“Surprise” for 2016 – California will spark a national debate on drug pricing, this time with teeth

During the 2016 elections, the “California Drug Price Act” will be on the state ballot. This proposal would mandate that California state plans (i.e. CalPERS, prisons, and California Medicaid, known as Medi-Cal) buy drugs at prices offered to the Department of Veterans Affairs (VA). Prices offered to the VA are currently excluded from the ‘most-favored nation’ prices enjoyed by states. The VA system enforces very narrow formularies and has demanded prices far below typical commercial prices. Estimates are that VA pricing would confer an additional 20% savings to California vs. current prices.

Early polls have indicated overwhelming support for this measure. The only surprise is why the poll was even done. What voter would decline if asked “Should the state pay lower drug prices?” Perhaps employees of local biotech companies, but not many others.

There are multiple implications that could follow from this bill. Once this gets attention and traction, the idea will probably spread to other states. Already there is an initiative in Ohio to get a similar proposition on the ballot there. If this works in California, other states would be foolish not to pursue getting the same savings.

The federal government is not likely to change Medicare part D (the drug insurance benefit part of medicare) or drug pricing. The status quo will remain that of gridlock, with Republicans blocking legislation to implement government price controls. Having said this, politicians are beholden to popular opinion. A risk to drug pricing could arise if California’s bill sparks a national dialogue about the government’s ability (and responsibility) to lower drug costs. It’s conceivable this initiative could foment broad national support for price controls on drug spending by federal programs (namely Medicare). It is largely for this reason that this initiative in California could snowball into something much bigger in coming months. This bears watching.


Sources: California Drug Price Relief Act (California Attorney General); Majority of Californians Approve of Rx Drug Price Initiative (CaliforniaHealthline.org); Ohio Drug Price Relief Act (Ohio Secretary of State)

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