SAN FRANCISCO (CN) - A small but ardent group chanted "Stop pharma greed!" in front of San Francisco City Hall this past week, as the Yes on 61 bus tour urged California voters to rein in expensive prescription drug prices they say are killing patients - even though health care providers could profit if the initiative passes in November.
One of those providers is Los Angeles-based AIDS Healthcare Foundation, the nation's largest provider of HIV and AIDS medical services. It wrote Proposition 61, also called the California Drug Price Relief Act, and has spent $15 million to get it passed.
According to the state legislative analyst, California spent $3.8 billion on prescription drugs in the 2014-15 fiscal year. Backers of the measure say this and recent drug pricing scandals like the one over Mylan's EpiPen make their case that people are dying because they can't afford the exorbitant prices pharmaceutical companies are charging, and prices must be brought under control.
Proposition 61 will do that, they say, by extending the deep discounts the U.S. Department of Veterans Affairs gets from drug makers to more Californians. The VA gets the biggest drug discounts of any government agency in the nation, and the measure would prohibit state agencies like the one that runs Medi-Cal from paying more for a prescription drug than the VA pays.
Although its discount rates are confidential, a 2005 Congressional Budget Office report estimates the VA pays 42 percent of a drug's list price, 9 percent less than the federal Medicaid program.
"You ask a nurse, you ask a doctor, you ask a social worker, they will tell you patients suffer, patients die," Erich Koch, a nurse at Alta Bates Summit Medical Center in Berkeley, California, told Courthouse News at the Yes on 61 rally.
But the measure exempts Medi-Cal's managed care program, which serves 75 percent of beneficiaries, from its provisions, and only targets its smaller fee-for-service program serving just 25 percent of beneficiaries.
Kathy Fairbanks, a spokeswoman for the No on 61 campaign, questioned AIDS Healthcare Foundation's motive for excluding Medi-Cal's larger managed care program from the measure. The group, she noted, serves Medi-Cal patients through the managed care system and has essentially exempted itself from the pricing provisions of its own initiative.
Meanwhile, Proposition 61 doesn't exempt the managed care programs operated by the state's public employee retirement system CalPERS.
"Why is managed care exempt when [Proposition 61] is supposed to be an initiative to benefit all state health care programs?" Fairbanks said. "The managed care exemption makes zero sense. We look at that and find it very suspicious."
A lawsuit filed by the AIDS Healthcare Foundation in 2009 may provide a clue. In the suit, the group accused California of attempting to balance its flailing budget "on the backs of safety net providers" like the foundation after the state scrapped reimbursements to them paid by Medi-Cal's fee-for-service program.
Safety net providers that participate in the federal 340B drug pricing program are eligible for upfront discounts from drug companies, but until 2009, they could choose to be reimbursed for drugs through the fee-for-service program instead, which pays more than the 340B program.