(probably) No on 61

I’ve been ignoring Prop. 61 because i’m uncertain what to do about it.

—What does Prop. 61 do?—-

“Notwithstanding any other provision of law, and insofar as may be permissible under federal law, neither the State of California, nor any state administrative agency … shall enter into any agreement with the manufacturer of any drug for the purchase of a prescribed drug unless the net cost of the drug, inclusive of cash discounts, free goods, vlume discounts, rebates, or any other discounts or credits, as determined by the State Department of Health Care Services, is the same as or less than the lowest price paid for the same drug by the United States Department of Veterans Affairs.”

In other words: the state and its agencies cannot contract with drug manufacturers to purchase drugs at a price higher than that paid by the VA.

There are a couple of obvious problems with this as stated: how do we know how much is paid by the VA, and what do we do if we can’t tell? How do we know how much we’re paying, given the complexity of discounts, free goods, rebates, etc? What’s the point in prohibiting purchases *from the manufacturer* but not prohibiting purchases from some intermediary retailer?

That last point, in particular, is telling — this only effects purchases from the manufacturer, and there are ways to get around that using shell intermediaries, so it’s not clear that it will even have any effect.

But put that aside for a moment, because it doesn’t really address my key conflict on the issue.

—Why am I conflicted?—

This is a high-stakes negotiating tactic.

One of the key things in negotiation is that when you come to a table with a price you’d prefer, you claim that you can’t budge from it. The *credibility* of that claim effects your negotiating partner’s behavior – if he thinks your claim isn’t credible and that you’d prefer a higher price to no deal, he’ll push for a higher price. If, on the other hand, he believes that you would prefer no deal to a higher price, then he has to ask if *he* would prefer no deal to this price.

So if you can increase the credibility of your negotiating position, you increase the likelihood that you’ll get what you’re asking for.

In this case, the proponents of the initiative are trying to create a situation where the state *must* take ‘no deal’ over a deal with a higher price. This is the ultimate in credibility: we are legally prohibited from taking a higher price.

That’s great! It greatly increases the likelihood of California getting the price it wants *if the people we are negotiating with would prefer that price to no deal*.

Would they?

Who knows.

That’s why this is a gamble. It’s high reward if it pays off, but it’s high risk if it fails – because if it fails then California may simply not be able to buy certain drugs.

I’m generally pretty risk averse when it comes to this sort of thing, so the high risk worries me way more than the high reward does, which causes me to lean against.

But at the same time … if *anyone* can get away with this, California can.

So maybe it’s worthwhile?

At the end of the day I’ll probably vote against, because of a combination of my risk aversion and a sense that this *really* is not the sort of thing the voters should be deciding. I get that it’s a ballot measure because the legislature is to some degree bought by the drug industry via campaign contributions and so the legislature could never pass something like this on its own; and yet at the same time, a vote of the people doesn’t strike me as being the best way to decide whether or not to proceed with a high stakes negotiating gamble.

Advertisements