. The state has been barraged with ads [described as “Nasty” on both sides]. The argument against the Bill has been helped significantly by the enrollment of some (not all) veterans groups against the measure, now convinced (largely through PhARMA) that the bill would result in the VA raising its prices.

And now- on election day- the latest polls show Californians deadlocked on the issue.

This initiative is not the first time a state- or a sector within the federal government- has tried to control the pharmaceutical industry, nor will it be the last. But it is a shining example of why this industry has so successfully avoided regulation in the past. Proposition 61 was an excellent opportunity to “send a signal” to D.C., and more importantly, the drug industry itself.

But PhARMA has already gotten the message. Their “Playbook” for the post-election season includes spending “hundreds of millions of dollars” to fight similar legislative proposals. This explains why PhARMA member companies have just been hit with a requirement to “fork over an additional $100 million per year” for membership.

Regardless of the results of the election, I hope you take time to check on the fate of this California ballot. I don’t know right now if Proposition 61 was successful- but you do (or can find out).

It is worth investigating, because it points to a battle that has just begun.

Want To Know More?

The abuses I mentioned earlier have not gone without any repercussions. The “Bad Boy” Martin Shkreli is currently under criminal investigation– not for the price increase I mentioned, but for securities-fraud allegations based on his activities at two hedge funds before the drug pricing controversy. Watch for the trial Summer 2017.

Valeant- the company involved in the lead-poisoning treatment price increase has also fallen on hard times. The company’s “market cap has fallen 87% since August–some $80 billion in shareholder value has vanished, largely due to intense congressional scrutiny for its drug-pricing policies” Citation here

As for PhARMA- there are plenty of unflattering articles available– as evidenced by the titles. Here are some of my favorites: Big Pharma Is America’s New Mafia; The Evils of Big Pharma Exposed; Big Pharma is spending nearly $900 million to fight limits on powerful opioids; and AMA: Big Pharma Should Stop Selling Drugs Americans Don’t Need!