Election 2017: Issue 2 pits emotion against complex drug pricing system

Join us on Oct. 12 for a special public forum on State Issue 2.


Across political lines, Americans in poll after poll say prescription drugs cost too much, and stories abound about patients cutting pills in half or making the difficult choice between their medications and putting food on the table.

But while people may agree on the problem, what to do about it has thrust Ohioans in the middle of a big-dollar battleground pitting big pharma against a group that says it has a plan to lower prescription drug prices.

Some are arguing that the provisions outlined in the Issue 2 ballot measure could do just the opposite.

The two sides are already going head-to-head in media ads that will continue over the next month, creating a confusing picture for voters to follow.

And there’s not much time to sort through the proposal. The election is Nov. 7 and early voting begins Oct. 11.

To provide more clarity on what’s in the measure, here are the arguments from both sides.

How we got here

Ohio Taxpayers for Lower Drug Prices, a bipartisan coalition, collected more than 200,000 signatures to get the Ohio Drug Price Relief Act on the Nov. 7 ballot as statewide Issue 2.

The two-line ballot language is very simple. It would require that state-funded health care programs like Medicaid pay no more for prescription drugs than the lowest price paid by the U.S. Department of Veteran Affairs.

It also gives the petitioners the right to intervene in any legal challenge brought against the law, with Ohio taxpayers picking up their legal fees.

RELATED:Ohio’s drug price ballot issue: What’s really going on?

Supporters of the initiative say it will cause a ripple effect, first saving the state up to $400 million a year by lowering its prescription drugs costs, and then putting pressure on the drug companies to offer those lower prices across the market.

But opponents say the approach is over-simplified and doesn’t take into account the complexities of the current drug market. They say the law will be impossible to implement and will in fact have a negative impact on many consumers.

Each side is spending millions on advertising, pitting emotional stories of struggling, everyday consumers against the economic reality of a complex, high-cost drug system that most Ohioans don’t understand. 

The supporters

Issue 2 is endorsed by individuals across the state who want to send a message to big pharma that Ohio will not stand for price-gouging. Its supporters include many doctors, politicians, veterans and a nursing union, National Nurses United.

The Yes campaign is almost entirely funded by the AIDS Healthcare Foundation, a California non-profit that bills itself as the largest provider of HIV/AIDS medical care in the U.S. It serves AIDS patients around the globe, including through several pharmacy and clinic locations in Ohio.

AHF’s founder Michael Weinstein has become the face of Issue 2 — both called out by opponents as a greedy “health care CEO,” who makes his money off prescription drugs; and lauded by supporters as a tireless humanitarian who saved the AIDS Taskforce of Greater Cleveland from collapse.

So far he’s directed more than $5 million of the organization’s money to support Issue 2.

A $1.3 billion operation, AHF makes about 80 percent of its revenue from selling drugs through its pharmacies. Some see Weinstein’s use of aggressive business tactics to drive revenue as counter-intuitive to a non-profit mission.

MORE: Who is Michael Weinstein?

But he says the more money AHF brings in, the more it can offer services including free HIV testing and treatment for the poor.

Weinstein’s salary — he was paid $403,093 in 2015 according to tax filings — is modest when compared to other directors of large non-profits, his supporters say.

“All the dollars earned go back into our mission,” Weinstein said on a call with Ohio journalists.

The Yes campaign says passing Issue 2 is the first step toward lowering drug prices for everyone. If state programs like Medicaid, state employee health plans, retiree health plans and prisons demand to pay the lowest price paid by the VA, they estimate the state of Ohio will see $400 million in savings each year.

MORE: Your questions answered about Issue 2

“That money in our budget would help us do two things. First it would help us fund tax relief, which we didn’t get in this past budget and maybe give more money to schools and local governments,” said Matt Borges, former GOP state party chair and a spokesman for the ballot issue campaign. “And also, it creates a ripple through the marketplace — that the drug companies have identified themselves — that would eventually bring prices down for everyone across Ohio and across the United States.”

