(Bloomberg) — California is becoming the new battleground for drug pricing, with pharmaceutical companies pouring millions of dollars into an effort to head off a state ballot initiative that would rein in spending on medicine.
The California Drug Price Relief Act would require government health programs to only contract with drugmakers at prices that are the same as or lower than those paid by the U.S. Department of Veterans Affairs (VA), which typically gets deep discounts on medications from drug manufacturers.
Drug prices have “gone from crazy to obscene,” said Michael Weinstein, president of the AIDS Healthcare Foundation, in a September interview. The Los Angeles-based non-profit organization is a proponent of the initiative. “Every new category of drugs is like 30 percent higher than the previous one.”
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Drugmakers have argued that drug prices haven’t risen as much as they appear because insurers and government programs pay much less than the list price after negotiations. They also note that drug prices haven’t risen as a portion of overall U.S. health care spending in recent years.
The initiative would be presented to voters in November 2016 if it gets the required signatures. Even though that’s more than a year away and the measure isn’t yet confirmed to be on the ballot, industry organization Pharmaceutical Research and Manufacturers of America (PhRMA) is already mobilizing, setting up a fund of more than $10 million to fight the bill.
Contributing to the fund are eight drugmakers, including Johnson & Johnson, which gave $5.86 million, Bristol-Myers Squibb Co., which gave $2.88 million, along with Pfizer Inc., Eisai Co., Purdue Pharma LP, the Medicines Co., Sunovion Pharmaceuticals Inc. and Daiichi Sankyo Co., according to a report filed last week with the California Secretary of State
Representatives for J&J, Bristol-Myers and Purdue declined to comment. Representatives for Pfizer, Eisai, the Medicines Co., and Sunovion didn’t respond to requests for comment sent after business hours.
Daiichi Sankyo in an e-mail said it has contributed $10,000 to the California Initiative Fund. The company “has serious concerns about this measure and its potential impacts,” it said.
Pharmaceutical companies may be particularly concerned about the California act since the national conversation on drug pricing has heated up in recent weeks. Democratic presidential candidate Hillary Clinton criticized Turing Pharmaceuticals AG on Sept. 21 for a price hike of more than 5,000 percent on an old anti-parasite drug it acquired. Her pledge to reform the industry sent the Nasdaq Biotechnology Index tumbling. Turing has said it will lower the price of the drug, though it hasn’t said how much.
Further political pressure came from House Democrats, who are pushing to subpoena Valeant Pharmaceuticals International Inc. for documents relating to drug-price increases. Valeant has said its business model doesn’t rely on large price increases and that increased pressure from politicians to curb government reimbursements won’t hurt the company.