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Last updateMon, 24 Aug 2020 12pm

In one of his first official actions, Gov. Gavin Newsom has directed state agencies, including the one that oversees Medi-Cal, to negotiate as a block to demand prescription drug-makers lower their prices.

The move will make California the nation’s largest negotiator with pharmaceutical companies, and could become a model for other states—if it works.

“Right now, with all the gridlock in Congress, we are seeing quite a bit of state action on prescription-drug pricing—and we hope that advances as much as it can until we can see some change in Congress,” said Peter Maybarduk, who specializes in medicine access at Public Citizen, a consumer advocacy group based in Washington, D.C.

“California government has power,” he continued. “It is a large enough economy and large enough state to influence pharma behavior and dictate terms.”

It’s such an attractive idea that it seems to have united the progressive Newsom with his political nemesis, President Donald Trump. Both have espoused the wisdom of the government consolidating its massive purchasing power so it can bargain hard with drug companies and cut the best deal for taxpayers.

Trump campaigned on the notion of harnessing the federal government’s bargaining power to reduce drug prices for programs like Medicare, but the idea went nowhere, because it’s prohibited by federal law: Congress specifically barred the federal government from negotiating Medicare drug prices—a restriction defenders describe as free-market protection and critics deride as a giant pacifier to Big Pharma.

Still it remains a simple and appealing idea in a nation confronted by rapidly rising prescription drug costs. A recent Harvard/Politico poll found the No. 1 priority voters have for the new Congress is reducing the cost of prescription drugs.

There’s a reason it’s top of mind. A study released this month in the Journal of Health Affairs found that the cost of brand-name drugs rose each year between 2008 and 2016—by more than 9 percent per year for oral medicine, and more than 15 percent for injectable medicine. Specialty drug prices soared even higher each year.

In his executive order, Newsom said California has seen prescription drug prices rise 20 percent annually since 2000—and that the 25 most expensive drugs account for half of the state’s spending on pharmacy costs. So far, Newsom’s office has not released any estimates of how much it expects the new bargaining plan to save.

“We will use both our market power and our moral power to demand fairer prices for prescription drugs,” Newsom said during his inauguration speech Monday.

That same day, he told the state’s Department of Health Care Services to begin negotiating the purchasing of prescription drugs for all 13 million recipients of Medi-Cal, the state’s health-care system for low-income patients. Currently, the state only represents 2 million of them, while the rest are on managed health plans that negotiate their own drug rates.

“The governor is the only one that can do this; he is the only one that can force everybody to the table,” said Democratic Assemblyman Jim Wood of Healdsburg, who heads the state Assembly’s health committee.

He said the consolidated bargaining power is vital to address skyrocketing drug prices. With nearly one in three Californians on Medi-Cal, and its budget of $250 billion, even small savings could be significant.

“The savings we’ll be able to enjoy from less spending on prescription drugs,” Wood said, “will help offset some of the additional costs that we’re going to be incurring to expand coverage for other people in California.”

Massachusetts was the first state to enact a “bulk Rx buying plan” in 1999. States eventually started joining forces, and now there are five bulk-buying programs that include multiple states, with some reporting significant savings. Three of those are focused on buying drugs for Medicaid recipients, according to the National Conference of State Legislatures.

The oldest one, focused on Medicaid pooling, was created in 2003 with four states and has now grown to 10, including Michigan, Minnesota, Montana, New York and North Carolina. It represents 3.8 million Medicaid recipients—still less than a quarter of the Medi-Cal recipients California will be bargaining on behalf of.

In its last session, the California Assembly approved a bill that would have created a prescription drug bulk-purchasing program for the state, but it was then held by its sponsor, San Francisco Democratic Assemblyman David Chiu. His office cited a lack of support from then-Gov. Jerry Brown. And nearly two decades ago—in another effort to decrease drug expenses—the state authorized the Department of General Services to buy prescription drugs for state or local agencies through a bulk purchasing program, but the program hasn’t been used much.

The governor’s plan also calls for eventually giving private employers the option to join the consolidated purchasing block, although how that would work is still vague.

As for the expected drug-industry opposition, the Pharmaceutical Research and Manufacturers of America said it’s reviewing the proposal.