The opposition

The group opposed to Issue 2 is called Ohioans Against the Deceptive Rx Ballot Issue.

The campaign is entirely funded by major drug manufacturers through the Pharmaceutical Research and Manufacturers of America, or PhRMA, a drug industry trade group. They’ve been called out by Issue 2 supporters for hiding how much each of PhRMA’s 37 member companies has donated, but the No campaign said it’s being very clear — the campaign is funded by big pharma.

More than 70 statewide organizations — including many that frequently oppose big pharma on other issues — have endorsed a no vote on Issue 2. The groups include the Ohio State Medical Association, Ohio Hospital Association, Ohio Pharmacists Association, AMVETS of Ohio, the Ohio Chamber of Commerce, and the Ohio Manufacturers’ Association.

MORE: Issue 2 supporters say opposition is hiding donor info

They argue that Issue 2 is unworkable because it doesn’t take into account differences in how the VA and state programs like Medicaid actually work. And while it aims to control costs to the state, the law wouldn’t have any authority over prices charged in the rest of the supply chain.

“It’s unworkable because we literally cannot find out what those lowest (VA) prices are. But even if we could, and we were able to do it, there’s no guarantee that the pharmaceutical companies are going to give (Medicaid) those lower prices. It doesn’t force them to sell it at that lower price,” said John McCarthy, former Ohio Medicaid director under Gov. John Kasich, who has conducted an analysis of Issue 2 for the opposition.

RELATED:What questions do you have about Issue 2?

If the pharmaceutical companies refuse to give the state lower prices, but those programs are required by law to spend below a certain cap, cost shifting to other areas will occur, McCarthy maintains. That could include higher co-pays for state employees and retirees, lower reimbursements to pharmacies causing them to drop out of Medicaid, or a reduced number of drugs offered on state formularies, his analysis says.

How much would be saved?

An essential question with Issue 2 is whether the VA price is better than what the state of Ohio currently pays?

The opposition says it is impossible to know whether the VA price is always lower than what state programs currently pay because neither the VA’s final price, nor the state’s final price, is public information.

The VA receives a 24 percent mandatory discount off the the non-federal average manufacturer price and then negotiates additional discounts by limiting which drugs it offers on its formulary. Drug companies give lower prices in order to be included.

Medicaid, under federal law, must receive a 23.1 percent mandatory discount and then is able to negotiate additional discounts off of that.

RELATED: More than $20 million in ads to hit Ohio airwaves on Issue 2

The additional discounts that both programs work out with manufacturers are considered proprietary and are not disclosed publicly.

So it’s unknown what the ultimate lowest price is that either pays, but several experts who analyzed the available data said it’s likely the state and the VA are already paying pretty close to same price for drugs.

“It is reasonable to assume that Medicaid and the VA are approximately equivalent in terms of the net discounts/rebates realized from manufacturers,” an analysis by consultant Maureen Corcoran says. She was Ohio Medicaid director under Gov. Ted Strickland.

If that was the total picture, then Issue 2 wouldn’t really do much to help or hurt drug prices, the report says.

Two very different systems

The VA and the various state programs impacted by Issue 2 are very different in how they purchase drugs — a distinction that isn’t taken into account in the wording of Issue 2, opponents say.

“Unlike the VA, Medicaid does not buy drugs in bulk or otherwise directly buy from wholesalers and then distribute or dispense drugs through its own pharmacy system. So Medicaid has additional costs in its net cost paid for drugs that are associated with getting prescriptions filled by a retail pharmacy — costs that are not reflected in the benchmark VA price,” the consultant report says.

Issue 2 would not change the amount the pharmacy pays for the drug, but would restrict the amount a state-funded health plan like Medicaid could reimburse the pharmacy. This is why the Ohio Pharmacists Association is against the measure. It fears pharmacists will lose money on many prescriptions filled for Medicaid patients, a situation that is already happening and forcing community pharmacies to close, the association says.

