Too often in California and around the U.S., people must choose between paying for medication that costs too much and rent that costs too much.
This is illustrated by stories like that of Virginian Alec Raeshawn Smith, who tragically died at 26, a month after aging out of his mother’s insurance coverage. He was forced to ration the insulin he needed to survive, and that desperate choice killed him.
Most of us here in California do not need headlines to tell us that prescription drug prices are too high. We have cared for a loved elder, gotten sick or managed a disability—and felt it ourselves.
In his proposed 2020-21 budget, Gov. Gavin Newsom outlined some innovative reforms to curb drug prices. Among the most attention grabbing propositions is CalRx, a California-owned, generic drug label. Existing manufacturers will produce prescription drugs on behalf of the state, and if approved by the legislature, this model would be the first of its kind in the nation. CalRx seeks to bypass the complex process of negotiation, rebates and purchasing from private manufacturers. Newsom says the program will produce a low-cost supply of prescription drugs, while increasing competition and transparency in the drug market.
But CalRx is not a magic bullet. Magic bullets and general solutions often overlook the impacts on communities of color.
In 2019, Newsom signed an executive order making the state the sole negotiator of drug prices for all 13 million Medi-Cal recipients, and this cost-saving measure had unintended consequences. Before this, select non-profit health care providers and pharmacies that served low-income populations could negotiate for themselves and receive additional rebates from a federal discount program. This allowed them to stay open even while setting prices lower than they could sustain otherwise.
However, after the executive order “non-profit inner-city and rural pharmacies will close across the state, hundreds of thousands of low-income patients will lose pharmacy access,” said Jim Mangia, president and CEO of St. John’s Well Child and Family Center, a non-profit health care provider in South Los Angeles.
If CalRx does not intentionally build a path of access for low-income folks and communities of color, it will just be creating cheaper, but still unattainable, prescription drugs.
CalRx is part of a larger strategy of getting all people access to affordable health care, not a solution on its own. The state budget includes reforms that increase the population on behalf of whom the state can negotiate, ensure California gets the lowest price of any pharmaceutical purchaser nationally or internationally, create a single market for drug pricing within the state to require manufacturers to sell at a uniform rate—and, finally, CalRx.
While this new label is the most shiny and exciting, the other reforms will likely have more immediate impacts. For example, even prior to the proposed expansion, the legislation ensuring California gets the lowest price is projected to save the state hundreds of millions of dollars by 2022-23.
These reforms work and will take power away from greedy pharmaceutical companies, cut costs and strengthen California’s internal health care infrastructure.
California covers some percentage of the cost of prescription drugs for 13 million Medi-Cal recipients and provides assistance programs and rebates to patients outside of Medi-Cal. Even if the state doesn’t pay for high drug costs directly, it pays with the programming and infrastructure needed to support people facing economic insecurity as a result. The state pays when people are forced to choose between medication and other social determinants of health, like housing and food.
As the first state-owned generic drug label, CalRx, together with the other reforms laid out in Newsom’s budget, can have a large impact on the cost of prescription drugs. However, if decision-makers do not address how this plan will impact cost and accessibility for communities devastated by racial bias, over-policing, and housing and employment discrimination, these vulnerable populations will suffer. When we fail to confront historical, racist policies that targeted black, Latino and Native populations, the needs of our communities get lost in the net good.
Advocates for justice, including myself and my colleagues at The Greenlining Institute, look forward to tracking the implementation of CalRx to ensure that it moves us toward health equity for all.
Christian Beauvoir is the health equity fellow at The Greenlining Institute.
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