“We welcome the opportunity to work with the governor and his administration on comprehensive solutions to the problems patients are facing accessing and affording their medicines,” said spokeswoman Priscilla VanderVeer.

Gerald Kominski, senior fellow at the UCLA Center for Health Policy, lauded the idea of using market power to obtain the lowest prices possible, but predicted that drug-makers would unleash a campaign against it inside and outside of California.

“They will start running ads that are going to scare people—that if you are on Medi-Cal, you are no longer going to get this drug or this drug,” he said. “There will be dark music and maybe a doctor in the scene shaking their head 'no' saying you are no longer eligible for this or for that.”

For the health plans that currently serve the majority of Medi-Cal patients, efforts to get better prices are welcome, said John Baackes, CEO of L.A. Care Health Plan. With 2.5 million Medi-Cal patients, it is the largest Medi-Cal managed plan in the state.

“We are supportive of investigating the idea, because logically it says if the state is negotiating for 13.5 million people, they can do a lot, maybe more than what we can do for 2 million people,” he said. “It’s worth it to see if it will produce better pricing.”

But the details are going to matter, Baackes said. There has been no information yet on how it will be administered or how the state would handle customer service.

Even California, with super-sized buying power, can only bargain so far. Larry Levitt, senior vice president of the Kaiser Family Foundation, called Newsom’s approach “promising.” But he noted that the state can’t walk away from a negotiation, because it has an obligation to make sure that Medi-Cal recipients can access the drugs they need.

“Leveraging the purchasing power of the state is certainly a smart move,” said Sacramento Democratic Senator Richard Pan, chair of the Senate Health Committee. But he added a caveat: “We want to make sure it’s done in a way that ensures that people have access to the medication they need.”

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

Before responsible Riverside County voters go to the polls on Nov. 6, not only will they need to determine which candidates are the most qualified; they’ll need to examine candidates’ statements and positions to determine what is based on fact—and what is not.

This brings us to the race for California’s 28th Senate District—which includes the entire Coachella Valley—where incumbent Republican State Sen. Jeff Stone is running for a second term against Democratic challenger Joy Silver.

Silver is an underdog in the race. In the June primary election, Stone received 56 percent of the vote, compared to 34.7 percent for Silver—a margin of more than 34,000 votes. (A third candidate, Anna Nevenic, a Democrat, received 9.3 percent.)

We asked each candidate why he or she thought constituents should vote for them.

“Probably because I have a proven track record of being an elected official,” said Stone during a recent phone interview. “I’m completing my 26th year (of holding elected office). You never really forget who your boss is, and that’s your constituents, so you have to make sure that you’re always doing things in their best interests.

“Whether I was on the city council (of Temecula), or the board of supervisors (of Riverside County) or now in the California state government, whenever I meet with a governing body, I always feel like I’ve got my constituents sitting on my shoulder, and I ask myself, ‘Is this something they would like or not like?’ Certainly, coming to the state Senate has been a much more challenging experience, because you have a third dimension, which is not one that we had at a local level too much, and that’s partisanship. The partisanship is something you can cut with a knife.”

Silver is a small-business owner who built a successful career as a health clinic executive, senior housing developer and business consultant.

“I think it’s important for people to know that I’m not a career politician,” Silver said. “I’m an outsider who will bring real change to Sacramento, and that will include standing up to those policies coming out of Washington when they hurt all Californians. I want to bring my experience to work on our local priorities, and to fight for the values of our Riverside County constituents … all of us.”

The Independent asked what their priorities would be if elected to the four-year term.

“I carry some very basic fundamentals with me in being an elected official,” Stone said. “One is that government has limited responsibilities, mostly ensuring that our citizens are safe and healthy; and for those who don’t have financial resources, we need to make sure that we help them, especially those who want to help themselves.

“We’ve seen public safety deteriorate with all these terrible initiatives like Prop 47 (which reduced penalties for some crimes, passed in 2014), Prop 57 (passed in 2016, it incentivizes prison inmates to take responsibility for their own rehabilitation, among other things) and AB 109 (passed in 2011 in response to a U.S. Supreme Court order to reduce California prison populations, it transferred certain nonviolent offenders from the state prison system to county-level supervision). These public-safety experiments have come at the cost of a lot of lives and the demise of many businesses.”

