The Sacramento Bee

Drug makers prepare to fight
Firms commit funds to defeat discount measure.
By Clea Benson
The Sacramento Bee
July 18, 2005

SACRAMENTO -- The chief executives of many of the nation's largest drug companies met in a closed session to discuss political strategy at the May gathering of the Pharmaceutical Research and Manufacturers Association.

When they emerged from the room, the CEOs announced they had agreed to spend the money necessary to pass their version of a drug-discount plan on California's November special-election ballot and to defeat the discount plan supported by consumer groups, a PhRMA official said.

What the drug firms think it will take, it appears, is a huge amount.

According to campaign-finance disclosures filed so far, 17 pharmaceutical companies already have given a combined $52 million to the PhRMA Initiative Fund. That includes $8.5 million checks from Merck, Pfizer and GlaxoSmithKline in recent weeks that are among the largest single corporate payments ever to a ballot-measure campaign.

For the drug companies this year, a lot is at stake: The measure they oppose, Proposition 79, would force them to give drug discounts to low-income Californians or face being dropped from the preferred list for Medi-Cal, the state's health insurance for the poor and disabled. Medi-Cal prescriptions total about $4 billion a year.

Jan Faiks, vice president for government affairs and law at PhRMA, said the pharmaceutical industry is particularly concerned about a provision in Prop. 79 that would allow Californians to sue if they believe the companies are making excessive profits.

"It could damage your biotech industry in the state and seriously damage the pharmaceutical industry because of the potential liability," Faiks said. "It's very dangerous."

The drug-company measure, Proposition 78, would allow the firms to set up a purely voluntary discount program for uninsured, low-income Californians, similar to one proposed by Gov. Schwarzenegger and defeated in the Legislature earlier this year. There is no lawsuit provision in Prop. 78.

As the drug industry shores up its campaign accounts, the consumer groups, Democratic interests and unions supporting Prop. 79 have yet to file papers to organize a campaign committee to start collecting funds. The money to qualify the measure for the ballot came from the Alliance for a Better California, a multiple-issue committee largely backed by public-employee unions.

Sarah Leonard, a spokeswoman, said it was not clear how much money the Alliance would commit to the campaign for Prop. 79.

"Needless to say, it will be a volunteer-driven, grass-roots effort," she said.