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Commentary

A Comparison of Propositions 78 and 79, Prescription Drug Pricing Initiatives in the November 8, 2005, Special Election
John R. Graham, Pacific Research Institute, 10-27-05

This report, from John Graham, director of health care studies at the Pacific Research Institute, examines the dueling prescription drug discount initiatives that will be featured in the upcoming (November 8) special election in California.

The first initiative, Proposition 78, is a voluntary drug discount program that will serve as a clearing house for industry discounts for low- and moderate-income Californians without prescription drug insurance. The second initiative, Proposition 79, endorses price controls and opens the industry to civil lawsuits for “unreasonable” or “unconscionable” profits on its medicines.

Graham argues that only Proposition 78 will actually lower prices for uninsured Californians.

“Most Californians probably do not realize that government regulations cause high drug prices for uninsured patients,” said John R. Graham, director of health care studies at PRI and author of the new report. “Although Prop. 78 creates a new state program, it actually reduces government involvement in setting prescription drug prices by approving voluntary discount programs that drug makers are already operating in the U.S.” Over time, Mr. Graham expects that these discounts will be financed largely by pharmaceutical manufacturers and at little cost to California’s taxpayers.
“On the other hand,” said Mr. Graham, “Any discounts, if they ever occur under Prop. 79, will likely come out of the pockets of taxpayers, with the pharmaceutical industry and community pharmacies likely to boycott the program.” …
“Prop. 78 is a big step in the right direction, but there is more to be done to ensure that needy Californians get the medicines they need,” said Mr. Graham. “The next step will be to reduce the degree of government intervention further by limiting the state’s role as middle man for the rebates, and giving the discounts directly to the beneficiaries.”


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