Why It’s Hard to Control Drug Prices at the Ballot Box

This article was originally published at Stateline, an initiative of The Pew Charitable Trusts, and was written by Michael Ollove.

Just 9 percent of Americans think pharmaceutical companies put patients’ interests above their own profits, according to a Harris poll published earlier this year.

That dismal finding, which mirrors other recent polling, would seem to have boded well for a ballot initiative in Ohio intended to limit the amount the state pays drugmakers for prescription medicines.

Yet earlier this month, Ohio voters rejected the measure by a decisive margin of 79 to 21 percent, the most lopsided tally in recent history for a ballot initiative in the state. A nearly identical measure fell a year earlier by a narrower, but still substantial, margin in California, a left-leaning state where voters could have been expected to back limits on the industry.

The defeats come at a time when consumers, health advocates and public officials have voiced alarm and outrage over rising prescription drug costs. And they demonstrate the difficulties activists face in taking on a powerful industry prepared to spend millions to block efforts to control what it charges for its products.

Supporters of the Ohio measure — spearheaded by the AIDS Healthcare Foundation, an international nonprofit that advocates for HIV testing and provides care to thousands of patients in the United States — said the initiative would have saved taxpayers $400 million a year.

In both states, the principal opposition to the measures came from the pharmaceutical industry, which argued that rather than reducing state costs, the proposed changes would lead to higher prescription drug prices for many people. Drugmakers outspent supporters more than 3-to-1 in Ohio.

“Conversations about the cost of medicines are important,” the Pharmaceutical Research and Manufacturers of America, the lobbying arm of the drugmaking industry, said by email. But the group called the Ohio proposal “flawed policy [that] was not the answer to the challenges people face accessing and affording their medicines.”

Despite the two decisive defeats, the lead advocate behind the initiatives, Michael Weinstein, co-founder and president of the AIDS foundation, said he intends to finance similar efforts in South Dakota, where he said a Democratic activist has asked for his help, and Washington, D.C., which was attractive because of its liberal electorate and the relative ease of getting an initiative on the ballot.

Weinstein did not specify any change in strategy and said he was confident that the tide will turn. “This … is one of the major social issues of our time.”

Soaring Prescription Costs

States are major purchasers of prescription drugs, mostly through Medicaid, the health plan for the poor that is jointly financed by states and the federal government, but also for state employee benefit plans, public hospitals and prisons.

And those costs are rising. In Medicaid alone, spending on prescription drugs increased by 42 percent between 2013 and 2015, to $31.8 billion. (Overall in the United States, spending on prescription drugs grew by 22 percent in that period.)

States have tried a variety of approaches in recent years to stem rising drug prices or reduce their impact. Some have enacted laws that require drugmakers to disclose their development and marketing costs in the expectation that transparency will encourage them to lower prices. Some have limited out-of-pocket expenses for patients who use expensive specialty drugs, like many used to treat cancer and autoimmune diseases.

And Massachusetts recently asked the Trump administration for permission to exclude certain drugs from its Medicaid program in an attempt to improve its bargaining position with drugmakers.

But the referendums in Ohio and California appear to be the first time voters have had a chance to weigh in on what to do about rising drug prices. And their choice in both cases was to do nothing.

California’s liberal politics made the state an obvious choice to first try out the referendum, Weinstein said. He chose Ohio, he said, “because it had a large core of activists, and it is a large swing state with national importance.”

In Ohio, where the state spent $2.8 billion on prescription drugs in 2016, mostly through its Medicaid program, health policy experts who watched the campaign unfold said voters were confused by the language of the ballot initiative and feared that if it passed, it would lead to higher prescription drug prices for many of them.

“One thing we can say with certainty is that almost no one in the state understood the actual referendum,” said Daniel Skinner, an assistant professor of health policy at Ohio University.

The Ohio initiative would have required that state agencies pay the same or lower prices for prescription drugs as the U.S. Department of Veterans Affairs, which by law is entitled to a discount of at least 24 percent below the average manufacturer price. The VA is generally seen as getting the best prices available for medicines.

The measure also would have required the state to pay the legal expenses of proponents in the event the initiative passed and was challenged in court by opponents.

The group opposing the initiative, Ohioans Against the Deceptive Rx Ballot Issue, was largely funded by the pharmaceutical industry. Final campaign finance reports have not yet been filed, but reports in late October showed that opponents had raised $58 million, compared with just under $15 million for proponents, making it the costliest ballot initiative in Ohio history.

Opponents pointed out that the VA gets undisclosed discounts beyond the 24 percent, and without knowing what those are, Ohio would not be able to comply with the initiative. They also pointed out that the list of drugs the VA covers is tailored to its clientele of mostly older men and doesn’t include many drugs used by younger women and children, who comprise a majority of the Medicaid population — and that those other drugs wouldn’t have been covered by the initiative.

But perhaps opponents’ most effective argument was that limiting the price the state paid for prescription drugs would lead pharmaceutical companies to raise prices on consumers in employer plans or with individual policies.

“It was bad public policy that not only wouldn’t fix the problem but make things worse,” said Dale Butland, communications director for the opposition campaign.

Proponents deny that characterization. Dennis Willard, spokesman for the proponents, Ohio Taxpayers for Lower Drug Prices, said Ohio officials would have been able to work with the VA to get all the information they needed to ensure the state got the same deal on prescription prices.

And even if all drugs aren’t covered in the VA formulary, the initiative would have saved taxpayers $400 million a year through the drugs that are, he said. “If this measure was going to have no impact, why would they spend all this money opposing it?”

Paul Beck, a retired political scientist from Ohio State University, said the campaign against the measure used television and radio ads to sow confusion. And, he said, “when voters are confused about an issue, their tendency is to vote no.”

Going Forward

Even before the ballot initiative battles, Weinstein was controversial in some circles. Unlike other AIDS foundations that raise money through grants and fundraising, his operates a string of medical clinics and pharmacies, whose profits finance care for 700,000 HIV patients around the world.

Many in AIDS advocacy opposed the California referendum, fearing that drugmakers would respond to limits on state prescription drug spending by raising prices on other consumers.

But Weinstein has proven more than willing to depart from the orthodoxy of AIDS advocacy, not least of all by his hostility to PrEP, a drug that reduces the likelihood of contracting HIV by up to 99 percent. Virtually alone among AIDS activists, Weinstein has warned that the use of PrEP would discourage condom use.

As to the referendums, though, he said he is motivated by his conviction that drug companies are gouging consumers.

In Ohio, the no campaign painted him as a California carpetbagger who wanted to fleece Ohioans. The campaign suggested that the provision on legal fees was designed to pay for his future legal expenses, and it referred to him as a health care CEO.

“They made people think I was the drug executive, not them,” he said.

In California, Weinstein’s foundation spent $19 million on its campaign, compared with $111 million by the opposition, largely from drugmakers. It was the most expensive ballot measure battle in 2016, according to Ballotpedia, which monitors spending on elections.

Political analysts say Weinstein will run into similar problems if he doesn’t craft better initiative language or improve the messaging.

Public disapproval of the pharmaceutical industry should provide an opening with voters, said Skinner, the Ohio University political scientist. “But they also should have used their argument about saving taxpayer money much more effectively.”

And, Skinner noted, whatever the messaging, proponents are still likely to face the same spending disadvantage.

Buoyed by their recent victory, opponents also are doubtful about Weinstein’s chances going forward. “If you can’t get it passed in California, one of the most progressive states,” Butland said, “and you can’t get it passed in Ohio, it raises the question of where you can get it passed.”