J&J exec calls California pricing measure 'misguided'

Veterans groups have joined drugmakers in their opposition to Proposition 61. 

Johnson & Johnson has voiced its opposition to a popular proposition in California that would require drugmakers to charge state agencies the same prices for prescription drugs as the Veterans Affairs department does, with one executive describing the intent of the measure as “misguided.”

Joaquin Duato, worldwide chairman of pharmaceuticals at Johnson & Johnson,  told investors last week that Proposition 61 could create access issues for patients. “We don't see Proposition 61 as the right way to try to work on pharmaceutical pricing,” he said during a third-quarter earnings call. “We think it's a misguided action.”

See also: Drugmakers explore response to pricing debate

Voters are set to vote on the ballot measure on November 8. Also called the California Drug Price Relief Act, it would allow agencies in California to pay the same prices for drugs that the Veterans Affairs department pays, in an effort to lower the state's prescription drug tab. The VA reportedly pays up to 24% less for drugs compared to what other government agencies pay, according to Yes on 61, the organization advocating on behalf of the proposition.

About 66% of voters would vote yes on the ballot measure, a poll conducted in early September by USC Dornsife and the Los Angeles Times found. The measure has garnered the support of the AARP, the California Nurses Association, and Sen. Bernie Sanders (D-VT).

Despite widespread support for the measure, the degree of financial savings that it could achieve is unclear. The state's Legislative Analyst's Office failed to come up with an estimate of the fiscal impact of the measure, but said that if passed it “may result in a substantial net change in state or local finances.”

See also: IMS Health: Drug spend will steadily rise through 2020

To nobody's surprise, drugmakers like Pfizer and Merck are opposed to the measure. Veterans groups, worried about whether it will mean higher prices for them, are also opposed, as is the California Medical Association.

The issues of drug pricing and reimbursement, whether through a government agency or a commercial health plan, have become a key issue in the debate about rising U.S. healthcare costs. Once limited to medical circles, the subject has become an election-year issue, with Sanders, Hillary Clinton, and Donald Trump weighing in. At the same time, the CEOs of Mylan, Turing Pharmaceuticals, and Valeant Pharmaceuticals International were hauled before Congress to testify about price hikes of their drugs.

At least 14 states, including California, have introduced bills over the last two years that would require transparency about high-priced drugs, according to to the National Conference of State Legislatures. Three bills, two of which failed to move forward, have been introduced in California.

See also: Americans are increasingly critical of drug industry, a new poll finds

Some drugmakers, including J&J, have acknowledged that the current pricing model no longer serves the pharmaceutical industry, patients, and payers. They are seeking new ways to partner with insurers and PBMs, such as by developing outcomes-based contracts. Allergan publicly announced plans in September to limit price increases of drugs to once a year and no more than 10%.

“Pharmaceuticals represent 14% of total expenditures and we understand that we need to work with different stakeholders in order to try to manage our healthcare cost... We have advanced different ideas in that area … such as value-based contracting,” J&J's Duato said during the investor call.