Because its patient population is older, the VA doesn’t purchase as many different types of drugs as programs like Medicaid. If the VA does not purchase a drug — like a medicine used on infants for example — Issue 2’s rules would not apply to that drug. Supporters say the state would continue to pay the prices it does now for those drugs. But opponents say there is ambiguity in the proposed law.

RELATED: With small pharmacies disappearing, Medicaid reimbursements seen as culprit

“Because Issue 2 lacks any operational guidelines regarding how drugs not on the VA formulary are to be handled, whether the state could continue to purchase those life-saving drugs — and at what price — are open to question,” the Ohio Chapter of the American Academy of Pediatrics said.

Issue 2 proponents say it would be up to the legislature to work out those details.

“(Big pharma) wouldn’t be spending $50 million if this didn’t hurt them,” said Weinstein, using a figure he claims the opposition will spend by Nov. 7. He said the ballot language allows Ohio to figure out how to make the law work after it’s passed.

Blank check?

One of the more controversial aspects of the ballot measure concerns language that would give supporters the right to sue at taxpayers’ expense.

Weinstein said this provision was included to make sure the state implements and enforces the law. But opponents say it gives Weinstein and his organization a “blank check” to engage in an unlimited number of legal claims.

AHF hasn’t been shy about filing lawsuits. The opposition campaign says Weinstein and his organization have filed at least 52 lawsuits against government agencies in multiple states, including three in Ohio.

Most recently, the AIDS Taskforce of Greater Cleveland, which became part of AHF in 2015, sued the Ohio Department of Health when it was denied 2017 grant money.

Not only did AHF ask a judge to overturn that decision, but it filed an injunction that would have prevented any other AIDS organizations from getting their grant money until the matter was resolved in court. That would have tied up half a million dollars allocated to two other non-profits for services to AIDS patients, according to the court documents.

Cuyahoga County Judge Sherrie Miday denied that injunction in June. The lawsuit against the department of health is pending.

An official for Equitas, one of the nonprofits whose funding was impacted by AHF’s lawsuit, said having taxpayers cover the cost of litigation involving Issue 2 is a bad idea.

“It’s concerning that the named sponsors can essentially have a blank check from the taxpayers to pay their legal fees if engaged in a lawsuit, which is not unlikely because the initiative itself is unimplementable,” said Daphne Kackloudis, chief public policy and government affairs officer for Equitas, formerly the AIDS Resource Center of Ohio. “And especially when we consider the litigious nature of AHF nationwide.”

MORE: Battle over drug pricing comes to Ohio with costly campaign, TV ads

The actual language in Issue 2 gives four named petitioners — William Booth of Dayton, Daniel Darland of Dayton, Tracy Jones of Bedford Heights, and Latonya Thurman of Columbus — a personal stake in defending the act if passed.

That means that if the law were to be ruled unenforceable, they would have personal liability up to $10,000. But it also means they can join in the defense of the law with Ohio taxpayers paying their legal fees, and there is no limit on that cost.

Booth, Jones and Thurman all work with AHF either as employees or contractors. Booth has worked with AIDS groups for years and is HIV positive; he said he met Darland through his work in health care and helped him get money to pay for needed prescriptions.

Booth said the group of petitioners cares ardently about Ohioans having access to affordable health care. The legal piece of the ballot issue is simply to protect them from being sued, he added.

Weinstein said the provision is intended to ensure Ohio inacts and enforces the law if voters pass Issue 2. 

“It gives the four sponsors, three of whom work for (the AIDS Healthcare Foundation), an unprecedented right that’s never been in Ohio law before to hire their own lawyers and to intervene in any legal challenge that may be filed against this law and requires the taxpayers of the state to pay their attorney fees without limit and without a cap,” said Dale Butland, spokesman for the opposition campaign. “This could get extremely expensive.”

More prescription drug coverage:

Dayton man lead plaintiff in drug suit alleging price-gouging

Million-dollar drug keeps local woman alive

Consumers kept in the dark over drug pricing

Read fine print: Prescription drug discounts may contain catch



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