Orange County Register, November 2, 2005

An argument against Prop. 79 and arguments for and against Prop. 78

Proposition 78 will increase drug access and reduce drug prices for those in need precisely because it will enable the drug producers to make more money, by discounting drugs for those less fortunate without being forced to offer the same discounts to the federal government. Prop. 79 explicitly would reduce drug access for the needy in an effort to subsidize the middle class, and it would engender a tidal wave of litigation.

Beginning in 1990, federal law in effect made it illegal to offer price breaks to poorer patients because the drug producers then would have been required to give that same price to the feds. And so the need to cover large research-and-development costs prevented the drug producers from using such differential pricing to increase access to medicines for the poor.

The Bush administration has changed the rules so that the producers now may give such discounts to those less fortunate through Patient Assistance Programs, without being forced to offer those same low prices to federal drug programs. Prop. 78 enables precisely that. While it may seem counterintuitive, the voluntary approach of Prop. 78 yields far greater benefits for those in need precisely because it allows drug producers to make more money.

Prop. 79 attempts to force sharp price discounts for over half of Californians by threatening to remove from the Medi-Cal preferred drug list the drugs produced by those pharmaceutical firms not agreeing to the discounts demanded by a new California Prescription Drug Advisory Board. In other words, Medi-Cal patients would be denied the newest and most effective medicines if a given drug producer refused to offer sharp discounts to the middle class, unless this new board granted prior authorization for a given prescription.

That is why Prop. 79 almost certainly would never be implemented: The federal government has made it clear (in a 2002 letter to the state Medicaid directors) that it will not approve state programs that threaten the benefits of Medicaid patients in efforts to reduce drug prices for those not poor.

Under Prop. 79, "profiteering" would be a civil offense, "defined" as "unconscionable prices" or "unjust or unreasonable profits." This is a blatant attempt to conduct "negotiations" with a gun held to the heads of the drug producers. Any attorney could file a lawsuit, with damages of $100,000 plus costs per prescription. It's accurate to say that Prop. 79 would take from the poor and give to the lawyers.

Prop. 79 would have the effect of making not only the poor but also the broad middle class dependent upon government, and that is the overriding goal of the left. That is something that all freedom-loving individuals should fear and oppose.

Benjamin Zycher is a senior fellow at the Pacific Research Institute, which receives research grant support from the pharmaceutical industry. Email: benzycher@bzecon.com.