Special Election: Propositions 78 & 79

Both Propositions 78 and 79 would create a state-managed prescription drug
discount program for uninsured Californians. In both measures, consumers
would apply for a state-issued drug-discount card that would allow them to
purchase their prescriptions at discounted rates. Those discounted rates
would be negotiated by the state Department of Health Services with the
pharmaceutical manufacturers.

But the two measures substantially differ in terms of the enforcement
mechanism and the scope of those eligible. Proposition 78, which is
supported by the pharmaceutical industry, is a voluntary program, with
discounts dependent of the cooperation of drug makers. Proposition 79, which
is backed by labor and consumer groups, threatens non-compliant manufactures
with exclusion from lucrative state drug markets and possible profiteering

Under Proposition 78, Californians are eligible so long as they make no more
than $29,000 a year, with the income cutoff rising to $58,000 for a family
of four.

The income caps under Proposition 79 rise to $38,000 a year for an
individual, and $77,000 for families of four, with coverage also extended to
people whose families spend at least 5 percent of their income on medical

Backers of 78, claim that 4 to 6 million new Californians will be eligible
for discounted drugs under their program. Meanwhile consumer groups counter
that 8 to 10 million new Californians would become eligible for cheaper
drugs with the passage of Proposition 79.

But those numbers are rough estimates that appear exclusively in the
arguments for the measure, not in the actual text of the initiative. The
number of actual enrolled Californians in both programs would depend heavily
on outreach and education because both require consumers to proactively
submit applications, with a nominal difference in processing fees. The
extent of outreach is not mandated in either initiative.

According to the nonpartisan Legislative Analyst both programs would have
similar administrative costs–both one-time and ongoing–“in the low tens of
millions of dollars annually.”

Besides eligibility requirements, the biggest difference between the
measures is enforcement. Proposition 78 relies on the cooperation of drug
companies to give voluntary discounts.

In contrast, Proposition 79 states that those drug companies that do not
participate in the new drug discount program will be excluded from the
Medi-Cal program, whose drug market is valued at $4 billion annually. That
provision only applies if there is not another equivalent drug available. In
addition, any Medi-Cal beneficiary who has already been prescribed a drug
would continue to receive it without prior approval.

The drug manufactures have railed against a provision in Proposition 79 that
would allow the lawyers to sue drug companies for “profiteering.” The
definition of profiteering, according to the measure, includes demanding “an
unconscionable price” and demanding “prices or terms that lead to any unjust
or unreasonable profit.”

The pharmaceutical makers say that provision will lead to a flurry of
lawsuits that will tie the initiative up in court battle after court battle.
Indeed, one of the arguments that proponents of Proposition 78 have used is
that it is “the only workable drug discount plan.” The thinly veiled threat
is that Proposition 79, if passed, would be tied up in court for years.

A similar measure in Maine faced a similar fate, with a four-year lag
between passage and implementation. And the pharmaceutical companies, who
have marshaled $80 million in the campaign to defeat Proposition 79,
certainly have the resources to take the measure to court if it passes.

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