California Proposition 78, Prescription Drug Discounts (2005)

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California Proposition 78, also known as the Prescription Drugs Discounts Initiative Petition, was on the November 8, 2005 special statewide ballot in California as an initiated state statute, where it was defeated in spite of the fact that over $118 million was spent encouraging voters to approve it.

Had Proposition 78 passed, California would have adopted a new state drug discount program to reduce the costs of prescription drugs for Californians at or below 300 percent of the federal poverty level.

Major contributors supporting the Proposition 78 petition were Pharmaceutical Research and Manufacturers of America California Initiative Fund of Sacramento, Pfizer, Inc. of New York, Johnson & Johnson of New Brunswick, New Jersey, Merck & Co. of Whitehouse Station, New Jersey, and Glaxosmithkline of Philadelphia, Pennsylvania.

Proposition 78 competed with Proposition 79. Both propositions failed.

Election results

Proposition 78
Result Votes Percentage
Defeatedd No 4,508,873 58.5%
Yes 3,199,193 41.5%
Total votes 7,708,066 100.00%
Voter turnout Of registered voters: 50.1%

Text of measure

Proposition 78 vote distribution map.gif


The ballot title was:

Discounts on Prescription Drugs. Initiative Statute.


The question on the ballot was:

"Should the state adopt a new state drug discount program to reduce the costs of prescription drugs for Californians at or below 300 percent of the federal poverty level?"


The official summary provided to describe Proposition 78 said:

  • Establishes discount prescription drug program, overseen by California Department of Health Services.
  • Enables certain low- and moderate-income California residents to purchase prescription drugs at reduced prices.
  • Authorizes Department: to contract with participating pharmacies to sell prescription drugs at agreed-upon discounts negotiated in advance; to negotiate rebate agreements with participating drug manufacturers.
  • Imposes $15 annual application fee.
  • Creates state fund for deposit of drug manufacturers’ rebate payments.
  • Requires Department’s prompt determination of residents’ eligibility, based on listed qualifications.
  • Permits outreach programs to increase public awareness.
  • Allows program to be terminated under specified conditions.

Fiscal impact

See also: Fiscal impact statement

The fiscal estimate provided by the California Legislative Analyst's Office said:

  • One-time and ongoing state costs, potentially in the millions to low tens of millions of dollars annually, for administration and outreach activities for a new drug discount program. A significant share of these costs would probably be borne by the state General Fund.
  • State costs, potentially in the low tens of millions of dollars, to cover the funding gap between when drug rebates are collected by the state and when the state pays funds to pharmacies for drug discounts provided to consumers. Any such costs not covered through advance rebate payments from drug makers would be borne by the state General Fund.
  • Unknown potentially significant savings for state and county health programs due to the availability of drug discounts.
  • Potential unknown effects on state revenues and expenditures from changes in prices and quantities of drugs sold in California.


Website art of the Yes on 78 campaign


The official voter guide arguments in favor of Proposition 78 were signed by:

  • Kristine Yahn, RN, executive director of Californians for Patient Care
  • Carolyn Peterson, RN, MS, AOC, chief operating officer of Community Hospice
  • Doris Luna, RN, a certified pediatric oncology nurse at the UC-Davis Medical Center
  • Tom Murphy, chair of the California Arthritis Foundation Council
  • Rusty Hammer, president of the Los Angeles Area Chamber of Commerce
  • James S. Grisolia, M.D., senior vice-president of the Epilepsy Foundation of San Diego County[1]

Arguments in favor

Supporters of Proposition 78 made these arguments in its favor in the state's official voter guide:

  • "Proposition 78 offers Californians struggling with high prescription drug costs real help, right now. Prop. 78 is a proven program that can take effect immediately, and will deliver critically needed prescription drug discounts to millions of seniors and low income, uninsured Californians."
  • "Known as Cal Rx, Proposition 78 offers Californians the best prescription drug discount program in the country. It is an improved version of a successful program already operating in Ohio that is delivering discounts averaging 31%, saving consumers $15.31 on every covered prescription. Every major prescription drug manufacturer participates in the Ohio program."
  • "Proposition 78 is even better than the Ohio program. The California Department of Health Services concludes that the Cal Rx program enacted by Proposition 78 will result in discounts of over 40% to millions of eligible Californians. State officials say that Cal Rx prices will compare favorably to prices in Canada."
  • "Prop. 78 does not require a big government bureaucracy to implement. The discounts go right to the patient in their community."
  • "ALL drugs are eligible for discounts under Proposition 78, not just those on a government determined list."
  • "There are two prescription drug discount proposals on the ballot, but only Proposition 78 will work. Unlike the other proposal, Prop. 78 doesn’t require federal approval, provides discounts on a wider range of drugs, doesn’t depend on a big government bureaucracy to be implemented, and won’t result in costly litigation by trial lawyers."[1]


