New York Times Examines Two Ballot Measures Related to Prescription Drug Costs

The New York Times on Friday examined competing proposals for prescription drug discount programs included on the ballot for a Nov. 8 special election in California, measures that could affect drug makers' access to the state's $4 billion annual Medicaid drug market.

Proposition 79, supported by some labor unions and consumer groups, would require drug makers to offer discounts to uninsured state residents whose annual incomes do not exceed 400% of the federal poverty level and to some insured people with large medical expenses. Under the proposal, Medi-Cal would require physicians to get permission to prescribe drugs manufactured by companies that do not comply with the discount program. Drugs without a therapeutic equivalent would be excluded from the requirement.

The competing measure, called Proposition 78, is backed by the pharmaceutical industry. It would create a state-administered discount program for uninsured people with incomes that do not exceed 300% of the federal poverty level that would be voluntary for drug companies. If voters approve both measures, the one with the most votes would take effect.

According to the Times, the competing measures are "making California a test case of how drug discount programs for low-income people, which are being considered by other states, may be structured."

Although the drug industry argues that the union-backed proposal would violate federal regulations by using Medi-Cal as leverage, the Times reports that "the legality of tying a plan to Medicaid is unclear." In 2003, the U.S. Supreme Court allowed a similar plan in Maine but "did not rule clearly on the legality of using Medicaid for leverage" and suggested that a plan threatening to exclude drugs from Medicaid would require approval from HHS.

To date, drug companies have contributed about $40 million to a Pharmaceutical Research and Manufacturers of America fund to support Proposition 78. By comparison, the industry spent $9.8 million on all federal elections in 2004, according to the Center for Responsive Politics.

Meanwhile, a coalition backing Proposition 79 and several other measures on the special election ballot has raised more than $10 million to campaign in favor of the initiatives.

Gov. Arnold Schwarzenegger (R) has not stated a position on either measure, but he helped develop California Rx, a voluntary plan supported by drug makers that was defeated by the state Legislature (Pollack, New York Times, 7/8).