Higher Prices, Fewer Choices: Why California’s Prop. 61 Will Not Bring Drug-Price Relief

Prop. 61 would prohibit California government agencies—with the notable exception of managed-care plans operating within Medi-Cal, the state’s Medicaid program—from paying more for a prescription drug than the price paid for the same drug by the U.S. Department of Veterans Affairs (VA).

According to its supporters, Prop. 61 would enable California “to negotiate the same or even better deals [than the VA] for taxpayers, which could save [California] billions in healthcare costs.” Instead, Prop. 61 would likely unleash numerous unintended consequences, including increased state spending on prescription drugs, higher drug prices for veterans, reduced (or delayed) access to medicines, and slower growth and investment in one of California’s vital industries.

Prop. 61 cannot force drug manufacturers to offer California the same prices that the VA pays for drugs. If the California Public Employees’ Retirement System (CalPERS), the state’s public-pension fund, could not secure VA-level prices for the drugs that the VA covers, CalPERS would have to drop such drugs from its coverage—sharply curtailing access to medicines for CalPERS’s 1.4 million beneficiaries.

If CalPERS were forced to limit its coverage to more expensive medicines, California taxpayers would foot the bill, while CalPERS members would be protected by their gold and platinum health plans.

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