OPPOSES
Proposition 78--Discounts on Prescription Drugs
Initiative Statute

Proposition 78, called by its proponents the California State Pharmacy Assistance Program (Cal Rx), would:

• establish a discount prescription drug program that would be administered by the California Department of Health Services (DHS)
• enable certain low- and moderate-income residents to purchase prescription drugs at reduced prices
• authorize DHS to negotiate and contract with pharmacies to sell drugs at agreed-upon prices
• authorize DHS to negotiate rebate agreements with participating drug manufacturers
• impose a $15 annual application fee on program participants
• create a state fund for deposit of drug manufacturers' rebate payments
• require DHS to provide a prompt determination of residents' eligibility based on listed qualifications
• permit outreach programs to increase public awareness
• allow DHS to terminate the program if it found there were insufficient discounts to make the program work, if too few persons enrolled in the program, or if it could not find a vendor to help run the program.

Prescription Drug Coverage. More than half of all American adults report taking prescription medicine on a daily basis (Henry J. Kaiser Family Foundation HealthPoll Report, Jan-Feb 2005). Americans who pay retail for prescription drugs pay more than anyone else in the world for their medications. As prescription drug prices soar, many Californians are forced to choose between vital medicines and other necessities.

Currently, several state and federal programs provide discounted prescription drug coverage to eligible individuals:

• Medi-Cal, administered by the Department of Health Services, provides prescription drugs for low-income children and adults.
• The Healthy Families Program, administered by the state's Managed Risk Medical Insurance Board, provides prescription drugs for children in low- to moderate-income families who do not qualify for Medi-Cal.
• Beginning in January 2006, the federal Medicare program for elderly and disabled persons will provide prescription drug coverage. (Some persons covered will also be enrolled in Medi-Cal.).
• Various other programs using state or federal funds help pay for part or all of the costs of drugs for specified individuals.

California and other states, private associations, and drug makers have established drug discount programs to help certain individuals, who are not eligible for government programs, purchase prescription drugs at reduced prices.

Private insurance, paid for by individuals or employers, provides discounted prescription drug benefits.

The Proposal

Proposition 78 would create a new state discount prescription drug program for certain California residents to reduce the cost of prescription drugs purchased at pharmacies. The new drug discount program would be administered by DHS, which could contract with a private vendor for assistance.

Discount Card Program. Eligible individuals:

• would have income at or below 300 percent of the federal poverty level (up to almost $29,000 a year for an individual or about $58,000 for a family of four)
• could not participate if they are enrolled in Medi-Cal, the Healthy Families Programs, or other public programs supported by state or federal funding
• could generally participate only after a minimum of three months separation from a previous private or public source of drug coverage
• could not get discounts on drugs already covered by Medicare if they are enrolled in that federal program.

Individuals would be charged a $15 fee to enroll in the program for the first year and for each year thereafter, and would obtain a card that would qualify them for discounts on their drug purchases from pharmacies.

Program Administration. DHS would seek two types of discounts. The department would negotiate an agreed-upon discount in advance with pharmacies that voluntarily choose to participate. Further discounts would reflect any rebates the state negotiated with drug makers, which would be used to reimburse pharmacy discounts.

DHS would be required to implement agreements with drug discount programs operated by drug makers and other private groups so that discount cards would automatically provide consumers with access to the best available discounts.

DHS would conduct an outreach program to inform state residents about the new drug discount program to the extent funds are available.

DHS could end the program if it found there were insufficient discounts to make the program work, if too few persons enrolled in the program, or if it could not find a vendor to help run the program.

Estimate of Net State and Local Government Fiscal Impact. Proposition 78 would generate a one-time cost and ongoing state costs, potentially in the millions to low tens of millions of dollars annually, for administration and outreach activities for a new drug discount program. A significant share of these costs would probably be borne by the state General Fund.

Potential state costs could be in the low tens of millions of dollars to cover a funding gap between when drug rebates are collected by the state and when the state pays funds to pharmacies for drug discounts provided to consumers. Any such costs not covered through advance rebate payments from drug makers would be borne by the state General Fund.

Due to the availability of new drug discounts, state and county health programs could potentially realize significant savings.

Potential effects on state revenues and expenditure from changes in price and quantities of drugs sold in California are unknown.

Proposition 78 should be compared with Proposition 79, the Cheaper Prescription Drugs for California Act (Cal Rx Plus), a second measure on this ballot that would establish a new state drug discount program.

Proposition 78 relies on the drug industry to voluntarily discount drug prices, whereas Proposition 79 allows the state to enforce drug discounts.

Proposition 78 would offer coverage with lower discounts to about half as many individuals and would exclude more people from its program than Proposition 79.

Furthermore, unlike Proposition 79, Proposition 78 would not:

• link its discount program to Medi-Cal for the purpose of obtaining rebates on drugs
• establish a drug discount program to assist certain business and labor entities
• create an advisory board to review access to and pricing of drugs
• change state law to make it a civil violation for a drug maker to engage in profiteering from the sale of prescription drugs.

The State Constitution provides that if a particular provision of a proposition that has been approved by the voters is in conflict with a particular provision of another proposition approved by the voters at the same election, only the provision in the measure with the higher number of yes votes would take effect.

Proposition 78 specifies that its provisions would go into effect in their entirety, and that none of the provisions of a competing measure, such as Proposition 79, would take effect if Proposition 78 received the higher number of yes votes.

