Samuelson Proposes Initiative to Cap Prescription Drug Prices

Rep. Kristi Noem tried to make a little political hay this week out of her effort to reduce health care costs by capping damages in medical malpractice cases. Of course, Noem’s vote for this measure would have no impact in South Dakota, since we already have malpractice damage caps. The measure would also have minimal impact nationwide, since medical liability costs make up 2.4% of health care costs, and a 2009 CBO analysis says tort reform might reduce health spending by 0.5%. Noem’s real headline vote on health care, that mean old House Republican ACA repeal she yea‘d in May, does nothing to control health care costs, and neither does the Senate GOP bill, largely because her voodoo chantings about bottom-up, patient-centered, free-market competition are counterproductive in health care.

If Noem is serious about controlling health care costs, maybe she would like to hang her ratty Carhartt cap on a ballot measure out of the blue: Drey Samuelson has proposed an initiative to lower prescription drug prices. The draft text reviewed by the Legislative Research Council would require the state to buy any prescription drugs for no more than the price paid by the U.S. Department of Veterans Affairs.

Federal law requires drugmakers to give the VA a 24% discount of the top, from which discount VA officials can negotiate for even lower prices. Applied to state drug purchases, this measure would affect Medicaid recipients, inmates, state employees, and others receiving health benefits directly from the state. In the debate over a similar measure, Proposition 61, on California’s ballot last year, opponents claimed this drug price cap would affect only 12% of state residents, while proponents claimed the measure would directly affect up to 19% of state residents. Of course, every taxpayer benefits from reduced state spending on any line item.

The initiative includes an interesting and potentially illegal provision deeming the sponsors of this initiative to have “a direct and personal state in defending this Act from constitutional and other challenges” in court. I understand the intent—Samuelson is clearly looking at last year’s court fight over Initiated Measure 22 and trying to ensure that his ballot question committee can use its resources to directly fight for its ballot measure in court, if it passes muster with the voters. However, it seems that such an explicit granting of legal standing could run afoul of our state constitution’s Article 3 Section 23(9) prohibition on “Granting to an individual, association or corporation any special or exclusive privilege, immunity or franchise whatever.”

Also of legal interest is Section 5 of the draft initiative, which specifies an effective date of the prescription drug cap of July 1, 2019. LRC points out in its drafting recommendations that this provision is unnecessary, since 2017 Senate Bill 59, now written into SDCL 2-1-12, already sets the enactment date of approved ballot measures as July 1 following the election. As written, Section 5 is superfluous, but it raises the question of what happens if Samuelson comes back with a revised enactment date that differs from July 1. The Legislature fixed July 1 as the initiative enactment date instead of the previous law allowing ballot measures to come into effect as soon as the vote was officially canvassed to give themselves more time to sabotage popular initiatives that they don’t like. Since that later enactment date is just a law, it seems Samuelson and other initiators are free to propose alternative enactment dates with a simple “notwithstanding.” I would love to see Samuelson poke that legal bear and propose an enactment date of January 1, 2019… but I suppose there are complications to requiring new negotiations for drug prices in the middle of a fiscal year.

Prescription drugs make up about 10% of our health care spending. How much of that spending in South Dakota comes from state agency purchases of prescription drugs is a good question, but reducing the amount we taxpayers directly pay to obtain drugs for state health programs certainly seems a more direct and more moral way to reduce health care costs than limiting the amount of money that people who’ve been harmed by bad medicine can receive in damages from erring health care providers.

Senator Bernie Sanders campaigned hard for Proposition 61 in California, but pharmaceutical companies spent over $100 million to ensure the defeat of Proposition 61 53.2% to 46.8%. Ohio voters will face a similar initiative on their ballot this year.

LRC issued its draft recommendations on June 23. If Samuelson turned his draft around over that weekend and got his revisions to the Attorney General by June 26, then the A.G. has until August 25 to review the measure and issue is explanation. That would put petitions in Samuelson’s hands to circulate just barely in time for the State Fair and with eleven weeks total to gather the necessary 13,871 signatures to put this prescription drug cap on the November 2018 ballot.

5 Responses to Samuelson Proposes Initiative to Cap Prescription Drug Prices

  1. Nick Nemec

    If Samuelson gets this proposal on the ballot, and I hope he does, expect the drug companies to spend millions in an effort to defeat it. Then expect the drug companies to spread their wealth to the SD Legislature in an effort to further limit the initiative process.

  2. Don Coyote

    Once again another poorly written initiative by Samuelson. California already kicked a similar initiative (Proposition 61) to the curb in last years election. Rachel Sachs at the Petrie-Flom Center raises a couple of questions on the efficacy of this type of law:

    1) “First, capping state prices at VA prices seems to require the state to know what the VA is paying for a drug. The problem is that the prices paid by the VA are not public. Nothing in either state [California and Ohio] initiative requires pharmaceutical companies to disclose these prices to the relevant state actors, and it’s not clear that the states would have the ability to access the information otherwise. So how are the states supposed to know what the VA is paying? ”

    2) “…even if a state knows the VA prices, it doesn’t clearly have the legal ability to demand that it also pay those prices. The VA has much greater ability to set a formulary than do most public payers, including state Medicaid programs. …. Basically, the VA can often get up and walk away from the bargaining table if it doesn’t like what the pharmaceutical company is offering. That leverage allows them to demand and receive lower prices than many other public payers receive. Medicaid, by contrast, is required by law to cover nearly all FDA-approved drugs. … By law, Medicaid can’t easily walk away from the table, limiting its ability to demand VA prices.”

    Price caps don’t work. There is nothing in any of these poorly written legislative monstrosities to prevent pharmaceutical companies from further raising prices so as to mitigate the additional price discounting. All this law accomplishes is cost shifting, increasing the “list pricing” of prescription costing the general citizenry more in Rx prices and increasing the odds that VA costs would also rise which is why veteran’s groups have been opposing them.

  3. preventing injured little people from recovering significant sums by caps protecting providers, ad faith insurers and others is like refusing garland, and appointing Gorsuch.

    meanwhile on the single payer front, good comments too:

    stupid republicans screwed up health care opportunities presented by HRC, then by dems by walking out on ACA hearings under Obama, and now by this stupid repeal/replace idiocy. they don’t desrve another chance and resultant delay to keep killing citizens. f**cking republicans

  4. How about we here in South Dakota, make an initiative to cap the prescription drug prices at what we can buy at the pharmacy in either France or Spain? They are the same drug, the same freshness, the same manufacturer but at a lesser cost, like a 100%.

  5. Aww, screw it. How about just posting a list of credible Canadian pharmacies on line and bypass the inflated prices here in the U.S? I know, I know, it’s not “legal”. Nor should it be “legal” to rip society off with the $$$ influence of big pharma over our legislative process. I know, “money is free speech”. If we keep electing the same people, expect the same results… the influence of MONEY, not PEOPLE!