Would Prop. 61 Really Cut Drug Prices?

John Seiler
Most recently the press secretary for state Sen. John M. W. Moorlach, for three decades John Seiler was an editorial writer for the Orange County Register

It passes strange that, after so many scandals, the Veterans Administration is a being held up as a model for prescription drug prices. But that’s just what Proposition 61 does. The Ballot Summary reads: “Prohibits state agencies from buying any prescription drug from a drug manufacturer at any price over the lowest price paid for the same drug by the United States Department of Veterans Affairs, except as may be required by federal law.”

I’m a U.S. Army veteran and sometimes use the VA. Right now it’s my only medical insurance. Although the care can be quite good, and I like the doctors and other medics I’ve worked with, the real problem is that it’s a big government bureaucracy that needs to be pushed, sometimes pushed hard, to get things done.

That’s why John Cooper, a spokesman for Concerned Veterans for America, said in April, “The VA is still struggling with a lack of accountability, an inability to properly manage a budget rapidly approaching $200 billion, and a failure to provide veterans with timely access to care and benefits.”

And is the VA the best model for low-cost prescriptions? For generic drugs, according to the VA’s site, “Prescriptions: 30-day or less supply for certain Veterans: $8. 30-day or less supply for higher income Veterans.” (Some veterans, such as those who are wounded or former POWs, receive all medical care free.)

But for my two blood-pressure prescriptions, I pay $4 each at Walmart.

Perhaps the difference in cost favors the VA for non-generic drugs. But for me, at least, and millions of other veterans, the private-sector is the way to save money.

Of course, I realize Walmart offers its low price to get me to come into the store to buy mass quantities of the stuff on its shelves. But that is the point: The private sector finds ways to cut costs because it is competing. The government doesn’t.

I wish the California Public Employees’ Retirement System would stay out of politics and just maximize its funds’ value. However, in this case Prop. 61 directly would affect CalPERS, according to its analysis:

“As related to CalPERS, then, the Act would: Apply the VA price ceiling to programs where the state is the ultimate payer for a drug, which could include CalPERS even if CalPERS does not purchase the drug directly…. Require responsible state agencies, such as CalPERS, to enter into agreements with drug manufacturers for further price reductions so that the net cost of the drug, as determined by the California Department of Health Care Services (DHCS), is the same or less than the lowest price paid for the same drug by the VA.”

And: “The Legislative Analyst’s Office, in its May 2016 report … indicated that the overall fiscal effect of the Act is ‘highly uncertain’ due to ‘uncertainty around (1) whether the lowest prices the VA pays for prescriptions drugs are publicly available and (2) how drug manufacturers would respond in the market if this measure were enacted.’”

And: “The Act could cause pharmaceutical manufacturers to increase their VA prices instead of lowering the prices paid by California state purchasers such as Medi-Cal and CalPERS.”

Sounds like higher costs and even more bureaucracy. And given that CalPERS has big financial problems, suffering its worst year of returns since 2009, any extra costs imposed by Prop. 61 ultimately would be withdrawn from taxpayers like an unneeded blood sample.

The Yes on 61 campaign released a memo attacking CalPERS: “The analysis also underestimates the market power that CalPERS will have when negotiating drug prices pursuant to the measure…. [T]he analysis ignores crucial evidence from the pharmaceutical industry. The industry itself predicts that the measure would lower their profits and cause other states to pass similar legislation. Both of these outcomes would be exceedingly unlikely if this Act produces higher drug prices or reduced drug sales in California.”

But how is “lower…profits” good for the drug industry? In a capitalist system, profits are used to fund research and development for new products, in this case wonder drugs to save us. (Granted, Big Pharma gets us hooked on too many of its potions and lobbies against alternative medicines and treatments; but that’s another matter.)

The memo quotes the publication Pharma Exec from Dec. 16, 2015, with “emphasis added”: “If the voters of California approve this proposition it would establish an incredibly deep, mandatory discount – in essence a ‘price control’ – for the public purchase of prescription drugs in America’s largest state.”

Price controls? How’s that working in Venezuela? From the days of Emperor Diocletian’s Edict on Maximum Prices in 301 in ancient Rome until today, price controls always cause scarcity and misery.

The Yes on 61 campaign does highlight the problem of expensive medications. But the solution there is to reduce, not increase, government controls on medications. My longtime Register colleague the late Alan Bock used to urge that the FDA insist only that drugs be safe, not efficacious. Efficacy would be left to the determination of doctor and patient. Such a change would drastically cut the cost of developing new drugs.

And Obamacare, the risibly named Affordable Care Act, has forced premiums to rise faster than the thermometer under the tongue of someone with a bad fever.

All of this – Prop. 61, Obamacare, the inevitable Hillarycare II – is intended to push us into a single-payer, government-run system like they have in Canada, Venezuela or Cuba.

If that’s the case, I might as well move to Cuba for the cheap stogies.

Longtime California commentator John Seiler’s email: [email protected].

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