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Californians Still Hate Trump, But More Uncertain About Drug Companies

Xconomy National — 

The polls are tightening. Millions of people are still making up their minds. National figures are making last-minute pitches. The decision could have huge implications for people across the U.S.

We’re talking of course about next week’s vote on Proposition 61 in California, an attempt to control drug prices in the nation’s most populous state. This week, a poll released by the Hoover Institution and YouGov reported a slim majority of 51 percent in favor of Prop. 61, with 24 percent opposed and 25 percent undecided. (The poll was conducted over 10 days in early October.)

While still positive for Prop. 61, those numbers reflect a downward trend in what’s been infrequent polling conducted in recent months. In the summer, two polls found a large majority of support for the initiative, 66 and 73 percent, and third, conducted online, reported numbers similar to this week’s poll. (There has been only a little slide, however, in the state’s projected rejection of GOP presidential candidate Donald Trump.)

The initiative has attracted $109 million from opponents, as of yesterday. The top ten, from Merck and Pfizer ($9.4 million) to GlaxoSmithKline ($4.5 million), are all drug companies. Supporters have pitched in $17 million, mainly from the AIDS Healthcare Foundation in Los Angeles and the California Nurses Association. U.S. Senator Bernie Sanders, is hitting the Golden State to drum up last-minute support with a message he used frequently in his run for the Democratic presidential nomination.

The time seems ripe for Prop. 61 to pass with room to spare and spur similar actions in other states. Americans are fed up with healthcare costs. Many investors are, too. Even though pharmaceuticals comprise roughly 10 percent of total health spending, the industry has had a terrible time convincing the public that other healthcare sectors should field blame, too. They tried to dismiss price gouger Martin Shkreli as a bad apple, which backfires with every story about Mylan, Valeant Pharmaceuticals, Biogen, and others.

A spokesman for the Yes on 61 campaign told Politico that the initiative has “banked a lot of ‘yes’ votes with early voting.” But the latest poll shows a large amount of voters remain undecided. Perhaps they’re reacting to the No on 61 ad campaign. Perhaps they’re realizing the issues behind the proposition are complex, but the details of the proposition are sparse.

If voters say yes, Prop. 61 would require state healthcare entities to pay drug prices equal to or less than those paid by the federal Department of Veterans Affairs, which are generally considered some of the lowest, if not the lowest, in the country. Those entities spent $4.2 billion on prescription drugs in the fiscal 2014-15 year. The measure would lead to “significant savings,” according to proponents.

Problem is, the biggest parts of Medi-Cal, the state’s Medicare program, would be exempt: those administered as managed care and contracted out to private-sector insurers such as Blue Shield. In effect, only a small slice of Californians would be governed by the would-be law. Estimates range from 10 percent up to 25 percent of the state’s population. “The range is further evidence of a lack of clarity,” says Adams Dudley, director of the Center for Healthcare Value at the University of California, San Francisco. The state agencies didn’t create the problem of high drug prices, Dudley says, “and it’s not clear they have the power to fix it.”

The state’s legislative analyst office has weighed in more than once, each time saying the fiscal impact is unclear for two main reasons.

First, the prices negotiated by the VA are secret. They start with a discounted price list, but can go down from there. It’s assumed the VA gets even more discounts, but it’s not transparent. If everyone were to get those prices, drug companies would take a big hit. But with the Medi-Cal managed care plans not in play, not everyone will get those prices.
Which brings up the second reason the impact is hard to tease out: There’s no telling what the drug companies will do if Prop. 61 passes. Opponents have hinted of unintended consequences, and executives have sounded alarms in recent weeks.

There are all kinds of “squeeze the balloon” scenarios. Drug companies have already poured tens of millions of dollars into the campaign. If they lose, it’s hard to imagine them laying down their weapons. Would they try to raise VA prices? Would they try to make up the lost profits by raising prices in the uncapped parts of California’s healthcare markets? Opponents have exploited those uncertainties in their anti-Prop. 61 advertising, which the San Francisco Chronicle editorial board called an “industry-bankrolled disingenuous advertising blitz.” (The Chronicle recommended a “no” vote nonetheless.)

A few companies or executives have acknowledged the need to do something about prices; perhaps good intentions, or at least fear of a public-relations hit, would steer them toward some form of compliance. But other than a few test cases, such as Novartis and insurers inking “pay for performance” deals for a few products including the heart-failure drug sacubitril/valsartan (Entresto), ideas to change the way America pays for drugs have remained ideas. (And to be clear, just because a drug company might agree to be paid based on how much its drugs help patients doesn’t mean the transaction will be transparent.)

The Prop. 61 fight has now surpassed the dollar amount spent on another highly-contested California measure: Prop. 8, which aimed to ban same-sex marriage in 2008. The fight over same-sex marriage has also featured state-level maneuvering on both sides and threats of unintended consequences. Finally it was decided by the highest court in the land—the ultimate federal arbiter. Prop. 61, win or lose, is certainly contributing to the national conversation about drug pricing. But for big changes ultimately to come from Washington, DC, in the next few years, a few other races on next week’s ballot, including the one at the top of the ticket, will have to swing against the drug industry, too.

Image courtesy of the National Weather Service.