SUPPORTS Proposition 79--Prescription Drug Discounts. State-Negotiated Rebates Initiative Statute DESCRIPTION | BACKGROUND | FISCAL EFFECTS | COMPARE TO PROP 78 | LEAGUE POSITION SUPPORTERS/OPPONENTS | RESOURCES | SUMMARY POINTS | GET INVOLVED

Drive for Discount Drugs Tour

This initiative proposal would establish a new state program administered by the Department of Health Services aimed at reducing the costs that certain low- and middle-income residents of the state pay for prescription drugs purchased at pharmacies. Called by its proponents the Cheaper Prescription Drugs for California Act (Cal Rx Plus), Proposition 79:

• provides for prescription drug discounts to Californians based on income-related standards, to be funded through rebates from participating drug manufacturers negotiated by the California Department of Health Services
• prohibits new Medi-Cal contracts with manufacturers not providing the Medicaid best price to this program, except for drugs with no therapeutic equivalent
• requires that rebates be deposited in a fund in the State Treasury, and used only to reimburse pharmacies for discounts and to offset costs of administration
• directs at least 95 percent of rebates to fund discounts
• requires an outreach program to inform potential program enrollees
• establishes a nine-member public oversight board
• provides for an assistance program to help businesses, small employers and certain other entities to secure similar discounts and rebates
• makes prescription drug profiteering, defined as demanding "an unconscionable price" for a drug or demanding "prices or terms that lead to any unjust and unreasonable profit," unlawful.

Eligibility. Qualified Californians include:

• Residents whose unreimbursed medical expense equal 5 percent or more of family income
• Those with a family income equal to or less than 400 percent of the federal poverty level (about $38,000 for an individual or $77,000 for a family of four), who do not have prescription drug coverage under Medi-Cal or Healthy Families
• Medicare enrollees, for drugs not covered by Medicare.

Other Program Information. Participating individuals would obtain a discount card qualifying them to receive discounts on prescription drug purchases at pharmacies. There would be a $10 enrollment fee, renewable annually. Enrollment would occur in participating pharmacies, doctor's offices, or clinics, or through a call center or Internet site. Discounted prices would be negotiated by the state with voluntarily participating pharmacies. Manufacturers' rebates would reimburse pharmacies for additional discounts which would be available to consumers at time of purchase.

Prescription Drug Coverage is currently provided through several state and federal programs administered by the Department of Health Services (DHS), including Medi-Cal and Healthy Families. Beginning in 2006, prescription drugs will be a covered benefit for some Medicare enrollees. Many individuals also receive coverage through private insurance provided by employers or purchased individually.

Drug Discounts for Individuals are offered by California, other states, and private associations and drug makers to selected individuals not eligible for drug coverage under public programs. Current California law requires pharmacies to sell drugs at reduced prices to Medicare beneficiaries as a condition of participation in the Medi-Cal program.

Drug Rebates for Medi-Cal. Federal law mandates lower prices to Medicaid programs than prevailing retail prices. California negotiates rebates from drug makers for certain drugs that are given preference in the Medicaid program; that is, they are not subject to preauthorization, which tends to encourage utilization.

Linking Medicaid to Other State Programs. Other states have obtained greater discounts from drug manufacturers for other programs by linking these to their Medicaid programs. Preferred status in Medicaid is offered only to those manufacturers who offer rebates or discounts for the non-Medicaid programs. A 2003 U.S. Supreme Court decision has been interpreted to mean that states may do so as long as their actions would further the goals of Medicaid, such as providing assistance to individuals who might otherwise end up on the Medicaid rolls, provided that federal approval is obtained.

Administration and Outreach Activities would generate significant startup and ongoing costs, potentially in the low tens of millions of dollars annually. These includes costs to establish the program, including information systems; operate a call center and process applications and renewals of discount cards; negotiate rebates; assist business and labor organizations; and coordinate the program with other private discount programs. Costs would also be incurred for outreach activities, including media advertising and written materials.

These costs would be partially offset by a five percent share of the rebates, some of the enrollment fees, and any private donations. It is likely, however, that a significant share of administrative costs would be borne by the general fund.

Costs for "Float." 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.

The effects of linking the drug discount plan to Medi-Cal could result in either costs or savings, depending on a number of factors. Actual effects are unknown.

Potential Savings for State and County Health Programs. Absent the drug discount program individuals may require hospitalization for untreated conditions under Medi-Cal. County expenses for indigent care could be reduced as low-income individuals became less dependent on county hospitals and clinics.

Other potential effects may include changes in tax revenues due to reduced profits of pharmaceutical manufacturers and changes in the price and quantities of drugs sold.

