Why Bernie Sanders is taking on Big Pharma in California

Weed. The death penalty. Cigarettes. All of these controversial topics will be voted on in ballot initiatives across the country on Tuesday. But quietly, a ballot measure seeking to control drug prices in California has hit a deep populist nerve — and the deep pockets of the pharmaceutical industry and its allies, who are pouring unprecedented amounts of money into the campaign to defeat it.

Opponents of California’s Proposition 61 — innocuously titled the “California Drug Price Relief Act” — had raised more than $109 million to defeat the measure as of Oct. 22, the most one side has ever spent on a ballot initiative campaign in United States history. That fundraising dwarfs what entire countries have spent on ballot referendums. The opposing campaigns for “Brexit” this summer in the United Kingdom, for example, spent $40.6 million combined.

The “Yes on 61” side has raised just $16 million, and even though none of California’s major political, business, or media forces is supporting the measure, it is still far ahead in polling. The “yes” lead has shrunk over the past month, but a Hoover Institution poll released Tuesday pegged support for the initiative at 51 percent, opposition at 24 percent, and undecided at 25 percent. In interviews last week, no representative for either of the campaigns felt confident enough to predict victory.

This money-drenched campaign over a wonky ballot measure may be just the opening salvo in a oncoming political fight over pharmaceutical companies and rising health care costs. “Yes” proponents have already qualified a similar ballot initiative for Ohio in 2017 and are mulling doing the same in Florida. Michael Weinstein, Prop 61’s chief backer, wields a highway sign at rallies because, he says, “we know that this is just one mile of that battle” against “high drug prices.” Weinstein, an abrasive and controversial figure in the LGBT community, is founder and head of the Los Angeles-based AIDS Healthcare Foundation, the largest provider of AIDS services in the country.

The Prop 61 campaign offers a possible preview of a bigger intraparty fight for the national Democratic Party’s future, a fight Bernie Sanders helped instigate this year in the presidential primary against Hillary Clinton. Then as now, voters are largely tuning out so-called elite opinion and raging against a monolithic corporate power. But instead of Wall Street, it’s now Big Pharma.

Sanders himself took a detour from the usual presidential swing states to campaign in California for Prop 61 on Sunday and Monday, the last two days before Election Day. He is the “yes” campaign’s highest-profile surrogate, starring in campaign commercials, railing against the “crooks” in the pharmaceutical industry, and claiming that a victory in California will “reverberate all over America” in a fight against high drug prices.

“No on 61” spokeswoman Kathy Fairbanks acknowledged in an interview that recent price hikes on everyday drugs such as the EpiPen and diabetes medication have contributed to the opposition campaign’s difficulty getting traction. Last year, “Pharma Bro” Martin Shkreli incited intense popular anger when he raised the price of a drug to treat the rare parasitic infection toxoplasmosis, a disease that can be fatal for people with AIDS, by 5,000 percent.

Beyond seeing memes of corporate greed, Americans are also paying the price of drugs more often as they increasingly shift to high-deductible insurance plans. “When people had first-dollar coverage, nobody much cared. But now that they have high deductibles, people see how high prices are,” said Peter Hilsenrath, an economics professor and expert in health care management at University of the Pacific in Stockton. Perhaps as a result, Pharma is the most disliked industry in the country, according to a Gallup poll conducted in August. The only institution more unpopular is the federal government.

Prop 61 would require state health care services covering approximately 4.5 million people to pay the same price for prescription drugs as the Department of Veterans Affairs, which typically receives significant markdowns.

Opponents argue the proposition will unintentionally raise drug prices for veterans and people with private health insurance. Federal law requires pharmaceutical companies to give the VA a 24 percent discount and the industry says it already gives substantial discounts on top of that. Prop 61, they caution, may make it economically impossible to do that in the future.

The measure would not directly affect the 88 percent of California patients not covered by state-controlled health providers, but they, too, would be vulnerable to price hikes through their insurers.

