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Discounts on Prescription Drugs.
Initiative Statute.

THE QUESTION

Should the state adopt a new discount drug program for California residents with an income at or below 300 percent of the federal poverty level?

THE SITUATION

California law currently provides affordable prescription drugs for low- and moderate-income individuals eligible for Medi-Cal or the Healthy Families program. Beginning in 2006, the federal government will provide discounted prescription drug coverage for persons enrolled in Medicare. Various other state and federal programs provide funds to pay part or all of the cost of drugs for specific individuals. In addition, many Californians receive prescription drug coverage through insurance paid for by the individual or provided by their employer.

THE PROPOSAL

Californians with low and mid-level incomes (up to $29,000 for an individual or $58,000 for a family of four) will be able to purchase prescription drugs at reduced prices. It will be funded through rebates from participating drug manufacturers negotiated by the California Department of Health Services. Participation in the program will cost $15 annually and will not be open to those who receive drug coverage from other sources. The program will be administered by the California Department of Health Services which could contract with a private vendor for assistance. Drug companies and pharmacies will not be required to participate.

FISCAL EFFECT

One-time and ongoing state costs for administration and outreach activities could potentially be in the millions to low tens of millions of dollars annually. A significant share of these costs would probably be covered by the state General Fund. There could be state costs to cover the funding gap between the time 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 General Fund. There could be unknown savings for state and county health programs due to the availability of drug discounts.

SUPPORTERS SAY

• Proposition 78 will increase the affordability and access of prescription medications for qualified low- and middle- income participants thereby improving healthcare quality and lowering costs.
• This program will be integrated with other discount prescription drug programs so purchasers will get the lowest available cost for prescriptions.
• The competing proposition is legally flawed and may never be implemented.

OPPONENTS SAY

• Experience with voluntarily-negotiated prescription drug discounts in other states indicates that benefits are largely illusory and outweighed by the costs of implementing the program.
• The proposed "baseline price" for rebate negotiations is intended to protect the drug manufacturers overall pricing structure and removes any incentive to offer significant rebates.
• Proposition 78 is a smokescreen designed and bankrolled with millions of dollars from the prescription drug lobby to block Proposition 79.

For more information

PRO: Californians for Affordable Prescriptions, (916) 448-4234, www.calrxnow.org

CON: Health Access California, (510) 873-8787, www.VoteNoOnProp78.com

For More Nonpartisan Information

See Smart Voter on Proposition 78.