Don’t Poke the Bear

Learned Lessons from Pharma

Don’t Poke the Bear

In 2015, Assemblymember Chiu introduced legislation that would have required pharmaceutical companies to file an annual report on how they develop their drug pricing for new and existing products. Much of the language in the bill was already public information, but it was not easily accessible for the general consumer. It’s important to note the political landscape at that time was still generally positive to the Pharmaceutical Industry (Pharma). Seen as a necessary force, Pharma had positioned itself for the longest time as a white hat in the proverbial health care arena.

 

So, when Assemblymember Chiu wanted to increase transparency to their industry, they drew a hard line in the sand. How hard? Well, the lobbying efforts to the committee were so strong that the author canceled his request for a hearing. No transparency bills were passed, and the Legislature was put on notice that these types of transparency bills would not be supported by the industry.

While one can argue that Pharma made the smart move, we would contend they set themselves up for long-term failure. Pharma was not reading the tea leaves. Drug pricing was continuously increasing, and changes from the Affordable Care Act meant solely blaming health insurers was no longer a viable option. Health advocates knew public pressure was beginning to shift towards drug costs, and so they wisely tried again the following year.

In 2016, health advocates asked the Chair of Senate Health, Dr. Ed Hernandez, to introduce a drug transparency bill. The Senator agreed to carry the bill (SB 1010) but was adamant that compromises and agreements to provide increased transparency be made on all sides (including insurers). Pharma, perhaps feeling emboldened by the previous year’s success, continued to oppose the legislation at every step in the legislative process. Their opposition was also a stark contrast to the public’s opinion of them, as the EpiPen scandal had been on every news station from California to New York. For reference, Mylan raised the EpiPen cost from $100 a two-pack to $600. The bill would eventually die on the Assembly Floor, but it cost the industry greatly. And, it was an unnecessary utilization of said political capital.

A simple assessment of the public’s perception should have been sufficient to demonstrate to the pharmaceutical industry that changes were coming. Changes that involved reporting information that was already public were minor compared to what could come down the road. Yet, they fought because they believed too much in their own talking points. The result was SB 17, a substantially similar version of SB 1010 that had the full weight and resources of Senator Hernandez behind its passage. That bill is now law. Senator Hernandez’s tenure in the State Legislature may be over, but the memories of those battles are still ripe in people’s minds and new bills are being introduced that go far beyond reporting requirements.

If you’re not seeing how this all relates to our Apartment Association, google California housing crisis and read the top hits… they all discuss the crisis as an issue of affordability and try to make justifications for rent control. The public perception of the housing issue is at an apex, and Legislators are going to want every relevant stakeholder to offer compromises. How much effort should the industry put behind stopping an inevitable tide? What are the long-term implications of the public’s demands and beliefs? Based on SB 17, the best approach is one that realizes the status quo is closer to becoming historical context than continuing precedence.
Ron can be reached at ron@calstrategic.com