Official Title and Summary
Initiative Language
Press Kit

Summary of the Initiative

At the urging of big pharmaceutical companies, Governor Schwarzenegger vetoed legislation last year that promised million of seniors and families access to cheaper prescription drugs. He proposed an alternative scheme that relies on phony, ‘voluntary’ discounts from big drug companies that have failed in other states.

The Cheaper Prescription Drugs Act will ensure that drug companies provide low cost prescription drugs to the uninsured, low- and middle-income Californians, and those with high health care costs. It harnesses the purchasing power of Medi-Cal to do so.

Failure to provide real discounts and rebates will shut drug manufacturers out of the $4 billion Medi-Cal prescription drug program, except where no therapeutic equivalent is available.

Prescription drugs makers are gouging California seniors and families. The pharmaceutical industry is one of the world’s most profitable, with prescription drug spending increasing by double digits every year. The Cheaper Prescription Drugs Act will allow the state to negotiate for the lowest drug prices for millions of citizens while saving the state’s taxpayers hundreds of millions of dollars a year. The Cheaper Prescription Drug Act is California’s real answer to skyrocketing prescription drug prices.

Specifics of the Initiative

The California Department of Health Services (DHS) administers the Medi-Cal and Healthy Families programs which provide health care services for poor children and adults, including coverage for prescription drugs. These drugs are made available through contracts between DHS and the drug makers. Federal law requires drug makers to sell their products to Medicaid programs such as Medi-Cal at reduced prices.

The state negotiates for rebates from drug makers, resulting in yet lower prices for prescription drugs for the Medi-Cal program, in return for simplifying authorization to use those drugs. And, other programs such as the pharmacy assistance program help elderly and disabled Medicaid participants to buy cheaper prescription drugs.

The Cheaper Prescription Drugs for California Act establishes a new state program aimed at reducing the costs that low- and middle-income residents of the state pay for prescription drugs.

Discount Card Program: In the new pharmacy assistance program to be administered by DHS, eligible consumers could apply for and obtain a card which, when presented at a pharmacy, would qualify them for discounts on their drug purchases. Anyone who is a California resident in a family with an income up to 400% of the federal poverty level would be eligible (up to $37,000 a year for an individual, or $75,000 for a family of four). Families with higher incomes could be eligible if their unreimbursed medical costs exceed 5% of their family income.

Mandatory Drug Maker Rebates: The DHS would be prohibited from extending or entering into any new contract with drug makers for the Medi-Cal program unless the drug maker agrees to lower prices and rebates resulting in significantly discounted prices through the new pharmacy assistance program. Drug makers would have to provide their products at a net price equal to or lower than the price they are allowed to charge the Medi-Cal program.

Coordination with Private Assistance Programs: The DHS would be required to implement agreements with drug makers and other private groups which operate voluntary discount programs so that the discount cards would automatically provide the consumer with the best possible discounts available to them.

Business Assistance: The DHS would establish a pharmacy assistance program to help businesses, small employer purchasing pools and labor organization health and welfare funds among others receive the same pharmacy discounts and rebates from drug makers.

A state advisory board would review access to, and the pricing of, prescription drugs under the program. The DHS would be required to conduct outreach activities to inform the public about the program. “Profiteering” by drug makers would be deemed a civil violation under state law, subject to prosecution by the Attorney General or any member of the public.