November 8, 2005 Ballot Prop. 78

Introduction

With the the costs of prescription drugs rising, Californians now face shrinking coverage, higher co-pays and difficulty in obtaining the medication they need. Current California law requires pharmacies to sell prescription drugs at reduced prices for residents enrolled in the federal Medicare program. However, the pressure to introduce new pharmacy assistance programs has intensified in recent years. The urgency of the prescription drug issue has led to two measures on the November 8, 2005 Special Election ballot. Both initiatives would reduce prices for prescription drug users. One, supported by the pharmaceutical industry, would allow discounted drugs for those in financial need but would allow companies to drop their prices voluntarily. The other, supported by health and consumer groups, would mandate an agreement between the California Department of Health Services and drug companies which would keep drug prices lower for low and middle income prescription drug consumers.

Proposition 78 & 79

Prop. 78: California State Pharmacy Assistance Program The California State Pharmacy Assistance Program is a measure promoted by drug manufacturers to provide voluntary prescription drug discounts. The proposition would establish a state program called Cal RX, which would reduce the costs of prescription drugs for low and middle income residents. The program would establish a discount card system which would qualify consumers for discounts at pharmacies. The card would be available to individuals and families which meet federal poverty conditions. Individuals who make $28,000 or lower and families of four who make $56,000 or under would be eligible. The program would be available to residents who do not currently have private health care benefits or state benefits programs. Consumers would apply for the card from Cal RX and would pay an annual $15 fee to pharmacies. The California Department of Health Services would administer the program. Under the program, pharmacies who choose to participate in the program would negotiate an agreement with the state to sell certain prescription drugs at a discount to Cal RX card users. Drug companies would then send rebates to the state which would then transfer the money back to consumers who purchased the drugs.

The measure was previously attempted as SB 19 which was defeated by Senate Health Committee in May. The language was also submitted as a ballot measure on February 4, 2005. The effort to qualify the ballot measure was sponsored by the Pharmaceutical Research and Manufacturers of America. Other backers of the initiatives include Republicans in the legislature and Governor Arnold Schwarzenegger. The proposition was launched to counter the Cheaper Prescription Drugs for California Act (see above). The proposal has met with resistance from health groups who say that the proposal is an effort by drug companies to maintain high profits while offering an inadequate solution to the drug coverage crisis. They point to the fact that there are no penalties for companies that do not reduce prices. They also cite the fact that the state would carry the administrative and outreach costs of the program. Proponents of the measure claim that the program would be beneficial to both the drug companies and individual drug users, with an average discount of at least 40% off regular retail prices.

Prop. 79: Cheaper Prescription Drugs for California Act The Cheaper Prescription Drugs for California Act is a proposal that would establish a program which would administer prescription drug discounts for low-income Californians. This measure revives the language of legislation that passed the Legislature, but was vetoed by the governor. Under the measure, eligible residents would be able to apply for a discount card which they could present to pharmacies for discounts on their drug purchases. Individuals who make $37,000 or less a year and families of four who make $75,000 or less a year could participate in the program. The card would also be available to individuals from wealthier families who have medical expenses that exceed 5% of their family's income. Residents who participate in the program would pay a $10 annual fee to pharmacies. The California Department of Health Services would administer the program.

Individual pharmacies could choose to voluntarily participate in the program and would sell drugs at prices pre-negotiated with the state. The state would receive rebates from drug companies which would then be sent on to consumers. The Cheaper Prescription Drugs for California Act differs chiefly from the opposing initiative in that it would hold drug makers accountable if they did not sell their drugs at significantly discounted prices for the new program. The program would mandate that the Department of Health Services would seek rebates from drug companies equal to prices established for federal programs. Companies that did not negotiate discounts could be barred from selling drugs to the state Medi-Cal program. Currently, drugs do not have to have prior authorization to be included in Medi-Cal. Inclusion in the Medi-Cal program currently earns drug companies more than $4 billion annually.

