Ballot Issue on Drug Prices

On the ballot in November in Ohio will be this issue. The linked page defines the issue and what groups are urging yes and no votes. The Yes on Issue 2 group and No on Issue 2 group have been sponsoring many televisions ads urging viewers to vote for their side.

One of the ads for the No on Issue 2 group is deceptive. If you click on the ‘Who’s Behind the Ballot Issue’ and ‘Who’s Paying for the Yes Campaign’ on this webpage, it describes Yes supporter and bill author Michael Weinstein. He is the president of a non-profit that buys and sells drugs mainly to AIDS patients, but the ad says he is the CEO and omits saying non-profit. It says his company gets 80% of its revenues from selling drugs, AIDS not mentioned. It can give the impression that his organization is a high-priced drug manufacturer. 

I am not defending Weinstein. He has no qualms about using the strong arm of government to impose price controls on drug manufacturers. He pushed the same ballot issue in California, where it lost. His foundation, which is tax-exempt, operates pharmacies in competition with drug stores that are not tax-exempt. 80% of its revenues are from the pharmacies.  In 2015 revenues minus expenses, i.e. profit, was $55 million (link). He has brought anti-trust and other lawsuits against drug manufacturers. The No side claims his foundation uses funds for political purposes unrelated to the foundation's purposes. His foundation has provided near all the monetary support for the Yes side.

The spokesman on one of the ads by the Yes on Issue 2 group is Bernie Sanders. It shows several people who allegedly can’t afford to pay for their life-saving drugs. He describes drug manufacturers as only greedy (like Weinstein does) and gives them no credit for making life-saving drugs.

I’ve seen different ads by the No on Issue 2 group (website). Spokespersons include veterans, nurses, doctors, and pharmacists. One of the supporting groups is the Ohio Pharmacists Association (OPA). This webpage states their view of the issue. It shows how complicated the market for prescription drugs is, with so many parties involved, reimbursements, and discounts. The OPA mentions that passage of Issue 2 would adversely affect reimbursement amounts to pharmacies, but I don’t know how that works.

On first seeing deceit in some No on Issue 2 ads, I was repelled more than attracted to that side. Then I saw the ad from the other side with Bernie Sanders, which I found more deceptive and repulsive. His message is that passing Issue 2 will “take on the greed of the drug companies and significantly lower the cost of prescription drugs” (link) for the companies' "victims." Neither pharmacies nor insurers (who pay for most drugs) are mentioned. He is an expert demagogue.

The guy is a simple-minded wanna-be-dictator who shows no understanding of economics and markets. He sees a "pie," decides how much he feels government is entitled to take or take control in order to help “the victims.” He believes the pie will always be there, no smaller than before. He probably has no idea why or how the pie exists other than there are drug manufacturers. Like Weinstein, he has no qualms about using the strong arm of government to impose price controls on drug manufacturers. Of course, he doesn’t say passing Issue 2 will (allegedly) drive prices lower to rich people who buy and use prescription drugs, too. 😉

Such simple-mindedness also overlooks the complexity. The difference between what the ultimate consumer pays and what the drug manufacturer gets are lost in that complexity.* Medicare, Medicaid, whatever other insurance the consumer has, co-pays, deductibles, discounts, distributors, and pharmacy benefit managers are all involved.

On the other side, the No on Issue 2 ads tell people that the consequence of Issue 2 passing will be to raise the price of the drugs generally. However, there is no explanation of why that’s so in terms of markets -- supply and demand and price formation. It doesn't say that government dictating maximum prices too low leads to shortages. (In print the No side does say passing Issue 2 will reduce patients’ access to needed medicines.) Of course, I recognize the time constraint for television ads, and the No on Issue 2 website says more about the economics. 

* This reminded me of a TV ad for Hillary Clinton’s 2016 presidential campaign. Clinton verbally attacked “predatory drug pricing” and said she would crack down on it. Then she introduced a woman who was taking a drug for which there was a big price hike by the manufacturer or distributor. What wasn’t revealed was that most of the cost was being paid by the woman’s insurer. Not only that, she had refused a much cheaper generic substitute. She said she didn’t care what her insurer had to pay. When the deceit was noticed and critics responded, they stopped showing the ad.