Drug Discount Proposal Moves Forward

Gov. Arnold Schwarzenegger (R) on Wednesday said he expects to receive legislation to enact a prescription drug discount program in the next day or two, the San Diego Union-Tribune reports. At a news conference, Schwarzenegger said the program would provide some California residents discounts of 60% for generic drugs and 40% for brand-name treatments (Ainsworth, San Diego Union-Tribune, 8/24).

The proposed compromise between Schwarzenegger and Democratic legislators would require pharmaceutical firms to reduce prices to a level set by the state for residents who are ineligible for Medi-Cal, California's Medicaid program.

State residents would be eligible for the program if they do not have state-sponsored prescription drug coverage and if their household incomes do not exceed 300% of the federal poverty level. The program also would be open to Medicare beneficiaries whose medications are not fully covered under the Medicare drug benefit and to California residents whose out-of-pocket drug costs exceed 10% of their annual incomes, provided that their household incomes do not exceed the state median.

Under the program, pharmaceutical companies would have to offer the discounts within three years. If drug makers did not meet the benchmarks within three years, the state would be able to seek to remove the medications from the Medi-Cal formulary. Such a move would require physicians to obtain prior approval before the removed medications could be prescribed to Medi-Cal beneficiaries (California Healthline, 8/23).

State residents would pay $10 annually to participate in the program.

According to the Union-Tribune, the proposed agreement "is an attempt to split the difference" between Propositions 78 and 79, initiatives on the November 2005 special election ballot that would have established drug discount programs in California.

Drug makers supported Proposition 78, which would have established a voluntary drug discount program. Consumer advocates sponsored Proposition 79, a measure that included provisions that would have allowed the state to sanction companies that did not participate in the discount program.

Voters rejected both measures (San Diego Union-Tribune, 8/24).

In addition, the Los Angeles Times reports that the governor's compromises on the drug discount program and a minimum wage increase "solidif[y] an election-year transformation that robs his Democratic opponent, Phil Angelides, of coveted middle-class issues."

The drug discount agreement marks a "stark break" between Schwarzenegger and pharmaceutical companies, which have donated more than $1.1 million to his campaigns, according to the Times. As governor, Schwarzenegger has taken action consistent with drug makers' positions on eight of nine bills that have come before him, including vetoes of measures that would have made it easier for state residents to import medications from Canada and given the state more leverage to negotiate discounts on prescription drugs (Rau, Los Angeles Times, 8/24).

Opinion pieces in the San Francisco Chronicle argue for and against the proposed compromise agreement to establish a drug discount program in California. Summaries appear below.

• Emily Clayton/Lupe Alonzo-Diaz, San Francisco Chronicle: Legislation (AB 2911 and SB 1702) by Assembly Speaker Fabian Nuñez (D-Los Angeles) and Senate President Pro Tempore Don Perata (D-Oakland) addresses the differences in Propositions 78 and 79 "by initially giving drug companies the benefit of the doubt while also giving consumers some reassurances," according to Clayton -- a health care advocate for CalPIRG, a statewide public-interest advocacy group -- and Alonzo-Diaz -- executive director for the Latino Coalition for a Healthy California, a statewide Latino health advocacy group. Drug companies' opposition to the measures "call[s] into question their commitment to addressing" the affordability of medications and "thus make[s] the need for legal enforcement mechanisms all the more evident," Clayton and Alonzo-Diaz write (Clayton/Alonso-Diaz, San Francisco Chronicle, 8/24).
  
  
• Sally Pipes, San Francisco Chronicle: The proposed discount drug plan is "the same old ham-fisted attempt to impose price controls" on prescription drugs, Pipes, president and CEO of the Pacific Research Institute, writes. According to Pipes, the proposed discount program would push pharmaceutical firms to "compensate for the forced discounts by raising prices on those people who don't qualify" and would "lead to fewer new medicines, particularly if other states follow suit." Pipes writes, "Imposing price controls on prescription drugs has always been a terrible idea," in part because "unlike our politicians, economic gravity does not reverse direction in an election year" (Pipes, San Francisco Chronicle, 8/24).

KPCC's "AirTalk" on Wednesday reported on the agreement. The segment includes comments from Assembly Majority Leader Dario Frommer (D-Glendale), who was involved in writing the legislation (Chen, "AirTalk," KPCC, 8/23).

The complete segment is available online in RealPlayer.