See "Key Differences between Propositions 78 and 79" under Proposition 78 for a comparison of Proposition 79 to the competing measure, Proposition 78, the California State Pharmacy Assistance Program (Cal Rx). A chart comparing Propositions 78 and 79 is available at http://www.voteyesonprop79.org/comparison.htm.

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:
Henry L. "Hank" Lacayo, State President Congress of California Seniors	Tom Murphy, Chair California Arthritis Foundation Council
Elizabeth M. Imholz, West Coast Office Director Consumers Union	John Kehoe, Policy Director California Senior Advocate League
Lupe Alonzo-Diaz, Executive Director Latino Coalition for a Healthy California	Rodney Hood, M.D., President Multicultural Foundation

The rebuttal to the opponents' argument was signed by Betty Perry, Public Policy Director, Older Women's League of California; Michael Weinstein, President, AIDS Healthcare Foundation; and Jacqueline Jacobberger, President, League of Women Voters of California.

Proposition 79 is sponsored by Health Access California, Consumers Union (nonprofit publishers of Consumer Reports), California Alliance for Retired Americans, Congress of California Seniors, AIDS Healthcare Foundation, and the California Public Interest Research Group (CALPIRG).

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

Yes on 79, a coalition of consumer, senior, labor and health organizations, 414 13th Street, Suite 450, Oakland 94612, 510-873-8787 x103, www.VoteYesOnProp79.com. Visit the Web site for useful campaign material and opportunities to get involved in the campaign.

SUMMARY POINTS

Cheaper Drugs More Californians Can Count On

• Currently, millions of Californians cannot afford the high cost of prescribed medications--at significant detriment to their health.
• Proposition 79's drug discount program covers an estimated 8 to 10 million Californians, approximately twice as many as the competing measure sponsored by the pharmaceutical industry, Proposition 78.
• Those eligible for the Proposition 79 drug discounts include the uninsured who earn up to 400 percent of the federal poverty level (about $38,000 for an individual or $77,000 for a family of four); people with catastrophic medical expenses or chronic conditions who spend at least five percent of their family income on medical bills; and people on Medicare for drug costs not fully covered by that program.
• Prop. 79 provides strong economic incentives for drug manufacturers to participate in the program, because participation is linked to access to lucrative Medi-Cal contracts. The state negotiates Medi-Cal discounts of 50 percent and higher, and Prop. 79 uses the same mechanism to obtain discounts for eligible Californians.
• In contrast, participation in the Proposition 78 discount program is completely voluntary for drug companies. California has tried a voluntary drug discount plan that was dissolved because of lack of participation by the pharmaceutical industry.
• Prop. 79 specifies that rebates be negotiated that result in a net price comparable to or lower than Medicaid best price. The actual percentage reduction in cost can be known, as the basis for calculating the discount is public information. Prop. 78's discounts are based on the "lowest commercial price" set by the drug companies, which can change at any time.
• Prop. 79 mandates an outreach program to inform potential enrollees of the discount program.
• An oversight board will review access to and pricing of drugs, and make periodic reports to the Governor, legislature, and other state officials.
• With Prop. 79 in place, fewer people will need to rely on Medi-Cal or other public programs or to use taxpayer-funded emergency room care.
• Prop. 79 establishes a drug discount program to help certain business and labor groups obtain access to reduced drug pricing.
• This measure makes profiteering from drug sales an illegal activity subject to prosecution by the Attorney General or through civil lawsuits.
• This initiative is supported by a broad coalition of organizations, including public interest, education, health care, senior, consumer, and labor groups.

Note: Please adapt this letter to your own community, perhaps using local examples of the need for Proposition 79. Check your local paper's word limit for published letters.

Editor:

Americans pay among the highest prices in the world for prescription drugs; all too many struggle to pay for needed medications.

Proposition 79 on the November ballot provides a drug discount card to eight to ten million Californians who are uninsured or underinsured, or have high health care costs.

Prop. 79 covers twice as many people as a competing initiative, Proposition 78. Unlike Prop. 78, which relies on drug companies' voluntary participation, Prop. 79 has an enforcement mechanism.

The state could shift state business away from a company that refused to provide discounts. Using its purchasing power, the state would negotiate discounts of 50 percent and more on many drugs.

Prop. 79 also means that taxpayers will save money because fewer will rely on public programs like Medi-Cal or be unable to pay their bills from visits to taxpayer-funded emergency rooms.

Drug companies will spend a record $80 million or more to convince Californians to choose the measure they sponsor, the voluntary drug discount program in Prop. 78. Don't be taken in by the slick ads. Look at the facts.

Vote YES for Prop. 79's enforceable program that guarantees the deep discounts California families need. Vote NO on Prop. 78.

Sincerely,

(your name)

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