LEAGUE POSITION

LWVUS Health Care position: A basic level of quality health care at an affordable cost should be available to all U.S. residents.

SUPPORTERS Signing ballot arguments for	OPPONENTS Signing ballot arguments against:
Kristine Yahn, RN, Executive Director Californians for Patient Care	Nancy J. Brasmer, President California Alliance for Retired Americans
Carolyn Peterson, RN, MS, AOCN, Chief Operating Officer Community Hospice	Richard Holober, Executive Director Consumer Federation of California
Dora Luna, RN, Certified Pediatric Oncology Nurse UC Davis Medical Center	Jacqueline Jacobberger, President League of Women Voters of California

The rebuttal to the argument in favor of Proposition 78 was signed by Barbara A. Brenner, Executive Director, Breast Cancer Action; Ramon Castellblanch, Policy Advisor, Senior Action Network; and Kathy J. Sackman, RN, President, United Nurses Association of California.

RESOURCES

Barbara Storey, LWVC Program Director for Health Care, bs_lwv004@cox.net

Pat Snyder, LWVC Health Care Legislative Consultant, patsnydr@aol.com

Trudy Schafer, LWVC Program Director/Advocate, 801 12th Street, Suite 220, Sacramento 95814, 916-442-9210, Fax 916-442-7362, tschafer@lwvc.org

http://www.votenoonprop78.com/about78.htm, sponsored by Yes on 79 (see Proposition 79 in this Action Guide), includes information about Proposition 78 and its funders. A chart comparing Propositions 78 and 79 is available at http://www.votenoonprop78.com/comparison.htm

SUMMARY POINTS

Drug Manufacturers' Discount Proposal

• Proposition 78 is sponsored by drug companies who have pledged to spend "whatever it takes" to defeat Proposition 79, the real prescription drug discount reform sponsored by consumer, senior, health and labor organizations. As of September 20, The Pharmaceutical Research and Manufacturers of America California Initiative Fund had raised nearly $80 million to support Prop. 78 and oppose Prop. 79, setting a record for contributions to an initiative campaign. Four drug companies have donated nearly $10 million each!
• Proposition 78 would provide prescription drug coverage to about half as many Californians (4-5 million) as the competing ballot measure, Proposition 79, which would cover 8-10 million.
• Proposition 78 would not offer discounts to California residents who have inadequate drug coverage--people with catastrophic medical bills and the chronically ill--as would Proposition 79.
• Proposition 78 relies on drug manufacturers to voluntarily lower their prices and does not allow the state of California to enforce the program. In 2001, the Golden Bear State Pharmacy plan was designed to offer seniors voluntary discounts for their medications. More than 500 drug manufacturers were invited to participate, but only 14 agreed to do so, and the program was ended without being successfully implemented.
• Proposition 78 is a missed opportunity to take advantage of the state's purchasing power to achieve greater discounts from the drug makers. The state already negotiates drug discounts greater than fifty percent for Medi-Cal, saving taxpayers $5 billion in the last ten years. Using the same approach with drug makers, Proposition 79 would achieve higher drug discounts than those under the voluntary approach taken by Proposition 78.
• Proposition 78's voluntary discounts are based on the "lowest commercial price," a price set by and known only to the drug companies. These discounts could be anywhere from 15 to 40 percent--considerably lower than Proposition 79's discounts. Proposition 79 calls on drug companies to offer consumers the same discount price that the state pays for its Medi-Cal (Medicaid) program. "Medicaid best price" is widely recognized as the lowest prescription drug price in the country. Unlike the voluntary plan offered in Proposition 78, Proposition 79 allows the state to leverage discounts by taking a drug company off preferred drug lists if that company fails to provide real discounts to consumers.
• Proposition 78's discounts can end at any time if the Department of Health Services decides there are too few participating manufacturers, or insufficient discounts, or too few participating consumers. In contrast, with Proposition 79 if a drug company refuses to provide discounts, the state can buy from other drug companies that do offer discounts.
• The Proposition 78 program would not be transparent. Unlike Proposition 79, it does not provide for an advisory board to review the access to and pricing of drugs.
• If both measures pass, Proposition 78 has language that requires only the one with the most votes to become law.

Note: Please adapt this letter to your own community and check your local paper's word limit for published letters.

Editor:

Two prescription drug discount programs appear on the ballot this November. Drug companies back Proposition 78 and will spend tens of millions of dollars between now and the election to convince us that a voluntary program is enough.

But California has tried a voluntary plan before. The industry refused to participate, and the program dissolved in 2003 without ever being successfully implemented.

Why should California voters believe that drug companies will line up to provide voluntary discounts if Prop. 78 is approved? If they were truly interested in helping consumers faced with high drug prices, they would have lowered their prices a long time ago.

In contrast to Proposition 78's reliance on the good will of the drug industry, Proposition 79's discount program has an enforcement mechanism. If a drug company refuses to provide discounts, the state can shift government business away from that company.

Prop. 79 will ensure deeper discounts for twice as many Californians.

Don't be confused by the millions of advertising dollars. Proposition 78 is not the answer to the problem of unaffordable prescription drugs. Vote NO on 78 and YES on the real solution, Proposition 79.

Sincerely,

(your name)

For more information on this proposition, go to Smart Voter's coverage.