In the Los Angeles Times of July 25, Michael Hiltzik decried the fact that drug makers have budgeted $50 million to support one of two competing pharmaceutical pricing intitiatives (Proposition 78) that will be on the ballot at this November’s special election in California. Put very simply, Prop 78 encourages drug makers to reduce prescription prices for low-income patients voluntarilly, whereas the competing initiative, Prop 79, gives the state government almost complete control over drug prices. Mr. Hiltzik concludes his article with this invitation: “just consider how many indigent and elderly patients would be helped $50 million in discounts.”
I can’t answer the question precisely, but the answer is surely “very few.” US sales of prescription drugs run about $178 annually. About 10 percent of these sales are of generic drugs (not relevant to the question), leaving about $160 billion. Let’s say about 10 percent of US sales are in California: $16 billion. $50 million of $16 billion is a vanishingly small amount: about $1.47 for each Californian. Even if there’s a significant skewness to the distribution (as there surely is), $50 million is a tiny number. Let’s say one in ten Californians has “catastrophic” drug costs, such that they must trade off prescriptions for groceries: $50 million divided by these 3.4 million patients is still less than $15 per patient.
When looked at in perspective, $50 million is a tiny amount for this remarkably unpopular industry to invest in buying some breathing room from the relentless growth of government intervention in its affairs.
