Drug Plan Was Once a Bitter Pill for Gov.

Gov. Arnold Schwarzenegger’s new prescription drug plan is based on an approach his own health advisors repudiated last year as dangerous to poor people’s health and legally questionable.

Throughout 2005, the Schwarzenegger administration fought a Democratic plan to pressure pharmaceutical companies to discount drugs for Californians who earn too much to qualify for Medicaid but too little to afford many essential medicines.

Schwarzenegger objected to its hammer: Manufacturers would have to lower prices or face serious obstacles to the sale of their products to Medi-Cal patients.

“It is irresponsible to risk the health and wellbeing of our most vulnerable in order to leverage low prices for higher income individuals,” Kim Belshe, Schwarzenegger’s Health and Human Services secretary, wrote in a February 2005 column in the Sacramento Bee newspaper. “This strategy was a flop in other states and would not work for California.”

But the plan the Schwarzenegger administration and Democratic lawmakers have negotiated employs the same threat to manufacturers.

“I think they’ve compromised the wrong way,” said Angela Gilliard, legislative advocate for the Western Center on Law and Poverty, a Los Angeles-based nonprofit, referring to the Schwarzenegger administration.

Officials said Schwarzenegger changed course after competing discount initiatives on last year’s ballot failed and it became clear that Democrats in the Legislature would not trust the drug companies to voluntarily reduce prices.

“So [Proposition] 78 failed and 79 failed,” the governor told one advisor. “I want 78 1/2.”

The new plan has safeguards. Medi-Cal would not restrict access to drugs that have no substitute or those whose omission would increase costs to the state.

The plan also would make exceptions for people who are already receiving a particular medication, so they would not be switched to another.

Belshe said she hoped drug manufacturers would voluntarily agree to lower prices within the three-year window the new plan provides. “Our focus is on the near term, getting this program up and running, not what may or may not occur in three or more years,” she said.

The administration was not so optimistic last year, when it was arguing against the approach it has now embraced. In one private memorandum, officials wrote:

“If California includes the Medi-Cal linkage provision, we expect the drug companies will refuse to participate in [the program] and may sue.”