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.