Effort to Cut Drug Costs Not Yet Proved Effective

Administration officials acknowledged Thursday that Gov. Arnold Schwarzenegger’s plan to put discounted prescription drugs into the hands of poor Californians is only that: a plan.

So far, no actual discounts have been obtained from the pharmaceutical industry.

After officials briefed reporters on how the governor’s “California Rx” program would deliver discounts of 40% or more, critics said they doubted that such significant savings would be achieved.

Anthony Wright, executive director of Health Access, a nonprofit advocacy group for uninsured Californians, said the drug-discount portion of Schwarzenegger’s impassioned State of the State speech Wednesday seemed made for television.

“I would liken it to a prescription drug commercial,” Wright said. “There’s that first 30 seconds which has people running though fields and it looks very good. But there’s that second 30 seconds with the fine print that tells who’s excluded, what are the side effects, what are the real implications.... We really want to see the fine print. We don’t have that at this time.”

Administration officials said their plan was the quickest way to lower prescription drug prices for those Californians who sometimes must pay hundreds of dollars a month for medicines because they don’t have an employer or health plan negotiating cheaper prices on their behalf.

State health officials said the California Rx program was a top priority for the governor, who has spoken to some pharmaceutical executives.

“California Rx offers not just the rhetorical promise of lower-priced drugs; California Rx offers the practical reality of significant savings to nearly 5 million low-income and uninsured Californians,” said Health and Human Services Agency Secretary Kim Belshe.

Here’s how California Rx would work:

Schwarzenegger’s program would be available to those who earn less than 300% of the federal poverty level, or $28,000 a year for individuals and $56,600 for a family of four. For an annual $15 fee, enrollees would get a discount card that state health officials say could save them at least 40% on prescriptions at their pharmacies.

The plan is embodied in a bill that state Sen. Deborah Ortiz (D-Sacramento) and Sen. Chuck Poochigian (R-Fresno) will carry.

After writing a bill last year that was vetoed by Schwarzenegger because it sought prescription drugs from Canada, Ortiz broke with her Democratic colleagues to embrace the governor’s plan.

Other Democratic lawmakers criticized the proposal as ineffective and limited, but Ortiz said she thought she had an obligation to pursue a program that could help Californians who were forced to choose between buying food and getting the medication a doctor says they needed.

“Our job as elected officials ... is to in fact try to find that common ground,” said Ortiz, chairwoman of the Senate Health Committee. “We’ve got a huge challenge ahead of us this year.”

The discounts in California Rx would come in two ways, officials said: First, the program would require that manufacturers who wanted to participate offered drugs at the lowest price paid by any large commercial buyer in the state. Also, it would force pharmacies to grant California Rx members the same discounts they give large buyers such as the Blue Cross health plan or the Costco store chain.

What’s more, state health officials say, California has a good chance of qualifying for a federal program that would allow it to win even deeper discounts from manufacturers.

State health officials say that all major drug firms -- working through the trade group Pharmaceutical Research and Manufacturers of America -- have agreed to participate in California Rx and that, if legislation is passed and signed by Schwarzenegger, those companies must offer their lowest commercial prices as a condition of participation.

Schwarzenegger’s plan “balances the immediate needs of patients without compromising on the promise of future research and development,” said W.J. “Billy” Tauzin, a former Louisiana congressman who is the association’s president and chief executive. “We look forward to continue working with the governor to ensure this program’s success.”

Regardless of whether the legislation passes, the pharmaceutical association has committed to spending $10 million over the next two years to publicize and help Californians enroll in manufacturer-run programs for free and discount drugs.

The California Rx program also has the endorsement of the California Medical Assn., which represents the state’s doctors; AARP; and the California Pharmacists Assn.

“We wanted to put something on the table that would be legal, that would be safe, would be local and that we could implement in a reasonable amount of time,” said Sandra Shewry, director of the state Department of Health Services. “This will be unique.”

Some consumer advocates called the plan a sellout to the pharmaceutical industry, which has donated heavily to Schwarzenegger. They questioned how California could stop drug companies from raising prices before setting a discount.

Others called California Rx a far cry from what Schwarzenegger promised last fall when he vetoed a raft of Democratic-sponsored bills that would have, among other things, created a state website to link Californians to Canadian pharmacies selling cheaper drugs.

Democratic lawmakers reintroduced several of those bills Monday, including one that would offer a discount card to 2 million more uninsured Californians than the Schwarzenegger plan would cover.

“He promised that within six weeks he was going to have a deal with drug companies to negotiate discounts,” said Assemblyman Dario Frommer (D-Glendale). “We’re obviously three, four months past that now, and what he announced today is that basically nothing happened. He couldn’t name a single drug company that is prepared to offer discounts.”

Frommer complained that the program would lack a mechanism to force drug makers to give discounts. The state’s only hammer, he said, would be to bar companies from including their products on the lists of drugs that Medi-Cal patients could get without prior authorization from a doctor. California’s huge Medi-Cal program spends $4 billion a year buying drugs for roughly 7 million low-income, elderly and disabled people.

“Prescription drug companies all want to have their drugs on the [Medi-Cal] pre-approved list, which means that a doctor can write for a medical patient without getting any further approval from the state,” Frommer said. “That is the only leverage we have.”

Frommer and consumer advocates pointed to Maine as a model. Officials there tried to leverage pharmaceutical company participation in the state’s Medicaid program to get discounts for uninsured consumers. Drug companies challenged the program, and the ensuing legal fight went all the way to the U.S. Supreme Court, which backed Maine’s program in 2003.

Kimberly Fox, a senior policy analyst at Rutgers University’s Center for State Health Policy in New Jersey, said the most generous drug discount programs have been those in which states directly subsidized the cost.

“Direct benefit programs provide much more substantial coverage for the consumer,” Fox said. “The states of New York and Pennsylvania -- their consumers only pay $5 or $6 per drug. The discount cards reduce the price, but you are still paying the lion’s share of the price. A discount card is not drug coverage.”

One of California’s previous efforts at getting drug discounts was not successful. In 2001, lawmakers created the Golden Bear State Pharmacy, which was supposed to negotiate lower drug rates for the elderly on Medicare.

But Golden Bear never got out of the forest. Officials invited 500 manufacturers, but only one generic drug maker and 13 brand manufacturers agreed to participate -- an insufficient group, because more than half of the drugs used by Medicare recipients are generic. Companies that declined said they did not participate because if they did, they would have to give the federal government the same rebates they were giving California.

With those obstacles in mind, the Schwarzenegger administration told lawmakers last year that it had “exhausted efforts” to enact the Golden Bear program.