The Cheaper Prescription Drugs for California Act is supported by health care organizations, labor groups and many Democratic legislators. On March 15, 2005, the Pharmaceutical Research and Manufacturers of America (PHRMA) filed a lawsuit challenging the legality of the act. PHRMA is a drug trade group which represents 48 of the leading pharmaceutical companies in the United States. They assert that a segment of the initiative violates the state Constitution in that it names the California Chamber of Commerce and the California Labor Federation AFL-CIO as partners in setting up purchasing programs for small employers. Health Access, one of the groups supporting the Act, claims that the pharmaceutical industry is threatened by the initiative and is seeking any way to halt its progress.

Groups who oppose the initiative claim that the discounts mandated by the Cheaper Prescription Drugs for California Act would be far too expensive for companies to cover. They claim that California State Pharmacy Assistance Program (a PHRMA backed iniative - see below) is a much fairer proposition. Supporters of the Act believe that the Cheaper Prescription Drugs for California Act will allow for an estimated 10 million low and middle income Californians to gain necessary medications. They also say that the Act will force drug companies to provide drugs at affordable prices.

Background Reading

"The Basics: State Pharmacy Assistance Programs," National Health Policy Forum, Apr. 26, 2004. 

"State Pharmacy Programs: Assistance Designed to Target Coverage and Stretch Budgets," U.S. General Accounting Office, Report to Congressional Requesters, Sept. 2000.

Challenge to Initiative

A ballot argument erupted over Proposition 73 (Parental Notification of Abortion) regarding wording in the voter guide written by both supporters and opponents of the initiative. A Sacramento judge gave victories to both sides Aug. 11 by refusing to strike a statement by supporters which declared that parental notification laws in other states had reduced teen pregnancy and abortion rates "without danger and harm to minors.'' However, the judge also refused to strike a statement by opponents which declared that "millions of concerned parents" opposed the initiative. He also ordered opponents to replace wording that said that girls who sought a waiver from a judge would be put "on trial."

Official Voter Information

Proposition 78
Official Voter Information Guide

Campaign Finance: 
Individual Campaign Committees
Total Contributions and Expenditures (select "Nov. 2005 election" and "Prop. 78" in dropdown boxes)

Proposition 79
Official Voter Information Guide

Campaign Finance: 
Individual Campaign Committees
Total Contributions and Expenditures (select "Nov. 2005 election" and "Prop. 79" in dropdown boxes)

Key Websites

Better California 
Anti-Prop. 78 site from Alliance for a Better California. Also includes a Pro-Prop. 79 site. 

California Department of Health Services

California Healthcare Foundation 
2005 Election resource for health-related initiatives.

California Health Care Foundation
Non-Partisan analysis of both propositions

Health Vote
Non-partisan analysis of Prop. 78.
[Website archived in UCLA Online Campaign Literature Collection] 

Health Vote
Non-partisan analysis of Prop. 79.
[Website archived in UCLA Online Campaign Literature Collection]

Prop. 78 site
Prop. 79 site
League of Women Voters sites.

Pharmaceutical Research and Manufacturers of America 
Group financing Proposition 78. 

Public Opinion

Schwarzenegger Propositions Still Trailing: Three of four ballot initiatives backed by Governor are behind
and Proposition 75 is now in a dead heat. Support for both prescription drug initiatives falls. Polimetrix poll, Nov. 6, 2005.

"Voters moving to the NO side on each of the three health-related ballot initiatives – Propositions 73, 78 and 79," Field Poll, Release 2175, Nov. 2, 2005.

"Special Survey on Californians and the Initiative Process", PPIC Statewide Survey, Public Policy Institute, September 2005

"Both prescription drug intitiatives, Props. 78 and 79, are leading, but few voters can identify the proponents of each initiative: voters divided on Prop. 73, the Parental notification of teen abortion initiative," Field Poll, Release 2169, Sept. 6, 2005.

"Union dues consent initiative getting heavy initial support, as do two drug discount propositions. Voters narrowly back parental notification for teen abortion," Field Poll, Release 2160, June 22, 2005.