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Prescription Drug Discounts. State-Negotiated Rebates.
Initiative Statute.

THE QUESTION

Should California establish a new discount drug program for California residents with an income at or below 400 percent of the federal poverty level and make drug profiteering unlawful?

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

Proposition 79 provides for prescription drug discounts to Californians with low and moderate incomes (up to $38,000 for an individual or $77,000 for a family of four), or whose medical expenses exceed 5 percent of their income. It will be funded through rebates from participating drug manufacturers negotiated by the California Department of Health Services. Participation in the program will cost $10 annually and will not be open to those who receive drug coverage from other sources. At least 95 percent of the rebates must be used to fund the discounts to pharmacies. New or extended Medi-Cal contracts are prohibited with manufacturers who do not provide the best price to this program. An oversight board will be established. Civil penalties would be established for profiteering by drug companies.

FISCAL EFFECT

State costs for administration and outreach could be in the 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 net costs or savings due to the link to Medi-Cal contracts, and unknown savings for state and county health programs due to the availability of drug discounts.

SUPPORTERS SAY

• More people will be eligible to participate in Proposition 79 than in Proposition 78.
• Proposition 79 builds on a successful effort used for the Medi-Cal program that reduces drug costs for California through enforceable discounts.
• The state can use its Medi-Cal program as leverage to force companies to sell drugs at a lower price. Companies that do not give discounts could lose their ability to sell drugs to the Medi-Cal program.

OPPONENTS SAY

• Proposition 79 will establish a large government program costing more to administer than Proposition 78.
• The state is not likely to obtain federal approval for linking the drug discount program to Medi-Cal.
• Since neither a "fair price" nor a "fair profit" are defined in the measure, lawsuits could result with regard to profiteering.

For more information

PRO: Health Access California, (510) 873-8787, www.VoteYesOnProp79.com

CON: California Against the Wrong Prescription, (916) 448-4234, www.calrxnow.org

For More Nonpartisan Information

See Smart Voter on Proposition 79.