Schwarzenegger, Democrats Agree on Drug Discount Plan

Gov. Arnold Schwarzenegger (R) and Democratic lawmakers on Thursday announced an agreement on a prescription drug plan that would require pharmaceutical manufacturers to provide discounts for low- and middle-income California residents or have their medications excluded from Medi-Cal, the Sacramento Bee reports. Medi-Cal is California's Medicaid program (Benson, Sacramento Bee, 8/25).

Under the plan, drug companies would be required to provide discounts of up to 40% on brand-name drugs and 60% on generic medications (Chorneau, San Francisco Chronicle, 8/25). Discounts would be available to uninsured families earning less than 300% of the federal poverty level and people earning less than the median state income who spend more than 10% of their family income on medical expenses (California Healthline, 8/24).

The discounts also would be offered to Medicare beneficiaries during the drug benefit's so-called "doughnut hole" -- the coverage gap under which beneficiaries are responsible for 100% of annual prescription drug costs between $2,250 and $5,100.

The enrollment fee for the discount plan will be $10 per year (Hindery, AP/San Jose Mercury News, 8/25).

Drug companies would have three years to establish the discounts or face exclusion from Medi-Cal's formulary. California spends more than $2 billion annually on drugs for Medi-Cal beneficiaries (Sacramento Bee, 8/25).

The agreement will be amended into existing legislation (AB 2911 and SB 1702) and must be acted upon before the Aug. 31 end of the legislative session (AP/San Jose Mercury News, 8/24).

Drug companies, Republicans and advocates for low-income residents criticized the plan on Thursday.

Medi-Cal beneficiaries who protested outside the state Capitol said the plan would allow California to use its poorest residents, whose access to medicine would be restricted if drug companies do not offer discounts, as "hostages."

A statement by Pharmaceutical Research and Manufacturers of America Senior Vice President Ken Johnson said, "We strongly oppose any effort to impose price controls on medicines which history has shown could chill the future search for new cures and treatments."

Some Republican legislators said they also are concerned about price controls on medications, as well as the possibility that undocumented immigrants could receive discounted drugs under the plan (Sacramento Bee, 8/25).