Proponents counter that lower drug prices would help 100 percent of California taxpayers who provide the funds for state medical services. They also argue that the current system is so opaque that the state doesn’t have sufficient bargaining leverage. At the moment, there are separate negotiations and contracts for every drug from every company, and those prices are not made public. The proposition would excise hundreds of secret contracts and replace them with the contract negotiated with the VA.

It’s unclear how much money these price controls would save the state and patients. Pharmaceutical companies, for example, could claim it’s unprofitable or simply refuse to sell their drugs to the state at the VA price, but doing so would cut those companies off from California’s enormous market.

“We don’t know what’s going to happen with this, really, because it depends on the response of the pharmaceutical companies,” Hilsenrath said. Fairbanks said the only certainty if the proposition passes is that it “will be tied up in litigation for years.”

More than anything though, proponents are appealing to emotion by promoting Prop 61 as a way to “fight back” against an industry they deem to be corrupt and greedy. To them, criticism from members of the establishment and money spent on advertisements against the measure is only further evidence of a rigged system.

Neither the Republican nor the Democratic state parties endorsed Prop 61. The increasingly outnumbered California Republican Party encouraged its voters to vote “No,” and posted on its website: “Are we alone? No way!”

California’s Democratic Party controls every statewide office and has large majorities in both houses of the state legislature. Most of the state’s elected Democrats and party leaders, including Gov. Jerry Brown and Lt. Gov. Gavin Newsom, are either staying neutral on Prop 61 or finding themselves on the side of the pharmaceutical companies.

Those companies are fighting the measure “tooth and nail,” as Eli Lilly & Co. CEO John Lechleiter put it on a quarterly financial call the other week.

And the opposition goes beyond politicians and business interests. Newspaper editorial boards across the state have implored Californians to vote “No” on the measure, including the Los Angeles Times, San Francisco Chronicle, Sacramento Bee, and San Diego Union-Tribune. Most papers offer a variation on the argument that people’s anger is righteous and reform is needed, but Prop 61 is a poorly constructed solution.

Even with all these institutional forces aligned against passage, California voters and the Democratic base have not fallen into line, and the “No on 61” campaign and its pharmaceutical allies seem to have been caught off guard by the populist fervor against them. After spending tens of millions of dollars to defeat the measure, a USC Dornsife/LA Times poll conducted in early September showed the “no” side losing big, 66 percent to 23 percent. The “no” campaign then raised an additional $22.3 million from Sept. 25 to Oct. 22.

Leaders of the state Democratic Party opposed to the measure were also surprised by the backlash they faced from party members. The highest-ranking officers of the Resolutions Committee — which determines party endorsements — met before the state party convention last summer and planned to have the party endorse the “no” side, according to committee co-chair Raymond Cordova. “Anyone who reads the whole proposition and understands it is not going to support it,” he said.

At the convention, it soon became clear that the “yes” position was far stronger than expected and would force a floor fight. To avoid that conflict, Cordova said, the committee changed course and the party went neutral on the proposition.

“Yes on 61” supporters see this as evidence of how politically powerful the network of pharmaceutical companies has become. California Assemblyman David Chiu, one of the few state legislators to publicly support the proposition, criticized some of his Democratic colleagues for allowing the pharmaceutical industry to “buy” their support. “Pharma has been masterful at retaining dozens of the top lobbyists in Sacramento who have strong relationships with the state legislators and are able to leverage those relationships to ensure that we haven’t had any real policy discussion on drug prices,” he said.

Art Torres, a former state senator and the former chairman of the California Democratic Party, who supports the measure, explained the political establishment’s opposition to Prop 61 in one word: “Money!”

The pharmaceutical industry regularly spends millions of dollars each state legislative session through direct donations to lawmakers along with extra lobbying expenses. Nationally, the industry has spent $3.4 billion since 1998 lobbying the federal government, more than any other industry, according to the Center for Responsive Politics. And now it is pumping over a hundred million dollars into California.

The financial stakes for the pharmaceutical industry and the political stakes for the Democratic Party extend well beyond California. Whether Prop 61 passes or fails, it may prefigure a new progressive campaign against Big Pharma. Future candidates might be attacked more for giving speeches to Pfizer than to Goldman Sachs.