Statistics, however, don’t support Stone’s claims. A June 21 report from the Public Policy Institute of California indicates that property-crime rates have decreased slightly since 2011, when the first of these laws was enacted. While violent-crime rates have increased slightly in that time frame, they are still about 50 percent less than year 2000 levels.

Silver said her priorities would include job creation, universal healthcare for all California residents, developing a clean energy economy, career/vocational training, the expansion of affordable housing, and advocacy for immigrant communities.

We asked if universal health care was a realistic goal.

“I do think it is an achievable goal, and with my expertise in the provision of healthcare services, I think I can help move that concept into a place (where) it can work,” she said. “We do have a large economy. Certainly, there are smaller economies in the world that are providing health care for their people, and I think that with the right plan, we can make it happen here for Californians.”

The ever-increasing cost of many prescription drugs is another concern she hopes to address.

“I feel that there needs to be a particular focus on the ability to do group purchases,” Silver said. “Certainly, I’m not the first one to come up with that. When I did work in the health-care business, and we did provide service to a mostly Medicaid patient population, the key there was for independent ambulatory surgical centers to participate in group purchases of items, and that helped us turn around and provide needed goods to the population that we were serving. I think that would be one of the ways to contain costs in a larger venue like our state.”

Stone—who ran unsuccessfully for Congress against Dr. Raul Ruiz in 2016—said the business climate is a top concern.

“I’ve been an active opponent to taxation since I started my political endeavors in 1992, and I’ve never voted for a tax,” Stone said. “We need to do a better job of keeping jobs in California. We’re seeing a flight of the middle class out of the state. We see the price of homes out of the reach of middle-class Californians. Look at the flight out of San Francisco—the liberal experiment that goes on (there) where you have ‘shooting galleries,’ which are places to shoot heroin. And you see the homeless population exponentially increasing there with people bagging feces on the street, and hypodermic needles all over the place. … Even the property values here in Sacramento have been climbing like crazy. Why? Because the people in the Bay Area are trying to escape all this horrific policy that has reduced the quality of life of the people living in those areas.”

The Independent asked both candidates what solutions they would propose to combat the proliferation of wildfires in our state.

“We have to take into consideration that the dryness is part of that issue,” Silver said. “I know that in Idyllwild, they’ve had a plan, and because that plan was in place with various stop-gap measures and ways to coordinate with local fire departments at different points in time, they were able to contain the smaller fires that were initiated by embers. I think that Northern California (communities) could benefit from a plan such as the one in Idyllwild, because they knew how to control and contain. Aside from that, we’re going to have to look at climate and environmental issues to see how we can bring down the heat factor. We have to look at how we can work with a clean-energy economy to do that.”

Stone pointed out that he’s on a committee of lawmakers looking into the spate of fires.

“This has been the worst fire season that we’ve had, and it’s attributable, in some sense, to climate change, but it’s also due to our radical environmental policies that don’t allow us to go in and thin forests and get rid of the 129 million dead or dying trees in the state of California, all in the name of ‘environmental stewardship,’” he said.

The estimate on the dead-tree population came from the U.S. Forest Service in December 2017.

“But at the same time as environmentalists have prohibited us from going in to clear brush and trees, look at how many acres now have been completely erased from California’s landscape,” Stone continued. “How many endangered species and animals have perished in all of these fires that maybe we could have prevented? Certainly we couldn’t have prevented those involving arson, which includes two (recent) fires in my district, the Cranston Fire and the Holy Fire. But in other areas of the state, we could have prevented some of these fires potentially, or at least (lessened) the magnitude of the fires had we cleared the brush.”

The facts don’t necessarily support Stone’s position—particularly his placement of blame on environmentalists for the fires. According to an article from Aug. 7 in The Sacramento Bee, “As of 2015, through the national forests, national parks, Bureau of Land Management, and others, the federal government manages more than 40 percent of California’s total (forest) acreage. The California Department of Forestry and Fire Protection, by comparison, manages a little more than 30 percent. The Trump administration’s own budget request for the current fiscal year and the coming one proposed slashing tens of millions of dollars from the Department of Interior and U.S. Forest Service budgets dedicated to the kind of tree clearing and other forest management work experts say is needed.”

Published in Politics