San Francisco’s two competing LGBT Democratic groups — the leftist Harvey Milk Democratic Club and the centrist Alice B. Toklas Democratic Club — rarely agree on contentious economic issues. But both groups announced in September that they would be opposing Proposition 61, the high-profile initiative to lower drug prices.
A letter from the two groups claimed that Proposition 61 “will not lower prescription drug costs” and that the decision to jointly campaign against the initiative was reached after “careful consideration.”
Unknown to many activists in the city, this act of political camaraderie appears to have been rewarded by the pharmaceutical industry, which cut each club a $5,000 check from a fund set up to defeat the drug price initiative.
Neither LGBT group, both of which have sent voter guides to city residents, revealed the donation on their website, and neither responded to a request for comment. [Update 1:25PM ET: Peter Gallotta, the president of the Harvey Milk LGBT Democratic Club, wrote to The Intercept after publication to say that the No on 61 money was “earmarked specifically for our slate mailer and their contribution represents less than 6% of total contributions to our program,” adding that “it is typical for the Club to receive money from its endorsed candidates and measures.”]
The money was disclosed in filings made on Thursday that showed 19 different civic organizations, from the Foreign Legion to a bilingual voter guide organization, taking drug industry funds and endorsing No on Prop 61.
Proposition 61 is designed to allow California state agencies that pay for prescription drugs, such as the state Medicaid program and the state prison system, to pay the same or lower prices as listed by the federal Department of Veterans Affairs, which uses its collective bargaining power negotiate for better rates. While experts are divided over the actual cost savings that could be achieved through Prop 61, given the opaque pricing structure for state and federal agencies, many argue that the state could win significant discounts, given that the VA pays up to 42 percent less than Medicare, according a recent analysis.
The drug industry, led by its lobbying giant the Pharmaceutical Research and Manufacturers of America (PhRMA), is furiously attempting to defeat Prop 61, fearing that if the measure succeeds in California, the largest Medicaid market, similar ideas could spread to other states and embolden politicians already facing pressure to act on the national level.
To snuff out the drug price revolt, PhRMA has raised an astounding $109 million from its member companies, including Pfizer, Merck, Purdue Pharma, Johnson & Johnson, and other drug firms. That’s more than has been raised by both the Republican and Democratic candidates for U.S. Senate races in New Hampshire, Pennsylvania, and Nevada combined — and those are among the most costly races in the country.
In contrast, the proponents of the initiative — primarily the AIDS Healthcare Foundation, which operates a number of nonprofit healthcare clinics — have raised just over $14 million.
The No on Prop 61 war chest has been used to buy a seemingly endless stream of digital and broadcast advertisements across the state. A portion of the drug industry fund has been used to influence critical endorsements.
Several Republican groups opposing Prop 61, including the Save Proposition 13 Segregated Fund, the Small Business Action Committee, and the National Tax Limitation Committee received drug industry money.
Over half a million dollars flowed to groups sending out a variety of voter guides urging a vote against Prop 61.
The COPS Voter Guide, a voter guide that says it endorses candidates that “have pledged to make public safety a top priority,” and opposes Prop 61, received $210,000 from the PhRMA fund. Other organizations, including the Latino Voter Guide, the California Senior Advocates League Voter Guide, the Coalition for Literacy, the California Voter Guide, and a group called Voter Guide Slate Cards, similarly received drug industry money.
The practice of selling voter guide endorsements, though shunned by many consultants, is a common trick for interest groups seeking to buy the appearance of widespread support.
The new disclosures also reveal more information about drug industry money to veterans groups, a controversial element of the campaign. No on Prop 61 hired Anthony Principi, the former secretary of veterans affairs during President George W. Bush’s administration, and Sacramento lobbyist Pete Conaty, to round up support from veterans on behalf of the campaign. An archive of Conaty’s now-deleted website advertises “Veterans Lobbying Services” and the ability to organize local groups on behalf of clients.
Three of the veterans groups that endorsed No on Prop 61 and appeared in a television advertisement against the measure — the American Legion of California, Veterans of Foreign Wars of California, and the Vietnam Veterans of America CA State Council — all received direct payments from the PhRMA fund, the filings reveal. Other veterans groups that have campaigned against the initiative, including the American GI Forum, also received drug industry money.
The No on 61 veterans ad claims that the measure will make healthcare more expensive for veterans, an allegation denied by proponents, who say that the VA will not allow drug firms to hike prices.
“There also is no truth to the suggestion the measure increases the cost of a veteran’s copay,” the Sacramento Bee noted this week. “VA recipients have fixed co-pays, while some qualify for free health care altogether.”
The backers of the measure responded through another veterans organization, VoteVets Action Fund, which aired an advertisement supporting the initiative. Notably, VoteVets has received funding from the Yes on Prop 61 campaign.
The filings also provide more information about other consultants tied to the civic groups opposing Prop 61. The NAACP of California announced its opposition to Prop 61 this year. The disclosures show that AC Public Affairs, a consulting firm run by Alice Huffman, the president of the California NAACP, received $80,000 in consulting fees and $38,500 for print ads from the drug industry’s No on Prop 61 fund.
The U.S. pays far more for pharmaceuticals than any industrialized country in the world. Bloomberg found that Roche Holding AG’s Herceptin breast cancer drug, for example, “cost about 85 percent more in the U.S. than in other high-income countries.”
One driver of the higher costs is a provision of the Medicare Part D law, essentially authored by PhRMA, which prevents Medicare from using its collective bargaining power to negotiate for better drug prices. (Congressman Billy Tauzin, R-La., the lawmaker who helped usher in the PhRMA legislation, later became a PhRMA lobbyist earning $11.6 million in annual salary.) A recent study found that $16 billion could be saved annually by simply allowing Medicare to negotiate for lower rates.
Eli Lilly chief executive John Lechleiter, during on a conference call on Tuesday, sought to reassure investors by pledging that he is doing everything in his power to stop Proposition 61.
His company has been in the news recently for price gouging, especially for its Humulin R U-500 insulin medicine, a very profitable product for the firm that Eli Lilly hiked in price by 325 percent from 2010 to 2015.
“Prop 61, we’re fighting that tooth and nail in California,” Lechleiter said. “We have a pretty big campaign underway,” he added, noting that his company hoped to “shift voters toward a position of being against it for a whole variety of reasons.”