"No on 78" website banner from the No on 78/Yes on 79 website (archived)


The official voter guide arguments opposing Proposition 78 were signed by:

  • Nancy J. Brasmer, president of the California Alliance for Retired Americans
  • Richard Holober, executive director of the Consumer Federation of California
  • Jacqueline Jacobberger, president of the League of Women Voters of California
  • Barbara A. Brenner, executive director of Breast Cancer Action
  • Ramon Castellblanch, policy advisor to the Senior Action Network
  • Kathy J. Sackman, RN, president of the United Nurses Association of California[1]

Arguments against

Opponents of Proposition 78 made these arguments against it in the state's official voter guide:

  • "Prop. 78 is a smokescreen designed and bankrolled with tens of millions of dollars from the prescription drug lobby to block Prop. 79, a real discount solution put forward by consumer, health, and senior groups. Under their cynical strategy, if both measures get a majority, the one with more votes becomes law."
  • "Drug companies donated $50 million to Prop. 78 by mid-July, on track to run what could be the most expensive initiative campaign in California history."
  • "Prop. 78 relies on drug manufacturers to voluntarily lower their prices and does not allow the state of California to enforce the program."
  • "California tried this voluntary approach in 2001. The Golden Bear State Pharmacy was designed to offer seniors voluntary discounts on prescription medications. More than 500 drug manufacturers were invited to participate, yet only 14 agreed. Unable to implement it successfully, Governor Schwarzenegger closed the program."
  • "According to news reports, the drug companies said they didn’t participate in Golden Bear because if they did, they would have to give the federal government the same rebates they were giving California seniors. Have they really changed their minds four years later? Can we trust the manufacturers to voluntarily lower their prices now? No."
  • "The drug lobby buried a provision in Prop. 78 that allows them to effectively close their discount program when too few manufacturers voluntarily lower their prices."
  • "As stated in their initiative, Prop. 78 could end at any time if there are too few participating manufacturers, or insufficient discounts, or too few participating consumers."
  • "Make no mistake, this provision was included by the drug companies so they can end the program at any time and protect their profit margins."
  • "Half as many Californians are eligible for discounts under Prop. 78 as under Prop. 79. Prop. 78 provides no discounts to many uninsured Californians, those with catastrophic medical bills, and the chronically ill such as cancer and diabetes patients with inadequate drug coverage."
  • "The discounts offered by Prop. 78 are based on the 'lowest commercial price' set by the drug companies. These discounts could be anywhere from 15 to 40 percent—significantly less than Prop. 79’s discounts."

Campaign finance

The campaigns for and against Proposition 78 were heavily related to the campaigns for and against Proposition 79. This chart displays spending on both campaigns; if a campaign committee registered itself as in favor of one proposition and opposed to the other, its spending is reflected in more than one column in the table.[2][3]

Committee name Spent for 78 Spent against 78 Spent for 79 Spent against 79
Pharmaceutical Research & Manufacturers of America, Yes on 78 and No on 79 $85,998,683 $85,998,683
Californians for Affordable Prescriptions, Yes on 78 $32,767,788
Yes on 79 and No on 78, a Coalition of Consumer Organizations for Affordable Prescription Drugs $811,356 $811,356
Californians against Arnold's Special Interest Election, No on 73, 74, 75, 76, 77 and 78 and Yes on 79 & 80 $47,960 $47,960
Alliance for a Better California, Yes on Proposition 79 and 80 $38,754,725
Californians Against the Wrong Prescription, No on 79 $37,351,418
Biotechnology Industry Organization Committee Against Proposition 79 $922,583

Path to the ballot

See also: California signature requirements

The signatures needed to qualify Proposition 78 for the ballot were collected by two different petition drive management companies, Progressive Campaigns, Inc. and Bader & Associates, Inc..

See also: California ballot initiative petition signature costs

See also

External links

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